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Author: John Richards | Co-Author: | Practices: , | Tags: , , , , , ,

European “INTERMEDIARIES” MAY BE FORCED TO TAKE ACTIVE MEASURES AGAINST TRADEMARK INFRINGEMENT COMMITTED BY THIRD PARTIES

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I. Introduction

Recent cases in the Court of Justice of the European Union (“CJEU”) and the Court of Appeal of England and Wales (“the English Court of Appeal”) have addressed the question of whether those who provide facilities to persons who infringe the trademark rights of others may themselves be liable for trademark infringement.

European Union Directive 2004/48/EC (the “Enforcement Directive”), sets out measures, procedures and remedies necessary to ensure the enforcement of intellectual property rights which are to be applicable in all countries of the European Union. Among these measures, Article 11 of the Enforcement Directive provides the possibility for Member States to issue injunctions against the infringer of an intellectual property right, as well as against “an intermediary, whose services are used by a third party to infringe an intellectual property right”.

Injunctions against intermediaries are based on the fact that such intermediaries (e.g. Internet Service Providers) are, in certain cases, in the best position to stop or to prevent an infringement 1. However, as the present article will show, the provision of Article 11 of the Enforcement Directive has created uncertainties as (i) to which kind of intermediaries may be subject to a specific measure when contributing to or facilitating an infringement,  as well as (ii) to the “conditions” for granting such injunctions.

The cases we will consider are decisions of the CJEU and the English Court of Appeal addressing the application of Article 11 of the Enforcement Directive to “intermediaries” in the on-line and physical marketplaces.

In the landmark case L’Oréal SA and Others v. eBay International AG and Others, (C-324/09) (“L’Oréal Case”), the CJEU stated that an operator of an Internet marketplace may be subject to injunctions to put an end to and prevent further trademark infringements committed by Internet users. This decision was applied by the English Court of Appeal in July 6, 2016, in Cartier International and Others v. BSkyB and others (“Cartier Case”), which also granted an injunction requiring certain Internet Service Providers to block access to websites selling counterfeit goods. Following the same trend, in the recent case Tommy Hilfiger Licensing and Others v. Delta Center a.s. (C-494/15) (“Tommy Hilfiger Case”), the CJEU has applied the principles underpinning the online commerce field to the “physical world.” In its decision, the CJEU held that the operator of a “physical” marketplace — who sublease sales areas to market-traders who, in these areas, sell counterfeit goods — may be forced to put an end to trademark infringements committed by the market-traders, as well as to take action against the latter to prevent further infringements.

II. The Enforcement Directive

The Enforcement Directive concerns the measures, procedures and remedies necessary to ensure the enforcement of intellectual property rights 2. The scope of the Enforcement Directive is very broad and encompasses all the intellectual property rights covered by the European Union provisions, as well as those covered by the national laws of the Member States.

Like all the European Union’s Directives, the present Directive “shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods3.

The Enforcement Directive establishes, in turn, the threshold conditions that these measures should meet to be issued at a national level. To achieve this, Article 3 provides that the measures issued by Member States must be: (i) effective, (ii) proportionate, (iii) dissuasive, (iv) not unnecessarily complicated or costly, and (v) not capable of creating barriers to legitimate trade. Also, such measures shall (vi) be fair and equitable, (vii) strike a fair balance between the intellectual property rights and the freedom to conduct business, and (viii) provide a safeguard against their abuse. Such measures encompass the gathering and preservation of evidence 4  and the powers to force offenders to provide information on the origin and the distribution network of the goods which infringe intellectual property rights 5. They also include provisional and precautionary measures (such as interlocutory injunctions 6 or seizures of suspect goods 7), corrective measures 8, injunctions 9, pecuniary compensation 10, damages, as well as publication of judicial decisions 11.

In particular, Member States have the power to issue injunctions (i) to provide the immediate termination of infringements without awaiting a decision on the substance of the case 12, as well as (ii) to prevent further infringements of intellectual property rights, Recital 24 of the Enforcement Directive specifically pointing out the importance of preventing further infringements. The power to grant injunctions against intermediaries is set out in the third sentence of Article 11 of the Enforcement Directive which states that:

Member States shall also ensure that right holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right, without prejudice to Article 8(3) of Directive 2001/29/EC13.

III. The application of the Enforcement Directive to on-line commerce: the L’Oréal Case

In 2005, L’Oréal SA and its subsidiaries filed a lawsuit in the English High Court against the online marketplace operator eBay. In particular, L’Oréal claimed that eBay did not do enough to prevent infringing activities of third parties, who offered counterfeiting products in the eBay online marketplace. Thus, L’Oréal asserted that, although eBay was not liable for the infringements of its trademark rights, it should be subject to an injunction by virtue of Article 11 of Enforcement Directive. The English court stayed the proceedings and referred several questions concerning the obligations to which an Internet marketplace operator may be subject in order to prevent trademark infringements by the Internet users to the CJEU.

For the purpose of the present Article, here will be analyzed solely the tenth question referred to the CJEU, specifically:

whether the services of an intermediary such as an operator of a website have been used by a third party to infringe a registered trade mark, does Article 11 of [Directive 2004/48] require Member States to ensure that the trade mark proprietor can obtain an injunction against the intermediary to prevent further infringements of the said trade mark, as opposed to continuation of that specific act of infringement, and if so what is the scope of the injunction that shall be made available?

The decision of the CJEU

a) The operator of an online marketplace may be ordered to take measures not only to end the infringements of intellectual property rights, but also to prevent further infringements of that kind.

Answering the aforementioned tenth question, the CJEU clarified that the third sentence of Article 11 of the Enforcement Directive must be interpreted as requiring the Member States to ensure that the national courts (with jurisdiction in relation to the protection of intellectual property rights) are able to order the operator of an online marketplace to take measures which contribute not only to end the infringements of intellectual property rights, but also to prevent further infringements of that kind.

Therefore, such operators may be ordered to take measures aimed at stopping and preventing the trademark infringements, regardless of any liability of their own in relation to the fact at issue.

In the present case, the CJEU had no doubt that eBay, as an operator of online marketplaces, was an intermediary within the meaning of Article 11 of the Enforcement Directive.

As to the type of measures that an operator of online marketplaces may be required to take, the CJEU held that a restrictive interpretation of Article 11 – confining it just to an obligation to provide for the ending of the infringement by the operator of an online marketplace – would be in conflict with Recital 24 of the Enforcement Directive, which expressly refers to the need for measures aimed at preventing further infringements of intellectual property rights.

b) The conditions for granting an injunction against intermediaries

The CJEU also clarified the conditions that must be met for granting an injunction against the operator of an online marketplace. Noting that Article 3 of the Enforcement Directive requires that measures, procedures and remedies adopted under the directive must be “effective, proportionate, dissuasive and must not create barriers to legitimate trade”, the CJEU held that an intermediary, such as an online marketplace operator, cannot be required to exercise an “active”, “general” and “permanent” control over its customers 14. Such control would be unfair, disproportionate, and excessively costly 15.

Similarly, an injunction obtained against an operator cannot have, as its object or effect, a “general and permanent prohibition” on the selling in that marketplace of goods bearing the infringed trademarks 16. An injunction of this kind would be in conflict with the requirement that the measures should not create barriers to legitimate trade 17.

By contrast, an intermediary may, for example, be ordered to take a measure to identify the third parties who infringed the intellectual property rights, since the present measure appears compatible with the provisions of the Enforcement Directive.

IV. The English Court of Appeal’s application of the Enforcement Directive to on-line commerce: the Cartier Case

In 2014 plaintiffs, Cartier, Montblanc and Richemont, and others, filed a lawsuit against the defendant, five United Kingdom Internet Service Providers, to obtain an injunction requiring the Internet Service Providers to block, or impede access, to a number of websites which advertised and sold plaintiffs’ counterfeit goods.

The High Court granted such injunctions with a decision that the Internet Service Providers challenged before the English Court of Appeal.

The decision of the English Court of Appeal

a) The threshold conditions that must be satisfied before granting an injunction

With its decision, the English Court of Appeal upheld the High Court’s decision to grant an injunction requiring the Internet Service Providers to block access by their customers to certain websites (“the target websites”) which were advertising and selling counterfeit copies of the trademark owners’ goods.

This was the first time a United Kingdom Court granted an injunction against intermediaries in a case related to a trademark infringement. Previously, English Courts had issued injunctions solely in copyright infringement cases, due to the lack of statutory provisions in the United Kingdom which allow national Courts to issue measures of this nature with respect to trademark infringements.

In the present decision, the English Court of Appeal upheld the threshold conditions that the High Court had delineated, and that must be satisfied before granting an injunction 18.

Accordingly, to grant an injunction: (i) the Internet Service Provider must be an intermediary within the meaning of the third sentence of Article 11 of the Enforcement Directive, (ii) the Internet users must be infringing the claimant’s trademarks, and (iii) the Internet users must use the services of the Internet Service Provider 19.

According to the judgment of the English Court of Appeal, in this case all the threshold conditions were satisfied. In particular:

  • Regarding the first condition, similar to the judgment of the CJEU in the L’Oréal Case, the Court had no hesitation in holding that five Internet Service Providers were intermediaries within the meaning of Article 11 of the Enforcement Directive.
  • As to the second threshold requirement, the Court found that Internet users had infringed the plaintiff’s intellectual property rights (since they used signs which were identical to the registered trademarks in relation to goods which were identical to those for which the trade marks were registered).
  • Finally, the Court stated that also the third condition was met, since Internet users had used the services of the five Internet Service Providers “to access the websites” where they infringed plaintiffs’ trademarks. In addition “[t]he advertisements and offers for sale of the counterfeit goods were communicated to consumers in the United Kingdom using the services of the ISPs, and the agreements to sell and supply counterfeit goods to consumers in the United Kingdom were made using the services of the ISP20.  In this context, the fact that there was no contractual relationship between the Internet Services Providers and the operators of the websites, or that the Internet Services Providers did not exercise any control over the particular services of which those consumers made use, was irrelevant, since the Internet Services Providers were “essential actors in all of the communications between the consumers and the operators of the target websites 21”.

b) The application of the principles established at the European Union level

In considering whether an injunction should be granted, the English Court of Appeal applied the principles established by Article 3 of the Enforcement Directive 22 and applied in the L’Oréal Case.

In this context, the English Court of Appeal interestingly specified that an injunction (in the form of a blocking order like in the present case) is deemed:

  • “Effective” when such injunction “have the effect of making access to the target website difficult to achieve and of seriously discouraging internet users from accessing it 23, even if it does not lead to a complete cessation of the infringement.
  • “Proportionate” when a fair balance is reached between, on the one hand, the intellectual property rights and, on the other hand, the Internet Service Providers’ freedom to conduct business. This may occur when there is a large number of “alternative websites 24”, which are likely to be equally accessible and appealing to the interested users.
  • “Unable to create barriers to legitimate trade” when the measures adopted by the Internet Services Providers are “strictly targeted” so that they do not affect users who are using the Internet Services Providers’ services “lawfully 25”.

According to the English Court of Appeal, all the aforementioned principles were satisfied in the Cartier Case.

V. The application of the Enforcement Directive to the physical world: Tommy Hilfiger Case

Tommy Hilfiger and other manufacturers and distributors of branded products discovered that counterfeits of their goods were sold by certain market-traders in a marketplace in Pragu. Delta Company was the operator that sublets to these market-traders the sales areas in that market. On this basis, Tommy Hilfiger and the other manufacturers filed a lawsuit and asked the Czech Court to order Delta Company to stop subleasing sales areas to the market-traders who committed the trademark infringements.

The Nejvyssi soud (i.e., the court of last resort in Czech Republic) decided to stay the proceedings and to refer the following questions to the CJEU for a preliminary ruling:

  1. “Is a person with a lease of premises in a market, who provides stalls and pitches on which stalls may be placed to individual market-traders for their use, an intermediary whose services are used by a third party to infringe an intellectual property right within the meaning of Article 11 of the Directive of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, and
  2. Is it possible to impose on a person with a lease of premises in a market, who provides stalls and pitches on which stalls may be placed to individual market-traders for their use, measures, as provided for in Article 11 of Directive 2004/48/ EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, under the same conditions as those formulated by the Court of Justice in its judgment of 12 July 2011 in Case C-324/09 L’Oréal and Others v eBay and Others with regard to the imposition of measures on the operators of an online marketplace?

The CJEU decision

a) The operator of a physical marketplace as an “intermediary” within the meaning of Article 11 of the Enforcement Directive

As to the first question, the CJEU clarified that an operator of a physical marketplace, who sublets the market’s sales areas to market-traders – who use their area to sell counterfeit products – falls within the notion of “intermediary whose services are being used by a third party to infringe an intellectual property right”, provided by the third sentence of Article 11 of the Enforcement Directive.

In the present case, the CJEU clarified that to be an “intermediary” for the purpose of Article 11 of the Enforcement Directive, an economic operator has to provide “a service capable of being used by one or more other persons in order to infringe one or more intellectual property rights26.

Similar to the judgement of the English Court of Appeal in the Cartier Case, the CJEU further clarified that it is irrelevant that the operator of the marketplace maintains a “specific relationship” with those using the service, or that the same provides “a service other than the one which is used by the third party”.  The threshold question is whether third parties used the “services” provided by the operator of the marketplace to infringe trademark rights.

To rule on this issue, the CJEU compared the present case with two decisions in which the same issue had arisen in relation to the infringement of copyright in the on-line commerce field. In LSG-Gesellschaft zur Wahrnehmung von Leistungsschutzrechten GmbH v. Tele2 Telecommunication GmbH, the CJEU 27 considered intermediaries the Internet Service Providers who merely “enable clients to access the Internet” because, in this way, they supply the Internet users with the means to enter the virtual market where they infringed intellectual property rights.

Further, in UPC Telekabel Wien GmbH v. Constantin Film Verleih GmbH 28, the CJEU held that an Internet Service Provider may be regarded as an intermediary within the meaning of Article 11 of the Enforcement Directive, because it is “an inevitable actor in any transmission of an infringement over the internet between one of its customers and a third party, since, in granting access to the network, it makes that transmission possible”.

Applying these principles to the “physical” market, the CJEU held that a marketplace operator, who subleases to third parties sales areas used by the latter to commit trademark infringement, can be classified as an “intermediary” within the meaning of Article 11 of the Enforcement Directive.

In this context, the market operator is indeed the person who provides market-traders with the “services” capable of being used by third parties to infringe intellectual property rights. More specifically, by granting market-traders “access” to the marketplace where they sell counterfeit goods, the operator of a physical marketplace gives the infringers the means to make the trademark infringement possible.

b) The conditions for an injunction within the meaning of Article 11 of the Enforcement Directive

As to the second question, the CJEU held that the third sentence of Article 11 of the Enforcement Directive must be interpreted as meaning that the “conditions” for an injunction against “physical” intermediaries are “identical to those for injunctions which may be addressed to intermediaries in an on-line marketplace” set forth in the L’Oréal Case (and analyzed above).

As the CJEU clarified in the Tommy Hilfiger Case, the fact that in the L’Oréal Case the injunction was issued against on-line intermediaries is irrelevant 29, since the scope of the Enforcement Directive is not limited to situations which occur in the online marketplace, and must be applied also to physical marketplaces.

Therefore, as presently seen in the online commerce field, also in the “physical market” it is not possible to require a marketplace operator to exercise a general and permanent control over its customers 30. A similar control, indeed, would be in contrast with the provisions of Article 3 of Enforcement Directive.

However, once an operator becomes actually aware of the trademark infringement, it may be forced by judicial injunctions to stop such infringements and to take measures to avoid future (identical or similar) trademark violation made by the same individuals.

VI. Conclusion

After the L’Oréal Case, the extension of the notion of intermediary to operators of physical marketplaces was expected. To exclude such operators from the scope of the Enforcement Directive would indeed diminish the protection granted to intellectual property holders at the European Union level, and would not comply with the same Enforcement Directive which aims at granting “high, equivalent and homogeneous” 31 level of protection of intellectual property in the internal market.

Overall, the decisions analyzed may represent a favorable shift for intellectual property owners seeking to limit the sale of their counterfeit goods.

Trademark owners may now obtain an injunction, under Article 11 of the Enforcement Directive, not only against the third party infringing their trademark, but also against the operator of an online or a physical marketplace, whose services have been used to infringe trademark rights. In addition, operators of online and physical marketplaces have to play a more active role in fighting trademark infringements, by effectively ending such infringement as well as by preventing future infringements of the same kind.

It would be interesting, from now on, to observe how the general principles set forth by the CJEU will be applied “in the real world”, and in particular which type of injunctions will be actually issued by Member States to require intermediaries to “prevent” future trademark infringements committed by third parties.

  1. This interpretation is confirmed by Articles 12(3), 13(2) and 14(3) and by Recital 45 of the e-commerce Directive and Recital 59 of Directive 2001/29/EC on the harmonization of certain aspects of copyright and related rights in the information society.
  2. Article 1 of the Enforcement Directive.
  3. Article 288 of the Treaty on the Functioning of the European Union.
  4. Article 6 and 7 of the Enforcement Directive.
  5. Article 8 of the Enforcement Directive.
  6. Article 9 of the Enforcement Directive.
  7. Article 9 of the Enforcement Directive.
  8. Article 10 of the Enforcement Directive.
  9. Article 11 of the Enforcement Directive.
  10. Article 12 of the Enforcement Directive.
  11. Article 15 of the Enforcement Directive.
  12. Recitals 22 of the Enforcement Directive.
  13. Article 8(3) of Directive 2001/29 (“the Copyright directive”) provides that “Member States shall ensure that rights holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right.
  14. L’Oréal Case, paragraph 131.
  15.  L’Oréal Case, paragraph 139 and Article 3 of the Enforcement Directive.
  16. L’Oréal Case, paragraph 140.
  17. L’Oréal Case, paragraph 139 and Article 3 of the Enforcement Directive.
  18. The Court of Appeal also clarified that the same had jurisdiction to grant the site-blocking injunctions. Despite the lack of a specific statutory provision in the United Kingdom’s trademark legislation, the jurisdiction to grant an injunction of this kind against an intermediary in a case of trademark infringement can be derived from Section 37(1) of the Senior Courts Act 1981 which gives the High Court the right to grant an injunction “in all cases in which it appears to be just and convenient to do so” in combination with Article 11 of the Enforcement Directive, which provides that “Member States shall…ensure that rights holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right”.
  19. The English Court of Appeal also clarified that, as a fourth condition, ISPs must have actual knowledge of this in compliance with the E-Commerce Directive (Directive 2000/31/EC).
  20. Cartier Case, paragraph 95.
  21. Cartier Case, paragraph 95.
  22. According to which Member States must issue solely injunctions that are effective, proportionate, dissuasive and do not create barriers to legitimate trade.
  23. Cartier Case, paragraph 116.
  24. Cartier Case, paragraph 125.
  25. Cartier Case, paragraph 123.
  26. Tommy Hilfiger Case, paragraph 23.
  27. CJEU, Order of February 19, 2009 in LSG-Gesellschaft zur Wahrnehmung von Leistungsschutzrechten, (C?557/07), paragraph 43): “Access providers who merely enable clients to access the Internet, even without offering other services or exercising any control, whether de iure or de facto, over the services which users make use of, provide a service capable of being used by a third party to infringe a copyright or related right, inasmuch as those access providers supply the user with the connection enabling him to infringe such rights”. See also paragraph 44): “it must be held that an internet service provider, such as that at issue in the main proceedings, which allows its customers to access protected subject-matter made available to the public on the internet by a third party is an intermediary whose services are used to infringe a copyright or related right within the meaning of Article 8(3) of Directive 2001/29”.
  28. CJEU, Judgment of March 27, 2014 in UPC Telekabel Wien, (C?314/12), paragraph 32).
  29. Tommy Hilfiger Case, paragraph 36.
  30. L’Oréal Case, paragraph 131.
  31. Recitals 10 of the Enforcement Directive.
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