Intermediary Liability for Trade Mark Infringement, passing off, and misleading and deceptive conduct

Unlike the Copyright Act 1968 (Cth) and Patents Acts 1990 (Cth), the Trade Marks Act 1995 (Cth) does not contain a provision which makes liable those who authorise others to infringe a trade mark. Should the Trade Marks Act 1995 (Cth) be amended to include an express statutory provision extending liability for infringement to those who authorise infringement of registered trade marks? Some agitation of the issues has been seen in UK and US courts.

In 2014, Justice Arnold of the UK High Court presided over a trial between luxury brand owners and internet service providers in Cartier, Montblanc and Richemont v BSkyB, BT, TalkTalk, EE and Virgin (Open Rights Group intervening) [2014] EWHC 3354 (Ch). As set out in the judgment:

[1]. The Claimants ( collectively, “Richemont”) are the owners of a large number of United Kingdom Registered Trade Marks for CARTIER, MONTBLANC, IWC and other brands (“the Trade Marks”). The Defendants (“Sky”, “BT”, “EE”, “TalkTalk” and “Virgin”, collectively “the ISPs”) are the five main retail internet service providers in the United Kingdom. Between them, they have a market share of some 95% of UK broadband users. By this application Richemont seek orders requiring the ISPs to block, or at least impede, access by their respective subscribers to six websites which advertise and sell counterfeit goods (“the Target Websites”). Richemont contend that the operators of the Target Websites thereby infringe the Trade Marks. For the avoidance of doubt, there is no suggestion that the ISPs have infringed the Trade Marks or are liable for infringements by the operators of the Target Websites.

[2]. The application raises five main questions. First, does this Court have jurisdiction to make an order of the kind sought? Secondly, if the Court has jurisdiction, what are the threshold conditions, if any, which must be satisfied if the Court is to make an order? Thirdly, are those conditions satisfied in the present case? Fourthly, if those conditions are satisfied, what are the principles to be applied in deciding whether or not to make such an order? Fifthly, applying those principles, should such orders be made in the present case?

[3]. Over the last three years, a series of orders have been made requiring the ISPs to block, or at least impede, access to websites pursuant to section 97A of the Copyright, Designs and Patents Act 1988 (“the 1988 Act”), which implements Article 8(3) of European Parliament and Council Directive 2001/29/EC of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (“the Information Society Directive”). I have considered the principles to be applied to applications of that kind in a series of judgments: Twentieth Century Fox Film Corp v British Telecommunications plc [2011] EWHC 1981 (Ch), [2012] Bus LR 1471 (“20C Fox v BT”); Twentieth Century Fox Film Corp v British Telecommunications plc (No 2) [2011] EWHC 2714 (Ch) , [2012] Bus LR 1525 (“20C Fox v BT (No 2)”); Dramatico Entertainment Ltd v British Sky Broadcasting Ltd [2012] EWHC 268 (Ch), [2012] 3 CMLR 14 (“Dramatico v Sky”); Dramatico Entertainment Ltd v British Sky Broadcasting Ltd (No 2) [2012] EWHC 1152 (Ch), [2012] 3 CMLR 15 (“Dramatico v Sky (No 2)”); EMI Records Ltd v British Sky Broadcasting Ltd [2013] EWHC 379 (Ch), [2013] ECDR 8 (“EMI v Sky”); Football Association Premier League Ltd v British Sky Broadcasting Ltd [2013] EWHC 2058 (Ch), [2013] ECDR 14 (“FAPL v Sky”); and Paramount Home Entertainment International Ltd v British Sky Broadcasting Ltd [2013] EWHC 3479 (Ch), [2014] ECDR 7 (“Paramount v Sky”). Since the last of those judgments, Henderson J has considered the impact of the judgment of the Court of Justice of the European Union in Case C-466/12 Svensson v Retriever Sverige AB [EU:C:2014:76 in Paramount Home Entertainment International Ltd v British Sky Broadcasting Ltd [2014] EWHC 937 (Ch) (“Paramount v Sky 2”).

[4]. It is convenient to note at this stage three points about the cases under section 97A. The first is that neither the ISPs nor the rightholders have appealed against any aspect of the orders made in those cases, including those aspects which deal with the costs of the applications and the costs of implementing the orders. The second is that, since 20C Fox v BT and 20C Fox v BT (No 2), the ISPs have not opposed the making of the orders sought by the rightholders, but have restricted themselves to negotiating the wording of the orders if the Court is minded to grant them. Thirdly, in consequence, most of the orders have been granted after consideration of the applications on paper.

[5]. The present application raises different considerations, for two main, linked reasons. The first is that the present case involves an attempt to combat trade mark infringement rather than copyright infringement. The second is that there is no statutory counterpart in the field of trade marks to section 97A of the 1988 Act. In addition, the arguments raised on the present application have differed to some extent from those raised in 20C Fox v BT. For all these reasons, I have endeavoured to approach this application afresh. Inevitably, however, much of what was said in the judgments listed in paragraph 3 above is relevant. In addition, the experience that has been gained as a result of the orders granted in those cases is also relevant, as I shall explain.

[6]. I was informed by counsel that, so far as they and their professional and lay clients are aware, this is the first occasion on which an application for a website-blocking order against internet service providers in order to combat trade mark infringement has been made anywhere in the European Union, with the possible exception of the Danish case of Home A/S v Telenor A/S (Retten på Frederiksberg, 14 December 2012). It is a test case, which, if successful, is likely to be followed by other applications by Richemont and other trade mark owners, both here and in other countries.

The Australian statutory landscape is similar to that in the UK. The Copyright Act 1968 (Cth) s115A provides for blocking injunctions against online service providers who facilitate copyright infringement. However, the Australian Trade Marks Act 1995 (Cth) is silent on the issue. The UK plaintiffs, in the absence of a statutory provision in the UK Trade Marks Act 1994 (Cth), plead for the court to exercise its inherent equitable jurisdiction to issue an injunction. It is interesting to note that Australian courts also have such powers – for example Federal Court of Australia Act 1977 (Cth) s23. Justice Arnold decided that the High Court had jurisdiction to issue blocking orders forcing ISPS to block access to websites that were dealing in counterfeit goods. Similar to the outcome in a copyright case, Arnold J ordered that the ISPs bear the costs of implementation.

The ISPs appealed to the Court of Appeal of England and Wales. The court upheld Arnold J's decision at Cartier International AG and others v British Sky Broadcasting Ltd and Others [2016] EWCA Civ 658. Lord Justice Kitchin in the Cartier (appeal) the following to say about the problems facing trade mark owners:

[10] Unfortunately and as is well known, luxury goods attract the attention of counterfeiters and Richemont and other such producers suffer significant losses each year as a result of the international trade in counterfeit goods. In 2014 the European Commission published its Report on EU Customs Enforcement of Intellectual Property Rights: Results at the EU Border in which it stated that in 2012 the customs authorities at the external borders of the EU seized over 39.9 million counterfeit articles with a market value of almost 900 million, and that the authorities in the UK seized more articles than the authorities in any other Member State. In 2011 Frontier Economics Ltd published a report entitled Estimating the Global Economic and Social Impacts of Counterfeiting and Piracy in which it estimated that the value of internationally traded counterfeit and pirated goods would increase to US\$960 billion by 2015.

[11] The sale of counterfeit goods damages trade mark owners like Richemont in various ways. First, they suffer a loss of sales. Secondly, counterfeit goods are almost always of lower quality than the genuine articles and the circulation of such counterfeit goods diminishes the reputation attaching to the famous brand names. Thirdly, the cachet associated with luxury articles depends at least in part upon their expense and this is eroded by the availability of cheap replicas. Finally, the availability of counterfeit goods tends to damage the confidence of consumers in the legitimate market for luxury articles.

[12] There can be no doubt that a good deal of the business of counterfeiters is conducted using the internet. In 2008 the Organisation for Economic Co-operation and Development published a report entitled The Economic Impact of Counterfeiting and Piracy in which it observed that the online environment attracted counterfeiters for various reasons including anonymity, flexibility, the size of the market and the ease with which customers can be deceived. The European Commission also observed in its 2014 report that the top six categories of goods seized were all goods of a kind which are often shipped by post or courier after an order placed via the internet.

The ISPs appealed again to the Supreme Court on the issue of costs which could have been significant as the brand owners had identified at least 46,000 websites which sold counterfeit goods. In a judgment delivered on 13 June 2018, the UK Supreme Court at Cartier International AG and others v British Telecommunications Plc and another [2018] UKSC 28, allowed the appeal thus removing the burden on the ISPs in relation to compliance costs. Lord Sumption: (with whom Lord Mance, Lord Kerr, Lord Reed and Lord Hodge agree):

[37] It is critical to these conclusions that the intermediary in question is legally innocent. The appellants in this case are legally innocent because they are “mere conduits”. Different considerations may apply to intermediaries engaging in caching or hosting governed by articles 13 and 14 of the E-Commerce Directive, because these operations involve a greater degree of participation in the infringement, which is more likely to infringe national laws protecting intellectual property rights if the conditions of immunity are not satisfied. That must, however, depend on the precise facts and on the relevant provisions of national law. For my part, I would not accept that the mere fact, without more, that the immunities of intermediaries under articles 13 or 14 of the E-Commerce Directive are conditional on active steps being taken against the infringer in certain circumstances, is enough to require a court to make intermediaries covered by those articles pay the costs of compliance.

The Productivity Commission has recently expressed concerns similar to Lord Kitchin as to the problems created by counterfeit trade marked goods: see Australian Government, Productivity Commission, Intellectual Property Arrangements: Final Report (2016), p. 553-555.

Do you think the Australian Trade Marks Act 1995 (Cth) should be amended to include intermediary liability provisions similar to s115A of the Copyright Act 1968 (Cth)?

Do you think an Australian plaintiff will plead to the court's inherent jurisdiction for an injunction to order ISPs to block counterfeit websites?

In the UK, the Supreme Court held that brand owners would have to indemnify the ISPs for the costs of compliance as the ISPs are “innocent”. Do you find that convincing? Do you think this will deter brand owners from seeking such orders in the future?

US trade mark law and IP law in general is quite different from Australia's making comparative case studies difficult. However, a recent US case is highlighted here for its interesting fact pattern. Can a domain name registrar be liable for registering a domain name for a counterfeiter's website?

In the case of InvenTel Products, LLC v. Li, 18-cv-16590, Inventel sued Li and others for selling counterfeit products. After voluntarily dismissing GoDaddy from the action, InvenTel learned that Li had started a new website to further market counterfeit products at www.hdmirrorcambuy.com. InvenTel then brought a fresh suit against GoDaddy for registering the new website. GoDaddy filed to dismiss the claim.

Can GoDaddy be liable for counterfeiting activity for registering the domain name?

The court ultimately held no. Inventel Products v Li Civ. No. 2:19-9190 (13 August 2019). In relation to the trade mark claim the court re-iterated that US federal trade mark law provides a 'safe harbour':

15 U.S.C. § 1114(2)(D) states:

Notwithstanding any other provision of this chapter, the remedies given to the owner of a right infringed under this chapter or to a person bringing an action under section 1125(a) or (d) of this title shall be limited as follows ... A domain name registrar, a domain name registry ... shall not be liable for damages under this section for the registration or maintenance of a domain name for another absent a showing of bad faith intent to profit from such registration or maintenance of the domain name.

Thus the question was whether GoDaddy exhibit a bad faith intent to profit?

Plaintiff argues it “pled and established in detail through Declaration of Yasir Abdul [sic] and documentary evidence previously submitted to the Court that GoDaddy was provided with multiple notices of the infringement,” and thus acted in bad faith in registering the Website. Opp. at 13-15. The Court disagrees. The only pleaded basis for GoDaddy's knowledge that the Website would be used to infring is the Li Defendants' conduct using other websites and the Prior Action. See Compl. ¶¶ 76-83. But GoDaddy's domain name registration system is automatic. See May 7, 2019 Op. at 3, ECF No. 29 (discussing registration “computer systems”); McTernan., 577 F.3d 521, 530 (permitting findings and conclusions at preliminary injunction stage to have preclusive effect). Therefore, without a warning that the specific URL being registered would be used for an illicit purpose, GoDaddy did not have a “bad faith intent to profit” from the automatic registration of “www.hdmirrorcambuy.com.”. In other words, failing to prevent its computer system from registering the Website does not constitute “bad faith.” Plaintiff provides no basis for the proposition that GoDaddy must predict which URLs will be used for infringement purposes and proactively stop them from being registered. Accordingly, Plaintiff's Lanham-Act based claims (Count One and part of Four) are DISMISSED.

Advertisers who use brands have sometimes been held liable for misleading and deceptive conduct, passing off, and trade mark infringement. For direct liability for keyword advertising, see:

  • Veda Advantage Ltd v Malouf Group Enterprises Pty Ltd (2016) 241 FCR 161; facts plus trade mark infringement at 126-128; s18 ACL at 234 (who is the reasonable member); on what is a misleading misrepresentation 242-244 and [251]-[254].
  • Australian Competition and Consumer Commission v Trading Post Australia Pty (2011) 197 FCR 498 per Nicholas J Legal principles s31 – 38 FACTS in relation to Kloster Ford advertisement [85 88]; Analysis at [94] – [100] , only in relation to Representation A and B [118] – [130]. Note that these findings were not overturned on appeal.

In Google, Inc v ACCC (2013) 249 CLR 435 the High Court held that Google was not liable when it created a system to enable third parties to create advertisements that were reproduced on Google’s search results pages. The High Court was clear in finding that Google did not ‘endorse’ advertisements submitted by third parties and published on its own web pages, on the basis that the content of the material was wholly determined by the advertiser and published automatically by Google. Google ‘did not itself engage in misleading or deceptive conduct, or endorse or adopt the representations which it displayed on behalf of advertisers’ (at [73] (French CJ, Crennan and Kiefel JJ)). Liability for misleading and deceptive conduct is strict, but requires actual wrongful conduct on the part of the defendant that is likely to mislead or deceive — there is no separate secondary head of liability. Whether Google knew that the content was misleading was irrelevant.

For further reading, see:

  • Vicki Huang, ‘Liability For ‘Invisible’ Use of Trade Marks on the Internet’ (2018) 28 Australian Intellectual Property Journal 51
  • Kylie Pappalardo & Nicolas Suzor (2018) The liability of Australian online intermediaries. Sydney Law Review, 40(4), pp. 469-498.
  • On misleading statements in trade and commerce on Facebook: Madden v Seafolly Pty Ltd [2014] FCAFC 30
  • On s18 ACL in relation to social media marketing / cyber influencers: Lynden Griggs and Aviva Freilich, 'Influencers, Instagurus, and Enablers: Using Accessorial Liability to Establish a Norm of Behaviour in Relation to Disguised Viral Marketing' (2017) 25 Australian Journal of Competition and Consumer Law 113
  • Amanda Scardamaglia, ‘Misleading and Deceptive Conduct in Australia: Google Inc v Australian Competition and Consumer Commission [2013] HCA1’ (2013) 35(11) European Intellectual Property Review 707
  • Althaf Marsoof, ‘Serving the Goals of Trademark Owners Through the Australian Consumer Law: A Reflection on Google Inc v ACCC’, (2015) 23 Australian Journal of Competition and Consumer Law 244
  • Amanda Scardamaglia and Angela Daly, ‘Google, Online Search and Consumer Confusion in Australia’ (2016) 42 International Journal of Law and Information Technology 203
  • Angela Daly and Amanda Scardamaglia, ‘Profiling the Australian Google Consumer: Implications of Search Engine Practices for Consumer Law and Policy’ (2017) 40 Journal of Consumer Policy 299.
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