Cartier International AG and others v British Telecommunications Plc and another

A legally innocent intermediary which is ordered to prevent third parties from using its facilities unlawfully is ordinarily entitled to an indemnity from the rights-holder for its reasonable compliance costs. The rule applies to website-blocking injunctions against an internet service provider acting as a mere conduit.

European Union law does not allocate those costs. National law governs, subject to effectiveness, equivalence and the requirements that remedies be fair, proportionate and not unnecessarily costly. Conditional safe-harbour immunity is not a sufficient reason to make an intermediary bear compliance costs. Litigation costs remain distinct: an intermediary which unsuccessfully contests the injunction may be ordered to pay them.

Cartier International AG and others v British Telecommunications Plc and another concerned injunctions requiring internet service providers to block websites selling goods which infringed the respondents’ trade marks. The providers were innocent intermediaries. They supplied communications networks but neither provided nor stored the infringing content.

Arnold J granted the injunctions under the court’s general equitable jurisdiction and required the providers to bear their implementation costs. The Court of Appeal, by a majority, upheld that allocation: [2016] EWCA Civ 658; [2017] Bus LR 1. The jurisdiction to grant the injunctions and the criteria governing that remedy were no longer disputed before the Supreme Court.

The central issue was whether the rights-holders should indemnify the providers for the reasonable marginal costs of initially implementing and updating the blocks, and for costs or liabilities arising from malfunction without fault. A separate issue concerned the providers’ liability for the costs of the contested proceedings.

1. Appeal allowed in part, unanimously. Lord Sumption delivered the judgment, with which Lord Mance, Lord Kerr, Lord Reed and Lord Hodge agreed. The rights-holders were required to indemnify the appellant internet service providers for their reasonable compliance costs in the specified categories. The litigation-costs order remained undisturbed.

2. English equity permits an order requiring an innocent intermediary to assist in preventing the use of its facilities for wrongdoing. The jurisdiction is not confined to disclosure or to cases in which proceedings against the wrongdoer are contemplated. The decisive feature of Norwich Pharmacal Co v Customs and Excise Comrs [1974] AC 133 was that the intermediary had innocently become mixed up in and facilitated the wrong. The website-blocking orders could therefore have been made on ordinary equitable principles independently of European Union law.

3. The ordinary English rule is that, absent good reason to the contrary, a legally innocent intermediary is entitled to reimbursement of its reasonable compliance costs. The rule applicable to Norwich Pharmacal orders, freezing orders and analogous relief applies equally to website-blocking orders. The claimant invokes the court’s process for its own benefit, while the intermediary bears no legal responsibility for the infringement and acts only under judicial compulsion.

4. The relevant European Union directives do not allocate compliance costs between rights-holders and intermediaries. Such allocation is governed by national law, subject to the principles of effectiveness and equivalence and the requirements that remedies be fair, proportionate and not unnecessarily costly. Safe-harbour immunity and protection from general monitoring obligations are not exchanged for an obligation to bear compliance costs.

5. The Court of Justice decisions relied upon below did not establish a contrary rule. L’Oréal SA v eBay International AG concerned the prohibition of general monitoring and excessive burdens, while UPC Telekabel Wien GmbH v Constantin Film Verleih GmbH assumed the cost allocation prescribed by Austrian law. Those decisions established at most that costs imposed upon an intermediary must not be excessive.

6. The conclusion depended critically upon the providers’ legal innocence as mere conduits. Caching or hosting intermediaries may present different considerations because their activities involve greater participation and their immunities are conditional. Those conditions alone, however, do not require such intermediaries to bear compliance costs.

7. Intermediaries which do not oppose a website-blocking application should normally receive their litigation costs. Arnold J was nevertheless entitled to order the providers to pay the costs of these proceedings because they had made the claim a test case and had strenuously contested the jurisdiction. Paragraph 12 of the orders dated 11 November and 5 December 2014 was varied to require indemnification for reasonable processing and implementation costs falling within categories (iii), (iv) and (v) identified by the court.

1. United Kingdom Supreme Court: Unanimously allowed the appeal concerning compliance costs and varied the orders to require the respondents to indemnify the appellants for specified reasonable implementation costs. It upheld Arnold J’s exercise of discretion concerning litigation costs: [2018] UKSC 28.
2. Court of Appeal: By a majority comprising Jackson and Kitchin LJJ, with Briggs LJ dissenting on compliance costs, upheld Arnold J’s decision: [2016] EWCA Civ 658; [2017] Bus LR 1.
3. High Court: Arnold J granted the website-blocking injunctions, left the providers to bear implementation costs and ordered litigation costs against them because they had contested the jurisdiction and made the proceedings a test case.