'It Was Them Wot Did It!' – Defence Fails in ECJ Decision Relating to Physical Sales of Counterfeit Goods

On 7 July 2016, the Court of Justice of the European Union (ECJ) gave judgment in a case relating to the sale of counterfeit goods in a market in the Czech capital, Prague.  In it, it held that a tenant can be liable for the actions of subtenants under EU law.

The case concerned claims of trade mark infringement against Delta Center, the tenant of the 'Prague market halls' which sublet pitches or sales areas to stall holders who then sold counterfeit goods.

Background and Law

Several brand owners, including Tommy Hilfiger, Lacoste and Burberry (Claimants) discovered that the counterfeits of their goods were being sold at a market in central Prague.

The Claimants applied to the Czech courts for an injunction ordering Delta Center to stop subletting sales pitches to individuals committing such infringements.  In doing so they relied on Article 11 of Directive 2004/48/EC (which has been transposed into Czech law) which states that:

"Member States shall also ensure that rights holders 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 Directive 2001/29/EC".

Referral

Having passed through various Czech courts the claim reached the Czech Supreme Court which referred two questions to the ECJ for a preliminary ruling before making its decision.

The two questions referred were essentially:

Must the third sentence of Article 11 of Directive 2004/48 be interpreted as meaning that the tenant of market halls who sublets the various sales points situated in those halls to market-traders, some of whom use their pitches in order to sell counterfeit goods of branded products, fall within the concept of 'an intermediary whose services are being used by a third party to infringe an intellectual property right' within the meaning of that provision.
Must the third sentence of Article 11 of Directive 2004/48 be interpreted as meaning that the conditions for an injunction within the meaning of that provision against an intermediary who provides a service relating to the letting of sales points in market halls are identical to those for injunctions which may be addressed to intermediaries in an online marketplace, set out by the Court in the judgment of 12 July 2011 in L'Oréal and Others.

In an earlier judgment (C-324/09 L'Oréal v eBay), the ECJ held that national courts are able to order the operator of an online marketplace to end IP infringement committed by users of its services and to take measures to prevent further IP infringement.

In the current case, the ECJ confirmed that the Directive is not limited to e-commerce. Whether a marketplace is online or physical is irrelevant to the application of Article 11 and accordingly the principle set out in L'Oreal applied equally to online and physical sales of counterfeit goods.

Conclusion

The decision appears to be a substantial 'win' for brand owners in their ongoing battle to enforce their rights against sales of counterfeit goods.

Whether courts extend this principle to copyright infringement remains to be seen. In this situation, brand owners may be able to instigate legal proceedings against landlords whose tenants infringe copyright by way of selling or producing copyrighted material.

Case C-494/15 Tommy Hilfiger Licensing LLC and Others v Delta Center a.s