The issue of intermediary liability is a hot topic, particularly in the online environment, with decisions in Tommy

Hilfiger and McFadden only intensifying the debate.

In Tommy Hilfiger Licensing LLC v Delta Center1 the European Court of Justice (ECJ) issued a ruling on a preliminary reference
regarding the liability of the operator of a physical marketplace. More recently, in McFadden v Sony Music Entertainment
Germany2 the ECJ issued a decision regarding the liability of a service provider in an online marketplace.
These latest rulings follow the ECJ's ruling from 2011 on a preliminary reference in L'Oral v eBay3 regarding the liability of
operators of internet marketplaces.
In L'Oral the question arose as to whether eBay was liable for infringements committed by internet users on its online
marketplace, whereas in McFadden the issue was whether a provider of a free WiFi network was liable for infringements
committed by its users. In Tommy Hilfiger the question arose as to whether Delta Center the tenant of a physical marketplace
could be held liable for trademark infringements committed by stall holders in its market hall. This update examines whether the
same rules relating to intermediaries' liability apply both online and offline. It also examines the rights and duties of
intermediaries and what measures can be taken against those whose services are used to infringe IP rights.

Defining an 'intermediary'
Before discussing the issue of liability, it is useful to examine what should be understood by the term 'intermediary'. An
intermediary is often a service provider that is active on a commercial stage and is part of a supply chain that facilitates and
often unwillingly and indirectly aids and abets an IP infringement. The intermediary typically offers added value to a
commercial transaction. However, the term has a different meaning depending on whether the intermediary operates in a physical
or online marketplace.
In a physical marketplace, an intermediary is a service provider whose services are used by a third party to infringe an IP right.
The following fall under this definition:

a market hall tenant that sub-lets sales points where counterfeit products are offered for sale;4

the tenant of premises where counterfeit goods are stored;5

a shipping agent;6

a transporter of counterfeit goods;7

1
(1) C-494/15, EU:C:2016:582, July 7 2016.

2
(1) C-494/15, EU:C:2016:582, July 7 2016.

3
(3) C-324/09, EU:C:2011:474, July 12 2011.

4
(4) Tommy Hilfiger.

5
(5) adidas v Export Management Services, IRDI 2009, president of the Brussels Commercial Court, October 14 2008, p65.

6
(6) IRDI 2008, president of the Antwerp Commercial Court, May 6 2008, p260; IRDI 2011, February 24 2011, p320 related to
patent infringements.

7
(7) DKH Retail (Superdry) v Anex Customs, AR/2013/09073.
 an intermediary storing goods under duty-suspension arrangements in view of (parallel) imports in the European
Union;8 and

a service provider which fills cans bearing infringing marks (although such service providers are not liable for
trademark infringement under the EU Trademark Directive (2015/2436), their role can be assessed under other rules of
law9).

The ECJ has left unanswered the question of whether a supplier of electricity to premises where counterfeit goods are offered for
sale could also be considered an intermediary. 10 However, since any injunction within the meaning of Article 11 of the IP
Enforcement Directive should ensure a fair balance between IP protection and obstacles to legitimate trade,11 it seems likely that
the courts would find measures against energy companies to be disproportionate to the goal of enforcing IP rights. In an online
marketplace, account must also be taken of internet service providers (ISPs). Content providers although not intermediaries
actively upload or sell content on the Internet and are thus potentially engaging in directly infringing behaviour. As providers of
unlawful content, they can be seen as third parties that use the services of online intermediaries for infringing activities. On the
other hand, those buying unlawful content or illegally downloading12 can also be seen as third parties that use services of online
intermediaries for infringing activities.
In UPC Telekabel Wien13 the ECJ stated that "an internet service provider... which allows its customers to access protected
subject matter made available to the public on the internet by a third party is an intermediary". 14 So which ISPs are acting as
intermediaries? Host providers supply facilities (eg, websites, platforms and technology) that make it possible for content
providers to share content publicly. In most cases they do not actively monitor this potentially unlawful content. One example of
this is an online intermediary marketplace such as eBay. 15 Internet access providers merely permit internet access without
proposing other services or reviewing the services that they provide.16 Blocking injunctions are increasingly issued against them
in order to prevent access to certain websites (eg, the Pirate Bay). The ECJ has noted that these blocking injunctions are
compatible with EU law17 but this practice is hotly debated across EU member states.

8
(8) Top Logistics v Bacardi C-379/14, EU:C:2015:497, para 45.

9
(9) Winters v Red Bull, C-119/10, EU:C:2011:258, December 15 2011, Paragraph 35; see also Red Bull v Konings, IRDI 2013,
president of the Brussels Commercial Court, September 26 2012, p203; Ing Cons, Liege Court of Appeal, April 19 2012, p415,
on refilling Marquis de Bossuet and Marquis de Briant wine bottles.

10
(10) Tommy Hilfiger, Paragraph 16.

11
(11) L'Oral, Paragraph 143.

12
(12) Stichting de Thuiskopie, C-435/12, EU:C:2014:254, April 10 2014.

13
(13) C-314/12, EU:C:2014:192, March 27 2014.

14
(14) Paragraph 32.

15
(15) L'Oral; Sabam, C-360/10, EU:C:2012:85, February 16 2012.

16
(16) LSG-Gesellschaft zur Wahrnehmung von Leistungsschutzrechten, C-557/07, EU:C:2009:107, February 19 2009,
Paragraph 43; Scarlett Extended, C-70/10, EU:C:2011:771, November 24 2011; UPC Telekabel Wien, Paragraph 32.

17
(17) UPC Telekabel Wien, Paragraph 64; L'Oral, Paragraph 131.
Liability of intermediaries
In Tommy Hilfiger the ECJ held that the conditions for an injunction within the meaning of Article 11 of the IP Enforcement
Directive against an intermediary providing a service relating to the letting of sales points in market halls are identical to those
for injunctions against intermediaries in an online market space, as established in L'Oral. In other words, intermediaries offering
counterfeit goods for sale should be treated the same, regardless of whether the marketplace is physical or online. However, in
some circumstances intermediaries may be held directly liable for trademark infringement. Articles 10(2) and (3) of the new
Trademark Directive and Articles 9(2) and (3) of the new EU Trademark Regulation (2015/2424) allow rights holders to prohibit
the fixing of trademarks to package labels, tags and security or authenticating features or devices, and prohibit the offering,
marketing, stocking, import and export of such products if there is a risk that such use would constitute trademark infringement.
In this respect it could be argued that an intermediary which merely fills cans bearing infringing marks is directly liable for a
preparatory act that would constitute trademark infringement.18
No obligation to monitor
There is no general obligation on service providers to monitor the information that they transmit or store. Nor is there a general
obligation actively to seek facts or circumstances that indicate illegal activity. 19 Although the limited liability of intermediary
service providers in an online environment does not exclude injunctions or court orders requiring the termination or prevention of
any infringement including removing illegal information or disabling access to it a service provider will be held liable only if
it collaborates with one of the recipients of a service to undertake illegal acts which go well beyond acting as a conduit, caching
or hosting.20
In McFadden the ECJ ruled that providing access to a communications network must not go beyond the boundaries of a
technical, automatic and passive process for the transmission of information.21 This ruling confirms the ECJ's earlier holding
in Google France:22 a service provider may be held liable where it plays an active role which gives it knowledge of, or control
over, this data, instead of confining itself to providing that service neutrally by a mere technical and automatic processing of data
provided by its customers.23 An intermediary in an online marketplace takes an active role when it provides assistance which
involves optimising how offers for sale are presented or helps to promote those offers.24
In Tommy Hilfiger the tenant of a marketplace had concluded rental contracts with its sub-tenants. Each contract imposed on each
sub-tenant an obligation to respect the regulations to which their activities were subject. Moreover, the tenant had published a
brochure stating that the sale of counterfeit products could lead to termination of the contract for the rental of the sales area. The
ECJ applied the online rule to the physical marketplace, stating that the intermediary could not be required to exercise general
and permanent oversight of its customers. 25 In other words, the tenant of the marketplace was not obliged to monitor or check the
pitches or stalls of the individual market traders which were its sub-tenants.

18
(18) Winters v Red Bull.

19
(19) Article 15 of the E-commerce Directive.

20
(20) Articles 12, 13 and 14 of the E-commerce Directive.

21
(21) Paragraph 49.

22
(22) C-236/08 to C-238/08, EU:C:2010:159, March 23 2010.

23
(23) Paragraph 120; see also Papasavvas, C-291/13, EU:C:2014:2209, September 11 2014, Paragraph 41, for a non-IP context
(defamation proceedings).

24
(24) L'Oral, Paragraph 116.

25
(25) Tommy Hilfiger, Paragraph 34.