IP Infringement in ‘Brick and Mortar’ Stores – Landlord Liability?
19 August 2016
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”) has decided that this principle does apply and so landlords may be injuncted if their tenants sell counterfeit products.
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.
Online Intermediaries are Subject to Injunctions
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.
In this case, Delta Center sub-let various pitches in a Prague marketplace. Various rights holders identified the sale of counterfeits from those pitches and 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.
Brick and Mortar Intermediaries also Confirmed as Subject to Injunctions
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 by virtue of providing third parties with the ability to let or sub-let pitches in a marketplace, through which the third parties have access to that marketplace and offer counterfeit products for sale in the marketplace, the operator is an “intermediary whose services are used by a third party to infringe” intellectual property rights.
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 which 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.
What does this mean?
This new decision will require relevant landlords to review their leases with tenants to ensure the leases are robust enough and give sufficient flexibility to landlords 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.
For more information, contact a member of our Technology team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.