Another milestone for cease and desist orders has been reached in Germany. The German Federal Supreme Court has clarified in a number of decisions that defendants in cease and desist orders not only have to cease the infringing use but also have to recall all products delivered to retailers. In a recent ruling issued on October 10, 2017 (published February 6), the Supreme Court was less restrictive clarifying that in preliminary injunction proceedings the defendant generally does not have to recall but only to notify its customers that the infringing products may no longer be distributed. In practice, however, such obligation to notify will have the same effect as a recall.
This matter in dispute has been highly controversial amongst the Higher Regional Courts in Germany for many years and was answered partially during the last two years by the German Federal Supreme Court in a surprisingly claimant-friendly fashion.The Supreme Court clarified in three cases that cease and desist orders in principle comprise the obligation to recall products from the retail market (see our earlier blog post covering this ruling)
According to this new judgment, the special characteristics of a preliminary injunction proceeding, especially its provisional character and the limited defence opportunities for the defendant, make a restrictive interpretation of the cease and desist orders necessary.
For this reason, in principle the defendant would not be obliged to recall the infringing products from the retail market when being served with a preliminary injunction but would, however, still be obliged to inform customers that the sale of the products has to be halted preliminarily.
In practice, such obligation to notify will most likely lead to the same effect as a recall. The defendant has to contact its customers and actively inform them of the prohibition to distribute the products for the time being. This may in some cases lead to customers cancelling the purchase orders, especially if food products are concerned which have a short-term expiry date. If the defendant refrains from notifying his customers, he risks a penalty order by the court. He may still argue that a notification of his customers will adversely affect his commercial activities and customer relations and that the interest of the claimant in these measures does not exceed this risk. However the defendant would run the risk of a court not being convinced to refrain from ordering a penalty if the defendant has not contacted his customers.
Take away points
With the present judgment the German Supreme Court continued its claimant-friendly, wide interpretation of cease and desist orders.
The troubling fact remains that, at least in a regular court proceedings, every cease and desist order comprises the obligation to recall the infringing products from the retail market.
Although the recall-obligation may now be slightly weakened in preliminary injunction proceedings the consequences for the defendant remain severe and the claimants position strong. Because even a “mere” notification to the customers to provisionally stop distributing the products due to a cease and desist order remains an extremely burdening obligation and will in many cases have severe detrimental effects to its image and customer relationships.