BREAKING NEWS: Supreme Court rules that trademark owners must indemnify ISPs for costs of implementing a site blocking order

The Supreme Court has today delivered its much anticipated judgment in the appeal of Cartier International AG & Ors v British Telecommunications Plc & Anor. It has held that trade mark owners who obtain a site blocking order must indemnify Internet Service Providers for the costs relating to the implementation of such an order.

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Background to the dispute

This case concerns injunctions to block customers of ISPs from accessing websites advertising counterfeit versions of goods designed, manufactured and sold by three well-known companies; Cartier, Montblanc and IWC. ISPs provide networks via which their subscribers can access content, but the ISPs themselves do not have any active role in providing or storing content.

The judge at first instance granted the blocking order and ordered the ISPs to pay the costs, including the costs of implementation. When the ISPs appealed, the Court of Appeal, in agreement with the first instance judge, held that the costs of complying with these injunctions should be borne by the ISPs and become an absorbed cost of their business.

BT and EE appealed to the Supreme Court against that decision.

Issues considered by the Supreme Court

The Supreme Court considered the following two issues:

  1. The threshold conditions for the imposition of an order requiring ISPs to block or attempt to block access to websites infringing registered trade marks;
  2. Whether ISPs, as innocent parties, should be required to bear the costs of such blocking orders.

Judgment in favour of ISPs

The Supreme Court unanimously allowed the appeal of the ISPs on the issue of the cost of complying with the injunction. The Court held that the question of who should bear the costs is a matter of national law and neither the relevant EU Directives, nor judgments of the Court of Justice of the European Union expressly lay down any rules relating to the costs of compliance, save that where they are borne by the intermediary they must not be excessive.

The Court applied the ordinary principle under English law that unless there are good reasons for a different order, the innocent intermediary is entitled to the costs of compliance (similar to costs of compliance with the Norwich Pharmacal order). On the facts, the ISP serves as a mere conduit and would not incur liability for trade mark infringement even in the absence of the liability protection provided by the ECommerce Directive. As such there is no legal basis for requiring that party to bear the burden of remedying the injustice, acting under the compulsion of a court order.

The Supreme Court did not accept the argument advanced by the trade mark owners that the ISPs are indirectly benefitting from pirate trade from the volume of traffic and appeal of the content. Rather, the Court was of the view that website-blocking injunctions are sought by rights-holders in their own commercial interests and the entire benefit of compliance with such an order rests with them. The protection of IP rights is a cost of business to the owner of the rights who has the relevant interest in asserting them, not an innocent third party who has nothing to do with the rights in question and who merely provides a network which is abused by others.

The Court held that there is a public interest in the enforcement of intellectual property rights just as there is in the enforcement of any legal right. However the public interest in enforcement of IP rights is not wider or any different from the private interest of the rights-holders.

Where does this leave rights holders?

This new guidance provides clarity for trade mark owners in respect of the liabilities associated with pursuing injunctions to fight online acts of infringement. Blocking orders are a powerful means of combatting the sale of counterfeit goods but such action will now come at the cost of the rights holder.

The Court’s judgment raises the question as to the broader applicability and whether costs of compliance with injunctions relating to other IP rights (e.g. copyright) should also be borne by the rights holder.

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