A remedy on the rise

1 minute read

A big question around blocking orders is: who should pay for the implementation costs? The UK Supreme Court last year in Cartier v BT found that rights holders should indemnify the ISPs for the reasonable costs of implementing the orders. In Germany, courts have not routinely ordered blocking orders because their legal basis has been unclear, but recent judgements by the Federal Court of Justice and the Munich Courts may make blocking orders more popular. In Italy, blocking injunctions have become increasingly frequent. Previously in Italy, ISPs usually bore the costs of implementing orders but a recent ruling in Milan took a different view. The French Supreme Court considered the issue of the costs burden for such orders in 2017, affirming the decision of the Court of Appeal and deciding to charge the access providers with the costs of blocking illegal streaming websites.

Website blocking orders are an extremely useful tool for trade mark and copyright owners to obtain against intermediaries, such as internet service providers (ISPs), to prevent third party website operators offering infringing content or counterfeit branded products.

When the ISPs block or disable access to certain unauthorised websites, an infringer's access to its consumers is shut down, or – at the very least – reduced in scope. Those responsible for these infringements have become ever more adept at evading enforcement. This is why rights holders have turned to blocking orders as a powerful weapon, which offers a more effective solution than pursuing infringers directly in difficult jurisdictions.

A big issue with the increasing popularity of blocking orders is the thorny question of who should pay for the implementation costs for such orders. This issue was recently decided by the UK Supreme Court in June 2018 in the case of Cartier International and others v British Telecommunications and another [2018] UKSC 28.

While we have a well-established line of case law in the UK in respect of blocking orders that has been further developed by the Supreme Court's judgment in Cartier, this article also examines the approach taken in other important EU territories – Germany, Italy and France.

The UK Courts granted the first website blocking order against an intermediary in the Newzbin II case (Twentieth Century Fox Film v British Telecommunications (No 2) [2012, 1 All ER 869), which blocked access to copyright infringing content, pursuant to s.97A of the Copyright, Designs and Patents Act 1988 (CDPA). Since then, the blocking order has developed as a remedy for copyright infringement through UK case law and has even evolved to combat unauthorised live streaming of football matches.

Cartier marked a departure from the previous Newzbin line of cases because it was concerned with trade mark infringement and not copyright infringement. Could the case law develop and widen in scope to provide a remedy for trade mark infringement? The applicants in the Cartier case sought blocking orders against all of the major ISPs in the UK, in order to prevent the further sale of counterfeit watches on a number of third party websites. The High Court granted the orders in 2014, ruling that it had jurisdiction to grant such injunctions pursuant to section 37(1) of the Senior Courts Act 1981 and Article 11 of the IP Enforcement Directive 2004/48 EC. In a significant legal development, this was the first time that blocking orders had been granted against intermediaries, on the basis of trade mark rights in the UK. In keeping with all of the previous blocking orders in the UK copyright cases, it was ordered that the ISPs should bear the implementation costs for such orders. An appeal followed in the Court of Appeal, with Lord Justices Kitchin and Jackson agreeing that the ISPs should bear the implementation costs for the orders and Lord Justice Briggs in dissent.

A further appeal to the UK Supreme Court ensued, with two of the ISPs challenging the finding that the ISPs should bear the implementation costs for such orders.

The UK Supreme Court judgment is only concerned with the following forms of implementation costs:

• the initial implementation of the order, which involves processing and configuration of the ISP's blocking systems;

• updating the block over the lifetime of the order in response to further notifications from rights holders, which entails reconfiguring the blocking system; and

• costs and liabilities that may be incurred, if the blocking malfunctions through no fault of the ISP, for example over-blocking resulting from errors in the notifications from rights holders.

These costs are entirely separate and distinct from the costs of bringing the action, which always sit with the rights holder. The UK Supreme Court has reversed the costs position at first instance and in the Court of Appeal, finding that rights holders should indemnify the ISPs for the reasonable costs of implementing the orders. Any indemnity is limited to reasonable compliance costs and the costs cannot be excessive, disproportionate or such that they would impair the rights holder's ability to enforce its trade marks. While the UK Supreme Court did not expressly state that the same principles would also apply to the implementation costs for blocking orders in copyright cases, this seems a reasonable assumption.

In common with the position in Germany, it seems that initial implementation costs are unlikely to be recoverable by ISPs, other than in exceptional circumstances, as there is an expectation that ISPs must have this form of technology available in any event in order to deal with criminal issues, such as blocking illegal child abuse sites.

The intermediary's legal innocence is an important factor in assessing who is responsible for implementation costs. If the ISPs are access providers only (as was the case here), they have no means of knowing what use is being made of their networks by third parties to distribute illegal content or sell counterfeit products. In playing this neutral role, they serve as "mere conduits" and as such, could not be liable for trade mark infringement under English law, even in the absence of the safe harbour provisions in the E-Commerce Directive 2000/31 EC.

The Supreme Court took the view that this was a matter for English law and did not agree that there should be any departure from established principles of English law, such as those applied in Norwich Pharmacal orders, freezing orders and other injunctions, where the innocent party should be entitled to be indemnified against the costs of taking compliance measures required by a third party.

If an intermediary assumes a greater degree of participation than a mere conduit, for example, by carrying out caching or hosting activities, it is unlikely to be legally innocent. In such circumstances, the ISP may still have to bear the implementation costs for any blocking orders against it.

Having compared the UK with other territories in this article, it appears that the UK is at the forefront of developing this remedy with a more established line of case law in respect of blocking orders. However, several high-profile cases in Germany, Italy and France suggest that other member states also endorse the availability of blocking orders as a remedy, albeit the position on costs in not quite as clear-cut as it is in the UK following the guidance provided in Cartier.

It will be interesting to see how the law evolves and develops in the UK, following this ground-breaking case. There are likely to be developments elsewhere on this in the EU and while the UK Courts found no reason to refer the matter of implementation costs to the CJEU, another member state may well refer a question on implementation costs in the future in order to clarify further the position on such costs across Europe.

© Sarah Burke, senior associate, and Joel Smith, partner, Herbert Smith Freehills, London.

Holders of IP rights, in particular copyrights and trade marks, may apply for blocking orders against ISPs as an infringement remedy in Germany. Thus far, blocking orders against ISPs in relation to online IP infringements have been based upon case law. The German Copyright Act (Urheberrechtsgesetz) and/or the German Trade mark Act (Markengesetz) provide that infringement claims may be raised against an infringer (direct infringer) and any instigators or abettors (indirect infringers). However, such provisions are not generally deployed against ISPs, because ISPs are not standardly liable as direct tortfeasors/infringers or as indirect infringers, because they usually lack knowledge, intention or negligence. Accordingly, the German civil law courts have created another concept of liability for such contributory activities called "disturbance liability" ("Störerhaftung").

A person may be classified as a "disturber", if he enables an unlawful action of a third person in an adequate way, provided that it would have been possible and reasonable for him to prevent this action. As disturbance liability is a form of strict liability, no fault is necessary but German courts require a breach of the reasonable duty to examine content. However, online intermediaries are neither obliged to proactively monitor their facilities nor to actively search for possible infringements. An intermediary is only obliged to act on becoming aware of an infringement, and, moreover, take precautions in order to prevent comparable violations in the future. Damages cannot be claimed in respect of disturbance liability and a rights holder can only claim injunctive relief, for example removal of the infringing content.

The recent amendment of German Tele Media Act (Telemediengesetz) in September 2017 has not changed the disturbance liability concept with regard to internet access providers, as it only applies to WLAN providers.

Blocking orders have not been routinely ordered by the German courts so far, because their legal basis was somewhat unclear. However, in the wake of the high-profile judgements of the Federal Court of Justice (Bundesgerichtshof, the BGH) and the Munich Courts (as discussed below), blocking orders may become more popular as a remedy in Germany.

The BGH first specified the liability of host providers for online infringements of IP rights in 2004 (BGH, March 11 2004, File no. I ZR 304/01, Internet Auction I – Internet-Versteigerung I). The BGH then decided two parallel cases in 2015 in relation to the liability of ISPs, (November 26 2015, Files no. I ZR 174/14 and I ZR 3/14 respectively, "Disturber Liability of an Access Provider" / "Störerhaftung des Access-Providers").

More recently, in 2018, a copyright holder successfully applied for a blocking order, which was granted by the County Court Munich I (Landgericht München I) against the ISP, Vodafone, based on copyright infringements perpetrated by host provider kinox.to, which had made use of Vodafone network facilities (February 1 2018, File no. 7 O 17752/17)

This decision was confirmed by the Court of Appeal Munich (Oberlandesgericht München) (June 14 2018, File no. 29 U 732/18). As this judgement concerned only preliminary measures, further remedies were not provided for and, as such, the judgement is final.

In the "Disturber Liability of an Access Provider" case, the BGH referred to the CJEU decision in Telekabel (C-314/12, UPC Telekabel Wien v Constantin Film Verleih), which mentioned implementation costs as one aspect to be considered when deciding about ordering an injunction. The ISP had argued that the implementation costs would amount to €1 million ($1.15 million) and, as such, that a blocking injunction would be disproportionate. However, the BGH rejected this argument because the court considered it unspecific and inadequately explained. While the application for an injunction was rejected for other reasons, it is clear that costs of €1 million alone would not have prevented the grant of the requested blocking order.

In the kinox.to case, Vodafone, as a respondent ISP argued that the implementation costs of €150,000 were unreasonably high. However, these costs were the initial implementation costs. The Munich Courts decided that such initial costs could never serve as a reason for not granting the injunction, because the first rights holder to apply for a blocking order would never succeed in getting the requested block in place. Furthermore, the courts compared these costs of €150,000 to the ISP's total turnover of several billion and took the view that the ISP could easily reallocate these costs to its customers. Finally, the courts mentioned that in the wake of the BGH's decision in "Disturber Liability of an Access Provider", every access provider has to provide and operate blocking technology. Thus, the Court decided that Vodafone had to bear the implementation costs for the blocking order in this instance.

© Dr Wolfgang Bomba, senior associate, Herbert Smith Freehills, Berlin.

Legislative Decree No. 70/2003 provides that ISPs (which provide conduit, caching and hosting services) are not liable for the information that is transmitted or stored via their services, provided that certain conditions are met and thus implements the E-Commerce Directive. However, the Italian Courts and Administrative Authorities can order ISPs to terminate infringing activity or take action to prevent it.

Articles 156 and 163 of the Italian Copyright Law and Article 124 of the Industrial Property Code (which transposed Article 11 of the Enforcement Directive into national law in Italy) allow parties to seek court injunctions against intermediaries (including ISPs), whose services are used by third parties in the infringement of IP rights.

Since 2014, copyright holders can also file a notice and takedown application with AGCOM (the Italian Communications Authority) in order to have infringing digital works removed from the internet or websites hosting copyright infringing materials blocked, if the relevant server is located outside Italy. The targets of AGCOM orders are ISPs, as well as infringing content uploaders and website operators. The procedure is very fast and effective – AGCOM normally issues a decision within 35 business days, but the timeline can be reduced to 12 business days, in the event of serious or massive breaches. The AGCOM Regulation was amended in October 2018 and two of the main changes include a fast track procedure to stop recurring copyright breaches and and an urgency prima facie infringement assessment procedure. The AGCOM procedure applies only to digital works, not to trade marks or other IP rights.

AGCOM's ability to issue such injunctions has been the subject of some debate in Italy. However, following a case that was brought before the Constitutional Court (later dismissed for procedural reasons), the Regional Administrative Court (TAR Lazio) confirmed the validity of the AGCOM Regulation.

AGCOM blocking injunctions have become increasingly frequent in Italy, as shown in the chart below.

Blocking orders against ISPs with the goal of preventing online trade mark and copyright infringement have become increasingly frequent in Italy. In a recent trade mark infringement case, the Court of Milan ordered Aruba, the hosting provider for websites offering counterfeit Rolex products to block access to said websites by changing their access keys, as well as ordering the transfer of the relevant domain names to the trade mark holder (Court of Milan, June 13 2017, Case no. 4186/2017, Rolex v ITM)

The Italian courts have also issued numerous blocking orders against ISPs for copyright infringement, in both interim proceedings and main actions. Those orders are undisputed when aimed at blocking infringing websites identified by specific domain names. However, there has been debate between rights holders and ISPs about the lawfulness of "blank" blocking injunctions. Such injunctions target not only existing domains for infringing websites but also new domains that may host the websites in the future, so that there is no need for the rights holders to return to court to obtain further injunctions. Initially, the Court of Milan ruled against this form of injunction on the grounds that it would be aimed at future infringements that had not yet occurred and that, once occurred, are controlled only if the rights holder notifies the ISPs from time to time of the relevant sites (Court of Milan, July 27 2016, Case no. 31892/2016, Mediaset Premium v Orlando).

However, in a recent interim decision, the same court in Milan ordered that the main Italian ISPs must block access to a platform containing downloadable copies of copyrighted magazines, via both current domains and future ones, by adopting "the most appropriate technical measures" (Court of Milan, April 12 2018, Case no. 51624/2017, Mondadori v Fastweb and others). The onus is on the rights holder to notify the ISPs of any new infringing domains.

In the Mondadori case, the court also ruled on the technical implementation costs of such an order and held that they should be borne by the rights holder. Previously, it had been the case in Italy that the ISPs usually bore the costs of implementing the orders, which is what happened in the Rolex case cited above. However, the Court in Milan took a different view in the Mondadori case. This case was also a departure from previous case law in that the order extends to blocking of future domains and as such, is more labour intensive than usual for the ISPs, but it may also be the beginning of new law in Italy in relation to such costs.

In order to block online copyright infringement, the AGCOM procedure is undoubtedly the quickest and most cost-effective solution in Italy. To counteract trade mark infringement, the fastest route is to start interim proceedings in the Italian courts.

© Sara Balice, senior associate, Herbert Smith Freehills, Milan

The Law for Confidence in the Digital Economy of 2004 (No. 2004/575), implementing the E-Commerce Directive, introduced a general basis upon which injunctions against intermediaries may be sought. Article 6, I-8 of the 2004 law allows parties to seek any appropriate measures against both access and hosting providers. This provision is frequently used against intermediaries hosting hate speech or defamatory statements.

In addition to this general provision, Article L.336-2 of the French Intellectual Property Code, as introduced in 2009, provides a specific basis for copyright infringement online (HADOPI Law N° 2009-669). Pursuant to this Article, copyright holders or royalty collecting and distribution societies may seek any measures against anyone who is able to prevent or stop online infringement. Access providers have often been ordered, on this basis, to block access to domain names or IP addresses for websites entirely dedicated to counterfeiting (for example, "Allostreaming"). French case law has also recently allowed victims of copyright infringement to seek an injunction against search engines to de-reference infringing websites from their results (High Court of Justice of Paris, May 28 2018, N° RG 18/03028, FNDF and others v Orange, Free, Google and others).

Moreover, Article L.716-6 of the French Intellectual Property Code, which implements the Directive on the Enforcement of Intellectual Property Rights (2004/48/EC), also grants the right, for trade mark right holders or any person with a standing, to seek injunctions against online or physical intermediaries in order to prevent or cease trade mark infringements. This Code has been applied by French judges, including where an order was made against the online marketplace, Alibaba to block the publication by third parties of offers for sale infringing the trade mark rights of the claimant (Tribunal de Grande Instance de Paris, ordonnance de référé, November 21 2017, Lafuma Mobilier/ Alibaba).

When granting blocking injunctions, French judges take into consideration the CJEU jurisprudence and principles derived from the European directives and in particular, Article 3 of the Enforcement Directive. As a result, judges examine, on a case-by-case basis, whether the requested measures against internet intermediaries are proportionate, effective and dissuasive. For instance, French courts frequently limit the duration of the blocking injunctions to 12 months post-implementation by the access providers (High Court of Justice of Paris, July 6 2017, N° RG: 17/51194, FNDF and others v Bouygues Télécom, Free and others). Moreover, judges leave the ISPs free to determine the way in which they should implement the measures ordered. Finally, courts do not usually grant any 'general' injunctions as the injunctions granted are standardly limited to the illegal websites specifically identified by the claimants. However, some first instance courts have permitted 'dynamic injunctions' against search engines, which not only block a domain name but also block access to any 'mirror' websites, which may appear later, containing the same illegal content.

The French Supreme Court considered the issue of the costs burden for such orders in 2017 (Cour de cassation, Civ 1, July 6 2017, n°16-17.217, 16-18.298, 16.18.348, 16-18.595, Union des producteurs de cinéma, FNDF and others v SFR, Free and others). The Supreme Court affirmed the decision of the Court of Appeal and decided to charge the access providers with the costs of blocking illegal streaming websites. It did, however, specify that a balance shall be found between the right to protect the property of intellectual property right holders and the freedom to conduct business of the ISPs, which are both protected under the Charter of Fundamental Rights of the European Union. The Court concluded that it is only in highly exceptional circumstances that such costs could be borne by rights holders. Rights holders may bear such costs in circumstances where the measures to be taken by ISPs are disproportionate, because of their complexity, costs or duration, or to the extent that they might compromise the long-term viability of the intermediaries' business model.

© Sébastien Proust, of counsel, and Elodie Benoit-Bataille, avocet, Herbert Smith Freehills, Paris.