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New onus on landlords for sales of counterfeit goods on their premises

Posted on 30 September 2016

New onus on landlords for sales of counterfeit goods on their premises

A recent decision from Europe's highest court has opened up the possibility of Courts ordering landlords to stop their tenants selling counterfeit products and other illicit goods on their premises.  The case focused on a marketplace operator in the Czech Republic that had let units to individual stall holders who sold counterfeit products, but the effect of the decision could extend to landlords of shopping centres, as well as to other commercial landlords.

The European Court of Justice (CJEU) decided that a market operator who sub-lets units to stall holders selling counterfeit products is an 'intermediary' whose services are being used to infringe an intellectual property right.  As a result, intellectual property rights holders can seek an injunction against them, requiring them to stop sales of counterfeits on their premises - provided that the court granting the injunction is satisfied that certain criteria are met, including that an injunction would be proportionate in the circumstances. 

Whilst this decision does not require landlords to exercise general ongoing oversight of their tenants, it does mean that a Court may force them to take measures to prevent new infringements of the same nature by the same trader.  Accordingly, landlords should be ready to take prompt action if they learn that counterfeits are being sold on their premises. This may include lease termination and so it is important to ensure that appropriate termination provisions are included in leases.  The decision also reinforces the need for landlords to conduct robust due diligence on new tenants. 

The case was brought in the Czech Republic by a number of brand owners, including Tommy Hilfiger and Burberry, against Delta Center. Delta is the tenant of the Prague Market Halls and it sub-lets pitches to individual market traders.

The Czech Supreme Court asked the CJEU to determine whether market-operators like Delta Center are an intermediary whose services are being used to infringe an intellectual property right. The CJEU has previously considered this issue in relation to e-commerce and online marketplaces, in a claim brought by L'Oréal against eBay. In the Delta decision, it has applied these same principles to physical markets, confirming that the scope of the right to an injunction in such circumstances is not limited to online intermediaries.

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