1 January 2010TrademarksJens Künzel

Trademarks in financial markets: the DAX case

While there is a financial crisis in Europe, the financial sector should pay close attention to an October 2009 decision of Germany’s Federal Supreme Court on the protection of trademarks used for financial products, says Jens Künzel.

Germany’s Federal Supreme Court has said that the DAX case, on trademarks for financial products, will soon be published in the official collection of Supreme Court decisions. It concerns, inter alia, the question of when a stock exchange may invoke its trademark rights for a stock index against financial products using references to that index.

Deutsche Börse AG created the well-known denomination ‘DAX’ as the name of the German index for stock prices. The German stock index reflects the value of the stock of 30 of the bestknown publicly traded corporations in Germany. In addition, Deutsche Börse AG created the ‘DivDAX’, an index that reflects the stock value of the 15 companies listed in the DAX index that pay the highest dividends.

Both DAX and DivDAX are protected by trademarks registered by Deutsche Börse AG. DAX is protected for “stock exchange quotation; evaluation, including computation, of stock price indices” and “financial markets, in particular services of a stock exchange, a bank and a stock exchange and/or finance broker, including the emission of, trade with, and placement and administration of stock values”. DivDAX is protected for “services of a bank; evaluation and computation of stock price indices in relation to securities and futures”.

The plaintiff in the DAX case had used the trademarks in relation to financial products. He sued the trademark owner, Deutsche Börse AG, with a negative declaratory action and asked the court to declare that his use of the DAX trademark could not be legally challenged on the basis of the DAX trademark.

"The plaintiff argued that marketing a product whose value is determined in relation to the stock price index DAX cannot be challenged on the basis of the DAX trademark."

Prior to this, Deutsche Börse AG had challenged the plaintiff’s use of the DAX trademark in connection with stock purchase warrants that created a claim with reference to the DAX index, in particular, the indication ‘related to DAX®’. Deutsche Börse replied by making a counterclaim against the use of DAX and DivDAX, the latter having been used by the plaintiff in connection with a product called ‘Unlimited DivDAX® Indexzertifikat’.

On the use of the DAX trademark, the Federal Supreme Court considered the defence brought forward by the plaintiff that the use of the trademark was allowed under a section of the German Trademarks Act conforming to Article 6 (1) lit. (b) of the EC Trademark Directive of 1988 (Section 23 No. 2 German Trademarks Act).

According to this section, the use of a trademark may not be prohibited if it is used as an indication concerning the kind, quality, intended purpose, value or other characteristics of the goods or service, provided such use is not contrary to the conventions common in the market.

The plaintiff argued that marketing a product whose value is determined in relation to the stock price index DAX cannot be challenged on the basis of the DAX trademark. The defendant (Deutsche Börse AG) argued that, generally, the use of the DAX trademark as a reference point for commercial products was contrary to market conventions, because it took unfair advantage of the reputation of the trademark.

The court allowed the use and said it was covered by the statutory exemption. It argued that it was the DAX index, as a reference point, and not the individual values of the index (the stock of the 30 companies that the index reflects), which determined to a large extent the value and characteristics of the products at hand. Therefore, it was not contrary to the conventions of the market to offer a product whose reference point was the DAX index and to use the trademark in order to indicate that.

For the same reasons, the court said that the use of the DivDAX trademark, if it is used merely as a reference point for certain products was also covered by the exemption in Section 23 No. 2 of the German Trademarks Act.

However, the court held that the use of the DivDAX trademark as part of the product name ‘Unlimited DivDAX® Indexzertifikat’ was not covered by this exemption. On this point, Deutsche Börse AG’s counterclaim was allowed, because the plaintiff had used the trademark as part of his own trademark when it was not necessary to indicate a characteristic.

Even if it was accepted that the purpose here was to indicate a characteristic of the product, such use was contrary to market conventions. No trademark owner is obliged to acquiesce to such use as it takes unfair advantage of the reputation of the trademark. It is not necessary for the purpose of the exemption to use one trademark as part of another.

Another matter addressed by the court was whether the plaintiff, by offering a financial product whose value is determined by reference to the DAX stock price index, committed an act of unfair competition. The argument by the defendant Deutsche Börse AG was, in this respect, that the DAX index is protected under unfair competition laws as a concrete result of Deutsche Börse AG’s efforts to calculate the index and that the plaintiff ’s products made unlawful use of these protected results.

The Federal Supreme Court held that financial products whose value is determined by reference to the DAX index are different from the DAX index itself so that claims of unfair competition are unfounded. A further reason to dismiss this claim was that such ‘use’ of the DAX index could not be considered to take unfair advantage of the repute of the index.

Jens Künzel is a partner at Krieger Mes & Graf von der Groeben. He can be contacted at: jens. kuenzel@krieger-mes.de

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