United States: Counterfeit Goods: Has The War On ISPs Just Gotten Tougher?

Last Updated: October 29 2014
Article by Sarah Wells and Chris Coulter

The pressure on ISPs to take responsibility for the sites accessible through their services has been growing in recent years (e.g., the requirement for certain ISPs to block filesharing sites). On October 17, 2014, the High Court of England and Wales took this one step further by granting a website-blocking order against certain ISPs in a case involving counterfeit goods. This case is notable for the fact that the infringement related to trademarks and not copyright. While English copyright law has a provision under which blocking injunctions may be sought, there is no statutory equivalent under trademark law, yet an injunction was still granted. Has the war on ISPs just gotten tougher?

The ISPs in question were Sky, BT, EE, TalkTalk and Virgin, and the matter centered around six websites that advertise and sell counterfeit goods (such as Cartier and Montblanc). The claimants (trademark owners in the Richemont/Cartier group) sought a blocking injunction from the ISPs for these six sites.

In reaching his decision to grant the blocking injunction, Mr. Justice Arnold focused on (a) whether the court had jurisdiction to grant the injunction; (b) whether such an injunction could be granted where no specific statutory legislation was in place relating to this remedy; and (c) whether the threshold conditions were met for granting such an injunction.

Having established that the court did indeed have jurisdiction, Mr. Justice Arnold noted that, although there is no specific legislation providing for injunctions in cases of trademark infringement, to grant such an injunction against a non-infringing party would nevertheless be consistent with EU law and UK policy. Further, Mr. Justice Arnold noted that "the 1994 [Trade Mark] Act both confers remedies against persons who are not necessarily infringers . . . and yet does not purport to contain a comprehensive code of the remedies available to a trade mark proprietor . . . More generally, there is nothing inconsistent between granting an injunction against intermediaries . . . and the provisions of the 1994 Act." Thus, in this instance, the court held that an injunction could be granted even where no specific statutory legislation was in place.

Mr. Justice Arnold then focused on whether the threshold conditions for an injunction (in this case a website-blocking order) were met:

  1. Is the defendant an intermediary within the meaning of Article 11 of the Enforcement Directive (Directive 2004/48/EC)? The court determined that ISPs clearly fall into this category.
  2. Do the users and/or the operators of the website in question infringe the claimant's trademarks? The court determined that each of the six websites did infringe because each provided goods bearing signs identical to the trademarks in dispute, and sold these goods in response to orders without consent of the claimants.
  3. Do users and/or the operators of the websites use the ISP's services to infringe? Mr. Justice Arnold held that the answer to this question was yes. The ISPs have an essential role, as it is via their services that the advertisements and offers for sale are communicated to users in the UK. Even if UK consumers don't purchase any goods, the first act of infringement is already complete based just on the advertisements.
  4. Do the ISPs have actual knowledge? Here again, the court held in the affirmative: If the operators of the websites in question use the ISPs' services to infringe, then the ISPs have actual knowledge of the infringement, based on the fact that the claimants sent notices to the ISPs and the other evidence produced.

In considering whether the injunction would unduly interfere with the ISPs' freedom to carry on business and Internet users' freedom to receive information, Mr. Justice Arnold considered that no new technology would be required to block the sites in question and, although alternative measures such as takedown and de-indexing were available, these measures would not be as effective as an injunction and would not be less burdensome. However, he did adopt certain points made by the Open Rights Group, including requiring that additional information be provided to users when they attempt to access the blocked sites and limiting the order to an initial two-year period.

The Internet is increasingly used in the counterfeit goods trade. A study published in 2008 by the Organisation for Economic Co-operation and Development entitled The Economic Impact of Counterfeiting and Piracy estimated that the value of counterfeited and pirated goods moving through international trade alone in 2005 amounted to US$200 billion. In 2014 the European Commission published its Report on EU Customs Enforcement of Intellectual Property Rights: Results at the EU Border, which recorded that, in 2012, customs authorities at the external borders of the EU seized a total of over 39.9 million articles, representing a market value of almost €900 million, with the UK seizing more articles than any other Member State. It remains to be seen, however, whether this case, acknowledged by Mr. Justice Arnold as a test case, will open the floodgates for trademark owners affected by this widespread issue or, given that domain names can be easily purchased and new sites quickly set up, will have little real impact.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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Sarah Wells
Chris Coulter
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