Takeover of traditional brand: Misleading mark?

The takeover or integration of companies is part of the free market economy. Often, traditionally established brands in particular are taken over into the new company, quite deliberately. But beware, if misled, such a brand can be declared forfeited. We have a look at case-law.

Misleading by adopting a “traditional trademark”

Both German trademark law and European trademark law (Union Trade Mark Regulation (UMV)) provide for the revocation of a trademark in case of misleading use of a trademark.

Specifically, the Austrian Supreme Court (15 March 2021 – 4Ob221/20h) now ruled on such a case of misleading use of an EU trademark for wooden barrels. A company had taken over the Union trademark for wooden barrels from a traditional company which was closed down, specifically the Union trade mark No 012315719 (word/image mark) “Pauscha Austria – since 1875” was at issue. The company continued to use the acquired established trademark, also for such wooden barrels which differed in their production method, appearance and composition from the barrels originally protected by the disputed trademark.

Was this a case of deception by the established trademark taken over?

An application was made for revocation of the trade mark on the grounds of deception under Art 58(1)(c) UMV, which was now decided by the Austrian Supreme Court. And the court granted the application and confirmed the existence of deception.

The Austrian Supreme Court explicitly referred to Art 58 UMV c: “if the trade mark is liable to mislead the public, in particular as to the nature, quality or geographical origin of those goods or services”.

The EU trademark to be assessed here combines the family name with the indication of tradition “since 1875” and thus refers to the approximately 150-year family tradition in the production of the designated wooden barrels, the court explained. In this sense, it was recognised in case-law that the public also associates special experiences and ideas of quality with the reference to a long-standing tradition. However, because the EU trademark in question refers to the craft tradition of the acquired company and not to that of the now owning family, the acquired EU trademark must be revoked for being misleading under Art 58(1)(c) UMV, the Austrian Supreme Court ruled.

Judgment matching the case law of the ECJ?

Does the ruling of the Austrian Supreme Court thus differ from the case law of the European Court of Justice (ECJ)? In 2006, the ECJ had answered important questions regarding misleading use of an EU trade mark in the case of Elizabeth Emanuel (C-259/04, Interpretation of the provision on revocation of a trade mark (Art 12(2)(b) of the Trade Mark Directive 89/104/EEC)).

In this case, the ECJ had emphasised that it was not the consumers’ belief but their actual misleading behaviour that was decisive. In the case of clothing bearing the adopted established mark ELIZABETH EMANUEL, the ECJ did not consider the public to be misled as to the nature, quality or origin of the goods bearing the mark. This was because, even if some consumers were influenced by the branding of the established mark, the characteristics and qualities of that garment were still guaranteed by the undertaking which had taken over the established mark and was now the proprietor of the mark.

The Supreme Court of Austria itself referred to this ECJ judgment Elisabeth Emanuel. It was correct, confirmed the Supreme Court of Austria, that misconceptions of the public about business continuity or business-related deceptions cannot in themselves in principle lead to the revocation of a trade mark; only in the case of bad faith, but that is a different issue.

However, the court emphasised that a different situation applies if the public associates a particular quality and grade with the company assumed to be behind the trademark, which the goods or services actually no longer have. And this was precisely the case with wooden barrels.

Misleading mark in German case law

The German courts have also dealt with clear statements on the revocation of a trade mark due to misleading statements on several occasions, relevant for this in German trade mark law is § 127 MarkenG. Accordingly, it is about characteristics and the properties of the marked product with regard to the geographical indication of origin.

In 2019, for example, the Higher Regional Court of Stuttgart dealt with the question of whether a meat factory may use the protected trademark of a “farmers’ producer association”. Specifically, the collective marks “Hohenloher Landschwein” and “Hohenloher Weiderind” were at issue. The OLG Stuttgart upheld the producer association and ruled that there was an infringement of the collective marks (2 U 73/18). The court emphasised that it had to be taken into account whether consumers could come to the erroneous conclusion that the third party belonged to the collective or that the goods met certain quality requirements or production methods.

The decision of the Higher Regional Court of Cologne of 2013 on Himalayan salt (6 U 192/12), which was confirmed by the Federal Supreme Court(BGH) in 2016 (I ZR 86/13), is also well-known. The term Himalayan salt is used misleadingly if the salt is not mined in the area of the Himalayan high mountain massif. This judgement also received a lot of attention because a large online trader was the defendant, which, according to the court, violated the requirements of professional diligence within the meaning of the UCP Directive with the advertising it carried out. An online trader may not rely on mere information provided by his supplier, the BGH ruled, a trading platform is liable for the product listings of third parties.

The OLG Jena also recognised a trademark infringement in the use of a territory name. In 2009, the OLG found misleading by labelling with the trademark containing the area name (“Lausitzer Früchte”) (1 Ws 445/09). Such a false indication of origin regularly requires an explanatory addition, the OLG Jena ruled.

BGH: Misleading and deceptive

Trademarks for beer have also been decided several times before German courts. In 2011 (until 2014), the BGH made a much-publicised decision on the question: Is the Dutch beer trademark “BAVARIA HOLLAND BEER” an infringement of the protected designation of origin “Bayrisches Bier”? The BGH answered in the affirmative (IZR237/12) and also ruled that a geographical indication of source has a special reputation within the meaning of § 127(3) German MarkenG if it enjoys a special reputation, without this having to be justified by objective characteristics of the products marked with a geographical indication of source.

And the BGH also ruled on the connection between misleading and deceptive. Accordingly, the obstacle to protection of the suitability for deception (§ 8 (2) no. 4 MarkenG) is not fulfilled if there is no misleading of the public through the use of the trademark. This BGH decision from 2016 (I ZB 43/15) concerned the trade mark “Stadtwerke Bremen” and was also interesting because the city of Bremen only held an indirect minority share in the trademark owner.

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