Federal Court of Justice on antitrust law aspects of a trade mark delimitation agreement
In its judgment of 15 December 2015 (case KZR 92/13), the Federal Court of Justice decided on antitrust law issues in connection with delimitation agreements under trade mark law. The Court came to the finding that trade mark delimitation agreements alone do not lead to potential competition between the contract parties. Furthermore, the Court found that it is not the protective scope of the trade marks that is relevant for assessing whether such an agreement restricts competition, but instead whether the parties are to be regarded as current or potential competitors based on general principles. Apart from this, the Court found that delimitation agreements that are permissible under antitrust law do not become ineffective simply because the trade mark that is the subject of the contract is cancelled.
In 1994, Pelikan, a German manufacturer of office stationery, and Pelican Products, Inc., an American manufacturer of torches and protector cases, entered into to a delimitation agreement. The German company Pelikan is the owner of various German “Pelikan” word and word/figurative marks which are registered among other things for lighting apparatus and whose design is shown below:
The American company Pelican Products, Inc. is the owner of the Swiss word mark “Pelican Products, Inc.” and the figurative mark registered for products including torches:
In the delimitation agreement, Pelican Products agreed not to use the “Pelican” sign as a trade mark or to register it as a trade mark in Europe, while German company Pelikan waived the right to register the sign “Peli” and agreed not to object to such a registration by Pelican Products.
Contrary to what was agreed, in 2008 Pelican Products registered three EU trade marks for products including torches and protector cases, i.e. a “Pelican” word mark and a figurative mark and a word/figurative mark with the following designs:
It also filed a claim requesting that the agreement was in breach of antitrust law, making it ineffective.
Hamburg Regional Court dismissed the claim, whereas Hamburg Higher Regional Court partially admitted the claim. The Higher Regional Court found that the agreement was in breach of antitrust law since a conflict existed under trade mark law (i.e. in the field of special-purpose lamps and protector cases).
Following the appeal on points of law, the Federal Court of Justice decided that the delimitation agreement entered into in 1994 was admissible under antitrust law at the time and was therefore effective. It said that the agreement did not subsequently become ineffective, either.
In its judgment, the Federal Court of Justice states that the agreement in question did not lead to a restriction on competition because the parties were not current or potential competitors. It says that there were no objective factors indicating that the German company Pelikan would enter into competition with Pelican Products on the markets for torches and protector cases. It holds that trade mark delimitation agreements alone did not lead to potential competition between the contract parties. Similarly, the fact that Pelikan’s trade marks had been registered among other things for lighting apparatus did not suggest potential competition. Instead, it maintains that where a delimitation agreement exists the only decisive point is whether the parties’ products are interchangeable due to their purpose, price or features when determining whether an active or potential competitive relationship exists. In addition, other aspects have to be taken into account, e.g. whether one of the parties can be seriously expected to enter the interchangeable product market based on concrete facts.
In its decision the Federal Court of Justice also states that any restriction on competition towards third-party companies which may be caused by the delimitation agreement was at least not appreciable. A restriction on competition is appreciable if the agreement prohibits one of the parties from doing business on new markets. However, in the case at issue Pelican Products had the possibility to do business on all markets under the “Peli” trade mark.
Finally, the Federal Court of Justice found that delimitation agreements which are admissible under antitrust law do not become ineffective simply because the trade mark covered by the contract is cancelled, but that in such cases the obligor has to give notice on the agreement to be able to claim that it no longer applies. In contrast, the Federal Court of Justice left open the question of whether this also applies if the delimitation agreement was entered into by competitors. However, it makes clear that merely not using a trade mark (without cancelling it) definitely does not make a delimitation agreement ineffective. The court says that not using a trade mark merely leads to the mark being vulnerable to cancellation (which can be remedied), but not to the conflict under trade mark law ceasing to apply.
Analysis of the decision
This decision by the Federal Court of Justice, which brings clarity in the area of delimitation agreements, is a welcome development. In the decision the Court acknowledges that delimitation agreements also occur outside a current or potential competitive relationship and makes clear that a delimitation agreement alone does not suggest that one of the parties is to enter the relevant markets in the near future. Similarly, the Federal Court of Justice does not adopt the assessment under trade mark law that the registration of a sign for certain goods and services would appear to suggest that the trade mark owner wishes to start doing business in this field in the near future for antitrust law, but instead requires other objective indications of a potential competitive relationship.
Moreover, the clarification that delimitation agreements which do not raise any concerns under antitrust law do not become ineffective if the trade mark is not used or is cancelled is good news. If someone wishes to release themselves from such a delimitation agreement, they first have to arrange for the mark to be cancelled and then give notice on the contract. However, only time will tell whether the same applies for delimitation agreements between competitors.
Any questions? Please contact: Janina Voogd
Practice Group: Intellectual Property & Media, Antitrust & Competition, Commerce & Trade