The German Federal Court of Justice holds that an anticipation of the main proceedings, which is generally not permitted in injunction proceedings, has not taken place if the party liable did not recall the goods it distributes from its customers, but has only asked them not to sell the goods until further notice due to the preliminary injunction.
The German Federal Court of Justice has again affirmed that a cease and desist order not only requires the party liable to cease and desist from any further acts of distribution, but also mandates active steps to prevent the further distribution of products packaged or labelled in an infringing manner. The obligation of the party liable is limited, however, to requesting action from third parties to a feasible, necessary, and reasonable extent. The particular nature of injunction proceedings as well as the strict requirements for the anticipation of the main proceedings and the respondent’s limited ability to defend itself may result in restrictions if a recall obligation is assumed due to a cease and desist order.
The obligation of the party liable is not only established by what is feasible and reasonable, but, according to the German Federal Court of Justice, limited as well. In the opinion of the court, the party liable may not remain inactive if and to the extent the interpretation of the cease and desist order results in an obligation to take action. By the same token, the party liable does not have to take steps that don’t contribute to a prevention of further infringements and are therefore not required, nor is the party liable expected to take actions to prevent or remedy the interference that would disproportionately disadvantage the party liable in its commercial activity and are therefore unreasonable.
Since the obligation of the party required to cease and desist, which must be determined by way of interpretation, differs in terms of content from what is owed in accordance with the specific provisions governing recall claims, it is irrelevant whether the petitioner has claims against the party liable for removal and recall pursuant to Sec. 98 para. 2 of German Copy-right Law (Urhebergesetz – UrhG), Sec. 18 para. 2 of the German Trademark Act (Markengesetz -MarkenG), Sec. 43 para. 2 of the Designs Act (Designgesetz – DesignG), Sec. 140a para. 3 of the German Patent Act (Patentgesetz – PatG), Sec. 24a para. 2 of the German Utility Model Act (Gebrauchsmustergesetz – GebrMG) or Sec. 37a para. 2 of the German Plant Varieties Protection Act (Sortenschutzgesetz – SortenschutzG). These provisions in special laws cannot prevent the interpretation that a cease and desist claim includes a recall as well. Typically, the recall claims based on special laws and a recall obligation based on a cease and desist order may compete in cases where a distribution of products, which are designed, labelled or packaged in an infringing manner has already taken place and it can be expected that the party liable will continue to distribute them quickly and in significant quantities. The court clarified that a separate application area remains for the recall claims based on special laws, when products, which are designed, labelled, or packaged in an infringing manner, were in fact distributed, but there is no specific expectation of any further distribution.
The German Federal Court of Justice did not explain when a “specific expectation of any further distribution” can be assumed in practice. It only established that the party required to cease and desist has the same obligation as a party liable to perform a recall claim based on a special law to persistently and seriously attempt to get the products back from its customers by referencing the infringing character of the products. However, the party required to cease and desist is not responsible for the success of the recall.
Taking into account the fact that the main proceedings may only be anticipated in preliminary injunction proceedings under strict conditions, the German Federal Court of Justice made the following distinction:
If there are no specific indications leading to the assumption that the party liable tried to avoid its cease and desist obligation by quickly reselling the goods in question, or if the case relates to pirated products, the party generally has no obligation to recall goods that are labelled or packaged in an infringing manner and that were sold before the cease and desist order was issued. The cease and desist order can be interpreted to mean, however, that the party liable does, in fact, have to encourage third parties to refrain from continuing to commit infringing acts, but that the activities owed in this regard only have to serve the protection of petitioner’s cease and desist claims without ultimately satisfying its claims. In this regard, the German Federal Court of Justice holds that main proceedings were not anticipated in an unlawful manner if the party liable did not recall the goods it distributes from its customers due to the preliminary injunction issued against the party liable, but only asked them not to sell the goods until further notice due to the preliminary injunction. The court considers this approach reasonable with regard to the party liable, because said party already has the contractual auxiliary obligation to inform customers that they must anticipate a preliminary injunction if they resell the goods. The German Federal Court of Justice grants the party liable the option of relief, i.e. when it can be assumed that the customers of the products will learn about these measures even without the party liable informing them accordingly.
By establishing this case law, the German Court of Justice is distancing itself from parts of its “Rescue Drops” decision due to the criticism it had received . With regard to the prohibition to anticipate the main proceedings, the German Federal Court of Justice points out the difference that in the context of preliminary injunction proceedings, removal cannot be demanded in the form of a recall, but only in the form of a request from the party liable sent to its customers not to distribute the purchased goods until further notice due to the preliminary injunction. The customers are not required to respond to this request. Specifically in the pharmaceutical sector, however, the question arises whether, in consideration of limited storage capacities, such a request would still cause wholesalers to return the goods and/or to ask the company to take the goods back, which ultimately is equivalent to a recall.
One consequence of the distinction the German Federal Court of Justice makes between the main proceedings and the preliminary injunction proceedings is that the party cautioned, who has issued a cease-and-desist declaration, but would like to avoid a recall, should specifically state that the cease-and-desist declaration to be issued does not include a claim to removal.
In consideration of the claim to damages pursuant to Sec. 945 of the German Code of Civil Proceedings (Zivilprozessordnung – ZPO), a party issuing a caution should, if the preliminary injunction is later set aside, specifically clarify in the petition for an injunction or the statement of facts that it is only requesting the other party to cease and desist, and that it is not demanding a recall. In a delimited economic sector, such as the pharmaceutical industry, in which the respective market participants face each other time and time again in preliminary injunctions, it would also be desirable to completely refrain from the claim to removal to avoid the respective expense and uncertainty in the market. It may be tempting to enforce such a recall or, respectively, the request not to continue distribution until further notice against a competitor. It should always be considered here, however, that pharmaceutical companies often find them-selves in the reverse procedural situation with the same opponent. Furthermore, it is of relevance, especially in the pharmaceutical area, that a recall and its communication to the dif-ferent levels of trade should be reserved for a recall that is necessary under pharmaceutical law in order not to create additional uncertainty.
