Cease and desist letters issued on a mass scale — abusive?

The claim for submission of a cease and desist declaration subject to a penalty clause, reimbursement of legal fees and compensation for damages incurred are generally justified in the case of legitimate cease and desist letters due to breaches of competition law and/or the use of works protected by copyright. However, the Higher Regional Court (OLG) Hamm had to decide the question of the extent to which actual legal breaches, which were only warned against for the purpose of profit-making, are abusive. The consequence of an abusive cease and desist letter would be that the infringing party neither has to submit a cease and desist declaration subject to a penalty clause, nor is it required to reimburse costs or pay damages.

Companies A and B sell used cars via their online shops on the Internet. The defendant Company B offered in March 2008 via its Internet platform a Land Rover Discovery and a Mercedes E 300 D Automatic exclusively to business customers for purchase. The offer was expressly not intended for consumers. No email address for electronic contact was provided in the offers. Furthermore, in the course of informing about the right of withdrawal for non-business purchasers, a withdrawal period of two weeks was pointed out, so that the impression was created that the offer also applied to consumers.

Company A had Company B warned by letter from a lawyer regarding the incorrect specification of the withdrawal period and the incomplete imprint due to the missing email address.

As a result, Company B changed the disputed information regarding the withdrawal period and supplemented this information in its imprint. However, it refused to submit a cease and desist declaration as well as cost reimbursement. It already invoked abusive conduct by the competitor in this context, who, in its view, merely wanted to make money with the cease and desist letter. This, it argued, resulted from the geographical distance between the two companies and the fact disclosed in witness testimony that the legal representative of Company A was authorized to discover violations on behalf of its client himself and then independently to issue cease and desist letters.

Court decision
In itsjudgment of 12.11.2009 – Az. 4 U 93/09 the Higher Regional Court (OLG) Hamm held the cease and desist letter to be abusive.

According to the Higher Regional Court (OLG), abuse is to be assumed if the controlling motive of the creditor in asserting the claim for cessation was an extraneous purpose. As a typical example of such an extraneous motive, the law cites a pure interest in generating fees. The law even expressly states that the assertion of a claim for cessation is inadmissible if it serves primarily to create a claim against the party in breach for damages or costs of legal proceedings.

The Higher Regional Court (OLG) Hamm also provides indications for determining such a case. Thus, abuse of the cease and desist letter can be assumed if the external circumstances, according to the overall impression from the perspective of an economically rational entrepreneur, make clear that the party entitled to make the claim can have no significant economic or competition policy interest in legal proceedings and therefore sees only or predominantly in the cease and desist letters a good source of income. If the competitor is therefore only interested in obtaining damages and not in eliminating the legal breach itself, a cease and desist letter is unlawful.
In the concrete case, the Higher Regional Court (OLG) was of the opinion that the parties were competitors despite their geographical distance, since they sell cars in the same price segment.

However, circumstances were present here which negated the otherwise justified interest in legal proceedings. Thus, it could be proven that the lawyers of Company A could themselves discover potential legal breaches and then independently pursue legal proceedings against such breaches by issuing cease and desist letters, that is, without being instructed by the client for the specific case. Furthermore, the cease and desist letter activity here was so extensive that it no longer bore any reasonable relationship to the commercial activity of the party issuing the cease and desist letter. According to the judgment of the Higher Regional Court (OLG), the same consequence would result from cease and desist letter activity in an area in which the party issuing the cease and desist letter operated only to a relatively limited extent.
Therefore, Company A did not have the right to assert the claim for cessation against Company B precisely because the abusive conduct deprived it of standing to sue.

Conclusion:
If the party issuing the cease and desist letter primarily wants to make money with its cease and desist letter, that is, fundamentally is not interested in the cessation of the competition law or copyright-infringing action itself, then such a cease and desist letter is abusive. In such cases, the actions brought by these parties issuing cease and desist letters have no prospect of success.

Accordingly, cease and desist letters issued on a mass scale by so-called mass cease and desist letter operators in the file-sharing sector can be examined more closely, who have precisely turned this profit-making through mass cease and desist letters into a successful business model. If law firms engaged in mass cease and desist letter activities or their clients pursue primarily the objective of making a profit for themselves and their clients, such cease and desist letters can be rejected on the grounds of abuse of process, insofar as the court has sufficient indications of such a practice.
For the rest, the question of abuse of process must be examined ex officio at any stage of the proceedings, so that this argument can be raised in the proceedings at any time.