The UK Supreme Court has ruled that the costs for blocking access to websites selling counterfeit products do not have to be paid by internet service providers (ISPs). When a website-blocking injunction is obtained against an ISP, as an innocent intermediary, to prevent the use of its facilities by wrongdoers for unlawful purposes, the IP rights-holders whose commercial interests are being protected cannot look for a contribution to their legal costs from anyone but the infringers.
In 2014 the English High Court granted Cartier an injunction to prevent major UK ISPs, including BT, Sky, TalkTalk, EE and Virgin Media, from allowing access to websites selling counterfeit luxury goods such as jewellery and watches. Importantly, the Cartier case was the first to confirm the availability of website-blocking injunctions in the context of trade mark infringement; until then such orders had been granted only against copyright infringement. The High Court also ordered the ISPs to pay Cartier the costs incurred in implementing the website-blocking order. Two of the ISPs appealed arguing that they should not have to pay such costs. In 2016, the Court of Appeal dismissed the appeal and confirmed that the ISPs should pay the costs of the blocking orders. The Supreme Court disagreed and has unanimously allowed the ISPs' appeal. Lord Sumption gave the lead judgment, with which the other judges agreed.
The Supreme Court decided that the question of who should bear the costs of compliance with site-blocking injunctions is a matter of national law. Unlike the Court of Appeal, the Supreme Court took the view that none of the relevant EU Directives says anything about the incidence of compliance costs – only that insofar as they are borne by the intermediary they must not be excessive.
The Supreme Court found that the basis for granting site-blocking injunctions against innocent intermediaries lay in the equitable jurisdiction of the English courts and did not have to be derived from EU Directives. Under English law the ordinary principle is that unless there are good reasons for a different order an innocent intermediary is entitled to be indemnified by the rights-holder against the costs of complying with a website-blocking order. The Supreme Court held that the position in relation to website-blocking orders is no different in principle from the established position for Norwich Pharmacal orders, freezing orders and other injunctions requiring an innocent party to assist the claimant in the assertion of its rights against a wrongdoer.
The Supreme Court attached importance to the fact that a 'mere conduit' ISP could not be liable for trade mark infringement under English law, even in the absence of the liability protection provided by the E-Commerce Directive. That meant that as an innocent intermediary its only duty was to comply with an order of the Court. There was no legal basis for requiring a party to shoulder the burden of remedying an injustice if it has no legal responsibility for the infringement and is not a volunteer but is acting under the compulsion of an order of the court.
The Supreme Court rejected the view that because ISPs benefit financially from the volume and appeal of the content available on the internet, including content which infringes intellectual property rights, it is fair to make them contribute to the cost of enforcement. This assumed a degree of responsibility on the part of the intermediary which did not correspond to any legal standard. Lord Sumption observed that the suggestion appeared to be that there was a moral or commercial responsibility in the absence of a legal one. But the law was not generally concerned with moral or commercial responsibilities except as an arguable basis for legal ones.
Even if moral or commercial responsibility were relevant, Lord Sumption considered it would be hard to discern one in a case like this. Website-blocking injunctions are sought by rights-holders in their own commercial interest. They are wholly directed to the protection of the claimant’s legal rights, and the entire benefit of compliance with the order inures to the rights-holder. He considered that the protection of intellectual property rights is ordinarily and naturally a cost of the business which owns those rights and has the relevant interest in asserting them, rather than a cost of the business of an ISP which has nothing to do with the rights in question but is merely providing a network which has been abused by others. There was therefore no reason why the rights-holder should be entitled to look for contribution to the cost of defending its rights to anyone other than the infringers.
Lord Sumption went on that there is a public interest in the enforcement of intellectual property rights, just as with other legal rights, since intellectual property rights are created by law as a reward for innovation and enterprise which confer wider public benefits. But that made no difference to the analysis. It supplied the reason why the rights exist, but the public interest in their enforcement was not wider or different from the private interest of the rights-holders.
Lord Sumption drew a potential distinction between conduits and other intermediaries, holding that it was critical to its conclusions that the intermediary in question was "legally innocent". The ISPs in this case were legally innocent because they were “mere conduits”.
He noted that different considerations might apply to intermediaries engaging in caching or hosting governed by articles 13 and 14 of the E-Commerce Directive, because these operations involve a greater degree of participation in the infringement. This was more likely to infringe national laws protecting intellectual property rights if the conditions of immunity were not satisfied, depending on the precise facts and on the relevant provisions of national law.
However Lord Sumption commented that, for his part, he would not accept that the mere fact, without more, that the immunities of caching and hosting intermediaries under Articles 13 or 14 of the E-Commerce Directive are conditional on active steps being taken against the infringer in certain circumstances, is enough to require a court to make intermediaries covered by those articles pay the costs of compliance.
Website-blocking injunctions remain a useful tool for brand owners against online infringers and counterfeiters. The Supreme Court has, however, clarified that brand owners must factor the cost of such enforcement into their own budgets and cannot seek to recoup the costs from legally innocent ISPs. More broadly, the Supreme Court has confirmed that there is a basis for granting site-blocking injunctions in domestic English law apart from EU Directives. This may encourage claimants other than copyright and trade mark owners to seek such injunctions against ISPs.