The German Federal Supreme Court confirmed once again that cease and desist declarations generally constitute an obligation to recall unlawful products or advertising material from the sales and dissemination channels (judgment of May 4, 2017, I ZR 208/15 – Luftentfeuchter).

The infringement of intellectual property rights or a violation of the laws against unfair competition give rise to claims for injunctive relief. Those can be fulfilled by the presentation of a binding cease and desist declaration subject to a contractual penalty for each case of contravention. According to natural speech comprehension, such declarations particularly prohibit to continue the unlawful activities in the future. However, in the recent past German courts repeatedly pointed out that they also might impose obligations in respect to acts performed in the past. In its latest judgment in this context, the German Federal Supreme Court once again confirmed this string of case law and declared its principles more or less generally applicable.

In the case at hand, a manufacturer of dehumidifiers printed an unlawful advertising slogan on his products’ packaging. Upon receipt of a cease and desist letter from one of his competitors, he made out a binding cease and desist declaration concerning the future use of this slogan. In addition, he immediately stopped the contested activities (removed the slogan from his website and pasted it over on the packaging still on stock). However, he did not recall the products he had already supplied to his customers (retailers). The German Federal Supreme Court confirmed that, by this negligence, the producer violated his obligations undertaken in the cease and desist declaration, and ordered him to pay a contractual penalty of 5,100.00 EUR. Even the fact that the producer did not have any enforceable claims against his customers to return the products did not affect the court’s rigorous findings.

Practical Impact:

The obligations undertaken in a cease and desist declaration become effective upon receipt by its addressee. The party making out the declaration thus has to be prepared to immediately comply with all these obligations. If the declaration concerns already distributed or disseminated products or advertising material, it generally comprises a recall obligation. Compliance herewith requires at least the sending of a sincere notice to the customers or advertising partners requesting them to return the illegal goods or materials. A violation of this recall obligation may give rise to very serious contractual penalty claims, which will often significantly exceed the amount of 5,100.00 EUR confirmed by the German Federal Supreme Court in its latest judgment.