Article by Dr Henning Harte-Bavendamm

A bank is entitled to use the DAX as "Underlying" and to mention the name "DAX®" to communicate that its financial instrument is linked to the rate of the DAX, the German stock exchange index. Such use does not require a trademark license from Deutsche Boerse. This follows from a decision of the Frankfurt Court of Appeal of Tuesday 13 February 2007. Since indirectly this court decision is also based on the European Trademark Directive, it is a relevant precedent for the other EC member states as well. It may affect the ability of index sponsors to charge trademark licence fees to banks and other financial institutions for using their indices.

The Judgment

The Appellate Court of Frankfurt issued a judgment on 13 February that may have far-reaching consequences for the index- licensing practices of Deutsche Boerse and other index sponsors. Deutsche Boerse obtained trademark registrations of the word DAX and other indices in the "DAX family" and entered into index-licensing agreements with financial institutions intending to use such indices as "underlyings". Following a dramatic increase in the annual fees charged by Deutsche Boerse after 2002, last year Commerzbank AG decided to terminate its licensing agreement with Deutsche Boerse. It applied for a declaratory judgment to confirm that under German law it was perfectly lawful to use the indices as underlyings and to refer to the index names in a neutral way, without Deutsche Boerse’s consent.

Last summer the District Court of Frankfurt found in favour of Deutsche Boerse. It took the view that it constituted unfair competition to benefit from the existence and continuous calculation of the indices without paying royalties to Deutsche Boerse. By linking the value of the certificates and other financial instruments to the development of the DAX, Commerzbank "imitated" the index and unfairly exploited the latter’s reputation.

Following an oral hearing on 23 January 2007 the Appellate Court reversed the decision. The judges held that the financial instruments were completely different products that neither "integrated" nor "imitated" the index nor otherwise exploited the investment and efforts of Deutsche Boerse. The index figures were generally available from newspapers, online services and other freely accessible sources. The judges of the Appellate Court also rejected the claim of trademark infringement. They supported Commerzbank’s view that the name DAX was only used in a fair and unobjectionable way to describe the value and conditions of the financial instruments. Without using references like "bezogen auf den DAX®" ("based on the DAX®") Commerzbank would be unable to offer and distribute such products.

Deutsche Boerse was granted leave to file a further appeal to the Federal Supreme Court (Bundesgerichtshof). As at that stage no new facts and evidence may be introduced, the review is limited to questions of law. A final decision can be expected for 2009.

Journalists who attended the hearing of 23 January have already said that they think this development could seriously endanger Deutsche Boerse’s index licensing policy and that it may also have repercussions for other indices.

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