Blocking orders in relation to counterfeit goods

Who is liable to pay the costs of implementing a blocking order?

The background

The claimants (entities within the Richemont group, which owns brands such as Cartier and Montblanc) brought a claim against the five major ISPs in the UK after certain websites were selling counterfeit goods infringing the claimants' registered trade marks.

In 2016, the Court of Appeal (confirming the earlier decision of the High Court) held that the defendant ISPs, whilst not guilty of wrongdoing, were inevitably instruments and actors in the infringing activities of websites selling the counterfeit goods.  As a result, it was decided that the High Court was entitled to order the ISPs to bear the costs of the implementation of the blocking order.

In reaching this decision, the Court of Appeal relied on European legislation (in particular, the 'InfoSoc Directive' and the 'Enforcement Directive').  The Court of Appeal found that both directives were implicit in deeming it appropriate for intermediaries to bear the costs of implementing the blocking order.  One Court of Appeal judge disagreed on this point (Briggs LJ, before joining the Supreme Court).  Briggs LJ considered the issue of costs to be a domestic one.

Two of the ISPs appealed to the Supreme Court on the question of who should bear the costs of implementing the website blocking orders.  They argued that neither the InfoSoc Directive, nor the Enforcement Directive provided a precedent or binding authority on the issue.  The ISPs also argued that there were no CJEU judgments which provided such authority.

The decision

The Supreme Court agreed with the appellant ISPs, concluding that the matter was an issue for domestic English law, provided it was applied within the broad parameters set by the EU (i.e. provided that any remedy is fair, proportionate and not unnecessarily costly).

The Supreme Court held that as a matter of English law, the general rule was that an innocent respondent intermediary ought to be indemnified by the applicant for the costs incurred in implementing the blocking order (unless there was a good reason to order differently). 

It was decided that the position was no different from other forms of injunctive relief which required an innocent party to assist a claimant in asserting its rights – such as Norwich Pharmacal orders.

The starting point, said the Supreme Court, was the innocence of the ISP.  Once it had been established that an ISP was merely a conduit for the infringement, it would not be liable for IP infringement, and there should be no reason for it to bear the costs of remedies which are designed to protect the applicant's rights.

Why is this important?

Whilst giving welcome clarity to ISPs facing blocking orders for websites advertising or selling counterfeit goods, it is notable that this decision diverges from the approach of the courts for website blocking orders regarding copyright infringement (such as illicit streaming).

In copyright claims, it is usual for the ISPs to bear the costs of implementation of the order, whilst the applicant bears the costs of the application. 

Any practical tips?

Rights holders should consider whether the overall cost of acquiring the order and paying for its implementation would exceed the benefit the blocking order may bring.  ISPs and intermediaries should measure the cost of implementing blocking orders so these costs can be recovered.