IP owners to pay the costs of blocking access to infringing websites

David Stone

The UK Supreme Court has unanimously ruled that trade mark owners should pay the costs of implementing a court order requiring UK ISPs to block access to websites selling counterfeit goods. This is a reversal of previous decisions, which had required the ISPs to bear these costs. Rights holders will still be able to obtain blocking injunctions, which are an effective means of tackling online infringements, but have to indemnify the ISPs for the reasonable compliance costs of putting these orders into effect in the UK.

The court’s ability to grant these types of blocking order was not in issue in this appeal. However, the question of whether the ISPs or rights holders should pay to implement them is significant because they are an important and increasingly common IP enforcement tool and the cumulative costs of complying with them is rising.

It is also important to note that this judgment does not necessarily extend to all possible forms of injunctions against online intermediaries. The Court emphasised that it is critical that the intermediary is legally innocent and the ISPs in this case would not incur liability for trade mark infringement, even in the absence of the safe harbours in the E-Commerce Directive (2000/31/EC). They are “mere conduits” (they transmit information and/ or provide access to a communications network) and do not know that their service is being used to distribute illegal content so do not have a duty to take proactive steps to remove it. The Court specifically noted that different considerations may apply to other intermediaries engaged in caching or hosting because these operations involve a greater degree of participation in the infringement, and are more likely to infringe national IP laws. This will depend on the facts of future cases.

The more detailed reasoning of the Supreme Court is as follows:

  • The costs of complying with blocking injunctions is a matter for English law, within the broad limits set by the EU principles of effectiveness and equivalence and the requirement to provide a remedy which is fair, proportionate and not unnecessarily costly.
  • Blocking injunctions are just one type of order that can be made against a third party to prevent the continued use of its facilities for wrongdoing. (Others include Norwich Pharmacal relief where an innocent intermediary needs to disclose information). In such cases, the intermediary is ordinarily entitled to be indemnified by the rights holder for its costs. There is no legal basis for requiring a party to shoulder the burden of remedying an injustice if it has no legal responsibility and is acting under the compulsion of an order of the court.
  • Website-blocking injunctions are sought by rights holders in their own commercial interest. The protection of IP rights is ordinarily and naturally a cost of the business which owns those rights and has the relevant interest in asserting them. There is no reason why the rights holder should be entitled to look for a contribution to the costs of enforcing its rights from anyone other than the infringer.
  • The ISPs are not obliged to pay the costs of implementing these blocking injunctions as a quid pro quo for the safe harbour provisions in the E-Commerce Directive, as suggested by the Court of Appeal.  The recitals of the E-Commerce Directive refer the terms of an intermediary injunction to national law so different national Courts may take different approaches. (For example, the French court recently decided that the ISPs should bear the costs burden). The purpose of the E-Commerce Directive is to enable information society service providers to operate across the EU on a common legal basis and the CJEU cases (eg L’Oreal v eBay and UPC Telekabel do not state that compliance costs should always be borne by the intermediary.

Co-Authors: David Stone, Neville Cordell and Beverley Potts