Cartier International AG and Others v British Telecommunications Plc and another

JurisdictionEngland & Wales
JudgeLord Reed,Lord Sumption,Lord Mance,Lord Kerr,Lord Hodge
Judgment Date13 June 2018
Neutral Citation[2018] UKSC 28
CourtSupreme Court
Date13 June 2018

Cartier International AG and others

(Respondents)
and
British Telecommunications Plc and another
(Appellants)

[2018] UKSC 28

before

Lord Mance

Lord Kerr

Lord Sumption

Lord Reed

Lord Hodge

Supreme court

Trinity Term

On appeal from: [2016] EWCA Civ 658

Appellants

Charlotte May QC

Jaani Riordan

(Instructed by Reed Smith LLP)

Respondents

Adrian Speck QC

Benet Brandreth QC

(Instructed by Wiggin LLP)

Interveners (in-house submissions)

(1) Telefónica UK Ltd

(2) Vodafone Ltd

(3) Hutchison 3G UK Ltd

Intervener (The Open Rights Group) (written submissions only)

Greg Callus

(Instructed by Preiskel & Co LLP)

Intervener (The Motion Picture Association) (written submissions only)

Richard Spearman QC

Intervener

(BPI (British Recorded Music Industry) Ltd) (written submissions only)

Edmund Cullen QC

Kiaron Whitehead

Heard on 30 January 2018

Lord Sumption

( with whom Lord Mance, Lord Kerr, Lord Reed and Lord Hodge agree)

Introduction
1

When an injunction is obtained against an innocent intermediary to prevent the use of his facilities by wrongdoers for unlawful purposes, who should pay the cost of complying with the order?

2

The respondents are three Swiss or German companies belonging to the Richemont Group. They design, manufacture and sell luxury branded goods such as jewellery, watches and pens under well-known trade marks including Cartier, Montblanc and IWC. The internet has provided infringers with a powerful tool for selling counterfeit copies of branded luxury goods, generally of lower quality than the genuine article and at lower prices. It allows them access to a world-wide market, as well as a simple way of concluding sales and collecting the price with practically complete anonymity. This illicit business is carried out on a large scale. The evidence is that at the outset of this litigation the respondents alone had identified some 46,000 websites offering infringing copies of their branded goods.

3

The two appellants and three other defendants in the proceedings below (who did not participate in this appeal) are the five largest internet service providers (or “ISPs”) serving the United Kingdom, with a combined market share exceeding 90%. They provide networks by which subscribers are able to access content on the internet. But they do not provide or store content. They are not even in a position to monitor it, for even if that was technically feasible given the volume of internet traffic, they are forbidden to do so by law. They have no contractual relationship with the operators of websites accessed through their networks, and are not necessarily in a position even to identify them. They do not therefore themselves use or infringe the marks or aid or abet others to do so. Nonetheless, the facilities which they provide for their subscribers are a critical means by which the sellers of infringing goods are able to reach their customers.

4

On 17 October and 26 November 2014 the respondents obtained injunctions from Arnold J requiring the appellant ISPs to block or attempt to block access to specified “target websites”, their domains and sub-domains and any other IP address or URL notified to them whose purpose is to enable access to a target website. Website blocking injunctions have become a familiar weapon in the continuing battle between the holders of intellectual property rights and infringers. There is an express statutory power to make such orders to protect copyrights under section 97A of the Copyright, Designs and Patents Act 1988. In Twentieth Century Fox Film Corpn v British Telecommunications plc [2012] 1 All ER 806 and Twentieth Century Fox Film Corpn v British Telecommunications plc (No 2) [2012] 1 All ER 869, Arnold J dealt with a number of issues concerning website blocking injunctions in copyright cases. Since then similar injunctions have been granted on 17 occasions against the appellant ISPs on the application of copyright-owners, and they have achieved a high degree of standardisation. Their use seems likely to increase.

5

This is the first case in which a website-blocking injunction has been granted to protect a trade mark. There is no specific statutory provision relating to trade marks corresponding to section 97A of the Copyright, Designs and Patents Act 1988. There was a major issue in the courts below about the jurisdiction of the court to make such an injunction under the general power conferred on the court by section 37(1) of the Senior Courts Act 1981. There were also issues about some of the criteria for granting them. The Court of Appeal upheld the decision of Arnold J on these points, and they are no longer in issue. This appeal is concerned with costs, and in particular with the costs to the ISPs of implementing website-blocking orders. Implementation costs vary according to the technology employed and the ISP's business model. But they fall, broadly speaking, under five heads: (i) the cost of acquiring and upgrading the hardware and software required to block the target sites; (ii) the cost of managing the blocking system, including customer service, and network and systems management; (iii) the marginal cost of the initial implementation of the order, which involves processing the application and configuring the ISP's blocking systems; (iv) the cost of updating the block over the lifetime of the orders in response to notifications from the rights-holders, which involves reconfiguring the blocking system to accommodate the migration of websites from blocked internet locations; and (v) the costs and liabilities that may be incurred if blocking malfunctions through no fault of the ISP, for example as a result of over-blocking because of errors in notifications or malicious attacks provoked by the blocking. The ISPs do not complain about having to bear the costs under heads (i) and (ii). Most if not all of those would be incurred in any event for other reasons, for example to block access to child abuse images or to provide facilities for parental controls. The main question at issue on the present appeal is whether the rights-holders should have been required as a term of the order to indemnify the ISPs for implementation costs under heads (iii), (iv) and (v).

6

The practice since Twentieth Century Fox Film Corpn v British Telecommunications plc (No 2) [2012] 1 All ER 869 has been to order the rights-holders to bear their costs of the unopposed proceedings to obtain website-blocking orders but to leave the ISPs to bear the costs of implementing the orders. In his judgment in that case, at para 32, Arnold J justified leaving the ISPs to pay the costs of implementation on two grounds. The first was essentially a consideration of commercial equity:

“The studios are enforcing their legal and proprietary rights as copyright owners and exclusive licensees … BT is a commercial enterprise which makes a profit from the provision of the services which the operators and users of [the target website] use to infringe the studios' copyright. As such, the costs of implementing the order can be regarded as a cost of carrying on that business.”

Arnold J's second ground was that it was implicit in the EU Directives which require member states to make website-blocking injunctions available. I shall return to this point when I come to deal with the Directives. At any rate, the practice proposed by Arnold J in 2011 has been followed ever since, and it was followed by Arnold J himself in this case. The majority of the Court of Appeal (Jackson and Kitchin LJJ, Briggs LJ dissenting) upheld him on this point also: [2017] Bus LR 1.

7

Although the terms on which an injunction is granted are discretionary, the current practice has been adopted as a matter of principle and routinely applied. It is therefore necessary on this appeal for us to decide whether the principle is sound. That requires us to examine the legal basis on which website-blocking injunctions are made. It is founded partly on domestic and partly on EU law.

Domestic law
8

For much longer than there has been an internet or EU Directives about it, the English courts have had jurisdiction in certain circumstances to order parties to assist those whose rights have been invaded by a wrongdoer. The historical origin of this jurisdiction is the bill of discovery in equity. The bill of discovery originated at a time when law and equity were separately administered. It was a proceeding in Chancery ancillary to proceedings against the wrongdoer at law, in which the sole relief sought was an order for disclosure for use in the principal proceedings. In Orr v Diaper (1876) 4 Ch D 92, the power to order disclosure was extended to a case where proceedings were not yet pending in another court, but the plaintiff wanted to know the names of those whom he might sue. Hall V-C ordered the innocent carrier of cotton thread bearing the plaintiff's counterfeit trade mark to disclose the name of the shipper which was as yet unknown to the rights-holder. This was a limited departure from the original principle. A more significant departure occurred with the decision of Lord Romilly MR in Upmann v Elkan (1871) LR 12 Eq 140. This decision marked the point at which the power to order a party to assist the plaintiff against a wrongdoer acquired a life of its own, independent of its origins in the bill of discovery. The facts were that the defendant freight forwarding agent was innocently in possession of consignments of counterfeit cigars in transit to Germany through a London dock. The action was not for discovery, but for an order restraining the forwarder from releasing the goods and an account of damages, on the footing that he had himself infringed the mark. The forwarder volunteered the names of the consignors and agreed to submit to whatever order the court should make. That left only the question of the costs of the action. Lord Romilly MR...

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