In its judgment of 1 December 2022 (Case No. I ZR 144/21), the FCJ clarified firstly that the delivery of a cease-and-desist declaration with penalty clause can also be made after a second infringement by means of a contractual penalty promise in accordance with the so-called “Hamburg custom”, and secondly that receipt alone of the cease-and-desist declaration with penalty clause does not lead to the cessation of the danger of a repetition if the plaintiff declines to accept it.
Through an informal warning letter, the offending party in disputes relating to industrial property rights is given an opportunity to avoid legal proceedings by signing a so-called cease-and-desist declaration, which eliminates the danger of a repeat of an infringement that is required in order for a claim for injunctive relief to succeed. However, the promise to cease and desist can only eliminate the danger of a repeat of the infringement if it is subject to contractual penalties. This can either be agreed by means of a fixed amount (so-called fixed contractual penalty), or in such a way that in the event of a breach the plaintiff determines the amount of the contractual penalty using his reasonable discretion (“Hamburg custom”).
The first part of the article outlined the current case law of the FCJ with regard to the Hamburg custom and its implications for the start of the statute of limitations.
This second part deals with another recent decision of the FCJ on the Hamburg custom with respect to the removal of the danger of a repetition of the infringement where there has been a repeated act of infringement by the defendant as well as the receipt of a cease-and-desist declaration with a penalty clause and the implications flowing therefrom.
Under previous practice, it was assumed on the one hand that a breach of an existing cease-and-desist declaration establishes a new danger of a repetition, which can generally only be eliminated by providing a further cease-and-desist declaration containing a significantly higher contractual penalty promise than the first declaration. Up to now, it has been a matter of dispute as to whether a cease-and-desist declaration in accordance with the Hamburg custom satisfies the requirements of a significantly higher penalty (rejecting e.g. the Higher Regional Court of Cologne’s judgment of 11 July 2013, Case No. 14 O 61/13).
Furthermore, according to earlier case law of the FCJ, receipt of the cease-and-desist declaration with a penalty clause alone also led to the cessation of the danger of repetition if the plaintiff refused to accept it from the defendant (e.g. FCJ judgement of 31 May 1990, file no. I ZR 285/88). The Senate no longer adheres to this case law.
In the case in question, which concerned a trademark dispute about car door lights, the defendant, after receiving a warning letter from the plaintiff, initially provided a cease-and-desist declaration according to the so-called Hamburg custom, i.e. without a fixed contractual penalty, which was accepted by the plaintiff. Three years later, after the plaintiff discovered that the defendant was again marketing such products, it issued a further warning to the defendant. The defendant then signed another cease-and-desist declaration in accordance with the Hamburg custom, which was, however, rejected by the plaintiff because in their view it was not suitable to eliminate the renewed danger of a repeat of the infringement due to the lack of a fixed contractual penalty. The plaintiff therefore pursued its claim for injunctive relief in court.
In a departure from its previous case law, the FCJ clarified on the one hand that in order for the danger of a repetition to be eliminated, the receipt by the owner of the right from the defendant of a cease-and-desist declaration containing a penalty clause is only sufficient if it manifests a serious intention to cease and desist. For this to be the case, the cease-and-desist declaration with a penalty clause must be binding until it is accepted or rejected by the plaintiff, so that the latter can accept it at any time and thus establish the contractual penalty obligation. Only then was the necessary deterrent effect achieved, which justifies the cessation of the danger of a repetition already at the time of receipt of the cease-and-desist declaration with penalty clause. In the present case, however, the FCJ ultimately rejected the notion that the danger of a repetition ceased to exist, as the plaintiff refused to accept the cease-and-desist declaration from the defendant.
On the other hand, said the FCJ, even in the case of repeated infringement, a further cease-and-desist declaration according to the Hamburg custom is sufficient for the risk of repetition to cease. According to the FCJ, the unlimited right of determination hereby established gives the plaintiff the decisive advantage in serious cases of infringement of being able to determine the contractual penalty even in an amount that may be considerably higher than that which would have been appropriate for an agreement on a fixed amount regarding the previously committed act of infringement. Therefore, the higher penalty required for a repeat offence was also inherent in a contractual penalty promise according to the Hamburg custom. In the case of a repeat offence, the Hamburger Brauch would have the necessary deterrent effect on the defendant because of the impossibility to predict the amount of the penalty, especially since the circumstance of the repeated infringement must be taken into account in a review by a court of law of the appropriateness of the contractual penalty.
The dispute about whether a contractual penalty promise according to the Hamburg custom requires a fixed contractual penalty in the case of a repetition is clarified by the present ruling. This will probably appear advantageous from the defendant’s point of view, as a specifically fixed contractual penalty is no longer required even in the event of a breach of a cease-and-desist declaration.
However, the change in the previous practice regarding the cessation of the danger of a repeated infringement where the defendant’s offer of an adequate cease-and-desist declaration is rejected ultimately makes the cessation of the danger of repetition dependent on a decision made solely by the plaintiff.