5 Jul 2017 | Unfair Competition

Recall obligation always part of injunctive relief?

In a recent unfair competition case, the Federal Supreme Court (BGH) ruled that injunctive relief prohibiting product distribution and / or advertisement may also implicate an obligation to actively recall these products from customers or other third parties.

On 29 September 2016, in a case where off-the-shelf products created a continued disturbance, the BGH ruled that the obligation to cease and desist includes the obligation a recall obligation, to the extent possible and reasonable, when necessary to eliminate the continued disturbance.

Plaintiff had obtained an injunction based on unfair competition law (UWG, German Act against unfair competition) against the marketing and distribution of alcoholic beverages using the signs “RESCUE DROPS” and / or “RESCUE NIGHT SPRAY”. The Appeal Court and the BGH, however, found that the Defendant failed to comply with the injunction by not recalling products that had been sold to retailers – primarily pharmacies.

Literally, a cease and desist order does not include a recall obligation. In view of the BGH it is however irrelevant for the interpretation of the cease and desist order whether the Plaintiff is entitled to a respective recall claim or not. With reference to and in continuation of inter alia the Hot Sox decision (court reference I ZR 109 / 14), the BGH held that a cease and desist order usually includes a recall obligation concerning the products already delivered to eliminate the continued disturbance. As a result, any future cease and desist order in Germany includes a recall obligation to the extent reasonable and necessary.

By that decision, the BGH actually abolishes the difference between the right to claim for disposal and the right to claim for cease and desist which is intended by the provision of Section 8(1) UWG. To resolve this inconsistency, the BGH consequently transferred the principle of proportionality which is essentially only applicable to the disposal claim and the cease and desist claim.

Previously, when there was a continued disturbance, German courts were split on whether injunctive relief was terminated when an infringement action had been terminated. Thus, the recent clarification of the BGH is very welcome. The decision follows the trend in recent case law to impose additional obligations on infringers. For example, in 2015, the Appeal Court of Dusseldorf ruled that a defendant who had made infringing acts on the internet (advertising), was not only required to delete the content and make sure it could not be found on popular search engines, but also required to ensure that the disputable advertising was deleted from the cache of popular search engines, (cf. Appeal Court of Dusseldorf, judgment of 3 September 2015, ref. I-15 U 119 / 14)

Practical Note

Going forward, the following rule will apply: If the unfair distribution and / or the unfair advertising of a product has been prohibited, the infringer must, to a reasonable extent, recall products that have been distributed to customers to ensure those products are not further distributed.

Now, the infringer not only has to take affirmative actions to cease and desist, including but not limited to recalling products while bearing its cost, but also has to disclose its respective injunction to customers and third parties involved in the distribution chain, which can damage the infringer’s image on the relevant market. We recommend a thorough documentation of everything that has been done to fulfill the recall obligation, such as deleting the cache on popular search engines, in order to have presentable evidence in case the plaintiff files an application for an administrative fine or an enforcement action of a contractual penalty.

Additionally, the extent to which the above-mentioned recall obligation applies to the corresponding claims for injunctive relief in German trade mark and copyright law is unclear. The respective recall provisions and their specific requirements risk circumvention as they are based on the implementation of the Enforcement Directive into German law.