German Federal Court of Justice (BGH) “Products for Wound Treatment” – Obligation of provisional sales stop in the distribution chain instead of recall of infringing goods
The Decision of the German Federal Court of Justice (BGH) on the obligation to recall infringing goods
Although under intellectual property law there is a special legal claim for recall of infringing goods (§48 II German Trademark Act and §140a III Patent Act) in parallel with the cease and desist claim (Sec. 18 II German Trademark Act and Sec. 139 I Patent Act), established case law of the German Federal Court of Justice has made the obligation to recall infringing goods from the distribution chain part of the cease and desist obligation. This development was first mentioned in the “Hot Sox” decision, confirmed in the subsequent decisions “Rescue Products” and “Air Dehumidifier” and is now adopted in a modified form in the decision I ZB 96/16 – “Products for Wound Treatment” for the interim injunction proceedings and thus the provisional legal protection.
The starting point for the development that took place in the case law of the First Civil Senate of the Federal Court of Justice, is the criterion that the cease and desist obligation is not limited to mere inaction. Thus, in the event that infringement is established, the infringer may not simply remain inactive, but is obliged to take (positive) action to remedy the situation created by the infringing acts. Failure to remedy infringements attributable to the infringer is considered a continuation of the act of infringement, which the infringer is obliged to cease.
From the beginning, this development has been strongly criticized, due to the serious consequences this interpretation may have in practice. Amongst others, the consistent application of this recall obligation results in high costs, time consuming efforts, and, last but not least, even more serious reputational damage.
Not only is the infringer exposed to a significantly higher risk, but also the risk for the patentee risk increases considerably. The IP holder, for example, may be confronted with high damage claims should the cease and desist claim subsequently turn out to be unjustified.
The risk for the infringer rises considerably if the obligation to recall were to also be applied to preliminary injunction proceedings. This is all the more the case as preliminary injunctions can be issued ex-parte and within a few days after filing, which involves a higher risk that the decision will not be confirmed on appeal or in proceedings on the merits. The First Senate of the Federal Court of Justice has now specified the legal situation in an interim injunction case in its decision “Products for Wound Treatment”.
II. The Case
The infringer sells products for wound treatment in Germany. Upon request of the patent holder, the Frankfurt Regional Court issued a preliminary injunction, enjoining the infringer from marketing or advertising products bearing a trademarkinfringing label. The infringer did not subsequently place any further infringing products on the market, but also failed to inform its customers of the injunction order.
In a test purchase carried out by the IP owner, a pharmaceutical wholesaler supplied products purchased from the infringer displaying the label covered by the injunction.
III. The Decision
The BGH found that the infringer had infringed the interim injunction by failing, either to recall those infringing marked products for wound treatment which it had delivered to its customers prior to the interim injunction or by failing to request the customers of the products not to further distribute them for the time being in light of the interim injunction order.
In accordance with the decisions of the Federal Court of Justice „Hot Sox“, „Rescue Products“ and „Dehumidifiers“, the infringer may therefore be obliged to take active efforts, also in the event of a preliminary injunction. On the basis of the principles of general tort law, the First Civil Senate of the Federal Court of Justice takes the view that an infringer of a property right not only has an obligation to cease and desist from infringing acts in the future, but, to an appropriate extent, to eliminate risks of further infringing acts created by actions in the past.
Regardless of the general meaning of the term “cease and desist”, this term must be construed such that the conduct covered by an order to cease and desist and the actions which can be asked from the infringer. deviate from the obligations that need to be met by the infringer under the statutory obligations to recall infringing goods. This obligation of the infringer differs in content from what is owed according to the statutory provisions for the recall of infringing goods. Here, the infringer is only obliged to take the reasonable and appropriate measures which are necessary to prevent further acts of infringement for the time being.
It follows that the infringer may not remain inactive, if the interpretation of the cease and desist order gives rise to an obligation to act.
The Federal Court of Justice clarifies that for the special circumstances of preliminary injunction proceedings (no anticipation of the decision on the merits; limited ability to defend for the infringer) a full and non-provisional recall of infringing goods cannot be requested.
An interpretation covering recall is therefore generally out of the question in the case of a cease and desist order issued in injunction proceedings, as this would, in fact, anticipate the decision on the recall in the proceedings on the merits. However, the infringer, who has already sold on the goods concerned by the injunction, can regularly be expected to ask customers not to redistribute the goods until the proceedings on the merits are decided.
The First Civil Senate of the Federal Court of Justice (BGH) adheres to its general recall jurisdiction and, with this decision, extends it to interim relief as well. For the preliminary injunction proceedings, however, it at least somewhat mitigates them. Under normal circumstances, there is no obligation for a full recall. It is generally sufficient if the customers are requested to cease further distribution of the goods concerned.
In practice, however, the points raised by the critics remain largely unchanged.
It is still up to the infringer to interpret the operative clause of the cease and desist order and to determine which measures can reasonably expected from him. Since the infringer takes a considerable risk in this respect, he will still (have to) be advised in case of doubt to act more comprehensively. The For further information: Meissner Bolte Franz Möltgen Bahnhofstr. 18 ½ 86150 Augsburg Germany Phone +49-821-991780 Fax +49-821-992164 E-mail: firstname.lastname@example.org The information contained in this newsletter may or may not reflect the most current legal developments; accordingly, information in this newsletter is not promised or guaranteed to be correct or complete, and should not be considered an indication of future results. Meissner Bolte expressly disclaims all liability in respect to action taken or not taken based on any or all contents in this newsletter. www.mb.de formulation of a corresponding protective letter, which sets out what is possible and reasonable for the infringer, can be used here as a pre-emptive defence against interim injunctions. This would enable the court to specify the measures (not) to be taken (recall) by the infringer, in case a preliminary injunction is granted. It also makes sense to quantify the infringers economic risk that he would be threatened with if he would have to call upon his customers to stay sales of the infringing products, and to request for a respective enforcement security to cover this risk.
This is because a request to customers not to redistribute the goods in question for the time being can result in a considerable loss of confidence and financial damages for the infringer.
If the preliminary injunction is revoked later on, the IP holder may still face high damage claims. Thus, the IP holder has little control over whether the former infringer will recall the goods in their entirety or whether the infringer’s customers will respond to the request by returning all their goods. A possibility of limiting the risk of damages is to make it clear in the request that the injunction order shall expressly exclude the recall obligation. Alternatively, the clarification may also be provided in the enforcement letter.
I Further developments of case law should be awaited before a more concise advise can be given. In the field of intellectual property rights and preliminary injunctions, different practices of the Higher Regional Courts regularly emerge. For example, the Patent Senate of the Higher Regional Court of Düsseldorf (decision of 30.04.2018, I-15 W 9/18) has already clarified that it rejects the approach of the I. Civil Senate of the Federal Court of Justice to read a recall obligation into the injunction claim. This clarification was made for both, interim injunction proceedings and proceedings on the merits. The patent senate of the Higher Regional Court of Munich, on the other hand, has in the past already sporadically awarded an obligation to recall in interim legal proceedings (see Munich Higher Regional Court, judgment of 28.06.2012, 6 U 1560/12). We will be keep you informed on any developments in this respect!
The obligations of the infringer to act must (continue to) be carefully examined.
Elaborating in a protective letter as to what are unreasonable or overly burdensome actions for the infringer may help against the obligation to ask its customers for a resale stop. In addition, the infringer’s financial risk should always be quantified and security for costs of enforcement should always be requested and substantiated.
An exclusion of recall and rectification obligations already in the request version of the interim injunction order reduces the risk of damage claims by the infringer, in case the injunction is overturned on appeal.