Cartier loses to ISPs in landmark UK Supreme Court decision

The long-awaited judgment in the case of Cartier International AG and others (Respondents) v British Telecommunications Plc and another (Appellants) was handed down by the UK Supreme Court last month, and BT and EE’s appeal that they should not have to bear the costs of complying with website blocking injunctions was unanimously allowed. The decision represents a landmark victory for Internet Service Providers (“ISPs”) in general.

The Decision

Following judgments in the High Court and the Court of Appeal allowing brand owners to obtain website blocking orders against ISPs in respect of websites selling counterfeit goods, the ISPs’ appeal to the Supreme Court was concerned only with which party should be required to bear the various costs of implementing such blocking orders. The Court of Appeal had previously decided that it was ISPs, rather than brand owners, which should bear the costs of implementing blocking orders since the services ISPs provide are an essential part of the infringement taking place.

The Supreme Court disagreed, noting that although ISPs benefit financially from the volume and appeal of content on the internet, including content which infringes intellectual property rights, an assumption that ISPs should therefore contribute to the cost of enforcement assumes a degree of responsibility on the part of the intermediary which “does not correspond to any legal standard.” The Court also pointed out that blocking injunctions “are sought by rights-holders in their own commercial interest.” The Supreme Court therefore unanimously concluded that rights-holders should indemnify ISPs against their reasonable compliance costs where the intermediaries in question are legally innocent of the infringing activity. It is worth noting however that intermediaries engaging in caching or hosting may not be considered “legally innocent”.

Implications for brand owners

The Supreme Court’s decision in this case is surprising, given the Court of Appeal’s finding that ISPs should bear the costs of implementing blocking orders earlier in the dispute. On the other hand, the question of implementation costs has been the most controversial element of the case and it is not difficult to appreciate the ISPs’ position that such costs should not be imposed on innocent intermediaries simply because counterfeit goods are being sold online.

The verdict will put brand owners and retailers of genuine goods in an undesirable position, balancing the enforcement of their rights against online counterfeiters with a new obligation to bear not only the up-front costs of identifying infringing websites and applying to the Courts for blocking orders, but also the ISPs’ costs of implementing those blocking orders once obtained. However, it remains to be seen how heavy a costs burden this will be in practice, as the Supreme Court noted that the costs must be “reasonable”. In confirming that website blocking orders may be obtained for online trade mark infringements, the case, as a whole, is a step forward in the ongoing battle against counterfeit goods; perhaps just a slightly more costly one than brand owners would have liked.