The team is joined by GuestKats Mirko Brüß, Rosie Burbidge, Nedim Malovic, Frantzeska Papadopolou, Mathilde Pavis, and Eibhlin Vardy
InternKats: Rose Hughes, Ieva Giedrimaite, and Cecilia Sbrolli
SpecialKats: Verónica Rodríguez Arguijo (TechieKat), Hayleigh Bosher (Book Review Editor), and Tian Lu (Asia Correspondent).

Saturday, 30 July 2016

Gotta catch 'em all without infringing copyright: Pokémon and Freedom of Panorama

Pokémon Go has seen thousands of people getting off the couch into parks, historical sites, and even railway tracks in search of Pokémon. For those unfamiliar with this addictive new hobby, it is a game app for smart phones that allow players to catch Pokémon; animated creatures that were popularised in the 1990s by a card game, television series, and video games. In Niantic’s latest revival of this craze, Pokémon Go, virtual Pokémon appear in public places, and can be photographed through the app, which raises the question of copyright infringement in countries which do not have Freedom of Panorama.

How does the game work?
Pokémon Go requires players to search for Pokémon in the real world, a revolutionary move in the gaming industry. Pokémon are randomly generated by the game software, using GPS tracking technology. When a player is near to a Pokémon, it will appear on her phone screen in camera mode and allow her to ‘throw’ a Pokéball at it to ‘catch’ it. The screen shows the Pokémon in the surrounding environment, making it a life-like experience. While photographs of the capture are not saved to the game, players have the option of saving the photos to their phone, thereby reproducing any surrounding works of architecture or sculptures. 

What is Freedom of Panorama?

Freedom of Panorama is a copyright exception derived from Article 5(3)(h) of the InfoSoc Directive;

Member States may provide for exceptions or limitations to the rights provided for in Articles 2 and 3 in the following cases… (h) use of works, such as works of architecture or sculpture, made to be located permanently in public places”

It is an exception which has been championed by MEP Julia Reda in her draft report (section 16) on the EU copyright framework. The European Commission had a consultation on Freedom of Panorama from 23 March 2016 to 15 June 2016.  Currently, member states have varying approaches to the this exception, with some allowing it fully, others limiting it to non-commercial use (which France recently did although in limited circumstances), and a handful have no exception whatsoever.

Even in member states where the exception is allowed for non-commercial purposes, people who share such pictures could be committing copyright infringement. This is despite the picture not being used commercially, as the terms and conditions of social media sites, such as Facebook, allow the site to use your photograph for commercial purposes, and requires that you have cleared any rights to your photography, as explained by Julia Reda.
Such requirements blur the line between commercial and non-commercial.

(Previous IPKat posts of freedom of Panorama here and here)

How does the absence of Freedom of Panorama affect Pokémon players?

Players who catch Pokémon in front of copyright protected sculptures and buildings in countries which do not have Freedom of Panorama, and take a photograph of their capture, are infringing copyright. For example, taking a photograph of the Pikachu you caught in front of Mimmo Paladino’s ‘Untitled’ horse sculpture in Naples, Italy, would be copyright infringement since Italy has no Freedom of Panorama exception. Since player are unlikely to keep these photos to themselves, there is further potential for infringement due to the terms and conditions of social media sites, in countries which only have a limited Freedom of Panorama.

Maybe Paladino's sculpture is a deconstructed Rapidash 
Furthermore, photographs are not currently saved to the game, but rather to the phone. If this changes and photographs are saved to the game, professional players (yes, this is now a career choice) who sell their accounts will be making a commercial gain from the photos, and will be committing copyright infringement even in countries with the non-commercial exception.
It is true that Freedom of Panorama is not a highly litigious area, so individual players can continue showing off their Pokémon on their social media accounts. This Kat doubts that this innocuous threat would deter players from sharing their rare captures such as Mewtwo, but it does raise concerns of the clarity of this area of law, especially concerning the line between commercial and non-commercial uses of reproductions of copyright works. Just like the Pokémon Go servers, Freedom of Panorama needs to be fixed so that the law does not hinder public enjoyment.  

Book Review: Trade Secret Protection

As is befitting a book on trade secrets, the cover of Trade Secret Protection, edited by Trevor Cook, is shrouded in mystery. Matte black with gold embossments, the book invites to you delve into the world of global protection of trade secrets.

The book covers 32 countries and their trade secrets protection. Each chapter is written by local experts and covers a similar format for the relevant civil and criminal law: substantive aspects, final remedies, procedural aspects, and general considerations. Chapters are generally around 7 pages (14 sides), so the coverage is more broad than deep.

Given the current focus on the Olympics, and because this Kat's years there as student make her partial, let's have a look at the chapter on Brazil. As in many jurisdictions, trade secret protection in Brazil sits across a few areas of law -- unfair competition, TRIPs, an "inviolability of privacy" clause and in a few other spots.  Trade secrets exist not as property rights, but as an, "immaterial right." When this right is assigned, the contract can be registered with the Brazilian Patent and Trademark Office (BPTO.) Author Elisabeth Kasznar Fekete describes the Brazilian system as being very different in terms of licensing, "While the US and other jurisdictions attribute a right of property to trade secrets, in Brazil undisclosed information does not generate a property right... the legal nature of know-how agreements is not considered, from the BPTO's perspective, to be a temporary license but a definitive assignment of rights." Very interesting.

As Cook notes in the introduction, "Trade secrets have only grudgingly started to form an accepted part of the world intellectual property order since TRIPs." I'm really pleased to see more work on trade secrets.  Certainly this book will appeal to the reader eager to access synopses of trade secret protection in key jurisdictions, and in particular non-English speaking ones where information may be less readily accessible. There isn't an index, which I would have liked to have seen as it would enable cross-country comparison. However, most readers will be looking for jurisdiction-specific information, and the book's standard chapter format and organisation by country will satisfy that need.

Trade Secret Protection: A Global Guide with consulting editor Trevor Cook, (2016) Globe Law & Business. ISBN-10: 1909416312 is available for £145.  Rupture factor: Medium, nearly 500 pages.

P.S. I suspect the entry has confused its Trevor Cooks.  Unless our Trevor Cook is also the author of Make Your Own Art, Cool Stuff to Do and Awesome Experiments.

Friday, 29 July 2016

BREAKING: Mr Justice Arnold refers questions on Article 3(b) SPC Regulation to CJEU

The AmeriKat after the end of this term....
With the swan song of this year's Trinity Term having ended today, the Patents Court has been a hive of activity.  Last minute applications, end of term hearings and judges clearing their desks of judgments are the usual features of the end of the English Court's term.  This term has been no different, but my, how they have ended in a dramatic fashion with....drum roll please...a reference to the CJEU from Mr Justice Arnold on the SPC Regulation in Merck Sharp & Dohme v Comptroller-General of Patents [2016] EWHC 1896.

The problem and the questions to be referred 

What do you do if your patent is about to expire, but despite notice that Member States have agreed to grant your marketing authorization (MA) under the decentralized procedure, a MS has not yet taken the step to actually grant it?  You still make your SPC application, of course.

What happens after that is now subject to the following referred questions to the CJEU (subject to further revision and refinement by the Court and the parties' counsel):
1.  Is an end of procedure notice issued by the reference member state under Article 28(4) of the Medicinal Products Directive equivalent to a granted marketing authorisation for the purposes of Article 3(b) of the SPC Regulation
2.  If the answer to question (1) is no, is the absence of a granted marketing authorisation at the date of the application for a certificate an irregularity which can be cured under Article 10(3) of the SPC Regulation once the marketing authorisation has been granted?
Eye roll all you want, the AmeriKat actually
really does like SPC law
The SPC Regulation

Nothing makes the AmeriKat happier than SPC law (as far as "legal happiness" goes).  For those who have better things to do with their time than to understand the wonderful world of SPCs or to follow the myriad of national and CJEU decisions in this area, the key points are as follows:
  • By law, before a medicinal product can be placed on the market, it requires a MA.  Getting a medicinal product to this point cant take upwards to 15 years. 
  • By the time a MA for a medicinal product is granted, much of the term of the patent that protects the product will have expired.  
  • This means that the effective protection under the patent is insufficient to cover the investment in R&D (see Article 4 of the SPC Regulation)
  • For this reason, a new right  - the Supplementary Protection Certificate (SPC) - was introduced by the SPC Regulation in order to address that problem.  
  • SPCs provide an additional period of protection - up to a maximum of 5 years - for a product (i) subject to a valid MA at the date of the application (Article 3(b)) and protected by a patent (basic patent) in force at the date of the application (Article 3(a)).    
  • National courts and the CJEU have spent many years wrangling with the interpretation and application of the SPC Regulation.  
What's the product?

Atozet is the medicinal product which contains the active ingredients of ezetimibe and atorvastatin.  It is used to lower cholesterol. Claim 17 of EP(UK) 0 720 599 (the basic patent) protects a pharmaceutical composition comprising ezetimible and atorvastatin (this was not in dispute).  MSD applied for a SPC for the "product" on the basis of this patent for:
"ezetimibe and atorvastatin or pharmaceutically acceptable salts thereof, including atorvastatin as atorvastatin calcium trihydrate". 
The problem was that at the time of the SPC application, there was no granted MA in the UK.


MSD's arguments
MSD obtained a MA and SPC for the mono product - ezetimibe - in 2003.  It then obtained a MA and SPC for a combination of ezetimibe and simvastin - in 2004 and 2006, respectively (Merpel was struck by the relevance of this in the decision given that Article 3(c) objections were not in dispute, save for in the Dutch court).

In September 2006, MSD began development of the fixed dose combo of ezetimibe and atorvastatin.  However, it encountered formulation difficulties.  Seven years later, in September 2013, MSD filed MAs for Atozet in a number of Member States using the decentralized procedure (DCP) of obtaining a MA.  MSD designated Germany as the reference Member State (RMS).  As the RMS, the German medicines regulatory authority - Bundesinstitut für Arzneimittel und Medizinprodukte - coordinated the approval process, preparing the draft documents and, most importantly, the draft summary of product characteristics (SmPC) on which the other Member States comment.  All Member States' respective regulatory bodies need to be happy with the documents before the procedure is closed.  Thereafter, once agreement is reached, each Member State has 30 days to grant the MA.   The German medicines authority did not accept that MSD had filed a valid application until 13 February 2014 (another interesting inclusion, muses Merpel....).

On 12 September that year - a single day before the patent expired (remember the basic patent has to be in force under Article 3(a)) - MSD applied for its UK SPC at the UK Intellectual Property Office (IPO).  However, MSD did not have a granted UK MA.  Instead, MSD submitted, with their SPC application, a copy of the end of procedure (EoP) notice from the German medicines agency stating that the DCP had ended with approval.  MSD explained that the effect of the EoP notice was that concerned Member States, including the UK, had agreed to grant a MA for Atozet.  MSD therefore asked the UK IPO for permission to supplement their application when their UK MA was granted.

Five days later, the UK IPO's examiner said MSD's application did not comply with Article 3(b) because at the time of filing their SPC application, they did not have a valid UK MA.  The EoP notice did not satisfy that requirement.  The IPO also objected to the application on Article 3(c) grounds.  Three weeks later, the UK MHRA granted the MA on 10 October 2014.  MSD submitted a copy of the UK MA, together with the first EU MA (from France) and asserted that these documents would rectify any irregularities in the application.  The examiner maintained her objections, leading to a hearing in which the hearing officer agreed that Article 3(c) was satisfied but the SPC application fell foul of Article 3(b) which could not be cured under Article 10(3).

The Issues 

The Court was tasked with deciding whether:
(1) The SPC application complied with Article 3(b)
(2) The absence of a MA was an irregularity that could be cured under Article 10(3)
Arnold J sided with the Comptroller's
Did the SPC application comply with Article 3(b)?

No (in his opinion).  Mr Justice Arnold sided with the Comptroller's arguments on the basis that:
  • The focus of the SPC Regulation and regulatory approval is MA grant.  
  • The SPC Regulation only talks about MA grant  There is no mention of EoP Notices in the SPC Regulation.  
  • MA grant is necessary to launch a product. 
  • EoP Notices have no legal effect.  Only national MAs have legal effect under national law and it is still for Member States to grant a MA (despite the mandatory provision of Article 28(5) of the Medicinal Products Directive which provides that once the approval is recorded, each concerned Member State "shall adopt a decision in conformity with the approved assessment report, [SmPC]...within 30 days after acknowledgement of the agreement". 
  • SPC applications are made to national IPOs who are not medicines authorities subject to the Medicinal Products Directive. 
  • Therefore, at the date of the application, there was no valid MA granted in the UK to place Atozet on the market.  The EoP Notice was not equivalent to a MA for this purpose. 
The judge ignored, in his decision, all the usual "go to" arguments about the underlying purpose of the SPC Regulation in compensating the R&D, which were made by MSD.  The AmeriKat notes the comments about the difficulties encountered in formulating the actives.  Indeed, it took seven years to get to the point of applying for a MA.   Surely, that is where the SPC Regulation's purpose should really kick in - as the time and expense in which it took to successfully formulate and take the product through Phase III trials should be recognized. Adopting an overly formalistic approach undermines the entire purpose of the SPC Regulation as set out in the Recitals, especially where there was only a month between the date of the SPC application and the grant of the UK MA.  But the text of Article 3 itself provides a harder line....

Is the absence of a MA an irregularity that could be cured under Article 10(3)?

No (in his opinion).  Mr Justice Arnold sided again with the Comptroller on the basis that DuPont[2009] EWCA Civ 966 - which held that Article 10(3) could be successfully used to remedy a defect in a paediatric extension application caused by the lack of all updated MAs being provided - was to be distinguished from the position in this case.  This was because of the following:
  • An applicant for an extension has to apply by a specific date irrespective of whether it has all the relevant materials or not (i.e. two years before SPC expiry).  If no application is made by this date, no extension can be obtained.  By contrast, an application for an SPC can only be made after the grant of the patent and the grant of the MA.  Once those two events occur, the applicant has 6 months to make an application.  
  • Article 3  - and therefore Article 3(b) - does not apply to an application for an extension.  Article 3(b) - a valid granted MA - is a condition of grant.  Such a condition is absent in extension applications, as noted by Jacob LJ in DuPont.  
  • Even if Article 10(3) was employed to assist MSD, it was a dead end on the basis that you can't cure the incurable.  That is to say, a condition of grant under Article 3(b) is that there is a valid MA at the time of applying for the SPC.  At the date of application there was no granted MA and there was not until after the application for the SPC had been made.  Had the applicant merely forgotten to supply a copy of the MA, then that could be occurred by Article 10(3), but in this case there was no MA to supply.   
Doing everyone a favor,
Mr Justice Arnold refers questions
to the CJEU
So, why the reference then?

Mr Justice Arnold referred the questions as set out above.because:
  • matters were not acte clair; and
  • due to the presence of divergent decisions in other Member States on the SPC.  
On the latter, he noted that in Portugal and Sweden, the SPC was refused on the same ground.  However, in Denmark, Greece, Italy and Luxembourg granted the SPC.  The Dutch Patent Office refused the SPC but on Article 3(c) grounds (there was no objection on Article 3(b) as it accepted the EoP Notice as being equivalent to a MA).

One might as well cut to the chase and ask the CJEU what it thinks.  Or, as Mr Justice Arnold, put it:
"In these circumstances, I consider that it is only by referring the matter to the Court of Justice of the European Union that an authoritative ruling can be obtained."
Unfortunately for MSD, muses Merpel, unlike patent amendments she does not know of any "retrospective" provision when it comes to MA grants...

Hospira v Genentech - revocation of patents confirmed on appeal

The Court of Appeal handed down its decision yesterday in Hospira v Genentech (with the first instance decision reported by this Kat here).  As is often the case when an appeal decision upholds a first instance judgment, there is not meat in the decision - the whole matter is dealt with in just 56 paragraphs - and correspondingly not much to say about it.  (Regrettably, notes Merpel, the product-by-process discussion of the first instance decision, which induced a not insignificant number of comments on this blog, is not discussed in the appeal judgement.)

Genentech appealed against the first instance decision revoking a pair of patents on the grounds that the claimed subject matter is obvious.  The matter came down to an obvious to try and could-would argument; Birss J, at first instance, found that it was obvious to screen a particular selection of possible drug formulations to determine which is most stable.  Genentech argued (a) that it was not obvious to try the particular formulations and (b) that even if it were, the skilled person would not expect the particular claimed formulation to be stable from that selection of possible candidates, and so the skilled person would have no reasonable expectation of success and would not therefore arrive at the claimed invention.  

Floyd LJ agreed with Birss J, stating (in paragraphs 50 and 51):
Given that the screening methods were part of the common general knowledge, that the tests involved were routine, that the excipients were common general knowledge excipients and that there was no a priori reason why a successful lyophilised formulation could not be made, it seems to me that it was beyond argument that the claimed combination in this case was one that could be made by the skilled team. The question is whether this is the type of case where it is necessary to go further and ask whether the skilled person would necessarily have made the precise combination claimed. In an empirical field it will be seldom be possible to predict in advance that any individual experiment will work. In many cases, the fact that a routine screening exercise could be carried out will be inadequate to establish obviousness.  
Nevertheless, on the facts of an individual case such as the present, the team may have a reasonable degree of confidence that a series of experiments will produce some which will work. To impose a requirement that the skilled team must be able to predict in advance which would be the successful combinations is wholly unrealistic. It would lead to the grant of patents for a whole variety of combinations which in fact involved no inventive effort. 
Finally, in paragraph 53, the judgement concludes:
It is always necessary to remind oneself that it is not the function of this court to second-guess the judge's finding of obviousness. The judge was evaluating a large number of inter-dependent factors. Despite Mr Tappin's very clear and well sustained arguments, I do not think that the judge fell into any error of principle which would justify this court in undertaking its own evaluation.
 Lord Justice Kitchin and Lord Justice David Richards concurred.

Patent litigation as a branding tool: Huawei v Samsung

This Kat never quite understood the motivations for the Apple-Samsung smartphone wars. Maybe the reason was as simple as often portrayed. The
late Steve Jobs was incensed at what he felt was a gross misappropriation of his company’s IP by Samsung. But when the leading judgment came down the US (among a number of law suits between the two companies related to the same subject-matter, which were taking place in various countries), there was a certain feeling of unease. Was the case really about the possibility of injunctive relief going to the heart of the competitive relationship between the two sides or the potential for a break-the-bank monetary award? After all, the focus of the court was on certain design patents, and some observers were of the view that these design patents were at best trivial and perhaps should have never been granted.

At least in this Kat’s eyes, Apple lost the IP high ground—an owner of valuable IP rights that were being brazenly misused. From the public relations point of view, the suits were a draw, with perhaps a slight advantage to Samsung. In the words of CIMB analyst Lee Do-hoon (see Reuters report below) --
“If you look at the patent battle with Apple and Samsung … it ultimately created a lot of benefits for Samsung in a kind of an advertisement.”
What we see from this high-profile IP litigation is that, sometimes, the most valuable aspect is the branding benefit, rather than injunctive or monetary relief. What reminded the IPKat of this was the announcement last week that Samsung Electronics Company was suing smartphone rival, Huawei Technologies, for patent infringement in several courts in China. According to a report by Reuters, the action filed in the court in Beijing sought 161 million yuan (approximately $24.14 million) plus injunctive relief against Huawei regarding the production and sale of alleged infringing products. Huawei had filed suit against Samsung in the U.S. in May, alleging patent infringement with respect to 4G cellular communications technology. Now comes the law suit filed in China.

What do we make of these filing and counter-filings? In the view of analyst Lee Do-hoon, monetary relief may not be at the heart of these disputes. As for Samsung, one gets the sense that the filing of the law suits in the Chinese courts is an attempt to perhaps nudge Huawei to the negotiations table. Of more interest is the potential benefits to Huawei with respect to filing of the U.S. case. It may simply be that the Chinese company wants to enjoin Samsung from using the technology covered by the patents. Or perhaps, the end game is some type of settlement, providing for cross-licenses or the like. But Lee Do-hoon suggests another factor may be at play in helping to explain the filing of the law suit by Huawei—
“Huawei might also be trying to create some noise marketing for itself.”
Consider the market circumstances of the two parties to these law suits. Samsung is the number one manufacturer of smartphones, while Huawei is a rapidly expanding number three. It is no secret that Huawei is seeking to extend the reach of its products into key countries outside of China, where Samsung and Apple hold way. It is also no secret that Chinese companies are still finding it a challenge to brand their products outside of China. Filing a high-profile law suit against Samsung in the U.S. sends a message that Huawei can play with the (other) big boys in the smartphone space. In doing so, it potentially enables the company to expand its brand recognition in the U.S.

Provided that the U.S. law suit does not go the way of the Apple-Samsung dispute, and Huawei is viewed as overplaying its IP hand, or otherwise is seen in a negative light, there is the potential for substantial upside in brand recognition of its smartphones in the vast U.S. market. Indeed, such a benefit may ultimately be much more significant for the company than matters of injunctions and monetary damages. Indeed, patent litigators might consider taking a program or two at their local school of management to learn more about the dynamics of brand-building, and how patent litigation can contribute to this process.

Friday Fantasies

IPWeek Singapore 2016

InternKat, sifting through this week's news
The 5th edition of IPWeek Singapore takes place this year from 22-24 August at Marina Bay Sands. The theme for the Global Symposium this year is "powering the innovation cycle through IP." Delegates will hear contrasting views from a panel of distinguished speakers about how IP can be used to build lasting competitive advantage. The conference attracted more than 1,300 participants from over 30 countries in 2015 and is expected to be even bigger and better this year. You can register to attend here.

Hot off the press: journal explores nexus of IP & international investment law

Katfriends Henning Grosse Ruse-Khan and Simon Klopschinski would like to draw your attention to the special issue of the Journal of International Economic Law (OUP) on the nexus of IP and international investment law. They write, "IPKat readers may be amazed to hear that besides the universe of IP-specific treaties (e.g. TRIPs) there is a parallel dimension of more than 3,000 international investment agreements (IIAs), which also protect IP. If a state violates its obligations under an IIA, the foreign investor is usually not forced to grudgingly accept any harm suffered, but can often take legal action under the IIA, without being dependent on the courts of the host state or the assistance of its home state. If you now wonder why as an IP expert you never heard of this parallel universe of IIAs, this may be because only relatively recently the first IP-related investment disputes arose.” The special issue contains 7 papers exploring the interface between IP and investment.

US inaugurates National Anti-Counterfeiting Month

For those of you who are watching the US presidential campaign with excitement or trepidation, we have news of a less contentious inauguration. The International Trademark Association (INTA) and the U.S. Chamber of Commerce Global Intellectual Property Center (GIPC) have applauded the passage of a Senate resolution designating  July National Anti-Counterfeiting Consumer Education and Awareness Month. The resolution deserved a snappier title but, 70 years after the passage of the first federal trade mark protection (The Lanham Act), it is a symbolically important step. You can read more about the report and access the resolution here.

New Zealand Trans-Tasman Patent Attorneys Amendment Bill

Plans to bring New Zealand and Australian patent attorneys under a single Trans-Tasman regulatory framework (initially mooted in 2009) have come a step closer to fruition this month. The NZ Parliament's Commerce Committee has reported back to the House with suggested improvements to the proposed legislation. There may not be too much longer to wait before the bill emerges from its legislative chrysalis.

Report from 19 July case management hearing on legal challenges to Brexit

Members of the IP community with an interest in this subject can read Darren Smyth's report on the hearing at the Royal Courts of Justice.

Costs of ISP blocking injunctions: is there really an EU rule?

Yesterday the stunning London offices of Simmons & Simmons hosted a panel discussion on the implications of the recent Court of Appeal judgment in Cartier [here]

The debate also included the question of who should bear the costs of a blocking injunction: should it be intermediaries or rightholders?

The Cartier decision and the dissent on costs

In its ruling the Court of Appeal upheld the decision of Arnold J at first instance [noted here and here] and confirmed that blocking injunctions can be also sought in online trade mark cases, even lacking an express implementation into UK law of the third sentence of Article 11 of the Enforcement Directive ("Member States shall also ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right, without prejudice to Article 8(3) of [the InfoSoc Directive].")

Similarly to Arnold J, Kitchin LJ confirmed that internet service providers (ISPs) are to bear the costs of implementing a blocking order, while rightholders have to pay the costs of the relevant application. In his dissent Briggs LJ stated to agree with the analysis of Kitchin LJ, except on the issue of costs. 

The appeal in Cartier was the first time that ISPs had ever appealed a blocking order (including those made pursuant to s97A of the Copyright, Designs and Patents Act), also in relation to costs.

Adding the costs of blocking injunctions
The Newzbin2 reasons

Since the landmark decision in Newzbin2 [the first copyright blocking order issued in the UK], ISPs have been regarded as those having to bear the costs of implementing a blocking injunction. 

At that time Arnold J noted how ISPs (in that particular case, BT) are commercial enterprises that make a profit from the provision of services which the operators and users of infringing sites (in that particular case, Newzbin2) use to infringe the rightholders' rights. As such, the costs of implementing the order could be regarded as a cost of carrying on their own business.

This conclusion was said to be reinforced to some extent - albeit implicitly - by EU law, in particular:

  • Recital 59 of the InfoSoc Directive ("In the digital environment, in particular, the services of intermediaries may increasingly be used by third parties for infringing activities. In many cases such intermediaries are best placed to bring such infringing activities to an end. Therefore, without prejudice to any other sanctions and remedies available, rightholders should have the possibility of applying for an injunction against an intermediary who carries a third party's infringement of a protected work or other subject-matter in a network. This possibility should be available even where the acts carried out by the intermediary are exempted under Article 5. The conditions and modalities relating to such injunctions should be left to the national law of the Member States.");
  • The decision of the Court of Justice of the European Union (CJEU) in L'Oréal [para 139], in which - pursuant to Article 3 of the Enforcement Directive - it was clarified that enforcement measures "must not be excessively costly".
This said, however, in my opinion the hints derived from EU law are, indeed, just ... hints.

Is there an EU framework?

The EU law framework  is pretty much silent regarding who should bear the costs of injunctions against intermediaries. Even the ambiguous wording of Article 14 of the Enforcement Directive ("Member States shall ensure that reasonable and proportionate legal costs and other expenses incurred by the successful party shall, as a general rule, be borne by the unsuccessful party, unless equity does not allow this.") does not seem to relate directly to injunctions. 

Substantially 'costs of injunctions' is therefore an area of the law that has been left unharmonised at the EU level. This is also because, as Recital 59 of the InfoSoc Directive eloquently puts, "[t]he conditions and modalities relating to such injunctions should be left to the national law of the Member States."

Although the majority of national legal systems envisages that intermediaries are those responsible for bearing the costs of an injunction against them for third-party infringements, Member States are therefore ultimately free to choose the solution they prefer.

As such, any discussion as to whether the solution indicated by Arnold J and subsequently followed in other cases is the one to prefer is a legitimate one.

Will the CJEU provide yet another de facto harmonisation? The Mc Fadden case

This being the state of the art, ie a formally unharmonised framework, things might change - as a matter of fact - soon. More specifically, things may change when the CJEU decides the pending reference in Mc Fadden, C-484/14.

This is a reference for a preliminary ruling from the Regional Court, Munich I (Germany), and was made in the context of proceedings between Sony and a person (Tobias Mc Fadden) who operates a business selling and renting lighting and sound systems for various events.

Mc Fadden owns a Wi-Fi connection that is open to anyone to use as it not protected by any password. In 2010 that connection was used by someone other than Mc Fadden to download unlawfully a musical work to which Sony owns the copyright. Following Sony’s formal notice, Mc Fadden sought a negative declaration from the referring court. This dismissed it and upheld Sony’s counterclaim, granting an injunction against Mc Fadden on the ground of his direct liability for the infringement at issue and ordering him to pay damages, the costs of the formal notice, and costs. Mc Fadden appealed that decision, arguing that the provisions of German law transposing Article 12(1) of the ECommerce Directive would shield him from liability for third-party infringements. The Regional Court held the view that Mc Fadden would not be directly liable, but rather indirectly liable according to the German doctrine of Störerhaftung, on the ground that his Wi-Fi network had not been made secure. This court decided nonetheless to stay the proceedings and seek guidance from the CJEU on a number of issues.

AG Szpunar
For the sake of this blog post, what is particularly interesting is Question 4:

"Is … Article 12(1) of [the ECommerce Directive] to be interpreted as meaning that the expression ‘not liable for the information transmitted’ precludes as a matter of principle, or in any event in relation to a first established copyright infringement, any claims for injunctive relief, damages or the payment of the costs of giving formal notice or court costs which a person affected by a copyright infringement might make against the access provider?"

What is possibly even more interesting is the answer that Advocate General (AG) Szpunar provided in his Opinion [here] on 16 March last.

The AG held that an intermediary cannot be held liable for an IP infringement committed by a user of its services and, as a result, cannot be asked to bear pre-litigation and court costs. Holding otherwise "could potentially have the same punitive effect as an order to pay damages and could in the same way hinder the development of the intermediary services in question." [para 77]

AG Szpunar however did not stop here.

He noted [paras 78-79] how injunctions can be imposed on innocent intermediaries to repress third-party infringements. However, he concluded that the safe harbour regime [Article 12 of the Ecommerce Directive in this specific case] "precludes the making of orders against intermediary service providers not only for the payment of damages, but also for the payment of the costs of giving formal notice or other costs relating to copyright infringements committed by third parties as a result of the information transmitted." [para 80, emphasis added].

In my own opinion, the phrase “other costs” might include the costs of implementing an injunction, including a blocking injunction.

This means that, should the CJEU confirm the AG analysis on this point, then Briggs LJ might have well been right ... Stay tuned!

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