Dealing with Cease-and-Desist Notices and Industrial Property Rights

The pre-litigation cease-and-desist notice in the event of infringement of industrial property rights (in particular in competition law and trademark law) is a legitimate instrument in industrial property protection for the preparation of legal proceedings. That the party rightfully receiving such a notice must bear the costs of the attorneys of the sending party is correct, but has increasingly given rise to abusive cease-and-desist practices. The problem also particularly affects the IT sector, because the market is highly competitive and almost daily new forms of infringement occur.

In practice, it can be observed that risk management in this regard often does not exist and handling cease-and-desist notices in an actual case is uncertain. The problem is that one cannot tell at first glance whether a cease-and-desist notice is justified and should be complied with or can safely be discarded. Furthermore, it is uncertain how serious the sender is and what steps he will take to enforce his (alleged) rights. In the worst case, the demand is justified and will be enforced after the set deadline through expedited proceedings (preliminary injunction). This means for the recipient that he may be confronted with a provisional but binding court decision without being asked for his opinion and legal position beforehand.

The available courses of action in a cease-and-desist matter range in principle from ignoring it to complete submission through execution of an undertaking not to infringe. The decision for or against a particular defence strategy, however, depends substantially on the legal position, which is often difficult to determine. As a general principle, the cease-and-desist notice itself and the set deadline should be taken seriously and treated accordingly in order to avoid disadvantages for one's own legal position.

Unconditional signing of the required undertaking not to infringe can only be advised against, even if this initially seems more cost-effective than confrontation. On the one hand, the pre-formulated declaration – even in the case of justified cease-and-desist letters – is generally far more extensive than is necessary to prevent the primary injunction; for example, it does not require an express obligation to bear the costs of the sender's attorneys for engaging their legal services (cease-and-desist costs). On the other hand, it is sometimes hardly possible to foresee what scope the ultimately undertaken injunction actually has. For even if the objectionable conduct can be dispensed with in future without detriment, an effective undertaking not to infringe is always associated with the promise of a contractual penalty of at least four figures in the event of breach. It is therefore absolutely necessary to refrain from all actions that fall under the injunction agreement, which requires precisely formulated language. Not infrequently, the contractual obligation is later forgotten or inadvertently breached due to misunderstanding. The consequence is that the contractual penalty becomes due, which is often more important to some senders than the assertion of their industrial property rights.

Conversely, every company operating on the market depends on defending its actual market position also in legal terms. Besides advertising law aspects – for example, the deception of the target group through inaccurate information from competitors – it is above all trademark law positions that need to be defended in order not to lose their force. In the software sector it should be borne in mind that conceptual protection of, for example, the product title does not require registration in the register maintained by the German Patent and Trade Mark Office. Rather, the title of software is protected by law (§5 MarkenG) as a work title and therefore confers ipso facto a legal status that must be respected by everyone else. This only applies, however, as long as the title – often based on descriptive terms – is understood as an indication of the manufacturer, which can be impaired by third-party use. Moreover, a software product naturally also enjoys copyright protection.

Industrial property rights are the foundation of any economic activity. These should be defended within the framework of a specific strategy both actively and passively in order to ensure the continuity of one's own market position and to protect industrial achievements from exploitation and impairment.