MHC Tech Law: Landlords to counterfeit traders hit by e-commerce IP rules


22 Aug 201638 Shares

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Counterfeit goods for sale at a weekly market. Photo via Ian Law/Shutterstock

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Mason Hayes & Curran explains how e-commerce rules for IP infringement now impact bricks-and-mortar stores – in particular, the landlords.

Currently, it is possible for an IP rights-holder to obtain an injunction against an online intermediary whose services are used to sell counterfeit products. What was not clear was whether the same principle applied to real-life marketplaces.

In the recent Delta Center case (C-494/15), the Court of Justice of the European Union (CJEU) decided that this principle does apply and so landlords may be injuncted if their tenants sell counterfeit products.

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Third-party infringement

Directive 2004/48/EC on the enforcement of intellectual property rights provides that EU member states must ensure that rights-holders are in a position to apply for an injunction against “intermediaries whose services are used by a third party to infringe” intellectual property rights.

It has been the case for some time that an online intermediary, whose services are used by a third party in order to infringe intellectual property (such as selling counterfeits), may be ordered to take measures to end those infringements and to prevent further such infringements (L’Oreal and Others, case C-324/09). These measures may be ordered regardless of any liability of the online intermediary in relation to the facts concerned.

CJEU ruling on Delta Center

The company Delta Center is the tenant of the marketplace ‘Pražská tržnice’ (Prague market halls). It sub-lets to market-traders the various sales areas in that marketplace.

Various rights-holders identified the sale of counterfeits from those market stalls. They applied for an order in the Czech Republic directing Delta Center to refrain from concluding or extending any contracts with persons held to have infringed intellectual property rights; and refrain from concluding or extending any such contracts where the contracts do not include a restriction on infringing intellectual property rights or a clause allowing Delta Center to terminate the contract in the event of intellectual property infringement.

The Czech courts refused to make these orders and, ultimately, the matter was referred to the CJEU.

In deciding the case, the CJEU saw no difference between the established approach to online infringement and infringement in brick-and-mortar stores or marketplaces. Like their e-commerce counterparts, the view of the CJEU is that the operator is an “intermediary whose services are used by a third party to infringe” intellectual property rights. After all, these third parties have the ability to let or sub-let stalls in a marketplace, through which they then have access to that marketplace and can offer counterfeit products for sale.

What principles apply?

The CJEU confirmed that rules for the operation of injunctions are a matter of national law and that such injunctions must be effective and dissuasive but equitable and proportionate. Such injunctions must not be excessively expensive and must not create barriers to legitimate trade.

The intermediary – the landlord in this instance – cannot be required to exercise general and permanent oversight of its customers. The intermediary may, however, be forced to take measures that contribute to avoiding new infringements of the same nature by the same market-trader from taking place.

Ultimately, any injunction must ensure a fair balance between the protection of intellectual property and avoiding obstacles to legitimate trade.

This new decision will require relevant landlords to review their leases to ensure they are robust enough and give sufficient flexibility to deal with intellectual property infringement by tenants.

Landlords will also be required to consider their approach to requests from rights-holders to take further action where tenants are found to have infringed intellectual property rights.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

Tech Law is a weekly series brought to you by Irish law firm Mason Hayes & Curran, whose legal tech team advises the world’s top social media organisations and emerging start-ups. Contact a member of the MHC Technology team or visit www.mhc.ie for more information.

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Counterfeit goods image by Ian Law via Shutterstock

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