In a landmark ruling of the Court of Justice of the European Union (CJEU) this morning, it has been held that the operators of physical marketplaces in the EU, in which third parties are selling counterfeit products, can be forced to put an end to infringements by traders and to put measures in place to prevent new infringements.
The case was originally brought by Tommy Hilfiger and others against the owners of a market in the Czech Republic. The CJEU held today that an operator which provides a service to third parties relating to the letting or subletting of pitches in a marketplace, and which thus offers the possibility to those third parties of selling counterfeit products in that marketplace, must be treated in the same way from an IP perspective as the operator of an online marketplace.
This judgment is great news for IP right holders in the EU who find themselves spending considerable sums chasing individual physical retailers selling counterfeit goods often on a small scale from physical marketplaces. It is of course necessary for rights holders to prevent these sales, but in many cases it can be difficult to identify and track down the person or entity behind the retailer. Also, in most cases the action does not lead to the source of the counterfeiting, and there is almost always a net cost to taking the action. If rights holders can in future target the owners of the locations of places where these retailers operate and have them be responsible for taking the action locally, then this relatively low level enforcement activity by the IP owners is likely to become quicker, less expensive and more cost effective. It will also be likely to have a longer lasting impact in the context of activities in the location itself.
For the owners of the marketplaces it appears that there are some protections to ensure that what they are required to do is not too unreasonable. In its press release today the CJEU made it clear that any injunctions against the owners of physical marketplaces must be equitable and proportionate. They must not therefore be excessively expensive and must not create barriers to legitimate trade. Nor can the marketplace owner be required to exercise general and permanent oversight over its customers. The CJEU did make it clear though that the marketplace owner may nevertheless be forced to take measures which contribute to avoiding continuing infringements of the same nature by the same market-trader.
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