Source: https://www.womblebonddickinson.com/uk/insights/articles-and-briefings/uk-supreme-court-calls-time-cartier-rights-holders-pay-reasonable
Timestamp: 2019-11-13 22:53:20
Document Index: 518944374

Matched Legal Cases: ['UKSC ', 'UKSC ', 'UKSC ', 'UKSC ', 'UKSC ', 'EWCA ']

UK Supreme Court calls time on Cartier
Overturning a Court of Appeal decision, the UK Supreme Court ("UKSC") has held that, under UK law, innocent intermediaries responsible for the implementation of website blocking orders should have some specific costs reimbursed by the applicant for the order. The rationale for the decision was that granting a website blocking order against intermediaries is no different to the position adopted in the granting of a 'Norwich Pharmacal' order or freezing order, whereby the general rule is that the intermediary is indemnified against the costs of complying with the order.
Website blocking orders against internet service providers ("ISPs") have proved to be powerful weapons in the struggle against online infringements. The orders require ISPs to implement technical measures to prevent access to websites that host or facilitate access to infringing material. Such orders have been adapted from those which had been previously introduced to restrict access to websites that allow the unauthorised streaming of football matches and music content.
The power of the High Court to grant injunctions against ISPs who are innocent intermediaries, so as to block such websites facilitating copyright infringement, is expressly provided for by section 97A of Copyright, Designs and Patent Act 1988. Whilst there is no express provision in respect of trade mark infringements, in the long running Cartier case[1], the English courts have confirmed that through their inherent equitable jurisdiction they retain the power to issue blocking injunctions against ISPs that facilitate the infringement of trade marks. Our previous note sets out the factual matrix of this case.
In the previous Court of Appeal decision, the majority held that the ISPs should bear the costs of implementing the blocking orders since such costs form part of the ISP's operating costs and constitute the hypothetical quid pro quo that ISPs must pay for various immunities and safe harbour provisions in the E-Commerce Directive. [2]
This point on costs was appealed to the UKSC.
The UKSC identified broadly five types of costs that may be incurred by ISPs in complying with blocking orders.
Acquiring and upgrading the hardware and software required to block access
Managing the blocking system
Configuring the ISPs' systems to implement a website block
Updating and reconfiguring the blocks over the lifetime of the order
"Over-blocking" or malfunctions to the blocking systems.
Those ISPs which were still parties in the proceedings did not contest before the UKSC that they should be responsible for the costs identified at points 1 and 2 above as these are costs which they would regardless incur in order to comply with other obligations such as that requiring them to block other types of unlawful or illegal content e.g. terrorism propaganda. Before the UKSC, the ISPs had argued that they should not be liable for the other categories of costs (points 3 to 5).
The UKSC considered that the question of who should bear the costs of litigation or compliance is determined by domestic law albeit guided by the EU principles of effectiveness, equivalence and how remedies need to be fair, proportionate and not unnecessarily costly. Accordingly, the terms upon which a blocking order is granted against an intermediary is a matter for English law.
On the basis of other similar orders which may be granted under English law against intermediaries, such as 'Norwich Pharmacal' orders and freezing orders in which the general rule is that the intermediary is indemnified against the costs of complying with the order, the UKSC ordered that the reasonable costs set out at points 3 – 5 above should be borne by the rights-holders.
The present case relates to website blocking orders to prevent trade mark infringement; however, there is no apparent reason why the decision would not also extend to website blocking orders granted to prevent copyright infringement, thereby reversing the current practice.
The UKSC's decision provides some useful guidance to rights-holders on applying for website blocking orders.
(i) Carefully define target websites and applicable technical measures
As the rights-holder will likely be liable to cover the reasonable costs of ISPs implementing the terms of the order, it can minimise its potential liability by ensuring that it carefully identifies relevant websites and webpages and specifies necessary and proportionate technical measures which are needed to provide effective relief for the rights-holder.
It would not be prudent to seek an order requiring ISPs to "over-block", i.e. include websites or webpages which do not facilitate infringement, given that potential recoverable costs may include losses incurred by third parties as a result of the block, which those parties then seek to recover from ISPs.
(ii) Consider the "innocence" of the ISPs in question
In the present case, the UKSC determined that the ISPs were acting as "mere conduits" and were "innocent", meaning that they had no obligation to assist the claimants other than any obligations imposed by a court order. Lord Sumption, who gave the judgment, considered that the situation may not be the same where the ISPs are involved in caching or hosting, being activities which he determined involve "a greater degree of participation in the infringement" and therefore could give rise to infringement if the conditions of immunity, as set out in the E-Commerce Directive, are not satisfied.
It would be wise for rights-holders to consider and identify which activities it believes the ISPs are carrying out (including investigating these thoroughly in any pre-action correspondence), as this could well impact on whether the ISP is committing any potentially infringing acts (alongside the primary infringer), and thus also potentially on the liability for costs – both of the legal action and of compliance.
(iii) Consider who will be responsible for the costs of the legal action
Costs of the legal action are treated separately from the costs of compliance with the blocking order. Although in this case, where the ISPs resisted the granting of a website blocking order, the costs of the legal action were awarded against the ISPs, the general rule has been that intermediaries who do not resist the grant of a website blocking order will have their legal costs borne by the rights-holder. Rights-holders seeking such an order should bear in mind this additional liability as a cost of enforcement.
[1] [2016] EWCA Civ 658
[2] Directive 2000/31/EC