UK Supreme Court: ISPs not liable for counterfeit site-blocking fees

The UK Supreme Court has today ruled that internet service providers (ISPs) do not have to pay the costs for blocking access to websites selling counterfeit products.

In 2014, Switzerland-based Richemont, parent company of luxury brand Cartier, sought an injunction to prevent some of the UK’s major ISPs, including BT, Sky, TalkTalk, EE and Virgin Media, from allowing access to websites selling counterfeit products.

Fraudulent products being sold included jewellery and watches.

The English High Court granted the injunction in October 2014 and ordered the ISPs to pay the costs incurred in implementing the website-blocking order.

The ISPs appealed against the decision and argued that they shouldn’t have to pay the costs for blocking the websites. In 2016, the Court of Appeal dismissed the appeal and ordered the ISPs to pay the costs of the blocking orders.

However, the Supreme Court unanimously disagreed with this decision and said the ISPs were “legally innocent”.

Michael Skrein, partner at UK-based Reed Smith who led the appeal team, commented: “Lord Sumption, whose judgment was supported by the four other Supreme Court justices on the panel, analysed the deep roots of the relevant principles of English law against the background of the EU directives and declared that ‘there is no legal basis for requiring a party to shoulder the burden of remedying an injustice if he has no legal responsibility for the infringement and is not a volunteer but is acting under the compulsion of an order of the court’."

The Supreme Court said that Richemont and Cartier will now cover the disputed blocking costs inflicted on the ISPs, although the ISPs will pay their own litigation costs.

“In a surprise result, the Supreme Court has endorsed the protection given by EU law to ISPs as intermediaries in providing potential access to third-party websites that offer infringing and counterfeit branded products,” commented Joel Smith, head of the IP group at UK-based law firm Herbert Smith Freehills.

He added that today’s decision is a “powerful endorsement” of the neutral role ISPs play as conduits of internet traffic.

Smith said that in future, it is the IP owner that must cover the costs the ISP faces in implementing a blocking injunction.

“Big brands will be disappointed with the outcome on costs. The court saw this as a cost of the private commercial interests of the rights holders,” he added.

Despite the latest ruling, securing the right to block access to sites offering counterfeit goods was a “significant step forward”, said Louise Popple and Michael Yates, IP and media specialists from law firm Taylor Wessing.

“Whilst brand owners will still have to pay the cost of implementing any injunction granted, these should not be prohibitive or outweigh the benefits of obtaining a blocking order,” they said.

“This is particularly so as ISPs are now likely to consent to blocking injunctions in appropriate trademark cases, as they already do in copyright cases. Brand owners should therefore look to use this tool as part of their overall strategies where more conventional methods of enforcement do not work."

Elaine O'Hare, senior associate and IP specialist at Stevens & Bolton, added: "The verdict will put designers and retailers of genuine goods in a precarious position, balancing the enforcement of their IP rights against online counterfeiters with a new obligation to bear the costs of any blocking orders. Nevertheless, the Supreme Court’s decision will ensure that costly injunctions will not be imposed on innocent intermediaries by rights holders repressing third-party infringements."

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