Handling of Restructuring and Use-Up Periods in Cases of Intellectual Property Rights Infringement

If someone is rightly pursued by a rights holder or a competitor for an intellectual property rights infringement (trademark, copyright, design, etc.) or an unfair competition violation (e.g. misleading advertising), they are in luck if the other party agrees to a restructuring or use-up period and thereby gives them time to remedy the infringement. However, this does not provide a free pass for further acts of infringement. Rather, the utmost care must be taken with regard to conduct during the running period in order to avoid further claims.

In substance, a restructuring or use-up period constitutes a contractual non-assertion obligation (Pactum de non petendo) on the part of the rights holder or competitor. The latter tolerates the infringer for a certain period of time if they can be assured of the cessation of the objectionable conduct for the duration of the period. During the running period, at least complete inaction or the sale of infringing goods is readily permissible, although this of course depends on the exact content of the agreement. However, the granting of a use-up period all too easily tempts the infringer to assume that they can act as they please during the running of the period.

That this is not the case had to be explained to a client by the Regional Court (LG) Stuttgart recently. In the preceding proceedings concerning misleading advertising on the internet (traditional advertising / age-related advertising), the parties settled on the basis that an enforceable cease-and-desist declaration was issued and a restructuring period until 31.12.2012 was granted for the modification of the website. Subsequently, the client changed the disputed content without eliminating the infringement. Unfortunately, we were only instructed when the damage had already been done.

A cease-and-desist declaration that relates to a specific infringement always encompasses "substantively identical" infringements (so-called core theory), that is, actions and statements that do not correspond to the wording of the declaration but are substantially equivalent and therefore must likewise be ceased. This can be read into the cease-and-desist declaration through interpretation, which is also how courts generally handle it. Otherwise, a cease-and-desist declaration relating to the specific form of infringement would never be suitable to eliminate the risk of repetition and thus the claim for cessation and desistance. By contrast, the agreement on restructuring and use-up periods is always related to the specific form of infringement, so that changes to the (subsequently) prohibited intellectual property infringement that take place within this core area also constitute a new infringement during the running period. The consequence is a further warning letter and possibly legal action. The latter is even predominantly likely because the unrepresented or poorly represented infringer will always rely on the running restructuring or use-up period. In this case, the agreed contractual penalty is also due.

The problem arises not only in changes to the conduct to be ceased, but also in the reproduction of infringing goods or advertising materials, since "using up" can by its nature only mean the sale of objects that already existed at the time of the agreement. It is therefore essential to ensure that during the restructuring/use-up period no new set of facts is generated, but only the known and disputed situation is remedied. Only the timing of the restructuring can the obligated party choose and if necessary postpone this until the last day of the period. Exceptions are conceivable at most if the conduct to be ceased consists of several independent sub-complexes that are successively modified or remedied. In this case, the infringer bears the risk that their actually well-intentioned change unexpectedly falls within the core area of the cease-and-desist declaration and they thereby already encounter new difficulties during the running restructuring period.

The conduct during and after the use-up period is determined by the precise wording of the agreement. It is also necessary to distinguish carefully between a restructuring period and a use-up period. Whereas restructuring periods are more intended for non-tangible infringements (e.g. modification of a website), the use-up period concerns infringing goods or advertising materials. Problems can also arise here if a use-up period is agreed but a restructuring period was intended. In case of doubt, it should therefore always be agreed precisely what is permissible during the running period so that no misunderstandings arise later.