Operator of a physical marketplace can be forced to stop the sale of counterfeits by its traders

The CJEU has confirmed that the operator of a traditional market place may be forced to put an end to the sale of counterfeits and other infringements committed by its market traders. Injunctions against these market operators are subject to the same conditions as those for operators of online marketplaces such as eBay.

The CJEU has today confirmed that the operator of a traditional market place may be forced to put an end to the sale of counterfeits and other infringements committed by its market traders. Injunctions against these market operators are subject to the same conditions as those for operators of online marketplaces such as eBay.

Background

Delta Center is the tenant of the Prague market halls and sublets to market-traders the various sales areas in that marketplace. Manufacturers and distributors of branded products such as Tommy Hilfiger discovered that counterfeits of their goods were regularly being sold in the market halls. They therefore asked the Czech court to order Delta Center to stop renting sales areas in those halls to people who committed such infringements.

The Enforcement Directive (2004/48/EC) at Article 11(3) states that: "Member states shall … ensure that rightsholders 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…" 

The Czech Supreme Court made a reference to the CJEU, essentially asking the following questions:

1. Is a market operator who leases its premises an intermediary to those stallholders whose services infringe an IP right, within the meaning of Article 11 of the Enforcement Directive?
2. Is it possible to impose on a person who leases premises in a market to individual stallholders, measures, as provided for in Article 11 of the Enforcement Directive, in accordance with the rules established for online marketplaces in L'Oréal v eBay (C-324/09)?

CJEU Judgment

The Court today ruled that an operator, which provides a service to third parties relating to the letting or subletting of pitches in a marketplace, and which therefore offers the possibility to those third parties of selling counterfeits in that market place, must be classified as an intermediary in the Enforcement Directive. Whether the provision of a sales point is within an online marketplace or a physical marketplace is irrelevant because the scope of the Enforcement Directive is not limited to e-commerce. The market operator may therefore be forced to put an end to the infringements by market traders and take measures to prevent new infringements.

The conditions for an injunction issued against a traditional market hall are identical to those applicable to online intermediaries (as set out in L'Oreal v eBay). The Court confirmed that such injunctions must be effective and dissuasive, equitable and proportionate. They must not be excessively expensive and must not create barriers to legitimate trade. Nor can the intermediary be required to exercise general and permanent oversight over its customers. By contrast the intermediary may be forced to take measures which contribute to avoiding new infringements of the same nature by the same market-trade. In addition, the injunctions must ensure a fair balance between the protection of IP and the absence of obstacles to legitimate trade.

Comments

IP owners will certainly welcome this decision as it gives them another weapon in their fight against the sale of counterfeits and other infringing goods. It is more economical to require one intermediary such as a market operator to take action to prevent its stall-holders infringing than it is to take direct action against each individual seller.

This is the first time that the Court of Justice has had to consider intermediary liability for traditional offline markets but it is right that the rules regarding online marketplaces such as eBay should also apply here. There is nothing to suggest that the Enforcement Directive only applies to e-commerce and it should be irrelevant whether the provision of the sales point is within an online or physical marketplace.

The decision also confirms that IP owners have the same rights in the EU as in other countries. For example, the landlord of Beijing's Silk Street shopping mall has been held accountable for failing to stop vendors from selling known pirated goods.