On appeal from: [2016] EWHC 339 (Ch).

This appeal considered the threshold conditions for the imposition of an order requiring ISPs to block or attempt to block access to websites infringing registered trademarks, and whether ISPs, as innocent parties, should be required to bear the costs of such blocking orders.

The Supreme Court unanimously allowed the appeal, so far as concerns the cost of complying with the injunction. The respondents will be ordered to indemnify the ISPs for the disputed implementation costs, but the judge was entitled to order the ISPs to pay the litigation costs. Lord Sumption gave the judgment, with which the other Justices agree.

The Supreme Court disagreed with the Court of Appeal’s ruling that, under EU law, liability for the costs of compliance was the quid pro quo of the immunities and the absence of any general obligation owed by ISPs to monitor information which they transmit or store.

First, the recitals refer the terms of an injunction against an intermediary to national law, without any further guidance. Second, the quid pro quo argument assumes what it seeks to prove: the Directives do not deal at all with the costs of complying with an injunction against an intermediary, so there is nothing from which such an inference could be drawn. Third, the rationale of the immunities, as explained in the recitals, is that disparities between national laws on liability can distort the functioning of the single market, and that the intermediaries have little or no control over content. It has nothing to do with the incidence of compliance costs when an injunction is granted. Fourth, the CJEU authorities say nothing about the incidence of compliance costs but only that, so far as they are to be borne by the intermediary, they must not be excessive.

The incidence of compliance costs is a matter for English law, within the broad limits set by the EU principles of effectiveness and equivalence, and the requirement that any remedy should be fair proportionate and not unnecessarily costly. An ISP serving as a mere conduit would not incur liability for trade mark infringement under English law even in the absence of the safe harbour provisions. There is no legal basis for requiring a party to shoulder the burden of remedying an injustice if he has no legal responsibility and is acting under the compulsion of an order of the court.

It has sometimes been suggested that because ISPs benefit financially from the volume and appeal of the content available on the internet, including content which infringes intellectual property rights, it is fair to make them contribute to the cost of enforcement. Website-blocking injunctions are sought by rights-holders in their own commercial interest. There is no reason why the rights-holder should be entitled to look for a contribution to the cost of defending his rights from anyone other than the infringers.

It follows that in principle the rights-holders should indemnify the ISPs for the compliance costs, subject to the limits on relief set by EU law. There is no reason to believe that such an indemnity, which must be limited to reasonable costs, would exceed those limits. Critically, the intermediary in this case is legally innocent. Different considerations may apply to those engaging in caching or hosting, which involve greater participation in the infringement.

As to the costs of the litigation, the judge was entitled to award them against the ISPs because, unusually, they had made the litigation a test case and had strenuously resisted the application.

For judgment, please download: [2018] UKSC 28
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (30 Jan 2018 morning session) (30 Jan 2018 afternoon session)