5% compensation
in damages for
LAYHER.
5% compensation
in damages for
LAYHER.
of
In a dispute between two scaffolding manufacturers over the use of the “Layher” trademark, Layher has been awarded 5% damages. After proceedings up to the Federal Court of Justice, the Higher Regional Court of Stuttgart confirms its previous judgment with new grounds.
Advertising with Layher
The scaffolding manufacturer Peralta, which we represented, advertised on its envelopes with:
Layher Blitzgerüst 70 S can be mixed with Peralta scaffolding components that have been approved for mixing.
The “Layher” lettering was graphically highlighted in a particularly prominent manner. The Peralta price list included in the material also contained a reference to the actual approval for use in combination with Layher scaffolding. There, too, the term “Layher” was set apart from the rest of the text by a different color. Thus, the “Layher” trademark was used solely in advertising in connection with the compatibility approval. Peralta’s products were never labeled with “Layher” at any time.
The company Wilhelm Layher GmbH & Co KG, which is one of the largest scaffolding manufacturers in Germany, considered the advertising to be an infringement of its laws on the trademark “Layher”.
After claims for injunctive relief were settled out of court, the parties subsequently disputed the claims for information and damages. Peralta was subsequently ordered by the Regional Court of Stuttgart to provide information and render accounts. Peralta then provided comprehensive information.
After the information was provided, the parties argued about the amount of compensation. Layher demanded 8% of net sales, which Peralta considered to be excessive. Layher justified this primarily with the reputation of the “Layher” trademark.
Proceedings before the Stuttgart Regional Court
The Regional Court of Stuttgart (Judgment of 14.01.2020 – Ref. 17 O 607/19 ) ruled in favor of Layher and ordered Peralta to pay damages amounting to 8% of net sales.
In the absence of other suitable points of reference, it stands to reason that, even in the case of trademark infringement, the parties would have based the license fee on the sales generated during the period of the advertising. Another basis for valuation—one that would rely on the causal link between an individual promotional letter and an order—is not practicable; thus, in the absence of other reliable starting points, reasonable parties would have based their calculation on the sales generated. This applies, in any event, in cases where the infringing advertisement seriously impairs the trademark owner’s interests, as is the case here.
Proceedings before the OLG Stuttgart
Peralta appealed against the ruling to the Stuttgart Higher Regional Court. In particular, as Peralta’s overall return on sales was only around 5%, the 8% was clearly excessive.
The OLG Stuttgart (Judgment of 14.01.2021 – Ref. 2U 34/20 ) partially upheld the appeal and reduced the damages to 5% instead of 8% according to the license analogy.
In Peralta’s favor, it had to be taken into account that Peralta had not copied or distributed any third-party products, but had merely used Layher’s trademark in its advertising to create a likelihood of confusion.
This case differs from a trademark infringement that occurs when the infringed party’s trademark is affixed to the product. If Peralta had offered or sold scaffolding systems bearing the “Layher” trademark, there would be no question that every product bearing that trademark would count toward the sales from which the royalty is calculated. However, if the scaffolding components themselves are not marked with the trademark, but the trademark was “only” used in advertising,
, it must be taken into account that a calculation based on a sales-based royalty would result in all scaffolding components sold by Peralta during the relevant period being included in the sales figure, not just those sold as a result of the advertising at issue.
In this type of trademark infringement, it is therefore particularly significant that, even during the period in question, only a small percentage of Peralta’s sales was attributable to the advertising at issue. This should be taken into account as a mitigating factor when determining the amount of the notional royalty rate, which is based on the total revenue generated from the advertised scaffolding components.
Federal Court of Justice on Damages for Purely Promotional Use
Peralta appealed against the judgment of the Higher Regional Court of Stuttgart to the Federal Court of Justice, as a turnover-based license is not appropriate in this case, but rather a fictitious blanket license, as no economically reasonable party would link a trademark license for use in advertising to the turnover achieved with it.
Layher, for its part, lodged a cross-appeal. It challenged the judgment of the Higher Regional Court of Stuttgart by arguing that a reduction in the license for use in advertising could not be justified by the fact that only a small part of the turnover was based on the trademark infringement.
The Federal Court of Justice (Judgment of 22.09.2021 Ref. I ZR 20/21 ) ruled in favor of Layher and granted the cross-appeal and referred the case back to the Higher Regional Court of Stuttgart.
If a sign is used solely in advertising in violation of trademark law, this does not exclude from the outset the possibility of calculating the claim for damages within the framework of the license analogy on the basis of a sales license. The choice of the basis for calculation is primarily a matter for the court of fact.
When calculating the claim for damages on the basis of a sales license, a license reduction in the case of a trademark infringement only in advertising cannot be justified by the fact that it is based on a turnover that is only based to a small extent on the trademark infringement. However, the fact that the trademark infringement is limited to advertising could be taken into account to reduce the license due to the possibly lower intensity of the trademark infringement.
OLG Stuttgart maintains 5% compensation for Layher
Following rejection, Layher sought to have the OLG increase the damages to the originally requested 8% of net sales. Peralta’s advertising had been particularly damaging, which is why there was no reason to reduce the license solely because of “only” advertising use.
The Higher Regional Court of Stuttgart did not share this view with the defendant represented by us and, in its judgment of 12.01.2023, maintained its assessment from its previous judgment, this time only with a different justification.
According to the Federal Court of Justice (BGH), the fact that the license fee is based on sales that are only to a small extent attributable to the trademark infringement should not be taken into account as a factor reducing the license fee. However, as the Federal Court of Justice explains, the mere fact that the trademark was used exclusively in advertising and not simultaneously on product labeling could, in and of itself, be a factor justifying a reduction in the license fee. The latter does not apply only if the significance of the advertising in the market for scaffolding components indicates that the infringement was of lesser intensity. However, this is not the case here.
Conclusion
We maintain our view that in the case of purely advertising use of another’s trademark, a blanket license or unit license would be more appropriate for calculating damages. However, important findings can be derived from the decisions to the contrary for claims for trademark infringement in advertising alone.
In principle, in the event of a trademark infringement exclusively in advertising, damages can be calculated on the basis of the advertiser’s turnover.
The mere fact that the use is solely for advertising purposes may reduce the license fee, unless there are special circumstances which the rights holder must explain.
We are happy to
advise you about
Trademark law!
