Counterfeiting: how to tackle the online threat
Posted on 21 October 2015 by Carter-Ruck
A recent decision of the Court of Appeal for British Columbia in Equuestek Solutions v Google Inc is set to have far reaching consequences for brands which find themselves victim to sustained and sophisticated counterfeiting attacks online.
As a result of this decision, handed down on 11 June 2015, counterfeiters will now find it much harder to circumvent the arm of the law. This is because the claimant in this case managed to obtain what is, in effect, a worldwide blocking order, preventing the world’s largest search engine from delivering search results pointing to websites selling counterfeits of its products.
This is a seminal decision and one which is likely to provide great comfort to high-end brands routinely targeted by counterfeiters. Previously, efforts to counter-act such operations were akin to “whack-a-mole”; every time access to a particular website was blocked, the counterfeiter would move the content to a new webpage.
The British Columbian decision, when coupled with orders made by the English High Court in Cartier International AG and others v British Sky Broadcasting Ltd in October 2014, represents a new line of attack in this protracted war. As a result of the English decision, brands can now target their efforts at Internet Service Providers (“ISPs”) such as Sky, BT, EE, Virgin Media and Talk Talk – simply requiring them to block access to infringing sites.
These two decisions, particularly if deployed together, ought to make it significantly easier for brands to protect their intellectual property rights and to guard themselves against sales of counterfeits of their products online.
Counterfeiting has long been a problem, particularly for well-known luxury and sports brands. Its negative effect on brands can include lost sales, brand dilution and reputational damage.
With the rise of e-commerce, sales of counterfeit goods are increasingly made online. A virtual global marketplace provides multiple benefits for counterfeiters, such as the following:
- It can be easier to deceive customers into thinking the product they are buying is genuine and make a sale, since only after payment and delivery will the consumer physically inspect the item.
- Goods can be sold before they are imported, thereby delaying the risk of customs intervention until after payment has been received.
- Counterfeiters can base themselves in jurisdictions where the laws on counterfeiting are less stringent (and therefore the risk to them is minimised), but still sell to consumers in other jurisdictions where there is more money to be made.
Whilst sales on websites such as Ebay and Alibaba can be tackled relatively easily (on Ebay, for example, using the VeRo system) the position is more complex if the goods are sold on the counterfeiter’s own website. Often such websites are designed to look like the authentic website, with a similar domain name.
What legal tools are available to assist trade mark owners?
Tackling the website operators directly can be difficult, as counterfeiters tend to conceal their true identities and even if their true identities can be established, they are unlikely to take heed of cease and desist letters and are likely to do all they can to evade any court proceedings. Even if a successful judgment is obtained it can be extremely difficult to enforce.
In October 2014, a new weapon was added to the brand owner’s armoury when the High Court made its first ever website blocking order in relation to counterfeiting in the case Cartier International AG and others v British Sky Broadcasting Ltd and others  EWHC 3354 (Ch). The order compelled several ISPs to block access to websites advertising and selling counterfeit goods.
Whilst this method is not a complete answer to the problem, given that the website is not altogether extinguished and the culprits are not directly targeted, it can be very effective. Statistics show that 95% of UK broadband users use the 5 largest ISPs – BT, Virgin Media, Sky, Talk Talk and EE – so a blocking order against those ISPs would cover the majority of UK broadband users.
In addition to this, following the decision of the British Columbian Court in Equustek, brand owners can now make applications seeking orders against the main search engine providers, prohibiting them from delivering search results pointing to the infringers’ websites.
Obtaining a website blocking order
Now that the law has been established in Cartier and Equustek, future orders should be simpler, quicker and cheaper for brand owners to obtain.
In order to obtain an order against an ISP, as obtained by Cartier against Sky, the following four conditions must all be satisfied:
- (i.) the ISPs against whom the order is sought must be intermediaries whose services have been used by a third party to infringe an intellectual property right;
- (ii.) the users or operators of the website must be infringing the trade mark;
- (iii.) the users or operators of the website must be using the services of the ISP to infringe; and
- (iv.) the ISP must have actual knowledge of the infringement.
Point (i) is likely to be straightforward to satisfy in most cases.
The majority of any application is likely to be concerned with point (ii), as it must be established that the counterfeit goods in question meet the relevant legal tests for infringement.
In the Cartier case, the judge decided that point (iii) was met on the basis that it was through the services of the ISPs that the advertisements and offers for sale of the counterfeit goods were communicated to 95% of broadband users in the UK. This test should therefore be relatively straightforward to establish in similar cases in future.
Point (iv) was met in the Cartier case on the basis that the claimants had sent information relating to the infringement (as well as subsequently serving evidence in the court proceedings) to each of the ISPs.
As well as the above, before granting the orders the court must be satisfied that the relief is necessary, will be effective, will be dissuasive, is not unnecessarily complicated or costly, does not create barriers to legitimate trade, is fair and is proportionate. Now that these questions have been considered and satisfied in the Cartier case, establishing them in subsequent similar cases should be more straightforward, but the issues will to some extent be based upon the individual circumstances of each case.
The orders in the Cartier case were to end after a provisionally defined period of 2 years unless the court ordered that they be continued or the ISPs consented to such. They also allowed users to apply to the court to have the orders discharged or varied.
The orders included a provision that the ISPs should block further addresses that might be notified to them by the claimants in the future because, for example, an offending website had changed its IP address. The potential risk of legitimate sites being accidentally blocked as a result was deemed to be countered on the basis that the order required the claimant to notify the site operator that the site was going to be blocked and invite it to move to a different server before that happened. Any affected website operator would therefore have the opportunity to move the site, or to object before the IP address was blocked.
As noted above, following Equuestek, a brand can seek an order from a search engine such as Google Inc compelling them to de-list search results providing links to websites selling counterfeits of their products.
However, a brand will first need to obtain an order prohibiting the counterfeiters from marketing their product. This will involve demonstrating that infringement of the brands’ IP rights has actually taken place. Once that is obtained, the brand can then seek an ancillary order against the search engines. This ought to make enforcement of primary orders against counterfeiters significantly easier given how difficult it can be to enforce against counterfeiters themselves.
Most search engines, such as Google, are based in the U.S. If seeking an order in the UK requiring the search engine to block, for example, results providing links to a UK website, a brand will need to demonstrate that the search engine has a “real and substantial connection” with the UK in order to demonstrate that the English Court has jurisdiction over it.
In Equuestek, it was held that a “real and substantial connection” could be established on the basis that even though Google did not have servers or offices in British Columbia, it carried on its business there by advertising to companies based there and on account of the fact that it gathered information residing or belonging to individuals based there through proprietary web crawler software. A similar approach could be adopted in UK proceedings.
The court must take into account balance of convenience, balancing the interests of the search engine and the brand. For example, in Equuestek the judge found that the order would not inconvenience Google in a material way and that Google would not incur expense in complying with it. On the other hand, the order was the only practical way in which the claimants could ensure that the offending websites were made inaccessible, given that the website owners had proved elusive and could not be relied upon not to flout the court’s orders. The balance therefore weighed on the side of the claimants.
Practical tips on discovery of an online infringement
Rights holders should adopt a zero tolerance policy to online infringement. If a brand makes a counterfeiter’s life difficult, it is more likely to move on to the next target i.e. another brand.
Steps to be taken on discovery of online infringement can include the following:
- Sending the ISP or auction site on which the counterfeit goods are being sold a “take down notice” setting out details of the infringement and asking them to remove or disable access to it. This can be an inexpensive and effective solution for small scale infringements in particular.
- Contacting payment providers, such as Visa, to ask them to suspend the accounts of website operators. This won’t stop the website operators taking payment by other means, such as bank transfer, but can help hit their operation where it hurts.
- Liaising with search providers, such as Google, to ask them to de-index links to websites selling counterfeit products. It is to be borne in mind, however, that they may not agree to do so without a court order –in which case it may be necessary to apply for an order similar to the one granted in Equuestek, as explained above.
- Applying for a website blocking order against the ISPs. Whilst more expensive, this can be very effective, for the reasons explained above.
- Consider bringing a private criminal prosecution against the infringers. The threat of criminal proceedings can be a frightening prospect for infringers given the severity of criminal sanctions. We have links with the top private prosecution firm in the UK so can make the necessary introductions.
This article was first published in the Intellectual Property Magazine.