Guest post by William Wortley*
Last week, the Supreme Court ruled in Cartier International v BT and another that the costs of implementing injunctions against internet service providers (ISPs), ordering them to block access to websites selling trademark infringing goods, should be borne by IP rightsholders rather than ISPs. The landmark decision overturns the High Court decision, upheld in the Court of Appeal, and raises questions about the scope of the decision and the potential impact on rightsholders moving forward.
The case has a well-documented history and should only require a cursory introduction. In England, there is a statutory basis for the implementation of injunctions in copyright infringement cases through s97a Copyright, Designs and Patents Act 1988, implementing EU law requiring such injunction to be available. Cartier is the first case to examine whether such injunctions were available in trade mark infringement cases. Although there was no equivalent direct implementation of Art 11 of the Enforcement Directive, the lower courts decided that such injunctions were available under existing English law, and that no direct implementation was necessary. The Supreme Court granted the ISPs’ appeal in part, agreeing to decide on the matter of implementation costs.
The Court concluded that determining who is responsible for the costs of carrying out such a court injunction is a matter of national law. Under English law, injunctions are available as an equitable remedy against innocent intermediaries in a number of forms, notably Norwich Pharamacal orders, the basic principle being that so long as the party required to carry out the order is innocent, that party should be indemnified by the claimant for the costs of complying with the order. The Supreme Court concluded that the injunctions sought by Cartier did not differ from such equitable remedies.
The Court considered the argument supported by Kitchin LJ in the Court of Appeal, that ISPs should bear the costs of compliance with blocking injunctions as a quid pro quo for the “safe harbour” immunities available to them by virtue of European law. It was held that the Directives did not provide any basis for the argument. The real rationale for the immunities was held to be the fact that disparities between national laws regard liability may distort the single market, and that intermediaries have no control over the infringing content. Any quid pro quo was deemed to be in relation to the removal of illegal content on notice, rather than being to do with costs. Lord Sumption found that the L’Oreal v eBay international and UPC Telekabel Wein v Constantin Film Verleih judgments of the CJEU did not support such a conclusion, instead highlighting the fact that any issue of high costs addressed by the court was specific to the country concerned.
The Supreme Court also dealt with the reasoning developed by Arnold J in Twentieth Century Fox Film Corpn v British Telecommunications (No. 2), originally in a copyright infringement context, that ISPs benefit financially from the “volume and appeal” of infringing material passing through their servers, and that as a result it is fair for them to contribute to enforcement costs. The Court opined that this reasoning has a moral or commercial basis, rather than a legal one, and that the lack of legal basis was decisive. The Court further stated that even if such arguments were relevant they would not be applicable in this case, as website-blocking injunctions are directed to protect the IP holder’s legal rights and they derive sole benefit from their implementation.
Trademark rightsholders will clearly need to factor in implementation costs as part of their business. While the judgement is a blow to rightsholders, it does not greatly reduce the utility of these injunctions, particularly for the owners of well-known marks whose brands are affected by significant counterfeiting operations. It remains to be seen whether Cartier will change the practice of copyright cases, which has developed so that ISPs bear the costs of compliance with injunctions. The Court’s rejection of the quid pro quo and ”indirect benefit” rationale for making ISPs bear enforcement costs in “mere conduit” cases certainly makes it possible that such an argument will be put forward in the future.
*William Wortley is an IP professional based in Munich and London. He holds an LL.M. in Intellectual Property and Competition Law from the Munich Intellectual Property Law Center. William.firstname.lastname@example.org