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Tuesday, August 30, 2016

Access denied: counterfeiters not welcome online

By Emma Gorrie, Lawyer

Legislation in the UK and Australia expressly provides for injunctions against ISPs in the context of copyright infringement, but not for trade mark infringement. A recent UK Court of Appeal decision, Cartier International AG v British Sky Broadcasting Ltd [2016] EWCA Civ 658, confirmed that there is a power to grant injunctions against ISPs to defeat trade mark infringement.

Background


In the High Court, the judge ordered ISPs to block certain websites advertising and selling counterfeit luxury goods, that the ISPs should bear the costs of implementing the blocking orders, and also awarded the costs of the substantive hearing to the trade mark holders. The ISPs appealed, contending that:

  • the court had no jurisdiction to make the orders;
  • if the court had jurisdiction, the jurisdictional threshold requirements were not satisfied;
  • the judge failed properly to identify the correct principles to be applied;
  • the orders were disproportionate having regard to the evidence;
  • the judge erred in making the orders he did in relation to costs.

The appeals were dismissed.

Legal Framework


The general power to grant injunctions is captured in s 37(1) of the Senior Courts Act 1981 (UK), which states '[t]he High Court may by order (whether interlocutory or final) grant an injunction … in all cases in which it appears to be just and convenient to do so.'

The UK Parliament inserted s 97A into the Copyright, Designs and Patents Act 1988 in order to transpose Article 8(3) of the EU's Information Society Directive into domestic law. Article 8(3) requires EU member states to ensure that rightholders 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.

Article 11 of the later Enforcement Directive effectively broadens the protection available under Article 8(3) of the Information Society Directive to intellectual property rights other than copyright. Article 11 does so by requiring member states to ensure that rightholders 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. Article 11 has not been transposed into UK law.


Reasoning


Jurisdiction


The Court of Appeal rejected the view that the power to grant injunctions is limited to particular circumstances, preferring the view that injunctions may issue in new categories where appropriate in accordance with general equitable principles.

The Court of Appeal confirmed that the threshold conditions which must be met before a website blocking order is made are:

  1. the ISPs must be 'intermediaries';
  2. either the users or operators of the website must be infringing the claimant's trade marks;
  3. either the users or operators of the website must use the services of the ISPs;
  4. the ISPs must have actual knowledge of the use in (3).

The ISPs conceded that they were intermediaries. The finding that the website operators were infringing trade marks was not challenged on appeal. The Court of Appeal confirmed that the operators were using the services of the ISPs to infringe, as the services of the ISPs allowed consumers to access the websites, were used to communicate the advertisements and offers for sale, and were used to make the agreements to sell and supply the goods. There was no dispute that if the operators of the websites used the services of the ISPs to infringe, then the ISPs had knowledge of this. Accordingly, all of the threshold conditions for making a website blocking order were met.

Principles to be applied


In the High Court, counsel for the ISPs submitted to the judge that the relief must:

  1. be necessary;
  2. be effective;
  3. be dissuasive;
  4. not be unnecessarily complicated or costly;
  5. avoid barriers to legitimate trade;
  6. be fair and equitable and strike a 'fair balance' between the rights of the ISPs and rights of the rightholders; and
  7. be proportionate.

The judge agreed that the relief must satisfy these requirements, also considering the substitutability of other websites and the requirement that remedies should be applied in a way that also safeguards against abuse of those remedies.

'Necessity' was taken to mean that there is no less-onerous means available of protecting intellectual property rights than a website blocking order. 'Effectiveness' does not require that an order must be likely to reduce the overall level of infringement. However, there is a link between effectiveness and proportionality in that a blocking order is less likely to be proportionate if there is a wide range of easily accessible alternative websites to the blocked site. Dissuasiveness refers to whether a blocking order will have a deterrent effect on other infringers or would-be infringers. The principle that an order must not be unnecessarily complicated or costly applies to the process for rightholders to obtain remedies, but also applies to the measures implemented by ISPs. Avoiding barriers to legitimate trade requires that blocking measures are appropriately targeted so that lawful information is still accessible. The requirement that an order is fair and equitable is met in part by ensuring an order is proportionate. Proportionality requires balance between intellectual property rights of the rightholders and the freedom of the ISPs to conduct business.

The judge summarised the question on proportionality as whether the likely costs burden on the ISPs is justified by the likely efficacy of the blocking measures and benefit to the rightholders, considering the availability of alternative measures and the substitutability of the websites. The judge concluded that in the circumstances before him, the costs burden was justified.

The Court of Appeal agreed with the principles to be applied as determined by the High Court. The Court of Appeal also agreed that, based on the application of these principles, the orders should be made. The Court decided 2:1 that the costs of implementing the blocking orders should be borne by the ISPs. The majority did not rule out that there may be instances where rightholders should bear the implementation costs.

Costs of the action


The judge held, and the Court of Appeal confirmed, that the ordinary costs rules should apply. This means that the unsuccessful party, in this case the ISPs, pays the successful party's costs.


Significance – Aussie ISPs on notice?


The online environment is a favoured marketplace for pirates and counterfeiters. This is thanks to benefits such as anonymity, flexibility, and access to a huge customer base. Specific to counterfeiting, a further benefit is that the customer does not have a chance to inspect products for quality as they might in a bricks-and-mortar store. This decision recognises that trade mark owners need the same protections as copyright owners when it comes to rights infringement in the online context.

Like the UK, Australia is also missing an express right to seek blocking orders against ISPs in relation to trade mark infringement. In addition, Australia has a similarly broad jurisdiction to grant relief. However, Australia is not obliged to observe EU laws. In these circumstances, Australian courts may or may not adopt a similar approach to that taken in the UK.

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