The Judges held unanimously that rights-holders should bear the costs of implementing website-blocking injunctions. In doing so, the Supreme Court reversed the Court of Appeal majority judgment. Although the case concerned blocking sites selling counterfeits, the judgment is not limited to online trade mark infringement. It will also apply in cases where ISPs (who are not caching or hosting) are required to block access to infringing copyright content.
The background to the case is that in 2014 Arnold J ordered the five major UK ISPs to block a number of websites that were advertising and selling counterfeit goods. He also held that the ISPs should bear the costs of the implementation of the blocking order. According to Arnold J, with one possible exception, it was the first occasion on which an application for a website-blocking order had been made in Europe in order to combat trade mark infringement. See our earlier blog on the first instance decision here. The ISPs appealed, both in relation to the blocking order and in relation to the costs. The Court of Appeal dismissed the appeals. The ISPs then appealed to the Supreme Court on the point of whether they should be required to bear the costs of implementing the blocking order.
Today, the Supreme Court unanimously reversed the Court of Appeal’s judgment, to make rights-holders responsible for paying the costs of complying with blocking injunctions incurred by ISPs who act as mere conduits, and who are therefore legally innocent.
Lord Sumption (giving the judgment) said that compliance costs is a matter for English law and the ordinary principle under English law is that an innocent intermediary is entitled to be indemnified by the rights-holder against the costs of complying with the order. The position is no different for website-blocking orders than any other order granted to require an innocent party to assist the claimant in the assertion of its rights against a rights-holders (e.g. Norwich Pharmacal orders or freezing injunctions). The Court found no reason why the rights-holder should be entitled to look for a contribution to the costs of defending its rights to anyone other than the infringers.
The decision does not apply to ISPs engaging in caching or hosting because they are not necessarily “innocent”. Lord Sumption said different considerations may apply to those ISPs engaging in caching and hosting because it is more likely that national intellectual property laws will be infringed if the conditions of immunity (i.e. the safe harbour conditions) for caching and hosting under the E-Commerce Directive are not met. He went on to say that in his view the mere fact that the ISPs are only immune if they take active steps (to remove infringing content on notification from rights-holders) should not be enough to require a Court to make the intermediaries pay the costs of compliance.
The decision will impact all rights-holders (not only trade mark owners) that are seeking a website-blocking injunction against an ISP. Faced with an ever-growing volume of online infringement rights-holders will be troubled with today’s decision, which shifts the costs of blocking websites from ISPs to rights-holders. Although the decision applies to “reasonable” compliance costs and the Court based its decision on evidence that the costs from an order would be “modest”, the result may impact a rights-holders strategy for applying for website-blocking orders on a mass-scale, which is often necessary in relation to counterfeit goods. There is also potential for disputes in relation to what amounts to “reasonable” compliance costs and we would not be surprised if this was an area where the regulator may need to become involved.
Authored by Alastair Shaw and Penelope Thornton