Counterfeit Goods and Online Sales

In 2014 the technology law landscape changed significantly when the High Court in England ordered some of Britain’s largest internet service providers (ISPs) to block access to websites purportedly selling counterfeit goods.

The case was brought by the Richemont Group (owners of the Cartier and Mont Blanc brands), who were successful in obtaining orders to prevent ISPs linking to websites which appeared to infringe registered trademarks owned by the Richemont Group.

The case was, at that time, something of a watershed in that no specific legislative provision existed to provide owners of registered trademarks with a remedy in this respect. Instead, the court relied on its powers under Section 37(1) of the Senior Courts Act 1981 which allows the High Court to grant an injunction “in all cases in which it appears to the Court to be just and convenient to do so”. That power, does not, of course, extend to Scotland. In Scotland, like England, there is no specific statutory power in respect of trade marks which would assist the courts. However, while the Scottish courts could not make provision in terms of the Senior Courts Act, on the face of it there is no reason why the courts could not grant interdict on the basis of the common law or by exercising the nobile officium.

Of more recent significance is the decision of the Supreme Court in June of this year which represented a notable innovation on the widely accepted rule of thumb that “expenses follow success” in court proceedings. It is generally accepted in litigation that the unsuccessful party will likely have to bear the opposing party’s judicial expenses and the costs of compliance with any court order. Only in exceptional circumstances is the general rule departed from. That said, the Supreme Court was sympathetic to the ISPs’ concerns that making an order requiring that the ISPs to bear the cost of complying with blocking orders in an age when counterfeit goods are rife, would be unduly onerous on the ISPs. At first instance, the High Court ruled that the ISPs should block content from the offending websites and that the ISPs should also bear the costs of implementing those orders. That decision was upheld on appeal by the ISPs to the Court of Appeal. However, the ISPs appealed again to the Supreme Court, this time only in relation to the matter of liability for implementation costs.

The Supreme Court held that there was no legal basis to require ISPs to meet the costs of complying with the blocking injunctions and, unlike the High Court and Court of Appeal, it did not appear to consider it appropriate to use any discretionary powers at its disposal to require the ISPs to meet those costs. Allowing the appeal, the Supreme Court ruled that while ISPs are under an obligation to implement blocking orders, they are not obliged to meet the costs of doing so and the holders of the trade mark rights will have to meet the costs of implementation by the ISPs to give effect to the injunctions.

Many rights holders no doubt hoped that having to meet the costs of implementing blocking orders would encourage more proactive policing of content by ISPs. However, it is difficult to dispute the fact that the task (and associated costs) of regulating content where some degree of knowledge of the parties’ underlying rights is required would be significant. It therefore remains the responsibility of the rights holders to meet these costs.

This development will be of no doubt interest to Scottish rights holders and, in theory, there is no reason why litigation in this area should not be developed north of the border. A Scottish case on this point is awaited with interest.

Contact:

Lynn Richmond, Partner lyr@bto.co.uk T: 0131 222 2939