Difficulty in Combating Online Sale of Counterfeit Goods

Trade mark owners often face difficulty in tackling websites which sell counterfeit goods. Without any doubt, such websites damage the interests of trade mark owners. However, given the cyber and cross-border context in such infringing activities, not only are the actual website operators not always easily identifiable, there is also hardly any practical enforcement mechanism even if trade mark owners are able to obtain any court orders against such infringing activities.

In Cartier International AG v British Sky Broadcasting Limited [2014] ESHC 3354, the English High Court may have offered a solution to the longstanding problem by imposing website blocking orders against internet service providers (“ISPs”).

Website Blocking Order

In Cartier, the Claimants are producers and retailers of luxury goods and owners of well known trade marks, including Cartier, Montblanc and IWC. The Claimants identified several websites which advertise and sell counterfeit goods (the “Target Websites”). Each of the Target Websites sells replicas of a single brand and incorporates such brand name in its domain name. Some of the Target Websites clearly state that the goods offered are replicas. Each of the Target Website targets consumers in the United Kingdom. All the goods purchased through the Target Websites are both counterfeit and of significantly lower quality than the genuine goods.

Instead of targeting the operators of the Target Websites, the Claimants sought remedies against the Defendants, being 5 of the major ISPs in the United Kingdom. Substantially, the orders sought require the ISPs to “block or attempt to block access to the Target Websites, their domains and sub-domains and any other IP address or URL notified to the [ISPs] whose sole predominant purpose is to enable or facilitate access to a Target Website” (the “Orders”). The ISPs were concerned that the Orders would impose additional operating costs and restrict their freedom to carry on business.

Jurisdiction of Granting the Orders

After considering legislation of the UK and the European Union, the Court found that it has jurisdiction to grant the Orders against the ISPs as requested by the Claimants. As the users and/or the operators of the Target Websites are infringing the Claimants’ trade marks using the ISPs’ services, and the ISPs as intermediaries have actual knowledge of such infringements, the Court concluded that the threshold conditions of exercising such jurisdiction are met. The question for the Court is whether the relief sought is a proportionate one.

The Proportionality Test

In answering this question, the Court listed a number of important factors it will take into consideration. Some of them include:

1.        The comparative importance of the rights engaged and justifications for interfering with such rights

In the present context, the Claimants’ trade mark rights on the one hand and the ISPs’ freedom to carry on business are competing interests which the Court must consider. The Court found that the Claimants have a legitimate interest in curtailing the activity of the Target Websites. There is also a public interest in preventing activities of trade mark infringement.

The Court also found that the Orders would not substantially impair the ISPs’ right to carry on business. As long as such orders are properly targeted at websites engaged in trade mark infringement, users of the ISPs’ services would not be affected.

2.        Availability of alternative measures

Despite the ISPs arguments that other measures could have been taken by the Claimants, the Court found that none of such measures are effective. The reason is that many of such measures fail to target operators of the Target Websites who may all be outside the United Kingdom. In addition, even if the Target Websites are taken down by one host or have the domain name seized, the operator will simply move the website to a different host and adopt a different domain name.

3.        Efficacy

Based on expert evidence, the Court concluded that the Orders will be effective in achieving the outcome of curtailing the trade mark infringement activities by the Target Websites.

4.        Costs associated with the measures

While the Claimants will have to bear costs of monitoring target trade mark infringing websites and the application, the ISPs will have to bear the implementation costs of the Orders. However, the Court considered the cost of implementing a single website blocking order was modest as the ISPs already have the requisite technology at their disposal. The ISPs may also make the commercial decision of passing such costs on to their subscribers.

5.        Impact of the measures on lawful users

The Court found that, as long as the blocking is specifically targeted, lawful users will not be adversely affected by the website blocking order.

Overall, the Court held that the likely costs burden on the ISPs is justified by the likely efficacy of the blocking measures and the consequent benefit to the Claimants having regard to the alternative measures which are available to the Claimants. The Claimants had already issued cease and desist letters to the infringers but such letters were simply ignored by the infringers. Therefore, the Court found that the Orders are proportionate and strike a fair balance between the respective rights that are engaged, subject to the following safeguards against abuse: (1) the ISPs and operators of the Target Websites have the right to apply to the Court to discharge or vary the Orders if there is change of circumstances; (2) the Target Websites should identify the party or parties which obtained the Orders and state that the affected users have the right to apply to the Court to discharge or vary the Orders; and (3) the Orders will cease to have effect at the end of a defined period (in this case, 2 years) unless either the ISPs consent to the Orders being continued or the Court orders that they should be continued.

Potential Impact in Hong Kong

The English High Court’s decision is significant as it opens up the possibility for Hong Kong trade mark owners to consider making a similar application in Hong Kong against websites selling counterfeit goods which infringe their rights in the trade marks. However, it is noted that this case is currently on appeal before the English Court of Appeal.