In Tommy Hilfiger Licensing LLC and others v Delta Center a.s., the Court of Justice of the European Union (“CJEU”) ruled that injunctions available against intermediaries under the Enforcement Directive (Directive 2004/48 on the enforcement of intellectual property rights) can apply to physical marketplaces in the same way as online marketplaces.
Tommy Hilfiger, Urban Trends, Radio Uhren, Facton, Lacoste and Burberry brought an action in the Czech courts seeking an intermediary injunction against an operator of a physical marketplace for infringement of their respective intellectual property rights.
The defendant, Delta Center, owns a series of Prague market halls, which are sublet to various market traders. The rental contracts stipulated that the market traders must comply with various obligations, one of which was a prohibition on the sale of counterfeit goods. Despite the prohibition, various manufacturers and distributors of legitimate branded goods became aware of the sale of counterfeit goods at these markets and wanted to prevent Delta Center from renting the market stall areas to people who persistently sold trade mark infringing goods.
The case was first heard at the City Court in Prague (Městský soud v Praze). The applicants requested that the court order Delta Center to:
- refrain from entering into a contract for the rental of sales areas with anyone whose conduct was found by the court to constitute an infringement risk; and
- refrain from entering into any contract where the terms do not include: (i) the obligation on market traders to refrain from infringing the applicants’ intellectual property rights; or (ii) a clause terminating the contract in the event of the infringement or likelihood of infringement of the applicants’ rights.
Both applications for injunctive relief failed at both the City Court and the High Court in Prague, and the applicants brought an appeal before the Czech Supreme Court.
The Czech Supreme Court stayed the proceedings and referred the following questions to the CJEU for a preliminary ruling:
- Is a person with a lease of premises in a market, who provides stalls and pitches on which stalls may be placed to individual market traders for their use, an intermediary whose services are used by a third party to infringe an intellectual property right within the meaning of Article 11 of the Enforcement Directive?
- Is it possible to impose on a person with a lease of premises in a market, who provides stalls and pitches on which stalls may be placed to individual market traders for their use, measures, as provided for in Article 11 of the Enforcement Directive, under the same conditions as those formulated by the Court of Justice in its judgment of 12 July 2011 in Case C-324/09 L’Oreal and Others v eBay and others with regard to the imposition of measures on the operators of an online marketplace?
On interpretation of Article 11 of the Enforcement Directive, the CJEU held that an operator which provides to third parties a service relating to the letting or subletting of pitches in a marketplace, must be classified as an “intermediary whose services are being used by a third party to infringe an intellectual property right” within the meaning of that provision. The CJEU also clarified that whether the sale takes place in an online or offline context is irrelevant because the scope of the Directive is not limited to electronic commerce.
The CJEU also stated, in response to question 2, that the conditions for an injunction within the meaning of Article 11 of the Enforcement Directive against an intermediary who provides a service relating to the letting of sales points in market halls are identical to those for injunctions which may be addressed to intermediaries in an online marketplace. As the same rules apply, the injunctions must be both effective and dissuasive but also equitable and proportionate.
This judgment is excellent news for brand owners as they may now have the opportunity to take action against numerous traders of physical counterfeit goods by seeking a sole injunction against the marketplace operators. However, it must be borne in mind that it cannot be expected that market traders/owners will be able to exercise general and permanent oversight over their customers.