20 July, 2016

Watch the Fight - Court of Appeal Affirms Blocking Order for Cartier Against ISPs

Just as was discussed last week, the issue of counterfeit goods has plagued many retailers, brand owners and online sellers for years, with the availability of Chinese (or otherwise) manufactured counterfeit items being sold for pennies on many websites. While qualitatively often worse than the real thing, the lost sales and revenues from the counterfeit business are what ultimately matter, and brand owners have tried to combat this issue through various means. One such tool has been to utilize the ISPs as third-party intermediaries in stopping access to these sites, and with a High Court ruling allowing for ISPs to be possibly on the hook for this enforcement (more on which can be found here), the matter seemed all but settled. The providers appealed the case, and the Court of Appeal handed down its decision only a couple of weeks ago.

As a brief primer to those who are not familiar with the case, Cartier International AG & Others v British Sky Broadcasting Ltd & Others dealt with the sale of counterfeit Richemont goods, encompassing the Cartier and Montblanc brands specifically. The goods were sold on a set of specific websites, and the claimant pursued an order to block access to these websites through the ISPs. They contested the application, which was subsequently given to the claimant, for which the ISPs appealed to the Court of Appeal.

The first point of contention discussed by the Court was that of jurisdiction, specifically under Article 8(3) of the InfoSoc Directive, Article 11 of the Enforcement Directive (and the lack of its implementation into UK law) and section 97A of the UK Copyright, Designs and Patents Act 1988, which, arguably, does not allow for the granting of an injunction under domestic law in the UK. Cartier contended the assertion that the lack of implementation of Article 11 of the Enforcement Directive did not preclude jurisdiction, which stemmed from section 37 of the Senior Courts Act 1981.

A blocking order: the red card of the Internet
Lord Justice Kitchin, who delivered the majority judgment, determined that, although the ISPs are not guilty of any wrongdoing (as they did not encourage or participate in the infringement themselves) nor did they owe a duty of care (per CBS Songs v Armstrad) to Richemont, the court's would still have jurisdiction to give the order in the case. The rejection of this would, per his assessment: "...impose a straightjacket on the court and its ability to exercise its equitable powers which is not warranted by principle". The ability to impose injunctions was not restricted to apply to only infringers, and could be used in 'new ways'. This extension was also, in his view, fully covered by Article 11 of the Enforcement Directive.

The law Lord saw no issues with the provision of the order by law, especially in the light of limitations to the rights and freedoms set out in the Charter of Fundamental Rights of the EU.

To be able to issue a blocking order certain threshold conditions have to be observed. These are, as set out by Lord Justice Kitchin: "...First, the ISPs must be intermediaries within the meaning of the third sentence of Article 11 [of the Enforcement Directive]. Secondly, either the users or the operators of the website must be infringing the claimant's trade marks. Thirdly, the users or the operators of the website must use the services of the ISPs. Fourthly, the ISPs must have actual knowledge of this". After some discussion (which this writer consciously omits for brevity's sake), the Court did determine that the threshold conditions were indeed satisfied in this instance.

Finally, the Court dealt with the matter of principles to be applied  when considering the imposition of a blocking order. These were set out by Lord Justice Kitchin: "...the relief must (i) be necessary; (ii) be effective; (iii) be dissuasive; (iv) not be unnecessarily complicated or costly; (v) avoid barriers to legitimate trade; (vi) be fair and equitable and strike a "fair balance" between the applicable fundamental rights; and (vii) be proportionate". Primarily what these conditions operate as are a safe-guard for too broad, onerous and one-sided orders, allowing for a certain degree of leniency to be applied in the consideration of any blocking orders. This, however, has to be assessed with the substantiality of the websites in mind (one would think this would encompass user amounts, sales and accessibility, and the number of websites applied for, for example) and the need for remedies to properly function as safeguards to abuse.

Lord Justice Kitchin did see that the order could be justified in the light of the above principles in this instance. The Court ultimately disallowed the appeal and sustained the order.

The decision was by no means without its issues, and one primary concern was raised by Lord Justice Briggs on costs. While the majority agreed that the costs and time should be imposed on the ISPs, Lord Justice Briggs saw that these should be not placed on the ISPs, but the rightsholders (and this writer, agreed with him, as the ISPs, functioning as non-active entities in the infringement process, would be unduly burdened by the possibility of dozens/hundreds of blocking orders and their subsequent costs). Even though the costs are largely modest, as observed by Lord Justices Kitchin and Jackson, burdening the ISPs with them would seem onerous, especially considering they derive no benefit from the exploitation of those rights.

In the end the case is a very interesting example of the law adapting to its new playing field, and while it does provide a great opportunity for rightsholders, it does also cause some concern for ISPs and the automation of enforcement on the Internet.  In any event, this writer does envision the case possibly being appealed to the Supreme Court, who would have the final say in the matter.

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