UK: IP Update: Service Providers, Shampoo And Stormtroopers

Last Updated: 12 September 2011
Article by Andrew Horrocks, Benjamin Craven and Alexa Scoones

The last weeks of the court term saw a number of high profile and significant rulings from four different courts in relation to intellectual property matters. This briefing note draws together these judgments to identify the key issues and trends.

L'Oréal SA and others v eBay International AG and others

In this case, the ECJ determined questions referred to it by the English High Court concerning the unauthorised sale of L'Oréal products on eBay. Brand owners like L'Oréal will be exultant at the ruling, which sees strenuous obligations being imposed on online service providers that facilitate the sale of such goods. The two points of particular note from the judgment relate to (i) the liability of operators of online marketplaces and (ii) the injunctions that may be granted against such operators.

In relation to the first point, the ECJ has indicated that online service providers will lose the benefit of the exemption from liability for intermediaries under the ECommerce Directive (which protects service providers from liability in relation to information stored by them which has been provided by a recipient of their services) if they take an active role in relation to offers of infringing goods placed on their sites. Although it was accepted that eBay stored (ie, held in its server's memory) data supplied by its customers, it was held that eBay's service went further, in particular it provided "assistance" to sellers entailing optimising the presentation of or promoting the infringing goods in question. Further, the ECJ noted that even if the service provider has not played such an "active role" it will, nevertheless, be prevented from relying on the liability exemption under the ECommerce Directive if it was aware of facts or circumstances on the basis of which a diligent economic operator should have realised that the offers for sale in question were unlawful and failed to act expeditiously in removing the unlawful material.

In relation to the second point, the ECJ has ruled that injunctions can be granted against online service providers where they do not decide, on their own initiative, to put a stop to infringements of intellectual property rights and/or to prevent future infringements from taking place.

The ruling shifts the onus more squarely onto service providers to police the use of their online marketplaces and to take active measures in the event that they become aware of infringing goods being sold via websites which they are operating. It also narrows the remit of the exemptions in the E-Commerce Directive and ensures that those operating online marketplaces are no longer able to hide behind these exemptions in order to protect themselves from liability. The decision is a welcome one from the brand owners' perspective and a cautionary shot across the bows for service providers, who are now going to have to pay much closer attention to allegations of infringing goods passing through their sites.

Twentieth Century Fox Film Corporation and others v British Telecommunications Plc

Meanwhile, in a test case of considerable significance for rights holders and Internet Service Providers (ISPs), the High Court has granted an injunction against BT to block, or at least impede access to, an indexing website that enabled file sharing. The application, which appears to be the first of its kind under section 97A Copyright, Designs and Patents Act 1988 (CDPA) (under which the High Court can grant an injunction against an ISP where the ISP has actual knowledge that their service has been used to infringe copyright), was brought as a test case by six film studios in relation to the Newzbin2 website, which enabled its members to make infringing copies of the studios' films. The studios had previously brought a successful claim for copyright infringement against a previous incarnation of Newzbin2, but the website had since relocated offshore, effectively putting itself beyond the reach of the English court. The studios therefore asked that BT, the largest ISP in the UK, block access to the website. BT resisted the injunction.

The High Court held that both users and operators of the Newzbin2 website used BT's services to infringe the studio's copyrights, and that BT had actual knowledge of persons using its services to infringe copyright, even if it could not be shown that BT had actual knowledge of a particular infringement of a particular copyright work by a particular individual. BT knew that users and operators of Newzbin2 infringed copyright on a large scale (particularly the copyrights of the studios), it knew the users of Newzbin2 included BT subscribers, and it knew those users used its services to receive infringing copies of copyright works made available through Newzbin2. The court therefore had jurisdiction to grant an injunction and did so.

The studios had made clear that, if successful, injunctions would also be sought against other UK ISPs. What is less clear is whether the case will lead to injunctions against ISPs in relation to other file sharing websites without a claim being brought against the primary infringer first. The court thought this was less likely, and noted that in this case the studios had already brought a successful claim against the website, before acting against BT. Nevertheless, the way in which rights owners can obtain an injunction against an ISP is now much clearer.

Newspaper Licensing Agency v Meltwater

The Court of Appeal has upheld the decision of the High Court that a media monitoring company, Meltwater, which provided headlines, article extracts and links to online newspaper content, and the PR companies which received them, had infringed the publishers' copyright in the original content. The Court agreed with the High Court that newspaper headlines were capable of being original literary works, despite previous English case law suggesting otherwise, and that it was inevitable that some of the extracts would constitute a substantial part of the original. However, the issue was not whether any particular extract was a substantial part, but whether it was likely Meltwater's business of providing the headline with the extract was likely to infringe the publishers' copyright. The Court thought it was, as the probability of it occurring on a regular basis was substantial.

The PR companies sought to rely on the exception under section 28A CDPA, which protects temporary reproduction where it is an integral and essential part of a technological process, such as transmission in a network between third parties with no economic significance. However, in the Court's view, the voluntary act of opening an email and clicking on a link did not fall within those requirements.

The position therefore remains that even very short extracts of text may attract copyright protection.

Lucasfilm Limited and others v Ainsworth and another

Finally, the Supreme Court, in its first IP hearing, was invited to determine whether Imperial Stormtrooper helmets were works of sculpture and thus capable of copyright protection.

The helmets, which memorably featured in the Star Wars films, have been the cause of a long-running dispute between Lucasfilm, owner of copyrights in the artistic works created for the films, and Mr Andrew Ainsworth, who was involved in the original production of the helmets and subsequently made versions of the helmets for sale to the public. In the US, Lucasfilm obtained default judgment against Ainsworth for claims under US copyright law, but proceedings in the UK were less successful, with Lucasfilm failing to persuade both the High Court and the Court of Appeal that the helmets were works of sculpture pursuant to the CDPA 1988.

The Supreme Court has now unanimously upheld the lower courts' decisions. Lucasfilm had sought to argue that the helmets had no practical function at all, and therefore their purpose was wholly artistic. However, the justices considered that the helmet was utilitarian in the sense that it was an element in the process of production of the film. It was the film itself that was a work of art.

However, the decision should sound a note of caution for English IP defendants as the justices departed from the Court of Appeal findings in one respect, and held US copyright is enforceable by the courts of England and Wales. Following a review of the jurisprudence in relation to the justiciability of claims for infringement of foreign IP rights, the justices held that, in the case of a claim for copyright infringement, the English court would have jurisdiction where the defendant is English. The implications of the judgment will thus be felt a little closer to home than a galaxy far far away.

Conclusion

These judgments show that, as the technology that we use becomes increasingly complex, so too do the questions that the courts must consider in relation to protection of intellectual property rights.

They also demonstrate that the courts are increasingly unwilling to accept that third parties caught up in infringements should bear no responsibility. ISPs in particular should be particularly cautious about these new developments which place considerably more responsibility on their shoulders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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