Nintendo Co Ltd v Sky UK Ltd & Ors

By this claim the Claimant (“NCL”) seeks an injunction requiring the Defendants, who are the five main retail internet service providers (“ISPs”) in the United Kingdom, to take measures to block, or at least impede, access by their customers to four websites (“the Target Websites”) which advertise, distribute, offer for sale and/or sell devices that allow technological protection measures (“TPMs”) on NCL’s popular Nintendo Switch games console to be circumvented. Two of the Target Websites

In so far as it relies on the protection of trade mark rights as its basis, the present application is straightforwardly based on the principles set out by the Court of Appeal in Cartier International AG v British Sky Broadcasting Ltd [2016] EWCA Civ 658, [2016] ETMR 43 and refined by the Supreme Court in the same case [2018] UKSC 28, [2018] 1 WLR 3259. The application raises one novel point, however, in that NCL relies, in addition to its trade mark rights, on the statutory protection given by sections 296ZD and 296 of the Copyright, Designs and Patents Act 1988 (“CDPA88”) against the circumvention of copyright protection measures. NCL accepts that the rights conferred by sections 296ZD and 296 CDPA88 are not themselves intellectual property rights and therefore fall outside the ambit of European Parliament and Council Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights (“the Enforcement Directive”), but contends that the reasoning of the Supreme Court in Cartier demonstrates that this is no obstacle to the present application.

The First Defendant consents to the application, while the other Defendants do not oppose it. As I have observed on previous applications for blocking injunctions, however, that does not absolve the Court from its responsibility to ensure that the application is well founded before granting it.

NCL is a well-known Japanese company that designs, manufactures and sells video games consoles, accessories and software. One of its most successful products to date is a console called the Nintendo Switch. NCL has sold millions of Nintendo Switch consoles in the UK. Games for the Nintendo Switch are written both by NCL and by third parties referred to as “Authorised Developers” who operate under a programme which NCL says is cheap to join, user-friendly and benefits from extensive support from NCL. Out of the 2100 games currently available for the Nintendo Switch, 1804 were developed by Authorised Developers.

NCL is the proprietor of various relevant intellectual property rights. Both the Nintendo Switch and the games include copyright works such as the operating software (referred to as “firmware”) embedded in the Nintendo Switch, the software for the games that run on the Nintendo Switch and various other copyright works such

NCL is also the proprietor of various trade marks. For present purposes, two EU Trade Marks are relied upon (“the Trade Marks”), both of which are registered for “programs for consumer video games, memory cards storing programs for consumer video game apparatus; storage media storing programs for consumer video game apparatus; programs for handheld electronic game apparatus” in class 9 and “consumer video game apparatus; parts and accessories for consumer video game apparatus” in class 28:

The TPMs employ symmetric and asymmetric encryption to protect the copyright works. In simplified outline, an authorised video game is encrypted using a unique key. Attempts to decrypt the game without the correct key will produce unintelligible results. When an authorised user purchases a game, they are supplied with the encrypted game and with a unique key known as the title key, itself encrypted using a common key, and further encrypted using a device key unique to the individual console. The title key may then be decrypted by the authorised user first using the device key then the common key, the decrypted title key is then deployed to decrypt the game itself. As well as encryption of the game software, encryption is used to create a digital signature that ensures that the source of the software being supplied is authorised. The operation of the TPMs relies on the presence of various encryption keys in the firmware in the Nintendo Switch.

Regrettably, third parties discovered that there was a way to circumvent the TPMs by installing custom firmware on the Nintendo Switch. NCL implemented a change to the Nintendo Switch to prevent this in June 2018, but there remains a very substantial number of the earlier, vulnerable Nintendo Switch consoles in circulation and there is evidence of active attempts being made to circumvent the TPMs even on the postJune 2018 Nintendo Switches.

The circumvention devices consist of the SX Pro, which comprises a USB dongle and a jig tool, together with software called SX OS. Having purchased an SX Pro from a reseller, the user downloads SX OS from the first of the Target Websites onto a blank microSD card which the user inserts into his or her Nintendo Switch together with the SX Pro. The user then goes to the second of the Target Websites and, using a licence key stored in the SX Pro, obtains a licence for SX OS, which is then operable on the user’s Nintendo Switch.

Copies of screenshots of the Target Websites are annexed to the Particulars of Claim. For present purposes, the following features are pertinent.

The first Target Website, which is located at the URL team-xecuter.com, is shown at pages 12-34 in Annex 2:

The second Target Website, located at the URL sx.xecuter.com, is shown at pages 35 to 41 of Annex 2. This Target Website is accessed by clicking on the hyperlink on the first Target Website entitled “SX Family Portal”. It is at the second Target Website that a user obtains a license for the SX OS. The link to do this is at the top right of page 35 labelled “Activate SX OS”. It is also possible to download updated versions of the SX OS, as can be seen from page 36. NCL contends, and I accept, that it can be seen that, in this and other ways, the two Team Xecutor Websites operate in conjunction with each other. In addition:

The third Target Website (R4), currently located at the URL sxflashcart.com, is shown at Annex 3:

The fourth Target Website (Stargate), currently located at the URL xecuteros.com but previously located at stargate3ds.org, is shown at Annex 4:

NCL’s evidence shows that persons located in the UK have been able to access the Target Websites using the Defendants’ services. In addition, a person located in the UK was able to purchase a Switch Xecutor SX Pro and OS from the R4 Website and a Switch Xecutor SX Pro and SX OS modchip from the Stargate Website, both of which were delivered to the UK. Using the device purchased from the R4 Website it was possible to install SX OS on a Nintendo Switch and then download and run unauthorised games. Similarly, the device purchased from Stargate could be installed on a Nintendo Switch.

NCL’s primary case of trade infringement is the operators of the Target Websites are infringing the Trade Marks under Article 9(2)(a) of European Parliament and Council Regulation 2017/1001/EU of 14 June 2017 on the EU trade mark (“the EU Trade Mark Regulation”). In my judgment it is beyond dispute that each of the Target Websites are using signs identical to the Trade Marks in the course of trade in relation to goods identical to those for which the Trade Marks are registered without NCL’s consent. That leaves three questions to be considered, First, is the use liable to affect one of the functions of the Trade Marks? Secondly, do the Target Websites target consumers in the UK? Thirdly, do the operators of the Target Websites have a defence under Article 14(c)?

So far as the first question is concerned, NCL contends that the answer is yes for three reasons. First, even if the majority of consumers are not confused as to the origin of the goods, the presentation of the Target Websites will lead a significant number of consumers wrongly to believe that these are authorised accessories. That is sufficient for a finding of infringement: see in particular Interflora Inc v Marks & Spencer plc [2014] EWCA Civ 1403, [2015] BusLR 492at [107]-[130].

Secondly, there is the prospect of post-sale confusion where, for example, a Nintendo

Thirdly, even if there is no effect on the origin identification function, there is an effect on the other functions and in particular the investment function: see in particular Case C-323/09 Interflora Inc v Marks & Spencer plc [2011] ECR I-8625 at [62]-[63]. The use of NCL’s Marks by the Target Websites is expressly intended to undermine the integrity of NCL’s console and game software and as such “interferes with the proprietor’s use of its trade mark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.”

In my judgment each of these contentions is well founded. In relation to the first contention, it seems to me that the majority of consumers would appreciate from all the references to “hacking” that the Target Websites were offering unauthorised products designed to enable circumvention of TPMs, but I consider that the presentation of the websites, and in particular statements such as the “About Us” statement quoted in sub-paragraph 11(vi) above, which give the impression that the Team Executor websites are legitimate, is likely to deceive a significant number of consumers.

NCL’s secondary case is that the operators of the Target Websites have infringed the Trade Marks pursuant to Article 9(2)(c). NCL contends that the Trade Marks benefit from a very substantial reputation as a result of the use made of them and that the use by the Target Websites without due cause takes unfair advantage of the reputation of the Trade Marks by intentionally exploiting that reputation in order to sell the circumvention devices. Again, I accept this.

Turning to the question of targeting, the relevant principles were considered by the Court of Appeal in Merck KgaA v Merck Sharpe & Dohme [2017] EWCA Civ 1834,

As to whether there could be defence under Article 14(c), NCL contends that this does not apply for two reasons. First, because a significant number of consumers would be misled: see in particular Bayerische Motoren Werke AG v Technosport London Ltd [2017] EWCA Civ 779, [2017] FSR 35 at [18]. Secondly, because the operators’ use is not in accordance with honest practices in industrial and commercial matters since the purpose of the circumvention devices is to allow users to circumvent the TPMs and to play unauthorised games. I accept these contentions.

As noted above, NCL also relies on the provisions of sections 296ZD and 296 CDPA88, which respectively implement Article 6 of European Parliament and Council Directive 2001/29/EC of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (“the Information Society Directive”) and Article 7(1)(c) of European Parliament and Council Directive

Section 296ZD addresses the protection of copyright works other than computer programs and provides (in relevant part):

“(1)

This section applies where—

(a)

effective technological measures have been applied to a copyright work other than a computer program; and

(b)

a person (C) manufactures, imports, distributes, sells or lets for hire, offers or exposes for sale or hire, advertises for sale or hire, or has in his possession for commercial purposes any device, product or component, or provides services which—

(i)

are promoted, advertised or marketed for the purpose of the circumvention of, or

(ii)

have only a limited commercially significant purpose or use other than to circumvent, or

(iii)

are primarily designed, produced, adapted or performed for the purpose of enabling or facilitating the circumvention of, those measures.

The interpretation of this provision and its application has been considered in a number of cases. A helpful review of the issues that arise was given by Floyd J (as he then was) in Nintendo Company Ltd v Playables Ltd [2010] EWHC 1932 (Ch), [2010] FSR 36. Since then, the Court of Justice of the European Union has considered Article 6 of the Information Society Directive in Case C-355/12 Nintendo Co Ltd v PC Box Srl [EU:C:2014:25].

The CJEU explained at [27] that Article 6 is to be interpreted broadly and “includes application of an access control or protection process, such as encryption, scrambling or other transformation of the work”. NCL contends, and I accept, that this covers the TPMs in this case, which encrypt the video games including their artwork, text, and soundtracks to prevent unauthorised copies being created or played on the Nintendo Switch console. It is no objection that these copyright works are supplied as part of the software: see Playables at [25].

The CJEU went on at [31] to hold that the measures must be proportionate to the aim of protecting copyright, being “suitable to achieve that objective and must not go beyond what is necessary for this purpose”. In making that assessment the CJEU pointed, at [33], to the relative costs of different types of technological measure, consideration of technical and practical aspects of their implementation, and comparison of the effectiveness of different types of technological measures. NCL’s evidence is that these TPMs represent good practice and that alternative measures would increase costs to consumers. In making the assessment, it is also relevant to consider the actual use of the circumvention devices: see PC Box at [36]. Although it might be said that the circumvention devices can be used to play “homebrew” games on the Switch, it is clear that they are used primarily to play pirated games. That is how they are promoted – as allowing the playing of “free” games. Accordingly, the circumvention devices are directed towards enabling circumvention of the TPMs so as to enable unlawful use of the Nintendo Switch. Nor does the presence of the TPMs inhibit independent development of video games for the Nintendo Switch since NCL provides an easy route to doing so via its Authorised Developer program. Accordingly, I am satisfied that the TPMs are proportionate.

The next issue that arises is whether the operators of the Target Websites fall within sub-section (1)(b). It is plain from review of the Target Websites that they do on any of the bases set out in sub-sections (i) to (iii). As noted above, the circumvention devices are expressly stated to be for “hacking” the Nintendo Switch.

The next question is whether NCL has standing to sue under sub-section (2)(a), (b) or (c). NCL qualifies under each of the potential sub-sections: it is the copyright owner in both the works and the TPMs as well as the party that issues the video games to the public through its eShop.

Finally, NCL accepts that, as with its claim for infringement of the Trade Marks, the activities complained of must be targeted at the UK since the rights conferred by section 296ZD are designed to protect UK copyrights. I have already considered this issue and the answer is the same in this context.

Section 296 CDPA88 applies to protection of computer programs. It provides (in relevant part) as follows:

“(1)

This section applies where--

The application of this section was again considered in Playables. Floyd J doubted whether the knowledge requirement in sub-section (1)(b) correctly implemented the Software Directive because there was no such knowledge requirement there, but because Playables was an application for summary judgment proceeded on the basis that it did. NCL invites the court to adopt the same approach here. It contends that the requirement for knowledge that the circumvention devices will be used to make infringing copies is clearly met since each of the Target Websites makes a point of the fact that what is being offered is a circumvention device that allows use to download and use infringing copies of relevant works: see for example the statement on the

The other requirements of the section are similar to those in section 296ZD. Although this section refers to “a technical device” rather than to “effective technological measures” the meaning of the term is wide and encompasses the encryption applied to NCL’s software: see Playables at [33]. It is clear from review of the Target Websites that they knowingly offer for commercial purposes circumvention devices whose express sole purpose is to circumvent the TPMs. NCL has standing to sue on all three of the sub-sections 2(a), (b) and (c). The activities complained of are targeted at the UK.

Accordingly, I conclude that NCL has good claims against the operators of the Target Websites under sections 296ZD and 296 CDPA88 as well as for infringement of the Trade Marks.

The Court’s jurisdiction to grant website-blocking injunctions in cases involving infringement of intellectual property rights notwithstanding the absence of any legislative implementation by the United Kingdom of the third sentence of Article 11 of the Enforcement Directive is now established at the highest level by the decision of the Supreme Court in Cartier. As NCL points out, however, it is clear from the reasoning of Lord Sumption (with whom the other members of the Court agreed) at [15] that the Court’s jurisdiction is not limited to cases involving infringement of IP rights:

“Website blocking orders clearly require more than the mere disclosure of information. But I think that it is clear from the authorities and correct in principle that orders for the disclosure of information are only one, admittedly common, category of order which a court may make against a third party to prevent the use of his facilities to commit or facilitate a wrong. I therefore agree with the view expressed by Briggs LJ in his dissenting judgment in the Court of Appeal that the website blocking order made in this case could have been made quite apart from the power derived from European law, on ordinary principles of equity.”

NCL contends, and I accept, that it follows that the Court has jurisdiction to grant NCL the order it seeks not only on the basis of its claims for infringement of the Trade Marks, but also on the basis of its claims for infringement of its rights under sections 296ZD and 296 CDPA88.

The Court of Appeal in Cartier confirmed at [80]-[81] that, in intellectual property cases, there are four threshold conditions which need to be satisfied in order for a website-blocking injunction to be granted:

Counsel for NCL submits that analogous criteria should be applied in cases which are not based on infringement of IP rights. I agree with this subject to the qualification that it may not be necessary for the defendants to be intermediaries within the meaning of Article 11 of the Enforcement Directive (although in website-blocking cases defendants usually are). In the case of the fourth criterion, as counsel rightly points out, this follows from the provisions of European Parliament and Council Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“the E-Commerce Directive”), which is a horizontal measure that is not restricted to cases involving IP rights.

Turning to the question of whether the threshold criteria are satisfied in the present case, NCL contends and I accept that:

The Court of Appeal in Cartier confirmed at [100]-[128] that, in intellectual property cases, in deciding whether to grant a website-blocking injunction the Court must consider eight criteria over and above the threshold conditions. The injunction must be (i) necessary, (ii) effective, (iii) dissuasive, (iv) not unduly costly or complicated, (v) avoid barriers to legitimate trade, (vi) a fair balance between the fundamental rights engaged, (vii) proportionate and (viii) safeguarded against abuse. Of these factors, proportionality is the key one, since consideration of the other factors feeds into the proportionality analysis.

Counsel for NCL submits that the same factors should be considered in a case based on other kinds of rights. I agree with this. Although the criteria set out above are largely drawn from the Enforcement Directive, it can be seen from the jurisprudence of the Court of Justice of the European Union that they largely reflect general principles of EU law, and to some extent principles of European human rights law. Moreover, there is no reason of principle why an application based on other kinds of rights should be subject to either more or less stringent criteria.

NCL contends, and I accept, that in the present case these criteria are satisfied because, in summary:

For the reasons given above, I will grant NCL the order it seeks.