SONN Patentanwälte – IP Attorneys

"Withdrawal of Consent to Use"

An inventor (plaintiff) has concluded a contract with a firm (defendant) to market together his invented product under his trade mark. The contract was concluded for an unlimited period without clauses for termination. The firm made substantial investment in tests and development of prototypes to make the product fit for the market. But after some time the inventor sent a termination letter and finally sued the firm for trade mark infringement as the firm continued using the trade mark for marketing that product. The question was whether such termination withdrawing the consent to trade mark use is possible and is valid or - as the firm stated - is disproportional and a misuse of law in view of the high investment not yet regained. Under Austrian general civil law contracts, with continuing obligations for an unlimited period can as a rule always be terminated also without due cause. (Ordinary termination implies an adequate time limit to end the contract, termination with due cause allows immediate dissolution of the contract.) This applies also to all such IP licence agreement including trade mark licence agreements. If a trade mark owner would only be allowed to terminate a contract for use of his mark with due cause - the Court stated -, this would contravene his exclusive right in the registered trade mark which cannot be reduced more than the borders delineated by Articles 5 to 7 EU TM Directive. (A termination with due cause needs really severe causes, wherefore it is difficult to achieve and rarely applied.) In that respect, the Court referred to the case Martin Y Paz of the CJEU (C-661/11). Therein, the CJEU declared with respect to Art 5 EU TM Directive that this allows trade mark owners to fully enjoy their trade mark rights if they so wish and can for that purpose withdraw their previous consent to a third party. From the reasoning (para 61), it can be deducted that the national courts can provide other sanctions or the obligation to pay damages if they come to the conclusion that the termination was disproportional or for other reasons unjust but must respect the termination itself. Accordingly, the Court also stated that the fact of substantial investment is no argument against the validity of the termination. Unlimited consent to trade mark use can regularly be terminated. DI Helmut Sonn