Judicial venues for unfair competition cases
It may either choose the court located in the district in which the defendant has his place of business, or may apply to the court located in the district in which the allegedly unlawful act has been committed (Unfair Competition Act, Sec. 14 para. (1) and (2)). In practice, the second option has developed into the more significant one by far because in Germany commercial businesses tend to offer their products or services nationwide, so advertisements are published with nationwide effect.
If an advertisement with nationwide effect contains the incriminating act, the plaintiff can choose any court in Germany because the act is deemed to have been committed in the whole nation.
So any practitioner will then choose a court with established credentials in unfair competition matters to lodge its request or complaint. That has led to a situation in which some courts have developed into “national centres” for unfair competition cases, with highly specialised and experienced judges. Such courts include the District Courts of Düsseldorf, Cologne, Hamburg or Frankfurt am Main.
Companies and members of the legal profession alike highly appreciate this court venue system: specialised courts can be presumed to know the latest judicial developments in this specialised area of law. They tackle the problems in a more efficient way since the judges have the experience to decide even on complicated or new sets of facts with relative certainty. And they tend to be quicker, which can be decisive in unfair competition cases where the harm is done quickly.
This established and highly-appreciated system may now be changed. The current German federal administration (Bundesregierung) has published a draft act against “disreputable business practices” which includes a new provision on the court venue in unfair competition cases.
According to that provision, the court in the jurisdiction where the incriminating act has been committed is the competent venue only if the defendant has no place of business in Germany. So normally, the venue will be the court located in the district where the defendant has its place of business.
“WHILE THE AIM TO CAP COSTS FOR SMALL BUSINESSES IS CERTAINLY WORTHWHILE, THE FEDERAL ADMINISTRATION HAS OVERREACHED TO AN EXTENT WHICH IS REMARKABLE.”
The German federal administration, when it drafted the act, had a special case in mind. In recent years, some lawyers have created a new kind of “mass case” by asserting claims against small companies selling goods in online shops for very minor offences such as mistakes or incomplete information in the statutory imprint catalogue on their Internet sites. These lawyers have sought relief at the most specialised courts in Germany.
These court proceedings have led to judicial costs that seem, to the federal administration, too large for small businesses who operate on-line shops. The administration presumes that lawyers and plaintiff companies deliberately choose certain courts which are far away from the defendants in order to produce high costs (such as fees and travel costs) in order to harm these defendants, and which tend to fix higher values of the cases in order to produce higher costs.
Therefore, the administration recommends to limiting court venues for unfair competition cases generally.
While the aim to cap costs for small businesses is certainly worthwhile, the federal administration has overreached to an extent which is remarkable for two reasons. Firstly, the cases on which the administration focuses only present a very small part of unfair competition cases.
The majority of cases contain more serious problems and plaintiffs and their lawyers don’t choose courts in these cases only on the basis of the distance to the defendant and high costs; in fact, most lawyers do not have these factors in mind at all. Second, by focusing on a minor problem which concerns an insignificant number of cases, the administration is obviously prepared to change a court venue system that has worked and produced good results in the past.
In fact, the administration recognises that specialised courts have their merits. In the reasons for the draft, the administration itself suggests that even on the basis of the new law the federal states have the power to concentrate unfair competition cases at certain courts so that the current spe-cialisation may continue.
This almost openly contradicts the whole rationale for changing the court venue system, since the subsequent concentration of cases at specialised courts may, in large part, reinstate the situation we have today, with the possible difference that a plaintiff who would like to have a case in Cologne may have to go to Hamburg if the defendant has its place of business in the state of Lower Saxony.
Jens Künzel, LLM, is a partner at Krieger Mes & Graf v. der Groeben. He can be contacted at: jens.kuenzel@krieger-mes.de
