In its decision “Wegfall der Wiederholungsgefahr III” (“Elimination of the risk of recurrence III”, judgment of 1 December 2022, I ZR 144/21, GRUR 2023, 255), the Court establishes two important principles: Firstly, a renewed risk of recurrence created by a new infringement can be dispelled by a further cease-and-desist undertaking without a fixed penalty, even if no minimum penalty is promised. Secondly, if the claimant rejects a cease-and-desist undertaking, the risk of recurrence is revived as of the time of receipt of that rejection. A claim for injunctive relief is then possible again.
1. Second cease-and-desist undertaking without a fixed penalty
According to settled case law, a new infringement in spite of a cease-and-desist undertaking gives rise to a renewed risk of recurrence which, in principle, can only be dispelled by a further cease-and-desist undertaking with a considerably higher penalty than promised in the first undertaking (cf. BGH, judgment of 7 December 1989, I ZR 237/87, GRUR 1990, 534 – Abruf-Coupon). The question of whether and how this case law can be applied to cease-and-desist undertakings with no fixed contractual penalty, where the amount of the contractual penalty is left to the discretion of the claimant (so-called “Hamburg custom”) has long been controversial. According to the prevailing opinion of the courts and academia, such undertakings were only sufficient if a minimum penalty was provided for (“…a contractual penalty not less than…”).
The BGH has now clarified that a (further) cease-and-desist undertaking in accordance with the “Hamburg custom” eliminates the risk of recurrence even if no minimum penalty is provided for, since the (necessary) higher penalty is already inherent in a contractual penalty promise according to the “Hamburg custom” and the fact of the repeated infringement can be taken into account in a judicial review of the appropriateness of the contractual penalty.
2. Revival of the risk of repetition if a cease-and-desist undertaking is rejected
The BGH’s statements on the revival of the risk of recurrence if a cease-and-desist undertaking submitted by the respondent is not accepted by the claimant, are of considerable practical importance.
If the respondent undertakes to refrain from further infringements without reservations and promises an appropriate contractual penalty, the risk of recurrence as a legal prerequisite for injunctive relief is eliminated according to established case law. The receipt of a unilateral undertaking is sufficient for this. Acceptance of the undertaking is not required for the risk of recurrence to be eliminated (even if only acceptance leads to a cease-and-desist agreement and thus establishes the obligation to pay a contractual penalty in case of an infringement). This remains, in principle, unchanged after the decision “Wegfall der Wiederholungsgefahr III”.
However, according to the previous case law the receipt of a cease-and-desist undertaking with a contractual penalty clause has led to the – final and irrevocable – elimination of the risk of recurrence even if the claimant does not accept that undertaking (see, e.g., BGH, judgment of 31 May 1990, I ZR 285/88, GRUR 1990, 1051, 1052 – Vertragsstrafe ohne Obergrenze). The BGH has now expressly abandoned this case law.
According to the decision “Wegfall der Wiederholungsgefahr III”, the presumption of a risk of recurrence established by the infringement can only be rebutted as long as the necessary deterrent effect is (still) provided for by an effective threat of sanctions. If the claimant refuses to accept the cease-and-desist undertaking, there is no longer a behaviour-controlling contractual penalty threat that can deter the respondent from future infringements. In this case, the risk of recurrence created by the infringement and initially eliminated by the unilateral cease-and-desist undertaking is revived resulting in the claimant (again) being able to assert claims for injunctive relief in court.
3. Practical Consequences
The new principles pertaining to the revival of the risk of recurrence in the event of a rejection of a cease-and-desist undertaking have significant practical consequences for both claimants and respondents.
a. … for claimants
The claimant now has the option of rejecting a cease-and-desist undertaking, even if it would be sufficient to eliminate the risk of recurrence, and instead asserting his cease-and-desist claim in court. This gives the claimant the option to obtain a court decision to rely on vis-à-vis third parties. Refusing a (sufficient) cease-and-desist undertaking might also be useful if the respondent submits an undertaking that is limited in relation to the undertaking demanded by the claimant (but still sufficient). In such a case, the claimant can try to obtain a wider cease-and-desist order in court.
It must be borne in mind, however, that rejecting a cease-and-desist undertaking is only possible if the respondent has modified the undertaking demanded by the claimant. This is due to the particularities of German contract law. If the respondent submits the exact undertaking the claimant has demanded in the warning letter, the respondents thereby accepts the claimant’s offer of a cease-and-desist agreement. In this case the agreement is concluded upon receipt of the undertaking by the claimant (Köhler/Bornkamm/Feddersen/Bornkamm/Feddersen UWG § 13 at 170). If, on the other hand, the respondent submits a modified cease-and-desist undertaking, he makes a (counter) offer that requires acceptance by the claimant. A claimant who wishes to obtain a judicial decision should therefore consider not attaching a draft cease-and-desist undertaking to the warning letter, at all (the claimant is not obliged to attach such a draft, even if this is customary; cf. Köhler/Bornkamm/Feddersen/Bornkamm/Feddersen UWG § 13 at 18). In such a case, a cease-and-desist undertaking submitted by the respondent always constitutes an offer to conclude a cease-and-desist agreement, which the claimant may reject.
It should also be noted that the claimant bears the cost risk when rejecting a (sufficient) cease-and-desist undertaking and asserting the cease-and-desist claim in court. The BGH expressly states in “Wegfall der Wiederholungsgefahr III” that a respondent who has submitted a sufficient cease-and-desist undertaking can (immediately) acknowledge the cease-and-desist claim in subsequent court proceedings, resulting in the claimant having to bear the costs of these proceedings according to sec 93 of the German Civil Procedure Act (ZPO).
There is a further disadvantage for a claimant who refuses a cease-and-desist undertaking and enforces his cease-and-desist claim in court: In the event of future infringements, the respondent has to pay an administrative fine to the state, not a contractual penalty to the claimant. Thus, in the case of future infringements, the claimant does not receive any (penalty) payments from the respondent.
A claimant must therefore carefully consider in each individual case whether it makes sense to reject a (sufficient) cease-and-desist undertaking.
b. … for respondents
Respondents who receive a warning letter and a cease-and-desist demand can no longer be sure that the matter is settled when they submit a sufficient cease-and-desist undertaking with a penalty clause (unless they submit the exact undertaking demanded by the claimant in the warning letter). Rather, they face the risk that the claimant rejects the undertaking and initiates legal proceedings. The respondent can try to counteract the resulting uncertainty by requesting that the claimant either accept or reject the undertaking (cf. Walesch, GRUR-Prax 2023, 90, 93). However, the claimant is not obliged to respond to such a request. What is more, if the respondent sets a deadline for the claimant to either accept or reject the undertaking, he runs the additional risk that such a deadline is interpreted as a time limit for accepting the undertaking and thus for the validity of the offer, with the consequence that even if the claimant does not respond, the risk of recurrence revives upon expiration of the deadline.
If the claimant expressly rejects a cease-and-desist undertaking, the respondent should consider a so-called third-party submission, i.e. the submission of a cease-and-desist undertaking to a third-party (this is an option at least in the case of unfair competition law infringements). This has the advantage that the respondent can choose the wording of the undertaking himself and, if necessary, restrict it in comparison to the undertaking demanded by the claimant. However, the respondent may also decide to risk legal proceedings and to avert the cost risk by immediately acknowledging the claim. In this case, however, he must accept the wording of the claimant’s request.
4. Outlook
The BGH’s decision in “Wegfall der Wiederholungsgefahr III” clarifies the long-disputed question whether a renewed risk of recurrence created by a new infringement can be dispelled by a further cease-and-desist undertaking without a fixed penalty (according to the “Hamburg custom”). This brings legal certainty for both claimants and respondents. It remains to be seen whether, in the case of an identical infringement, a second identical cease-and-desist undertaking in accordance with the “Hamburg custom” is sufficient to eliminate the renewed risk of recurrence. In past decisions, some courts (e.g. the Cologne Appeals Court, judgment of 5 December 2014, 6 U 57/14, ZUM 2015, 404 – Parfümfotos bei eBay) have doubted the seriousness of such an undertaking on the grounds that it does not grant the claimant any rights beyond the first undertaking and accordingly does not provide for a risk of sanctions beyond that of the original undertaking. However, after the decision “Wegfall der Wiederholungsgefahr III”, a second identical cease-and-desist undertaking will probably have to be accepted from now on.
The new principles pertaining to the revival of the risk of recurrence if a cease-and-desist undertaking is rejected may lead to uncertainties, particularly for respondents. On the other hand, these principles provide claimants with additional options, in particular the option to have the matter decided by a court. It is doubtful, however, whether this will reduce the importance of cease-and-desist undertakings as instruments of out-of-court settlement in Germany (as Walesch, GRUR-Prax 2023, 90, 92, assumes). In most cases, the claimant will also be interested in a quick out-of-court settlement (and the prospect of a contractual penalty in case of an infringement). Moreover, the claimant will usually want to avoid the cost risk in the event of an immediate acknowledgement in court. Therefore, it is not likely that the legal instrument of cease-and-desist undertakings will lose its importance in German law as a result of the Supreme Court’s decision.
