Let bygones be bygones

22-02-2017

Jens Künzel

Most infringement cases in Germany, whether based on a patent, trademark or design, involve the assertion of a claim for a restraining order telling the defendant to cease and desist from offering, selling and/or manufacturing the products in question.

Apart from claims for damages, it is the restraining order against a defendant which, most of the time, is the main focus of the litigation. 

Scholars and courts alike have tried to shape the duties that such an order imposes on defendants. It is self-evident that the main duty for the defendant is to discontinue the prohibited actions once the order has become enforceable against it. In cases where the defendant has distributed the products in question to several commercial customers, it is obvious that the defendant must not continue these actions.

Beyond the obvious duty of merely “stopping” the prohibited actions, it was an accepted rule that the defendant had the duty to retrieve such products that were still legally its own and to which it could assert legal claims against a customer to return the goods in question. The question regularly arose of which, if any, responsibility the defendant had for products that had already left the defendant’s sphere of influence before the court’s restraining order but which continued to be offered and sold by customers.

An all-too-simple advice (mostly used by practitioners in the past) was that “what is gone is gone”, meaning that a defendant did not seem to be obliged to actively retrieve goods that had left its sphere of influence, to ask customers to return such goods, or to ban all related advertising.

"many infringement cases are settled before they ever go to court and a part of that settlement often includes a contractual duty to cease and desist."

While that advice has never been too reliable, now it is simply wrong. This became all too obvious when Germany’s Federal Court of Justice published a decision in September 2016 (docket No. I ZB 34/15) which in the legal community was widely interpreted to considerably expand defendants’ duties that regularly follow from restraining orders.

According to this decision, a restraining order contained in a court ruling regularly requires the defendant to actively call back the products in question in cases of continuing infringements committed by the defendant’s customers. In principle, all measures that are “possible and reasonable” for the defendant in order to ensure that continuing infringements are stopped are deemed to be part of a court restraining order. And the Federal Court of Justice expressly says a defendant must “regularly” call back the products in question so that the products are not distributed any more.

Although the court had mentioned in the decision Hot Sox of November 2015 that the facts in that case merited a duty to call back products from customers, the court now seems to regard it as an accepted rule that such a duty is regularly imposed on defendants. So any practitioner who still advises his or her clients that “what is gone is gone” now arguably commits an act of professional malpractice.

It should be emphasised that this general rule may, in an unlimited form, only apply to court restraining orders. However, many infringement cases are settled before they ever go to court and a part of that settlement often includes a contractual duty to cease and desist. The extent of that contractual duty must be determined through interpretation of the contractual clauses, based, inter alia, on the context of the clause and the individual understanding of the parties.

Such interpretation may lead to the conclusion, in the given set of facts, that the cease and desist duty does not contain a duty to call back products from the customers, for instance because the parties had expressly or implicitly excluded such a duty or placed limits on it in another clause.

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

Jens Künzel, Krieger Mes & Graf v. der Groeben, patent, trademark, design, Hot Sox, cease and desist,

WIPR