Claim for 54-fold contractual penalty?

Does the party obliged to cease (Unterlassungsschuldner) owe a multiple contractual penalty to the party entitled to cease (Unterlassungsgläubiger) if he failed to eliminate the multiple infringement he created before signing the cessation declaration? The Federal Court of Justice (BGH) in Karlsruhe recently decided this question.

The operator of the internet platform "CT-Paradies" distributes collectible figures in the form of teddy bears via his website "www.ctparadies.de". The defendant also distributes so-called "Cherished Teddies" via eBay and illustrated his auction offering with photographs of the platform operator.

The operator of the webshop sent a cease and desist letter to the eBay seller and demanded reimbursement of costs. The recipient of the letter complied and ceased the reproduction, editing and distribution of the images. Although the eBay seller had ended all "Cherished Teddies" auctions upon receipt of the cease and desist letter, the images remained accessible on eBay after the signing of the cessation declaration via the search functions "advanced search" or "watched items" under the heading "completed auctions". The operator of "CT-Paradies" sent another cease and desist letter to the shop operator for 54 infringements. The latter again issued a penalty-bound cessation declaration.

In addition to the cease and desist costs and a license damages claim arising from the copyright infringement, the platform operator also asserts a contractual claim for payment of 54 contractual penalties in the amount of €275,400 (€5,100 per infringement) against the eBay seller. The latter had committed a 54-fold breach of contract because he failed to have the photographs removed from the search functions on eBay.

The eBay seller countered that the storage on eBay could not be attributed to him. Furthermore, he had not agreed contractually to the elimination of previous infringements. Finally, he had ended all auctions immediately and no longer uses the images. Moreover, the platform operator could, if anything, only demand one contractual penalty and not 54, as there was unity of conduct here and therefore only one infringement existed.

Court decision

By judgment of 18.09.2014 – Az. I ZR 76/13 – the matter was remitted to the appellate court. The Federal Court of Justice (BGH) thereby established that the obligation to eliminate the infringement also encompasses the obligation to use reasonable efforts to influence the operator of the internet platform eBay in order to induce him to remove the publicly accessible photographs, insofar as the shop operator could exert corresponding influence on eBay.

The promise to cease the reproduction, editing and distribution of the images also contains the obligation to eliminate existing infringements. If the debtor promises the creditor that he will pay a sum of money as a penalty in the event that he does not fulfil his obligation to cease or does not fulfil it properly, the penalty is incurred with the breach of the obligation to cease.

Whether in this case 54 contractual penalties were incurred or only one contractual penalty must now be decided by the appellate court. However, there is much to suggest that in the present dispute only a single breach exists, as the defendant only failed to perform a single remedial action.

Conclusion

In the present dispute, the eBay dealer should have requested the auction house to remove the copyright-infringing photographs from the "completed auctions" section.

The BGH regards this request not being made as a failure to perform a remedial action and therefore assumes only one infringement and thus only one incurred contractual penalty. This will be different if the infringer must eliminate individual infringements through his own actions, but fails to do so completely. In such cases, multiple contractual penalties are generally incurred.