Cartier International AG & Ors v British Telecommunications Plc & Anor (2018)
Trade mark owners who obtained website-blocking injunctions against internet service providers who were innocent conduits in relation to infringing activity carried out on websites to which they provided access, were required to indemnify the internet service providers against the costs of complying with the injunctions.
Five internet service providers (ISPs) appealed against an order requiring them to pay the costs of complying with injunctions requiring them to block access to websites which were being used to infringe trade marks belonging to the respondents.
The respondents designed, manufactured and sold luxury goods under well-known trade marks. The ISPs provided networks by which subscribers could access content on the internet; they did not provide or store content, were not in a position to monitor it, and had no contractual relationship with the operators of websites accessed through their networks. However, their networks enabled the sellers of infringing goods to reach customers. The injunctions, made pursuant to the Senior Courts Act 1981 s.37(1) and Directive 2004/48 art.11 required the ISPs to block, or attempt to block, access to certain websites selling counterfeit copies of the respondents' goods. In making them, the High Court rejected a jurisdictional challenge by the ISPs and required them to bear the costs of the litigation and of complying with the injunctions. The Court of Appeal upheld those decisions. The ISPs appealed against the costs orders.
The issue was who should pay the cost of implementing a website-blocking order obtained against an innocent intermediary to prevent its facilities being used for illegal purposes.
Legal basis for website-blocking injunctions - The blocking orders in the instant case could have been made under the ordinary principles of equity, quite apart from the power derived from EU law. The English courts could, in certain circumstances, order parties to assist those whose rights had been invaded by a wrongdoer. One example was the Norwich Pharmacal jurisdiction, which was commonly exercised to help a claimant bring or maintain proceedings against a wrongdoer, generally by requiring disclosure by innocent third parties unwittingly mixed up in the wrongdoing. However, that jurisdiction was not limited to the provision of information or to cases in which proceedings against the wrongdoers were anticipated, British Steel Corp v Granada Television Ltd  A.C. 1096, Ashworth Hospital Authority v MGN Ltd  UKHL 29 and Rugby Football Union v Viagogo Ltd  UKSC 55 followed. Once an intermediary was on notice of the infringement, it had a duty to stop placing its facilities at the wrongdoer's disposal, and the court had an equitable jurisdiction to intervene, Singularis Holdings Ltd v PricewaterhouseCoopers  UKPC 36 considered. In terms of costs, the practice was that, absent exceptional circumstances, the innocent intermediary was entitled to his costs of complying with the order, Totalise Plc v Motley Fool Ltd  EWCA Civ 1897 and Miller Brewing Co v Ruhi Enterprises Ltd  EWHC 1606 (Ch) applied (see paras 8-15 of judgment). National laws concerning intellectual property rights had been partially harmonised by Directive 2000/31, Directive 2001/29, and Directive 2004/48. Only the latter provided for the expense associated with the enforcement of judicial remedies, and that provision was limited and assumed that the infringer would be party to the litigation and would bear the costs of enforcing the rights-holder's rights. None of the Directives dealt with costs as between the rights-holder and the intermediary (paras 26-27).
Implementation costs - The incidence of the costs of implementation was a matter for English law, within the broad limits set by the EU principles of effectiveness and equivalence, and the requirement that any remedy should be fair, proportionate and not unnecessarily costly. The Directives did not require intermediaries to bear the costs of compliance as a quid pro quo for the immunities in the safe harbour provisions and the exclusion of a general monitoring obligation, L'Oreal SA v eBay International AG (C-324/09) EU:C:2011:474 and UPC Telekabel Wien GmbH v Constantin Film Verleih GmbH (C-314/12) EU:C:2014:192 considered. Unless there were good reasons for a different order, an innocent intermediary was entitled to be indemnified by the rights-holder against the costs of complying with a website-blocking order: the position was no different in principle from that in respect of Norwich Pharmacal orders, freezing orders and other injunctions requiring an innocent party to help a claimant assert its rights against a wrongdoer. The starting point was the intermediary's legal innocence. Under English law, an ISP serving as a mere conduit would not incur liability for trade mark infringement. Even if it learned that its network was being used for illegal content, it was not obliged to block access to that content; its only duty was to comply with any court orders. There was no legal basis for requiring a party to shoulder the burden of remedying an injustice if he had no legal responsibility for the infringement, and ISPs were not obliged to do so simply because they benefited financially from the content available on the internet, Twentieth Century Fox Film Corp v British Telecommunications Plc  EWHC 2714 (Ch) considered. Website-blocking injunctions were sought by rights-holders in their own commercial interests and were wholly directed to the protection of their legal rights, and there was no reason why the rights-holders should be entitled to look to anyone but the infringers for a contribution to the cost. In principle, they should indemnify ISPs against the costs of compliance, provided those costs were reasonable. In the instant case, the costs were neither excessive nor disproportionate and there was no reason to withhold the indemnity on discretionary grounds (paras 28-36). Critical to the foregoing conclusions was the legal innocence of the ISPs. Different considerations might apply to intermediaries engaging in caching or hosting activities (para.37).
Litigation costs - Intermediaries very rarely resisted website-blocking orders, and the normal practice would be to award them their costs of the action. In the instant case, the court had been entitled to award costs against the ISPs because they had strenuously resisted the application and made it a test case for whether the court had jurisdiction to make website-blocking injunctions in trade mark cases (paras 38-39).