Franchisors must typically consider the extent of concept protection in two situations:
- if franchisees which have left the franchise system reuse the concept in a largely unchanged fashion;(1) or
- if third-party competitors (outside the franchise system) copy the main features of the concept.(2)
In the restaurant industry, corporate concepts with certain furnishing features such as fittings and advertising designs are often imitated or copied by competitors. Although these concepts are seldom covered by registered IP rights (eg, trademarks), under certain conditions, it is unfair and thus prohibited under competition law to offer goods or services which imitate the goods or services of a competitor. According to Section 4(3) of the Act Against Unfair Competition, which governs 'supplementary IP protection' (also known as 'concept protection'), this applies, for example, if an imitating party deceives customers regarding the commercial origins of goods and services.
However, competition is clearly admissible and desirable from a legal standpoint. For example, the fact that the concept of Restaurant A provides for a 'show kitchen' does not prevent Restaurant B, some 20 yards away, from also setting up a show kitchen. This becomes an issue only if Restaurant B does more than simply set up a show kitchen as well, such as using identical colours and furniture to Restaurant A.
Determining where the boundary lies between permissible competitive actions and inadmissible imitation (ie, plagiarism) of corporate concepts thus involves a certain degree of judgement.
The plaintiff owned and operated a fast-food restaurant franchise which offered traditional snacks (eg, chips) as main courses as opposed to merely side dishes. It sought injunctive relief and damages based on supplementary IP protection from the defendant, which also operated a fast-food restaurant, on the grounds that the defendant had unfairly copied its gastronomic concept.
At first instance before the Duisburg Local Court,(3) the plaintiff submitted that its gastronomic concept had been to:
- equip its fast-food restaurants with "trendy and high-quality fixtures and fittings";
- implement a "distinctive sustainability concept"; and
- present products in a "relaxed, modern vintage atmosphere".
The competitive originality of the plaintiff's gastronomic concept, which was protected by Section 4(3)(a) of the Act Against Unfair Competition, did not result from individual features, but the innovative overall concept.
The plaintiff claimed that the defendant had allegedly imitated this concept in its restaurant operations in an anti-competitive manner by adopting the design and contents of the plaintiff's menu (almost identically) and basing its interior on designs selected by the plaintiff (eg, redbrick walls with black metro ceramic tiles and rustic-style wood panelling).
The defendant responded by stating that the plaintiff's concept did not have the necessary competitive originality as set out in Section 4(3)(a) of the Act Against Unfair Competition. Its individual design features and overall design were simply those of "trendy food restaurants".
As the trial court, the Duisburg Local Court ordered the defendant – following the plaintiff's application and for competitive purposes – to cease operating its catering outlets that had the same design elements as those of the plaintiff (eg, black menus with white writing and product photos, virtually identical product names and descriptions and redbrick walls with black metro ceramic tiles and wood panelling).
The Duisburg Local Court held that the plaintiff was entitled to injunctive relief against the defendant because of unfair imitation based on Section 8 in conjunction with Sections 3 and 4(3)(a) of the Act Against Unfair Competition. According to the court, the defendant had copied the plaintiff's concept, essentially transferring the striking and dominant combination of the individual elements of the commercial design to its restaurant (ie, the menus had been almost identical, the products largely identical and the restaurants' main design features and names matched).
According to the Duisburg Local Court, the plaintiff's gastronomic concept showed competitive originality in terms of both design and the products offered.
The Dusseldorf Higher Regional Court dismissed the defendant's appeal and upheld the plaintiff's claim to injunctive relief. The court also denied a second appeal on points of law only.
Gastronomic concept as protectable product
As regards the protectability of the plaintiff's gastronomic concept under Section 4(3)(a) of the Act Against Unfair Competition, the Dusseldorf Higher Regional Court found that it was a protectable product with average competitive originality.
When evaluating supplementary protection under competition law, the court bases its decision on the following guiding principles established by the highest German courts:
- The definition of 'goods and services' set out in Section 4(3) of the Act Against Unfair Competition should be interpreted broadly.
- A product attains competitive originality if the overall impression conveyed by its specific design and features and created among target customers refers to specific commercial origins.
- Target customer perspective must be taken into consideration.
In accordance with these principles, the Dusseldorf Higher Regional Court affirmed the competitive originality of the plaintiff's gastronomic concept. The concept (which included the design that was realised in its restaurant franchise and presented to the public) was considered worthy of protection against imitation under the laws of fair competition. The plaintiff's gastronomic concept consisted of certain design elements, including:
- identical menus;
- matching blackboards and menu boards;
- distinctive product names, descriptions and photos;
- a black, white and red colour scheme (creating a "relaxed, modern vintage atmosphere"); and
- a logo with a salient word combination placed prominently outside the restaurant.
The court found that the presentation of dishes had been significant to the concept from a target customer perspective. According to the court, for target customers to associate a gastronomic concept with its commercial origins, restaurants need not be designed identically – different design elements do not change the fact that the relevant public associates a company's restaurants with its gastronomic concept because this depends primarily on a harmonious general impression.
Imitation of gastronomic concept
The Dusseldorf Higher Regional Court considered the defendant's concept to be an imitation of, rather than identical to, another gastronomic concept – specifically, in terms of recreating another concept's accomplishments.
A concept is considered to recreate the accomplishments of another concept if it exhibits recognisable elements from the protected entirety of the products according to the general impression. In the present case, the Dusseldorf Higher Regional Court found that an almost identical imitation of the gastronomic concept could not established solely on the significant similarity between the menus and menu boards because these were only individual (albeit formative) elements of the concept. The measure of imitation must instead be the entire concept, including the design of the restaurants.
Knowledge of original
The Dusseldorf Higher Regional Court also held that the additional prerequisite for an imitation, according to which the producer must have been familiar with the original as a model at the time of the product's production, had been met. This is because a so-called 'independent secondary development' was virtually excluded in the circumstances. Knowledge of the original gastronomic concept could be deduced from the fact that the adoption of almost identical menus (even down to the product names, descriptions and other design elements) could not be otherwise explained. Further, imitations do not require any targeted intent beyond knowledge of the original.
'Avoidable deception' regarding commercial origins
The Dusseldorf Higher Regional Court affirmed that the target customers had been 'avoidably deceived' (within the meaning of Section 4(3)(a) of the Act Against Unfair Competition) with regard to the restaurant services' commercial origins. The plaintiff's gastronomic concept had had the necessary public recognition when the defendant's restaurant opened because the plaintiff had received several awards for its concept and the press had reported this several times. Further, the plaintiff had more than 44,000 Facebook followers, resulting in a certain regional fame among target customers.
According to the court, the recreation of the accomplishments of the plaintiff's concept had also established a false idea relating to commercial origins, since the plaintiff's uniform presentation of a novel range of dishes in its restaurant franchise (eg, using identically designed menus and boards) had given the relevant public a reference as to the concept's commercial origins. The defendant had adopted these features precisely from the plaintiff's gastronomic concept.
The court also dismissed the defendant's submission that it had avoided deception about its commercial origins by giving its restaurant a different name and logo. Deception in this regard had not been eliminated simply by designing a different logo because, in terms of the gastronomic concept, the presentation of the dishes and the design of the restaurant were clearly the centre of attention (ie, names were less important). With respect to the defendant's logo, the court held that the relevant public would recognise is as not being connected to the plaintiff's restaurant franchise. However, the idea that it could be a second brand of the plaintiff or that the operator of the defendant's restaurant was commercially connected with the plaintiff was not eliminated by the different logo; rather, due to key elements (eg, its identical presentation of dishes), the relevant public would believe that the defendant's restaurant was a second brand of the plaintiff.
In its overall assessment, the Dusseldorf Higher Regional Court considered it especially unfair that the defendant had imitated the plaintiff's presentation of dishes – a key element in the latter's gastronomic concept – in its restaurant.
This decision reinforces the IP protection of gastronomic concepts against competitors' inadmissible imitations. However, such protection does not depend on whether the imitator is outside the concept owner's corporate group (eg, former franchisees). Companies which adopt key elements of a gastronomic concept risk facing claims for injunctive relief under Section(4)(3)(a) of the Act Against Unfair Competition.
(2) See (for example) the Munster Local Court judgment of 21 April 2010 (21 O 36/10) concerning an Italian-style fast-food restaurant chain and the Dusseldorf Higher Regional Court judgment of 22 November 2018 (15 U 74/17), which provides valuable conclusions regarding the issue of supplementary IP protection and strengthens the protection of corporate concepts, especially in the fast-food industry.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.