Landlords beware: CJEU rule that operators of physical marketplaces may be forced to put an end to trademark infringements committed by market-traders

In a decision which will be of significant interest to landlords, the Court of Justice of the European Union (CJEU) has held that operators of physical marketplaces may be forced to put an end to trade mark infringements committed by market-traders and to take measures in order to prevent new infringements.

The judgment, which extends the landmark decision in L'Oréal v eBay relating to online operators, could have important implications for landlords of all types and leaves open the question of whether other operators might be classified as ‘intermediaries’ within the scope of Article 11 of Directive 2004/84/EC.

On 7 July 2016, the Court of Justice of the European Union (CJEU) held that operators of physical marketplaces may be forced to put an end to trade mark infringements committed by market-traders and to take measures in order to prevent new infringements. The judgement was made in response to guidance sought by the Nejvyšší soud České rep (Czech Supreme Court) in its reference for a preliminary ruling in Tommy Hilfiger Licensing and Others v Delta Center a.s., C-494/15.

The dispute

Brand owners, including Tommy Hilfiger, discovered that counterfeits of their goods were being sold at Pražská tržnice, a market hall in Prague. The applicants applied to the Czech courts for an injunction to order Delta Centre, the tenant of the marketplace which sublets the various sales areas to market traders, to stop renting sales areas to people who committed such infringements.

The Czech Supreme Court observed that Czech national law corresponded with Article 11 of Directive 2004/84/EC (Directive), which states that rightsholders should be able to apply for an injunction against intermediaries “whose services are used by a third party to infringe an intellectual property right”. The Czech Supreme Court took the view that the dispute would have to be resolved by considering whether the interpretation of Article 11 in the landmark case L'Oréal and Others v eBay, which held that the Directive applied to online operators, also applied to physical marketplaces. The Czech Supreme Court therefore decided to stay proceedings and referred the matter to the CJEU.

Judgment

The CJEU confirmed that whether the sales point is online or physical is irrelevant as the scope of the Directive is not limited to e-Commerce. The CJEU therefore held that an operator which provides a service to third parties relating to the letting or subletting of pitches in a marketplace, and which therefore offers the possibility to those third parties of selling counterfeit products in that marketplace, must be classified as an ‘intermediary’ within the meaning of the Directive.

The CJEU went on to confirm that the conditions for an injunction issued against an intermediary who provides a service of letting sales points in market halls are identical to those applicable to injunctions addressed to intermediaries in an online marketplace, as confirmed in the L'Oréal case. Specifically, such injunctions must be equitable and proportionate and must therefore not be excessively expensive or create barriers to legitimate trade. The intermediary cannot be required to exercise permanent oversight over its customers. However it may be forced to take measures which contribute to avoiding new infringements by the same market trader.

Consequently, an operator of a physical marketplace may be forced to put an end to trade mark infringements committed by market-traders and to take measures in order to prevent new infringements.

Commentary

This judgment means that the route to enforcement for brand owners against infringers in physical marketplaces will be far easier as they will be able to instigate proceedings against the landlord, as well as the primary infringer. The CJEU also confirmed that the conditions for an injunction will be identical to those formulated in L'Oréal meaning that landlords could be forced to take measures to prevent new infringements by marketplace traders as well as acting against existing ones.

While such powers seem sensible where the infringement is online, due to the difficulty in many cases of tracing the primary infringer, in this case, as a rightsholder is clearly able to physically locate the trader at a marketplace or premises, this appears to be an unfair shifting of the burden to premises holders and seems to go beyond the policy reasons for having such powers.

In terms of application, the CJEU avoided determining what other service providers might fall within the scope of Article 11. However it did confirm that to fall within the classification of an ‘intermediary’ within the meaning of Article 11, it is not necessary for the economic entity to maintain a “specific relationship” with those using the service or “provide a service other than the one which is used by the third party” in order to infringe the intellectual property right. The leaves the possibility for the principle to extend to landlords of single brand shops, other types of landlords and even councils who provide market trader licences.

There is also the question as to whether the courts might extend this principle to copyright infringements. In such a situation brand owners may be able to instigate proceedings against landlords whose tenants were infringing copyright by selling pirated music or films.