Can commercial landlords be liable for the infringement of IP rights by their tenants?

15 September 2016

IP rights: A recent reference to the Court of Justice has clarified whether intermediaries in the 'real world' are caught by Article 11.

The development of the internet as a market place for selling goods and services gave rise to an interesting legal issue, namely the extent to which intermediaries (for example, those who host web sites) could be liable for the infringing acts of their customers. 

In the European Union, this issue was addressed in Article 11 of EC Directive 2004/48/EC. It required member states to ensure that rightholders are able to obtain an injunction against an infringer and concludes:

"Member States are also to ensure that rightholders 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…."

What has not been clear until now is whether intermediaries in the real world, as opposed to the world of e-commerce, are caught by Article 11 and whether, for example, a landlord can be made the subject of an injunction in the event that its tenant infringes a third party's IP rights. A recent reference to the Court of Justice has, however, clarified the position.

The case was brought by Tommy Hilfiger and other rightholders against the tenant of a market place in Prague (Delta Center). Delta Center sublet sales areas within the market to market traders. Having discovered that there was a trade in counterfeit goods amongst the market traders, the rightholders brought a claim against Delta Center and asked the Czech court for an injunction restraining Delta Center from (a) entering into contracts with anyone who has infringed IP rights and (b) entering into contracts where there is no clause restricting infringement of IP rights or a clause allowing for the termination of the contract in the event of such infringement. 

The case reached the Czech Supreme Court which referred two questions to the Court of Justice: (a) is Delta Center an 'intermediary' for the purposes of Article 11 and (b) if so, can an injunction be imposed on that intermediary as if this were equivalent to an online market place?

The Court of Justice held that Delta Center will act as an intermediary where it provides a "service capable of being used by one or more persons in order to infringe one or more intellectual property rights, but it is not necessary that it maintains a specific relationship with that or those persons". It held that not only does Delta Center fall within the concept of 'intermediary' for the purposes of Article 11, but also that Article 11 is not limited to e-commerce and that the conditions for an injunction are the same as between real and online market places. 

In the light of this ruling, commercial landlords should check their existing leases to ensure that, in the event of the infringement of a third party's IP rights by their tenant, they are able to take the appropriate action (which may include the termination of the lease and vacation of the premises) and any new leases should specifically address this issue.

The content of this article is for general information only. For further information on this topic, please contact Matthew Atkins or a member of Birketts’ Intellectual Property and Technology Team. Law covered as at September 2016.