Germany: Combatting Product Piracy - Germany Finally Implements The Enforcement Directive

Last Updated: 2 July 2008
Article by Thorsten Vormann and Anette Gärtner

In May the German Parliament passed the "Act on the improvement of the enforcement of intellectual property rights". If the President signs and promulgates the Act in June, it can enter into force on 1 August 2008. Germany will thereby finally implement the Enforcement Directive (2004/48/EC) into national law – more than two years after the deadline. Although the Product Piracy Act of 1990 already provided for a relatively high level of protection, the new rules are welcome because they give rights holders new weapons in the war against product piracy.

1. New weapons in the war against IP infringers: An overview

The "Act on the improvement of the enforcement of intellectual property rights" (in short: Act) makes it easier for rights holders to determine whether there is infringement and to establish the underlying facts including the identity of the infringer. For example, in future it will be possible to demand that parties other than the actual infringer provide information on the origin and distribution channels of infringing products. In introducing new provisions on the right of information against third parties, the new German law goes even beyond the requirements of the Directive. In fact, rights holders will be able to assert claims for information against non-infringers regardless of whether an action against the infringer has already been brought, provided that the infringement is obvious.

Moreover, by introducing a right of inspection, the lawmaker also provides for a counterpart to saisie-contrefaçon. In accordance with the Directive and the inspection procedure developed by the Regional Court of Düsseldorf in recent years, a rights holder may demand access to, for example, a potentially infringing machine located on third-party property and have the machine thoroughly inspected by a court-appointed expert. Resorting to this procedure enables the rights holder to determine whether an infringement has occurred before bringing an action against the infringer.

Last but not least, rights holders will appreciate the upgrade of the "arsenal of remedies" available against infringers. In addition to the claim for destruction that was generally introduced in 1990, the Act provides for a right to demand a recall or the removal of infringing products from the distribution channels. Given that every recall may prove detrimental to the reputation of the alleged infringer, this new legal remedy will hopefully turn out to be an effective deterrent to potential infringers – including and in particular, product pirates.

2. Right of information against parties other than the infringer

The Act provides rights holders with new tools that may be used to establish the facts underlying an infringement. In future, the injured party will not only have a right of information against the alleged infringer; he will also be able to assert a claim for information about the origin and channels of commerce of infringing products against certain non-infringers who, for example, are found in possession of infringing goods on a commercial scale. Among others, this applies to warehouse operators or shippers. In introducing the new claims against third parties, the German lawmaker goes beyond the Directive requirements, because the new provisions do not necessarily require legal proceedings against an infringer, in the course of which a judge may order a third party to provide information. If the infringement is obvious, the rights holder may also assert his right of information outside legal proceedings. Rights holders will welcome the new provisions on the right of information, because they will make it much easier to identify any persons involved in the infringement so that action can be brought against them.

3. Right to inspection

Another improvement of the Act that will be appreciated by rights holders lies in the fact that it codifies recent case law on the right to inspection, including the discovery procedure developed by the Regional Court of Düsseldorf. In accordance with the Enforcement Directive and the Faxkarte and Restschadstoffentfernung decisions of the Federal Supreme Court, the IP laws (as amended) will provide that the right to inspection does not require a high, but only a "certain" degree of probability of infringement. Moreover, there will no longer be a need to discuss whether the principles laid down in the aforementioned Federal Supreme Court decisions may be applied in cases relating to rights other than patents or copyrights, because the new rules apply to all intellectual property rights.

As regards the enforcement of the right to inspection, the Act explicitly provides for an exception from the requirement for the resolution of the case on its merits. Accordingly rights holders will continue to be able to resort to the relatively new tool known as the "Düsseldorf inspection procedure" by simultaneously applying for a preliminary injunction as well as pre-trial measures for the collection and preservation of evidence. This combination of procedural instruments makes it possible to kill two birds with one stone. First, in granting the injunction the court orders the infringer to allow access to, for example, a potentially infringing machine and to allow its inspection by a court-appointed expert. Second, because the inspection is conducted by a court-appointed expert in proceedings for the collection and preservation of evidence, there is no need to have another taking of evidence in the ensuing infringement proceedings. By implementing the Directive, the lawmaker therefore indirectly codifies one of the most interesting developments in IP case law in recent years. Even if there is no saisie-contrefaçon or discovery in Germany, the Act confirms that Germany is a good choice of venue for the enforcement of intellectual property rights.

4. Recall and removal from distribution channels

The improvements provided by the Act do not only relate to the pre-trial phase of collecting facts and evidence. The legal position of rights holders is further improved by the introduction of additional remedies that go beyond the claim for destruction available since 1990. Ever since the coming into force of the Product Piracy Act, all IP laws provide that rights holders may – as a punitive measure – demand the destruction of infringing goods. However, this claim for destruction is limited to products that are still owned by or in the possession of the infringer. In other words, in the past the infringer could not be required to remove all the products from the market that had already been sold. Especially with low-priced counterfeit products, this represents a problem because the original manufacturers are faced with potential warranty litigation and damage to their reputation. In the current legal situation, the only way to solve this problem is to try and convince the product safety authorities to take action. However, rights holders are not entitled to demand that the authorities order the infringer to initiate a recall. With the coming into effect of the Act, the legal situation will change dramatically, because for the first time rights holders will have a claim for recall or the removal from the distribution channels against infringers. Whether the claim for removal from the distribution channels can be enforced even if the products are no longer in the infringer's possession has yet to be clarified by case law. However, recall campaigns can be initiated at any time, regardless of title or possession. As a result, the corresponding claim may well prove an effective deterrent to potential infringers.

5. Destruction via the simplified procedure

On the occasion of the implementation of the Directive, the lawmaker also introduces supplementary provisions relating to the simplified procedure according to the Council Regulation concerning customs action against goods suspected of infringing intellectual property rights (EC No. 1383/2003). According to the new rules, infringing products can be destroyed by customs agents regardless of whether a court has found the products to be infringing, provided that the potential infringer agrees. The infringer is deemed to agree, if he does not object to destruction within two weeks following the rights holder's application. This change yields two significant advantages for the holders of intellectual property rights. First, rights holders do not incur the costs involved in bringing court proceedings against the potential infringer. Second, it no longer represents a problem if, for example, an infringer from a foreign country "goes underground" to evade judicial proceedings. Given that the infringer is deemed to agree after the expiration of the two-week period, the infringing goods can be destroyed at the request of the IP rights holder without the alleged infringer saying a word. Therefore the IP rights holder can resolve the situation in a very short period of time and make sure that the infringing goods never reach the market.

Copyright Clifford Chance 2008.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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