Wangzhihe goes to Germany: How to enforce IP rights in one of the world’s biggest economies

2008/2/1By Dr. Henning Hartwig & Verena Wintergerst,[Trademark]

Protection of intellectual property rights in Germany has a long-standing tradi-tion, dating back to the second half of the 19th Century.  Today Germany is heading the statistics among European countries in applications for patents, trademarks, and designs.  The courts are certainly among the best in the enforcement of IP rights, in particular trademark and design issues.  The attractiveness of German courts is the result of their specialization and high qualifications of their judges, speed with which infringement cases are resolved, relatively low costs of infringement litigation, and the presence of qualified legal and technical advisors and attorneys.

In line with China's fascinating economic development, it was only a matter of time before Chinese companies home and abroad would have to enforce their IP rights.  Chinese enterprises have successfully invested in industries such as electron-ics (IBM/Lenovo), automotive (MG Rover/Nanjing Automobile), building materials (SGSB), textile (Dürkopp Adler/Grosse Jac/Qingdao Hisun Garment) or tools (Lutz/ZQ Tools).  Additionally, they also started to place their own distinctive products from different industrial sectors and regions on the German market.  In light of this, the most recent judgment rendered by the Munich District Court on November 14, 2007 by way of main proceedings is an excellent example of how Chinese IP rights may be protected and enforced under German law (Case No. 21 O 21512/06).

Munich District Court ruling of November 14, 2007 against Okai Import Export GmbH for using "Wangzhihe"

The Beijing Wangzhihe Foodstuff Group Co. Ltd. against its own German im-porter, the Okai Import Export GmbH which has its seat in Berlin, initiated the case.  Beijing Wangzhihe sued Okai for having used the claimant's trademark "Wangzhihe" and for having applied for a corresponding German trademark registration at the German Patent and Trademark Office (GPTO) without their consent.  The Munich District Court followed the claimant's arguments in large part and Okai was ordered to cease-and-desist the use of the following sign-in-suit.

In addition, Okai was ordered to proceed with the cancellation of the corre-sponding German trademark registration "Wangzhihe".  The decision not only en-joined Okai but also the Managing Director directly liable for Okai's infringements.  Although the claimant's arguments were mainly based on domestic law against unfair competition (and alternatively on trademark, company and copyright law), the basic issues of German infringement proceedings as they generally occur in "classic" trademark or design cases can be learned from the case at hand.

Court's jurisdiction

Initially, the Munich District Court correctly stated its international and national jurisdiction for the case at bar.  In principle, the organization of the courts is a matter for the 16 German federal states.  Consequently, the degree of specialization of the courts differs greatly from Land to Land.  In many infringement cases the claimant has the choice of the court because of the forum delicti commissi principle. Three separate instances hear infringement cases: first the District Court, second the Ap-peal Court and third the Federal Supreme Court.

Most German states have concentrated the jurisdiction for patent, trademark, design or copyright infringement matters in only one court in each state.  However, there is no such specialization for unfair competition cases.  Claimants show a ten-dency to file actions with courts known for handling a large number of IP cases, such as the District Courts of Düsseldorf, Hamburg, Cologne, Frankfurt/Main, Berlin, Mannheim and Munich.

In the Wangzhihe case, jurisdiction of the Munich District Court resulted from the claimant‘s plea pursuant to which the defendant's national trademark registration of the claimant's brand "Wangzhihe" was in breach of Section 14 German Trademark Act. The claimant could have also chosen the Berlin District Court according to the domicile of the defendant. Jurisdiction of the Munich District Court also came about from the asserted claim for assignment and/or cancellation of the defendant's Ger-man trademark registration, since the GPTO is located in Munich.

Length of proceedings and possible time limitations

It is not clear from the wording of the Wangzhihe ruling of the Munich District Court when the main action was filed.  However, it does not appear that the Wangzhihe proceedings took longer than average.

Generally, the length of proceedings in trademark or design infringement cases as well as in unfair competition matters may differ from court to court and may vary with the court's workload.  As a rule, main proceedings for trademark or design infringement are likely to take between six and nine months in the District Court, from filing of the complaint until rendering of the judgment.  Depending on the practice of the court, there may be one or two hearings in a typical case.  If the court orders the taking of evidence, there may be one further session of the court for hearing wit-nesses or experts, and in that case the proceedings will typically take another three months.

Appeal proceedings generally take approximately nine to twelve months on average, with usually only one court hearing.  If evidence is taken at the appeal stage, approximately three months should be added.  If admitted, a further appeal to the Federal Supreme Court would likely take one and a half to two years.

As a rule, infringement proceedings start with the claimant filing a comprehen-sive complaint, stating all relevant facts of the case.  The defendant then has to an-swer within about six to eight weeks.  An oral hearing will be held within another one or two months.  The decision is typically rendered about one month after the oral hearing. There is no automatic enforcement of the decision if an appeal is lodged against it.  A special order may authorize preliminary enforcement.

In the current Wangzhihe case, the asserted claims were mainly based on the German Act against Unfair Competition and only supplementary on trademark, trade name and copyright law. According to the press at www.bjrundschau.com, proceed-ings before the Munich District Court took just longer than nine months, as the com-plaint was pending since January 2007.  The decision was rendered on November 14, 2007.  It is worth noting that the Court held that the decision could be preliminary en-forced, in particular the obligation to cease-and-desist, by deposit of a security bond in the amount of EUR 40,000.00.

On the facts of the Wangzhihe case

The defendants had formerly been the exclusive importers of the claimant's products showing the "Wangzhihe" logo.  This was not in dispute between the parties.  According to the Munich District Court, the defendants successfully applied for regis-tration of the sign-in-suit at the GPTO in order to "save" or protect the exclusivity and/or to be the only beneficiary for marketing the "Wangzhihe" food products even in case the business relationship with the claimant ended.

Pursuant to the findings of the Court, the claimant has vested rights worth pro-tecting in Germany (even if it did not apply for a registration of the sign-in-suit in Germany and/or Europe), since it was one of the leading manufacturers of spices and food ingredients in China.  Thus, the Munich District Court concluded that the defendant by registering the sign-in-suit "Wangzhihe" for food matter merely aimed at forcing the claimant to keep the defendant as an exclusive trading partner for market-ing the products showing the sign-in-suit in Germany.

It is interesting to learn that the Munich District Court, in general, treated the claimant, a Chinese enterprise, in the same manner as any national or European claimant (as long as the Chinese claimant is represented by an attorney-at-law admit-ted to a German bar).  The only difference concerned the above mentioned security for costs and lawyers' fees.  Such a security must be deposited upon request of the defendant by any non-EU national acting as a claimant in main proceedings before a German infringement court.

On the grounds of the Wangzhihe case (cease-and-desist and cancella-tion)

The claimant's arguments were largely based on domestic law against unfair competition (and alternatively on trademark, trade name and copyright law). The Court found that the accused infringements as a targeted obstruction of the competi-tor, i.e., the claimant, fulfilled the preconditions of the German Act against Unfair Competition.  As a consequence, the defendant was enjoined to refrain from using the sign-in-suit and to consent to the cancellation of the German trademark registra-tion "Wangzhihe" as registered in the name of the defendant.  However, the obliga-tion to refrain from using the sign-in-suit only applied to products, which had not originally been put on the market by the claimant (with regard to which any rights would be "exhausted").  The Court's finding is in line with established German case law.  Accordingly, the application for registration of a trademark constitutes unfair competition in case the claimant's vested rights are worth protecting and the trade-mark registration is used as an abusive means of competition, in accordance with the case law of the German Federal Supreme Court.

However, the claimant argued that the sign-in-suit was a reputed trademark not only in China but also in relation to the target public in Germany (i.e., Chinese living in Germany and Germans interested in the Chinese culture of food).  The Wangzhihe decision refused to grant the asserted trademark claims. This resulted from the fact that the claimant's plea was based mainly on unfair competition law rather than trademark law. The German Act against Unfair Competition, largely re-codified in July 2004, provides a strong tool in the day-to-day struggle against unfair advertising and imitation practices.  Since "targeted obstruction of competitors" is one of the classic examples of unfair competition being explicitly stipulated in Section 4 No. 10 German Act against Unfair Competition (which is allowed to be applied inde-pendently from trademark law), the Munich District Court was not obliged to deal with trademark law and, thus, was not forced to decide whether the sign-in-suit had de-veloped any secondary meaning or had become well-known within the related fields of trade in Germany.

On the grounds of the Wangzhihe case (assignment, information and compensation)

The Court rejected asserted claims for assignment of the defendant's regis-tered German trademark as well as for information and compensation.

As a rule, the legal tools at the disposal of the claimant in infringement pro-ceedings include: claims for a cease-and-desist order (injunctive relief), for destruc-tion of the infringing products and for detailed information and rendering of account about infringement activities by the defendant, as well as for damages which may be calculated based on the accounting rendered (account of sales, profits etc.).  The claimant may choose between three alternatives for calculating damages: lost profits, infringer's profits, or reasonable royalty.  Punitive damages are not awarded.

The claimant has to present evidence of all relevant facts for finding infringe-ment.  Discovery, in general, is not available in German court proceedings.  Any facts which cannot be proven by documentary evidence may be dealt w