PeopleImages / iStockphoto.com
The subject of director liability seems at first sight to be restricted to company law. Case law shows that it can be rewarding to apply director liability to trademark infringement cases as well. The District Court in The Hague (June 27, 2017, in the case of Tommy Hilfiger) has given pointers on how to establish liability of directors in case of trademark infringement.
It was already known that directors can be a party in trademark infringement proceedings in addition to the company they are directing. In 2002 the Dutch Supreme Court ruled that an order to cease and desist trademark infringing use can be made towards a company and also towards its directors.
This is the case when the trademark infringement occurred under the supervision of the director, ie, with knowledge and approval of the director. By promoting the trademark infringement or by not preventing it the director acted unlawfully towards the trademark owner. It must be likely that the director could have prevented the infringement and by not doing so he has acted unlawfully towards the trademark owner. In that case the liability of the company was not considered to be a sufficient deterrent; liability of the directors would be.
In the current case several companies had the same director. Those companies were offering clothes for sale, acts which constituted trademark infringement on the Tommy Hilfiger trademarks. The trademark infringement was established, and the liability of the companies, but what remained was the liability of the directors.
In a separate judgment the court ruled on this matter. The specific details of the case are shown below as the court takes a very practical approach to establishing liability and takes many factual circumstances into consideration.
The director knew or ought to have known he was selling products which were brought onto the market without the permission of the trademark owner. In emails he mentioned that the clothes were ‘cheap’ and ‘backdoor’. Furthermore he was personally involved in the sale of the goods and therefore the trademark infringement; when bailiffs came to seize the products he was on the premises where the infringing goods were found.
"Use of a limited liability company does not always prevent a trademark owner holding the directors liable for damages resulting from trademark infringement by the company they are directing."
Another director (the trademark owner stated she was involved because a folder with falsified invoices was found on a computer) was not held personally liable. The name on the folder was the first name of the director. The court did not consider this proof of personal involvement—the name contained a typo, making it very unlikely that the folder had indeed been made by the director herself. You do not misspell your own name.
In another case (Court of Appeal The Hague, September 30, 2014) the court established personal liability of the director by making a distinction between the trademark infringement and the moment the director became aware of the infringement. In this case it concerned the sale of trademark-infringing stuffed toys in the shape of guinea pigs.
The Court of Appeal did not hold the director liable for the initial sale of the toys, as he could not have known they were infringing. But when the trademark owner had sent its cease-and-desist letter the director knew of the infringement and was acting unlawfully by not fully cooperating. The director withheld information on the identity of the professional buyers of the toys. Therefore he was held liable and was forced to pay damages.
Use of a limited liability company does not always prevent a trademark owner holding the directors liable for damages resulting from trademark infringement by the company they are directing. The general rule in Dutch civil law is the existence of a personal, severe reproach. The director knew or ought to have known he was acting unlawfully towards the trademark owner. What exactly this entails is decided on a case-by-case basis.
The latest Dutch case law is a sign that it can be useful to hold a director personally liable, in addition to holding the company liable. Depending on the facts, the courts in the Netherlands might agree. Just check for typos in the evidence presented.
Michiel Rijsdijk is a partner at Arnold & Siedsma. He can be contacted at: firstname.lastname@example.org
director liability, District Court in The Hague, The Hague, Tommy Hilfiger, Dutch Supreme Court, trademark infringement,