电子商务：对德国经销商的限制

15 7 月 2017

  • 德国
  • 分销协议
  • 电子商务

Manufacturers of brand-name products typically aim to ensure the same level of quality of distribution throughout all distribution channels, offline and online. To achieve this aim, they provide criteria how to resell their products. With the increase of internet sales, the use of such criteria has been increasing as well.

A total ban of online sales to end consumers within the EU is, however, hardly valid because online sales are considered as passive sales (cf. Guidelines on Vertical Restraints 2010, para. 52). Restrictions below a total ban are, however, commonplace (for examples, see the post “eCommerce: restrictions on distributors in Germany”). Yet, it is still not clear how far such restrictions are permissible.

For example, the luxury perfume manufacturer Coty’s German subsidiary Coty Germany GmbH has set up a selective distribution network and its distributors may sell via the Internet, under the following conditions. They shall

  • use their internet store as “electronic store window” of their brick and mortar store(s), thereby maintaining the products’ character as luxury goods, and
  • abstain insofar from engaging third parties as such cooperation is externally visible.

The court of first instance decided that tsuch ban of sales via third party platforms was an unlawful restriction of competition under art. 101 Treaty on the Functioning of the European Union (“TFEU”), namely a hardcore restriction under article 4 lit. c Regulation (EU) No. 330/2010 (Vertical Block Exemptions Regulation or “VBER”). The court of second instance, however, does obviously not see the answer that clear. Instead, the court requested the Court of Justice of the European Union (CJEU) to give a preliminary ruling on how European antitrust rules have to be interpreted, namely article 101 TFEU and article 4 lit. b and c VBER (decision of 19.04.2016, ref. no. 11 U 96/14 [Kart]) – see the previous post “eCommerce: restrictions on distributors in Germany”.

On 30 March 2017, the hearing took place before the CJEU:

  • Coty defended its platform ban, arguing it aimed at protecting the luxury image of brands such as Marc Jacobs, Calvin Klein or Chloe.
  • France – seat of several luxury brands such as Louis Vuitton, Chanel and Christian Dior –supported Coty.
  • The distributor instead argued that established platforms such as Amazon and eBay already sold various brand-name products, e.g. of L’Oréal. Accordingly, there was no reason for Coty to ban the resale via these marketplaces. Germany also supported this view by emphasizing the importance of online platforms for small and medium-sized enterprises (where, however, the share of distributors using online marketplaces is 62% much higher than in all other Member States, see the Staff Working Document, „Final report on the E-commerce Sector Inquiry“, para. 452).
  • Luxembourg – the seat of Amazon – considers a general platform ban to be disproportionate and therefore as anti-competitive (cf. Reuters’ article here).

Interest in the outcome of the Coty case is widespread, as the active participation of the various EU Member States illustrates (in addition to the abovementioned countries, also Italy, Sweden, the Netherlands and Austria). Simply put, the question is whether owners of luxury brands may generally or at least partially ban the resale via internet on third-party platforms.

Indications on how the court may decide have just appeared on 26 July 2017, with the Advocate General giving his opinion. The Advocate General proposes that the CJEU answers the questions referred to the court as follows:

“(1) Selective distribution systems relating to the distribution of luxury and prestige products and mainly intended to preserve the ‘luxury image’ of those products are an aspect of competition which is compatible with Article 101(1) TFEU provided that resellers are chosen on the basis of objective criteria of a qualitative nature which are determined uniformly for all and applied in a non-discriminatory manner for all potential resellers, that the nature of the product in question, including the prestige image, requires selective distribution in order to preserve the quality of the product and to ensure that it is correctly used, and that the criteria established do not go beyond what is necessary.

(2) In order to determine whether a contractual clause incorporating a prohibition on authorised distributors of a distribution network making use in a discernible manner of third-party platforms for online sales is compatible with Article 101(1) TFEU, it is for the referring court to examine whether that contractual clause is dependent on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary.

(3 The prohibition imposed on the members of a selective distribution system who operate as retailers on the market from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of the retailer’s customers within the meaning of Article 4(b) of Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) on the Treaty of the Functioning of the European Union to categories of vertical agreements and concerted practices.

(4) The prohibition imposed on the members of a selective distribution system, who operate as retailers on the market, from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of passive sales to end users within the meaning of Article 4(c) of Regulation No 330/2010.”

The Advocate General’s complete opinion can be found at CJEU’s website here.

The updated overview of the procedure can be found at CJEU’s website here.

Practical Conclusions

  1. The Coty case is extremely relevant to distribution in Europe because more than 70% of the world’s luxury items are sold here, many of them online now.
  2. The general ban to use price comparison tools shall be anti-competitive – according to the Bundeskartellamt, as confirmed by the Higher Regional Court of Düsseldorf on 5 April 2017. The last word is, however, still far from being said – see the post “Asics’ Distribution of Sporting Goods: Ban of Price Comparison Tools anti-competitive & void?!?”. Besides, also the Coty case’s outcome may influence how to see such bans.
  3. The Coty case is setting the course for future Internet sales. Depending on the decision of the CJEU, manufacturers of luxury or brand-name products can continue to ban the use of marketplaces like Amazon or eBay for the distribution of their products – or not any more or only under certain conditions. If the court follows the Advocate General’s conclusions, such platform bans appear possible, provided that the platform ban depends “on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary” (see above).
  4. For further trends in distribution online, see the EU Commission’s Final report on the E-commerce Sector Inquiry and details in the Staff Working Document, „Final report on the E-commerce Sector Inquiry“.
  5. For details on distribution networks and antitrust, please see my article „Plattformverbote im Selektivvertrieb – der EuGH-Vorlagebeschluss des OLG Frankfurt vom 19.4.2016“, in: Zeitschrift für Vertriebsrecht 2016, p. 278–283.

Manufacturers of brand-name products typically aim to ensure the same level of quality of distribution throughout all distribution channels. To achieve this aim, they provide criteria how to resell their products. With the increase of internet sales, the use of such criteria has been increasing as well.

Best example: Asics. Until 2010, the German subsidiary Asics Deutschland GmbH supplied its distributors in Germany without applying special criteria. In 2011, Asics launched a selective distribution system called “Distribution System 1.0“. It provided, inter alia, for a general ban on distributors to use price comparison tools in online sales:

“In addition, the authorized B … distributor is not supposed to … support the functionality of price-comparison tools by providing application-specific interfaces (” API”) for these price comparison tools.” (translated]

The German Federal Antitrust Authority (“Bundeskartellamt”) has determined by decision of 26 August 2015 that the ban of price-comparison tools against distributors based in Germany was void because it infringed Article 101 (1) TFEU, sec. 1 Act on Restraints of Competition (see the 196-page decision here). Reason given was that such ban would primarily aim at controlling and limiting price competition at the expense of consumers. Asics, instead, filed a complaint before the Higher Regional Court of Düsseldorf to annul the Bundeskartellamt’s decision. Asics argued that this ban was a proportionate quality standard within its “Distribution System 1.0“, aiming at a uniform product presentation.

Now the Higher Regional Court of Düsseldorf on 5 April 2017 confirmed the Bundeskartellamt’s decision that within selective distribution systems the general ban to use price comparison tools was anti-competitive and therefore void (ref. no. VI-Kart 13/15 (V); see also the Bundeskartellamt’s press release in English):

  • In particular, the ban of price comparison tools was not exempt from Art. 101 (1) TFEU by way of teleological interpretation (“Tatbestandsreduktion”). According to the court, it was not necessary in order to protect the quality and the product image of the Asics brand (same argumentation as the Higher Regional Court of Frankfurt in its judgment of 22.12.2015, ref. no. 11 U 84/14 regarding Deuter’s functional back-up bags; the Federal Supreme Court will, however, still decide on this, ref. no. KZR 3/16). The court declared that the ban was intended to restrict the buyers, arguing that distributors would be restricted in entering into a price competition with others. The presentation of products in price comparison tools would not damage the quality or brand of Asics products. It would neither give a “flea market impression“, ostensibly also not from the simultaneous presentation of used products. Also, the ban of price comparison tools would not solve the problem of “free-riding“. In any event, the general ban of price comparison tools was not necessary and therefore unlawful.
  • The ban would also not be exempt under the Vertical Block Exemption Regulation. Instead, the court argued, the ban would limit passive sales (over the internet) to end customers, contrary to Art. 4 (c) Vertical Block Exemption Regulation (referring to the CJEU decision in the case of Pierre Fabre, 13 October 2011, ref. no. C-439/09). The “equivalence principle” (i.e. restrictions for offline as well as online sales should not be identical, but functionally equivalent) would not apply as there were no comparable functions to price comparison tools in the stationary trade.
  • Finally, the ban would also not benefit from the individual exemption under art. 101 (3) TFEU (“efficiency defence”).

 Conclusions:

  1. According to the Higher Regional Court of Düsseldorf, manufacturers might not generally prohibit their distributors from using price comparison tools. At the same time, the court also refused to grant leave to appeal against its decision – which, however, can be challenged separately by way of an appeal (sec. 74, 75 Act on Restraints of Competition).The future development of criteria limiting distributors in reselling online remains open, especially as (i) the Coty case is pending at the CJEU (see below) and (ii) the EU Commission in its sector enquiry into e-commerce currently appears to favour manufacturers of brand-name products (see below).
  2. The court has explicitly left open – arguing that they were not relevant for its decision – whether
  • the ban of search engines is anti-competitive (para. 44 et seq. of the decision);
  • the general ban of third-party platforms is anti-competitive (para. 7) – although Asics’ “Distribution System 1.0” also banned third-party platforms such as Amazon or eBay.
  1. Whether and how manufacturers of luxury or brand-name products can continue to ban their distributing via Amazon, eBay and other marketplaces in general in the future will likely be decided by the CJEU in the coming months – in the case of Coty (see our post “eCommerce: restrictions on distributors in Germany”) where a hearing has been just recently been held end of March 2017.
  2. Without prejudice to the Coty case, the EU Commission has however, in its sector enquiry into e-commerce of May 2017, declared that
  • “marketplace bans do not generally amount to a de facto prohibition on selling online or restrict the effective use of the internet as a sales channel irrespective of the markets concerned …,
  • the potential justification and efficiencies reported by manufacturers differ from one product to another …”,
  • (absolute) marketplace bans should not be considered as hardcore restrictions within the meaning of Article 4(b) and Article 4(c) of the VBER…,
  • the Commission or a national competition authority may decide to withdraw the protection of the VBER in particular cases when justified by the market situation”
    (41–43     Final Report on the e-commerce sector inquiry).

Hence, on the basis of the EU Commission’s most recent position, there is room for arguments and creative contract drafting since even general marketplace bans can be compatible with the EU competition rules. However, the courts may see this differently in the single case. Therefore, especially the CJEU with its Coty case (see above) will likely bring more clarity for future online distribution.

In a previous post we outlined how the German Copyright Act protects creative and artistic works and how Design Patents protects achievements in the aesthetic field.

In this second of three posts on IP rights in Germany, we are going to focus the attention on Trademarks, Patents and Utility Patents, in order to verify how to best protect names, signs and technical inventions.

Trade marks

Trade marks identify products and services of an enterprise. By protecting such names and signs (such as words, letters, numbers, pictures, and even colours and sounds), the owner gets a monopoly on their use.

Protection is usually granted by the registration of the trade mark at the DPMA, but can also exist if a trade mark gets well known in the relevant market. There are some absolute grounds for refusal of the registration, the most important one being the lack of distinctiveness of the requested trade mark for the considered products and services. Trade marks which consist exclusively of signs or indications which may serve to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service, and trade marks which consist exclusively of signs or indications which have become customary in the current language or in the bona fide and established practices of the trade shall not be registered. But the office will not check on their own, if the new trade mark infringes trade marks of others. It is up to the owner of an older trade mark to challenge the new registration. However, the older trade mark can only attack the new application, if the older mark has been used in business within the last five years.

Registrations must be filed on a special form issued by the DPMA. It is important to include the list of goods and services for which the protection is sought. The exact fee for the application depends on the number of classes of such goods and services, starting at € 290,00.

The registration at the DPMA covers only the use in Germany. The protection can be extended by a Community trademark for the use in the whole EU (application fee starting at € 850,00) or by an international registration at the WIPO (application fee depending also on the number of countries for which the protection shall be granted).

A registered trade mark can be renewed indefinitely and last forever. However, the registration will be cancelled, if the renewal fee (DPMA: starting at € 750,00) is not paid every ten years.

Before the launch of a new name or sign for a product or a service, we recommend to always check if the name violates existing trade marks of third parties. If this is not case, it is recommendable to think about the protection of the new name or sign by registering an own trade mark, choosing the register (Germany, EU, WIPO extension to other countries) by considering the intended geographic markets.

Trade mark owners can sell and assign their trade marks to third persons. The owner of a trade mark can also grant others a right of use of the trade mark.

The Trademark Act also recognizes the protection of commercial designations, such as company symbols (names, firm names or special designations of business establishments or enterprises) and titles of works. These designations are not registered, but are protected by the use in the course of business.

Patents

Patents are granted for new technical inventions, giving the owner a monopoly for 20 years (starting from the date of the filing, under the condition of the payment of annual fees). The technical invention must be new, based on an inventive activity (requiring a high level of inventiveness) and susceptible of industrial use. It is not new if it has been described in any manner accessible to the public anywhere in the world before.

The most important part of the application is the publication of the invention. So other persons can challenge the validity of the patent on the one hand, and the patent can be a basis for further developments on the other hand.

Before filing an application for a patent, we recommend to always check if the publication of the invention can conflict with a business interests that may require secrecy, in order to avoid the raising of a dispute.

Patents granted by the DPMA are only valid in Germany. It is also possible to apply for a patent at the European Patent Office in Munich. It is also possible to file an international patent application under the Patent Cooperation Treaty. The advantage of such an international application is that there is only one application for more than one country. However, the application will be examined and the patent will be granted by the national patent offices of the countries which the inventor has selected for protection.

The patent holder can sell and transfer the patent. He can also keep the patent and grant licences to third parties.

Utility Patents and further technical protective rights 

As the design patent is the small brother of the copyright, the utility patent is the small brother of the patent. The utility patent is also registered at the DPMA, but the substantive requirements for protection (novelty, inventive achievement and industrial application) are not examined during the registration procedure. The protection is granted up to ten years, but has to be renewed by paying maintenance fees after three, six and eight years. For the rest, utility patents and patents are very similar.

Utility patents granted by the DPMA are only valid in Germany. There is no EU utility patent and no international application for other countries. In some countries, utility patents are not recognized at all.

Finally, Germany acknowledges the statutory protection of semiconductor chip topographies and plant varieties.

在分销合同中，制造商和供应商倾向于限制分销商在线销售商品(I.)。尽管这种做法相当普遍，但反垄断法对于是否有和有哪些限制得到允许并没有建立明确的规定(II.)，特别是有关于在选择性分销网络上销售奢侈品的情况(III.).。

如今，上述问题将决定于欧盟司法法院（CJEU）对互联网上的销售限制的所做出的初步裁决（IV）。以此同时，出现一个问题：如何处理转售限制？(V.)。

 电子贸易销售限制

 电子贸易不断发展–在全球并且也在德国，它约占总零售额的10%（据“Handelsverband Deutschland” [德国贸易协会]2016年的数据）。同样，知名品牌制造商也试图利用电子商务的市场机遇，同时努力维护自己品牌的形象。因此，制造商对分销商进行了若干限制，特别是：

  • 全面禁止互联网销售，
  • 禁止通过第三方线上平台销售（特别是“市场”），
  • 经营一个实体店作为因特网销售的先决条件，
  • 双重定价，或
  • 互联网销售的质量标准。

 对网上转售限制的反垄断限制

然而，反垄断当局最近对这些限制进行了审查，并在电子商务中实施反垄断规则。因此，有相当多的法院判决和反垄断当局的决定，赞成和反对这种限制的都有，例如：

  • 包（“Scout”第三方平台），
  • 运动（“ASIC”价格比较，标志条款，“阿迪达斯”第三方平台），
  • 电子（“森海塞尔”和“卡西欧”均为第三方平台），
  • 奢侈化妆品/香水（“科蒂”价格比较，第三平台），或
  • 软件（“谷歌”要求制造商预装应用程序，参见欧洲联盟委员会2016年4月20日的新闻稿）。

现在，Coty德国奢侈化妆品案已达到欧洲水平。

如今的科蒂案

本案的事实如下:供应商（Coty Germany GmbH）成立了一个选择性分销网络。分销商可在以下限制下通过互联网销售。它们应:

  • 利用它们的网络商店作为其实体店的“电子商店窗口”，从而维持产品的奢侈品性质，以及
  • 禁止与第三方合作，因为这种合作是对外可见的。

当事人的意图：供应商要特别实施最后的限制，阻止一个通过亚马逊的市场来销售供应商商品的分销商(Parfümerie Akzente GmbH)。很明显，分销商打算摆脱这种限制。

一审法院，法兰克福区法院，根据《欧洲联盟运作条约》（“TFEU”）第101条，裁决认为通过第三方平台的销售禁令，即Regulation（EU）第330/2010（坚决豁免规定或“VBER”）第四条（C）款。然而，二审法院，法兰克福高级地方法院，显然没有给出明确的答案。因此，法院已要求欧盟法院（CJEU）对欧盟反垄断规则即《欧洲联盟运作条约》第101条和第4条（b）款和（c）款（ 19.04.2016, ref. no. 11 U 96/14 [Kart]的决定)如何解释作出初步裁决，

提交给欧盟法院的问题

欧盟司法法院已经为“科蒂德国”立案（reference no. C-230/16）。以下是欧盟司法法院需要回答的四个问题：

  1. 选择性的分销网络的目标在于销售奢侈品以及确保商品有“奢侈的形象”以保 持竞争，这与《欧洲联盟运作条约》第101条第一款可以共存吗？

如果第一个问题得到肯定的回答：

  1. 在具体案例中，如果一个在零售业经商的选择性分销网络的成员被广泛禁止在公开的第三方线上平台进行网络销售，无论生产商的质量是否合法，其竞争性是否与《欧洲联盟运作条约》第101条第一款共存？

是否欧盟法第330 / 2010第四条（b）款可被解释为，强制禁止在零售业经商的选择性分销网络的成员在公开的第三方线上平台进行网络销售，限制了零售商的消费群体有关于物品的选择？

是否欧盟法第330 / 2010第四条（c）款可被解释为，强制禁止在零售业经商的选择性分销网络的成员在公开的第三方线上平台进行网络销售，限制了向终端用户通过物品的消极销售？

如今如何对待限制

在德国，关于网上销售的禁令有一些判例法，有些判决是赞成的，有些判决是反对的。网络销售的限制最近也被德国联邦卡特尔局所审查（联邦反垄断局），这种审查对反对这种限制有很关键的作用，包括对在第三方平台销售的限制。

然而德国最高法院的判决仍旧下落不明。关于供应商和分销商是否可以有效地达成一致特别是对于奢侈品方面的问题也至今没有一个清楚的答案。欧盟司法法院的初步判决应该给予这些问题清晰的回复。

直到欧盟司法法院初步判决下来，目前的法律现状应该特别建立在纵向限制标准2010（其不具备法律质量并且也不约束法庭，而是规定了指导欧洲委员会对纵向协议进行评估的原则，从而通过原则约束欧洲委员会本身）上：

  1. 全面禁止网络销售很难成立因为网络销售被认为是被动销售（参见纵向限制标准2010，第52段）。几乎没有一个批准是限制网络商店语言的因为这并不能改变这种销售的被动性质（参见纵向限制标准2010，第52段）。对互联网销售的营业额的限制也是如此。
  2. 然而，允许必须是，特别是
  • 对电子商务平台设计的定性要求（不造成全面禁止和不限制语言的使用）
  • 对在独占区域，或对供应商的独家客户群，或由供应商分配的另一个买家积极销售的限制（VBER第四条b款（i）项），比如在第三方网站上的区域性横幅（参见纵向限制标准2010，第53段）。
  • 成为供应商选择性分销网络成员的一般定性限制，例如要求分销商有一个或者多个实体店或陈列室（纵向限制标准2010，第54段，176）

欧盟法院的判决将更加清晰——Legalmodo会持续更新科蒂德国案和其他对于网络分销有可能的影响。

German Law recognizes protection for certain creations of the mind and grants a set of exclusive rights for these creations. While the Copyright Act grants protection for works of literature, science and art without any further conditions, other intellectual property rights basically require a registration at the German Patent and Trademark Office (DPMA) or in an international register. Furthermore, the imitation of products not protected by intellectual property rights can violate the Act against Unfair Competition, which grants protection against any kind of unfair practice in the course of the business. Unfair competition lawsuits are very similar to lawsuits in the field of intellectual property law and usually follow the same pattern.

In this first post we will analyse the German Copyright Act, Neighbouring Rights and Design Patents. The next post will look into Trademarks, Patents and Utility Patents; while a third post will focus on the Act against Unfair Competition and the procedural aspects.

Copyrights and Neighbouring Rights

The German Copyright Act protects creative and artistic works, in particular linguistic works (for example books, speeches and software), musical works, works of pantomime including choreographic works, works of fine art including those of architecture, applied art and plans for such works, photographic works, films and illustrations of a scientific or technical nature. Ideas are not protected, as only the form of an individual and personal creation is the subject of copyright. The person who creates a work shall be deemed the author; several persons who have created a work jointly shall be deemed joint authors. As mentioned above, there is no registration of works, but in the case of anonymous or pseudonymous works the true name of the author can be submitted for entry in the Register of Authors at the DPMA.

Copyright shall protect the author with respect to his intellectual and personal relationship with his work on the one hand, and with respect to the utilization of his work on the other hand. The right of exploitation of the work can be licensed to third persons, but the copyright itself cannot be transferred to others (except by way of inheritance). Copyright expires 70 years after the author’s death.

The Copyright Acts grants also protection for economic efforts in relation to works. The so-called Neighbouring Rights cover for example the protection of the performer of a work, of the producer of an audio recording of a work, of broadcasting organizations and of the maker of a database

Germany has signed the most important international copyright conventions and therefore grants copyright protection to authors of the most states in the world, while these states also grant copyrights to German authors, based on the respective national law. Several European Union directives on special parts of copyright legislation have been implemented in Germany, but the harmonization within the EU does not yet cover the whole copyright system.

Design Patents

The design patent is the small brother of the copyright, because it also protects achievements in the aesthetic field. However, the German Design Patent Act grants only protection after the registration of the Design Patent at the DPMA. The design has to be new and needs an individual character. A design shall be considered new if no identical design has been made available to the public before the date of filing of the application for registration. It has an individual character if the overall impression it produces on the informed user differs from the overall impression produced on such a user by any design which has been made available to the public before the date of filing of the application. The protection is granted up to 25 years, but has to be renewed every five years by paying renewal fees.

The German design patent grants only protection for Germany. If the creator of an aesthetic form wants to exploit the design internationally, he can also apply for a European Design Patent at the European Office for Harmonization in the Internal Market for the EU or at the International Bureau of the World Intellectual Property Organization (WIPO). Newly, the European system even recognizes the protection of new designs that have not been registered, but only for three years since the design has been made available to the public.

The GmbH is a capital company under German law. The liability of the shareholders in this kind of corporation is limited to the company’s share capital i.e. the company’s assets alone shall serve to fulfil the company’s obligations vis-à-vis its creditors. Being the GmbH – a limited liability company – a legal person, it holds autonomous rights and obligations; as such it may e.g. acquire ownership and other rights in real property and autonomously sue and be sued in court in connection with its rights and duties.

The corporate bodies of the GmbH required by compulsory provisions of the Limited Liability Company Act (GmbHG) are the entirety of the shareholders, who regularly adopt resolutions at the shareholder meeting (Gesellschafterversammlung), and the managing director(s) (Geschäftsführer). The establishment of a supervisory board (Aufsichtsrat) is, with some specific exceptions, optional.

Shareholders’ rights and duties

The rights and duties of shareholders may be quite different in origin and nature. Shareholder rights and duties may exist by force of law or may be created by, or based upon, the articles of association (Satzung). Said rights and duties may attach to all shares as such or belong to, or be imposed upon, a shareholder personally (personal shareholder rights and duties). Shareholder rights and duties may be available to, or be imposed upon, all shareholders equally or upon one or several shareholders particularly. In principle such rights and duties pass to any transferee of the share, whether such a transfer is by assignment, inheritance, or otherwise, and cannot be assigned or otherwise transferred separately from the share itself.

Both rights and duties attaching to shares, that are not created by law, and personal shareholder rights and duties can only be granted or imposed by the articles of association or by shareholder resolutions passed on the basis of the articles of association. These rights and duties must be distinguished from the ones provided within agreements between the shareholders, which are made “outside the articles of association”. Such latter agreements can only create contractual rights and duties among the parties thereto. If a share is transferred, the transferee can only exercise the contractual rights of the transferor, provided those rights were specifically assigned to him by contract; said transferee is accordingly bound by his transferor’s contractual duties only if he has agreed to take them over.

Shareholder rights can be divided into administrative and property rights. Administrative rights include the right (i) to request the calling of the shareholders’ meeting (ii) to participate in the shareholder meeting (iii) to vote and (iv) to be provided with information about the corporate activities. The right to information basically entails that the managing directors must provide every shareholder with information about the affairs of the company upon their simple request and allow them to inspect the books and records of the company. Property rights include the entitlement to a quota of the annual profits, the right to dispose of the share and the entitlement to a share of the liquidation proceeds.

The most important shareholder duties are the duty to render contributions, the fiduciary duty and the duty to ensure that the share capital, once provided, is preserved. Shareholder rights and duties can be expanded, restricted or excluded in the articles of association, as long as this is not in conflict with mandatory law provisions.

Finally, once the company gets into economic trouble, a shareholder is obliged to either (i) inject new equity to the company, (ii) liquidate the company or (iii) cause the management to commence insolvency proceedings.

Liability

The GmbH is a legal entity separate from its shareholders. Therefore, the shareholders are in principle not liable for debts of the GmbH. There are only a few scenarios of shareholder liability in literature and court practice:

  • Shareholders may be liable for debts or losses of the company – on a contractual basis – if they undertake a contractual obligation towards the company’s creditors or the company (e.g. by means of a guarantee or a comfort letter).
  • A shareholder may be personally liable to the company for payments received from the company to the extent such payments cause the equity of the company to fall short compared to the registered share capital.
  • Shareholders may be held liable by the company if, disregarding the purpose of the company’s assets to serve as collateral for its creditors, they intentionally abuse their control to remove assets or business opportunities from the company, rendering it unable to satisfy its debts.
  • Additionally, a shareholder may become personally liable towards the company’s creditors if the assets are not clearly allocated to the shareholders or the company in the books of the company (intermingling of assets) and such allocation is not inferable from other circumstances, e.g. the physical separation.

 Shareholders’ meeting

The shareholders’ meeting is the company’s ultimate decision-making authority. Shareholders usually exercise their rights in the shareholders’ meeting. Shareholder resolutions may also be taken without a physical meeting. In particular, a meeting is not necessary if all the shareholders confirm in text form that they agree with the resolution to be passed or to cast their votes in writing.

Usually, the articles of association determine the powers of the shareholders’ meeting and the rules of procedure to be applied in its context. To the extent that the articles of association do not contain specific provisions regarding the procedures to be applied within the shareholders’ meeting, §§ 46-51 GmbHG apply as the relevant model framework.

The shareholders’ meeting is exclusively entitled to:

  • amend the articles of association,
  • call in additional contributions of the shareholders,
  • liquidate the company and  appoint and dismiss the liquidators,
  • resolve upon measures pursuant to the Transformation Act (Umwandlungsgesetz – UmwG) such as mergers, spin-offs and changes of the company’s legal form.

Except as otherwise provided in the articles of association, the shareholders resolve upon:

  • the formal approval of individual and consolidated annual financial statements and the distribution of profits,
  • the repayment of additional contributions,
  • the division, consolidation and redemption of shares,
  • the appointment and dismissal of managing directors, as well as their discharge,
  • the execution and termination of service agreements with managing directors,
  • the assertion of damage claims to which the company is entitled against managing directors or shareholders, as well as the representation of the company in litigation proceedings against managing directors or shareholders,
  • the rules of procedure for the management,
  • the appointment of a Prokurist (person vested with the general power of representation) and of persons vested with the commercial power of attorney for the entire business establishment (Handlungsvollmacht).

The above mentioned tasks can be however transferred by the shareholders’ meeting to the supervisory board, if any, by adopting a relevant resolution.

In addition, the shareholders’ meeting has the right to issue instructions to the managing directors and to appoint or dismiss members of an optional supervisory board.

A shareholders’ resolution is deemed to be passed, when more than a half of the given votes are favourable. In exceptional cases a majority of ¾ will be necessary, e.g. with regard to amendments of the articles of association, the dissolution of the company, resolutions on mergers, spin-offs and other measures under the Transformation Act (UmwG), execution of domination agreements and of profit and loss transfer agreements.

Managing director

The company must have one or more managing directors (Geschäftsführer). The GmbH is not legally required to have more than one managing director except in particular cases (e.g. in case indicated by the Co-Determination Act. Both shareholders and non-shareholders (however only natural persons, no legal persons) may be appointed managing directors. In the articles of association the shareholders can set requirements regarding the qualification for the position of managing director.

If the GmbH has only one managing director, he represents the company severally. If several managing directors have been appointed, they must represent the company jointly. However, if the company has more than one managing director, the shareholders can also grant the power of representation to the individual managing director derogating the statutory rule of joint representation, by a corresponding clause of the articles of association. In other words any modification of the statutory powers of representation must be based upon a provision in the articles of association. That provision must either itself define directly the extended power of representation in favour of an individual managing director, or permit the shareholders to extend the power of representation of the managing directors by passing a relevant shareholder resolution.

In detail, the shareholders may grant each managing director, or one or several managing directors, the right

  • to represent the company acting alone,
  • to represent the company acting jointly with one or several other managing directors, or
  • to represent the company acting jointly with one or several managing directors or Prokurist.

The managing directors have authority to represent and act on behalf of the company in all legal transactions in and out of court.

A limitation of the authority of managing directors to represent the GmbH – even within the articles of association or resolved by shareholder resolution – will have no effect with respect to third parties. Should the articles of association e.g. set forth that the managing directors are not entitled to execute agreements with a value exceeding 5,000 € and the managing directors enter into an agreement with a 10,000 € value, such latter agreement shall be nonetheless valid vis à vis the contractual counterparty.

The limitation of the power to represent the company, however, operates in individual cases where the third party interacting with the managing director is not entitled to rely on the unlimited power of the managing director. This occurs in particular where a managing director abuses his powers to represent the company and the third party knows or deliberately ignores the abuse.

The power to represent the company is further limited by the prohibition of self-dealing and multiple representations. A managing director is in general not allowed to enter into legal transactions on behalf of the company with himself as counterparty (so called self-dealing) or as the representative of the company and of a third party (multiple representations). However, he can be exempted from such prohibitions. Such exemption may be granted in the articles of association or, if the articles of association allow it, by the shareholder meeting.

In the context of the internal relations between the company and the managing directors, the managing directors must observe the restrictions contained in the articles of association, the instructions set within shareholders’ resolutions or in the management contracts of the managing directors. The shareholders can issue instructions ad hoc or in a general way by establishing rules of procedure for the management (e.g. make certain kind of transactions subject to the consent of the shareholders’ meeting). In case the managing directors do not comply with such instructions, they are obliged to compensate the company for any damages incurred as a consequence thereof.

The shareholders may entrust specific fields of responsibility – i.e. administration, accounting, finance, employment and social matters, production, distribution, sales or marketing – to one or more managing directors. The shareholders may also introduce a hierarchic structure under which one managing director is granted an overall responsibility for any fields, while other managing directors are required to report to him with respect to matters regarding the specific field for which they are responsible. However, no managing director can be completely released from the joint overall responsibility for the well-being of the company. Thus, any managing director in charge of a special area of responsibility must report to the other managing directors whatever matters arise in his particular area if said issues may have an effect on the whole company; moreover any managing director may decide upon matters falling under the area of responsibility of another managing director if he believes that the overall well-being of the company may be affected by decisions taken with respect to those matters. In any case, such internal allocation of specific fields of responsibility does not lead to a limitation of the power of the managing directors to represent the GmbH and has no effect with respect to third parties.

Supervisory board

The creation of a supervisory board (Aufsichtsrat) is either optional or mandatory. It is mandatory if it is required by the One-Third Participation Act (Drittelbeteiligungsgesetz, in case of more than 500 employees), the Coal, Iron and Steel Co-Determination Act (Montanmitbestimmungsgesetz, in case of more than 1,000 employees), the Co-Determination Act (Mitbestimmungsgesetz, in case of more than 2,000 employees) or the Capital Investment Act (Kapitalanlagegesetzbuch, in case the company’s purpose is the management of investment funds).

In companies with up to 500 employees, no supervisory board needs to be established. However, the articles of association can provide for the formation of a supervisory board. In this event, the articles of association can even set forth rules for the supervisory board, including the board’s composition, competencies and mode of procedure. The scope of the competencies can be limited to monitoring and advisory responsibilities or even comprise decision-making and representation of the company vis-à-vis the managing directors.

Agency (regulations, duration, termination, indemnities – if any)

Instead of direct distribution (by setting up a branch, a subsidiary or via e-commerce), one can also distribute ones’ products and / or services indirectly. Indirect distribution especially includes agents, distributors, franchisees or commission agents.

Self-employed commercial agents solicit customers and can (but do not have to) have the authority to conclude a contract on supplier’s behalf. The supplier sells directly to end customers and bears the distribution risk, but may also control the margins. Contrary to employees, the agent’s remuneration (“commission”) can be exclusively profit-oriented, i.e. remunerated only in case of successfully soliciting customers, and in relation to the turnover. Commercial agents have to provide detailed market reports. If the commercial agent acts in the EU, protective agency law applies, including the indemnity claim.

An agent would be treated as a supplier’s employee if the agent does not act independently. An agent acts independently if the agent – according to the overall picture of contractual rules and factual activity – freely organizes his activities and working time (sec. 84 (1) 2 HGB). This goes mutatis mutandis for other types of distribution partners. The treatment as employee especially has the following consequences:

  • employee protection, e.g. limited right of termination under Dismissal Protection Act;
  • continued payment of salary during public holidays, illness and holidays;
  • minimum wage under Minimum Wage Act of 11 August 2014;
  • obligation to pay contributions to social security;
  • income tax on salary;
  • adherence to worker participation and collective bargaining agreements if applicable.
  • exclusive competence of labour courts if the employee has, during the last 6 months of activity, earned an average amount which does not exceed EUR 1,000 per month.

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Agency contracts are governed by sec. 84–92c German Commercial Code (HGB). The commercial agent is, next to the employee, strongly protected, e.g. by mandatory rules on remuneration, minimum notice periods, and goodwill indemnity. As regards remuneration, the agent is entitled to

      • “del credere commission” if the agent assumes liability for fulfilment of businesses (sec. 86b HGB);
      • an advance on commission once the principal has performed its obligation (sec. 87a para. 1 HGB);
      • accounting within maximum periods of three months (sec. 87c (1) HGB);
      • commission irrespective of delivery and payment, unless the principal is not responsible for non-delivery (sec. 87a ( 3) HGB);
      • request information, statements of account, an excerpt from the books, and inspection by an auditor (sec. 87c HGB).

These rules are mandatory and cannot be contracted out. Further details on the payment of commission (if not agreed otherwise) are set in sec. 86b et seq. HGB.

Besides, both parties have to safeguard each other’s interests (sec. 86, 86a, 90 HGB and sec. 242 BGB). Theagent is especially obliged to

    • check the customers’ creditworthiness,
    • inform the supplier immediately about any business procured,
    • keep confidential any information obtained during his activity, and
    • abstain from acting for the supplier’s competitors.

Agency agreements can be terminated without cause if contractually agreed. However, mandatory notice periods have to be observed, staggered pursuant to the contractual term: from one month in the first year to six months after five years (sec. 89 ( 1) HGB). The notice periods cannot be shortened, and, in case of extension, the supplier’s notice period must not be shorter than the agent’s one (sec. 89 (2) HGB). A cause is only required if the agreement is terminated without notice period (sec. 89a HGB). It is given if the terminating party cannot reasonably be expected to continue the relationship until ordinary termination (considering all circumstances of the single case and weighing the interests of both parties).

The agent is entitled to indemnity if the agent has brought new customers or has significantly increased the business volume with existing customers, which results in benefits for the principal, and if such payment of indemnity is equitable under the given circumstances (sec. 89b HGB). Indemnity is calculated on basis of the commission earned during the last 12 months of activity, earned with new customers, and existing customers towards whom the agent has substantially increased the sales. Indemnity is capped to a maximum of the past five year’s average annual commission (sec. 89b HGB). The claim cannot be waived before termination, but is excluded if the agent has not notified the principal within one year following termination. Indemnity is not payable if

  • the agent terminated the contract (unless justified by circumstances attributable to the principal or because of the agent’s age or illness),
  • the principle has terminated the contract because of default attributable to the agent (which would justify immediate termination for cause), or
  • the agent, with the principal’s agreement, assigns and transfers its rights and duties under the agency contract to another person.

Indemnity cannot be contracted out, unless the agent acts outside EEA (sec. 92c HGB).

Antitrust law does generally not apply to the agent-relationship, provided that the principal bears the commercial and financial risks related to selling and purchasing the products or services (Guidelines on Vertical Restraints of 10/05/2010, para. 12 et seq., 18, 49). Therefore, suppliers can control the price for which they sell the products / services via agents. Special limits apply only to post-contractual non-compete-obligations if concluded before termination. They must be limited to a two-year-maximum, to the agent’s territory or customers, and to the contractual products or services. Further, they must be done in writing and delivered to the agent. The principal has to pay an indemnity for the non-compete obligation’s term (sec. 90a HGB).

Generally, the parties are free to choose the applicable law (art. 3 Rome-I-Regulation). If, however, all elements relevant for the choice of law are located in another country than that of the chosen law, the choice of law shall not prejudice the provisions which cannot be derogated from by agreement (art. 3 (3) and (4) Rome-I-Regulation).

Overriding mandatory provisions of the forum’s law cannot be avoided by choosing another law. The courts may also give effect to overriding mandatory provisions of the country where the contractual obligations have to be performed (cf. art. 9 Rome-I-Regulation). Overriding mandatory rules are especially most of the protective agency law provisions. If, therefore, the agent acts within the EU, the agent’s claim for goodwill indemnity (based on the EU Directive on self-employed commercial agents of 1986) can hardly be contracted out – even if the parties choose a foreign law (cf. European Court of Justice, decision of 09/11/2000 [“Ingmar”], concerning, however, the former Rome Convention on Law Applicable to Contractual Obligations of 1980). Arguments against applying the same principles under the Rome-I-Regulation exist, but there is yet no case law which favors such interpretation.

Generally, the parties are free to choose a court, especially if

Besides, the parties may also choose arbitration (sec. 1029 et seq. ZPO, and art. 1 (2)d Brussels-Ia-Regulationand art. 1 (2)d Lugano-II-Convention).

However, a choice of court or arbitration can hardly avoid overriding mandatory provisions, as ruled by the Higher Regional Court in Munich (decision of 17/05/2006), and confirmed by the BGH (decision of 05/09/2012).

Suppliers and distribution partners are free to use any means of dispute resolution, especially out-of-court-negotiation, mediation, arbitration, litigation. Restrictions exist only insofar as overriding mandatory provisions can hardly be avoided by means of dispute resolution (see above). Suppliers and distribution partners can expect fair treatment in German courts since the judges are well-trained, have been determined beforehand, and the parties are entitled to due process of law (art. 101, 103 German Constitution). Advantages of resolving disputes in Germany are (inter alia) that court rulings are quite foreseeable and that court proceedings are quite quick (8.2 months for proceedings in the district courts according to the latest statistics).

Distribution or Concession of sale

Distributors buy and sell products on their own behalf. Consequently, they bear distribution risks, and, in return, gain profit from the difference between purchase and resale price, while suppliers’ margins are rather low. The distributor is obliged to market and distribute the supplier’s products, and to safeguard the supplier’s interests. Distributors are less protected than commercial agents (exceptions: see below). The supplier is obliged to assist and take care of his distribution partner, subject, however, to the supplier’s economic freedom.

Distributorship contracts are – as in most EU member states – not explicitly regulated by statutory law. However, there is extensive case law, e.g. whether the supplier has to take back products unsold at termination of contract. Agency law applies by analogy if the distributor is:

  • integrated into the supplier’s sales organization; and
  • obliged (due to agreement or factually) to forward customer data during or at termination of contract.

Further, distributorship contracts have to conform to antitrust law. Generally, the antitrust law of any affected market applies (art. 6 (3a) Rome-II-Regulation). Agreements which aim at or result in restraints of competition are prohibited by antitrust law, namely by the German Act Against Restraints of Competition (“GWB”) andart. 101, 102 Treaty on the Functioning of the EU (“TFEU”). Unless agreements contain hardcore restrictions, asafe harbor is provided by the De Minimis Notice of 30/08/2014 and the Vertical Block Exemption Regulation no. 330/2010 [“VBER”]). Hardcore restrictions are generally prohibited, regardless of the parties’ market shares, especially price fixing, restricting the geographic areas or categories of customers, or cross-supplies between distributors within a selective distribution system. If one party’s market share exceeds 30%, any restriction of competition can only benefit from the individual exemption under the strict criteria of art. 101 (3) TFEU(“efficiency defense”). Here are the most relevant types of clauses.

As regards non-compete-obligations, they are enforceable if they conform to antitrust law:

  • Such agreements between non-competitors are safe if each party’s market share does not exceed 15% on any relevant market affected. If one party’s market share exceeds 15%, but none exceeds 30%, a non-compete-obligation during the contractual term is valid if limited up to 5 years at most. Where products are sold on premises owned or leased by supplier from third parties, the five-year maximum does not apply. However, the non-compete obligation cannot exceed the term the buyer is occupying the premises.
  • After the contractual term, a non-compete obligation where one party’s market share exceeds 15%, but none exceeds 30%, is valid if it is necessary to protect know-how transferred to the distributor, and if limited to competing products, the concrete distributor’s premises, and a 1-year-term.

A supplier can generally not fix a resale price or price level at which its distributors or franchisees resell (except for suppliers that manufacture newspapers, magazines and books, sec. 30 GWB). An agreement or behaviour that aims at establishing such resale price maintenance is treated as hardcore restriction and thereforegenerally void (cf. Guidelines on Vertical Restraints of 10/05/2010, para. 48, 223). By way of – rare – exception, the supplier can plead the efficiency defense (e.g. when introducing a new product or a coordinated short term low price campaign).

However, resale prices can be influenced by recommending resale prices or setting maximum resale prices:Recommending resale prices or setting maximum resale prices is exempt from antitrust law if the parties’ market shares do not exceed 30% (beyond, there is only room for the efficiency defense), and only if it does not result in a minimum or fixed sale price because of pressure or incentives from one party (art. 101 (1) TFEU andart. 4 (a) VBER).

Establishing a minimum advertised price policy is exempt if it works as mere recommendation. If, however, it results in minimum resale prices or a fixed or minimum price level, it can only be exempt under the efficiency defense.

By contrast, a supplier shall not announce not to deal with distributors or franchisees that do not follow its pricing policy because it will be treated as fixing the selling prices (see above).

Most-favored nation or most-favored customer clauses are those which specify that the supplier’s price to the distributor will be no higher than its lowest price to other customer. Such clauses are enforceable if agreed between non-competitors and if none of the parties’ market shares exceeds 30% (beyond, there is only room for the efficiency defense).

The distributor on its side can generally charge different prices to different customers because of freedom of contract. However, a seller

  • may have to charge the same prices if it holds a dominant or similarly strong market position(sec. 19, 20 GWB and art. 102 TFEU);
  • may generally not charge different prices on grounds of race or ethnic origin. The same goes ongrounds of sex, religion, disability, age or sexual orientation if the respective sales contract is typically concluded without or with low importance of the buyer’s person, especially in “bulk business”. An exception exists if different treatment is based on objective grounds, especially where it serves to avoid threats, prevent damage etc. (sec. 19, 20 Anti-Discrimination Act, “AGG”).

A supplier may not restrict the territory into which, or the customers to whom its distribution partner sells (art. 101 (1) b TFEU). Exempt are, however, restrictions of:

  • active sales into the exclusive territory or an exclusive customer group reserved to the supplier or another distribution partner;
  • sales to end users if the distribution partner operates at wholesale level;
  • sales from members of a selective distribution system to unauthorised distributors in the system’s territory; and
  • selling components, supplied for incorporation, to customers who would use them to manufacture the same kind of products (art. 4 (b) VBER).

Active sales mean actively approaching individual customers (e.g. by direct, unsolicited mail, e-mail, visits) or a customer group in a specific territory trough promotions specifically targeted at that group. Passive sales mean responding to unsolicited requests from individual customers, including general advertising which reaches customers in other exclusive territories or customer groups if done reasonably. This also applies to the internet: sales via webshops cannot be excluded. A supplier may only, however, require its distribution partner to fulfil certain quality standards, especially in selective distribution (Guidelines on Vertical Restraints of 10/05/2010, para. 51, 54).

At the end of the distribution chain, consumer protection laws apply, namely between the seller and the buying consumer. Statutory law grants a 2-year-warranty that products are free from defects at the passing of risk. In case of defect, the buyer is entitled to claim subsequent performance (remedy of defect or delivery of a defect-free product), alternatively price reduction or withdrawal (all regardless of fault), and, damages, provided that the seller has acted with fault (sec. 437, 280 et seq. BGB). Though fault is generally assumed by law, the seller can exculpate itself, especially if the seller has not manufactured the good (but its sub-supplier). Towards consumers, these rights cannot be contracted out (sec. 474, 475 BGB). Each seller within the distribution chain is entitled to have recourse against its own supplier if the product has already been defective at the respective delivery (sec. 478, 479 BGB). In order to maintain these rights, however, the buyer (unless consumer) already has to check at delivery if products are defective, and inform the seller accordingly (sec. 377, 378 HGB).

Besides, special information duties towards consumers exist in:

Statutory law also limits the fees which the consumer shall pay beyond for means of payment or consumer hotlines etc. (sec. 312a (3–5) BGB). Finally, the consumer has a right of withdrawal regarding distance and off-premises contracts (sec. 312g, 355 BGB).

These consumer rights are similar throughout the EU because they are influenced by the EU Directives 1999/44/EC on the sale of consumer goods and 2011/83/EU on consumer rights.

A supplier may limit the warranty rights granted by statutory law towards its distribution partners. In general, there are few limits to individual agreements: they must not contradict statutory prohibitions (sec. 134 BGB) and public policy (sec. 138 BGB), and must not limit or exclude liability for willful intent, fraudulently concealing defects, where a guarantee has been given, or according to product liability law (sec. 202, 276, 444, 639 BGB). If the product has been found defective at the consumer, and the defect has already been existing between the distribution partners, a limitation of warranty can only be enforced if the supplier provides another compensation of equal value (sec. 478 (4) BGB).

In standard business terms, however, one may hardly deviate from statutory law – even in B2B-contracts (sec. 310 (1) and 307 BGB). One may only

    •  modify the rules of subsequent performance (time, place, number of attempts);
    • exclude liability for slightly negligent breaches of non-cardinal duties; and
    • limit liability for slightly negligent breaches of cardinal duties to the typical damages foreseeable at conclusion of contract.

The same goes for warranties provided to each downstream customer, unless the customer is a consumer because a consumer’s statutory rights cannot be contracted out.As regards product recalls, statutory law does not set any requirements. According to case law, a manufacturer must keep its products under surveillance and, when detecting risks for legally protected goods (as health), adopt the necessary preventive measures.Extent and time of such measures depends on the single case, especially the good at risk and the extent of possible damage (BGH, decision of 16/12/2008). Distribution agreements can delineate which party isresponsible for a recall and its costs. Individual agreements are not subject to specific limits. Standard business terms, however, are subject to a strict review in court: they can be unenforceable if they are incompatible with essential statutory principles, if they limit essential contractual rights and duties, if they are surprising or ambiguous (sec. 310 (1), 307, 305c BGB). Therefore, such terms should consider who would typically be responsible for recall and costs, depending on the product (ready-made, or not, etc.).

Distributor agreements with indefinite term can be terminated (sec. 314, 573, 620 (2), 723 BGB); the notice period depends, however, on the single case, considering also the distributor’s investments. E.g., one-year periods have been accepted in automotive distribution (BGH, decision of 21/02/1995 [Citroën]). In rare cases, antitrust law may demand a renewal of the relationship.

The distributor can claim indemnity only by analogue application of agency law (see above). The distributor’s indemnity can amount to the distributor’s average annual net margin.As regards applicable law / choice of lawand details on dispute resolution (choice of court, choice of arbitration / mediation), please see above in the section on agents.

Franchising

Franchisees buy and sell products on their own behalf. The franchisee acquires licences of intellectual property rights (trademarks and know-how) from the supplier (franchisor) for using and distributing the products or services. The franchisee is entitled and obliged to design its shop according to the franchisor’s concept and corporate design, and use the management-/system-specific know-how. In return, the franchisee pays royalties. The franchisor is precontractually obliged to disclose the key risks and issues for running the franchise, and subsequently often provides assistance on know-how and business.

Franchise contracts are not explicitly governed by statutory law (unlike e.g. in Italy). They combine elements of licensing, sales, and management of another’s affairs. Generally, agency law applies by analogy (cf. German Federal Court of Justice [“BGH”], decision of 17/07/2002).

Within franchisee relationships, the same antitrust rules apply as within distributor relationships: generally, agreements which aim at or result in restraints of competition are prohibited by antitrust law, namely by the German Act Against Restraints of Competition (“GWB”) and art. 101, 102 Treaty on the Functioning of the EU (“TFEU”). For details, please see above in the section on distributors.

Franchise agreements can be terminated according to agency law (mutatis mutandis). However, longer periods can apply in the specific case, e.g. if the franchisee made considerable investments due to the supplier’s product.

The franchisee can likely claim indemnity based on analogue application of agency law, but this has not yet been ruled out (BGH, decision of 23 July 1997, Benetton). No indemnity, however, can be claimed where the franchise concerns anonymous bulk business and customers continue to be regular customers only de facto (BGH, decision of 5 February 2015).

Trademark license

If a company owns a brand or design, such trademark owner can also distribute the product or service bygranting a trademark license to another party (“licensee”). By way of such license agreement, the trademark owner (“licensor”) allows the licensee to make use of its trademark.

The license agreement should especially cover:

  • the trademark;
  • the goods and/or services which the licensee is entitled to offer under the trademark and details on the use of the trademark (with or on the goods and/or services, promotion material);
  • the territory where the licensee is entitled to use the trademark;
  • any exclusivity of the license (if applicable);
  • royalty (in return for the license);
  • quality control (e.g. approval of samples prior to mass production and audit rights as regards the licensee’s facilities, the raw materials used and the final products);
  • the license’s term; and

the usual boilerplate clauses (written form, no waiver, severability, choice of law, choice of court etc.).

Selling via e-commerce (required licences, if any)

Selling via e-commerce does not require special licenses in Germany. However, certain requirements have to be observed as regards the webshop, especially providing clearly

  • the basic information about the entity behind the webshop (“Contact“, “Imprint” or “Legal Notes”);
  • the terms and conditions of sale; and
  • the privacy policy (it should mention which kind of personal identifiable data [“data”] is stored, how data, cookies and web-tracking are used, and explain the customer’s right to inform about, correct and delete data, cf. sec. 13 German Telemedia Act).

Relevant anti-trust regulations

According to the effects doctrine, the antitrust law of any affected market applies (art. 6 (3a) Rome-II-Regulation). Within the European Economic Area (“EEA”), Agreements which aim at or result in restraints of competition are prohibited by antitrust law, namely by art. 101, 102 Treaty on the Functioning of the EU (“TFEU”) and in Germany also by the German Act Against Restraints of Competition (“GWB”). Unlessagreements contain hardcore restrictions, a safe harbor is provided by the De Minimis Notice of 30/08/2014 and the Vertical Block Exemption Regulation no. 330/2010 [“VBER”]). Hardcore restrictions are generally prohibited, regardless of the parties’ market shares, especially price fixing, restricting the geographic areas or categories of customers, or cross-supplies between distributors within a selective distribution system.

Details are explained above with each kind of distribution channel.

Benedikt Rohrssen

Practice areas

  • 代理中介
  • 分销协议
  • 电子商务
  • 特许经营
  • 投资
Contact Benedikt

写信给 Distribution online – Platform bans in selective distribution (The Coty case continues)





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    Germany – Copyright and Design Patents

    10 7 月 2017

    • 德国
    • 知识产权
    • 商标和专利

    Manufacturers of brand-name products typically aim to ensure the same level of quality of distribution throughout all distribution channels, offline and online. To achieve this aim, they provide criteria how to resell their products. With the increase of internet sales, the use of such criteria has been increasing as well.

    A total ban of online sales to end consumers within the EU is, however, hardly valid because online sales are considered as passive sales (cf. Guidelines on Vertical Restraints 2010, para. 52). Restrictions below a total ban are, however, commonplace (for examples, see the post “eCommerce: restrictions on distributors in Germany”). Yet, it is still not clear how far such restrictions are permissible.

    For example, the luxury perfume manufacturer Coty’s German subsidiary Coty Germany GmbH has set up a selective distribution network and its distributors may sell via the Internet, under the following conditions. They shall

    • use their internet store as “electronic store window” of their brick and mortar store(s), thereby maintaining the products’ character as luxury goods, and
    • abstain insofar from engaging third parties as such cooperation is externally visible.

    The court of first instance decided that tsuch ban of sales via third party platforms was an unlawful restriction of competition under art. 101 Treaty on the Functioning of the European Union (“TFEU”), namely a hardcore restriction under article 4 lit. c Regulation (EU) No. 330/2010 (Vertical Block Exemptions Regulation or “VBER”). The court of second instance, however, does obviously not see the answer that clear. Instead, the court requested the Court of Justice of the European Union (CJEU) to give a preliminary ruling on how European antitrust rules have to be interpreted, namely article 101 TFEU and article 4 lit. b and c VBER (decision of 19.04.2016, ref. no. 11 U 96/14 [Kart]) – see the previous post “eCommerce: restrictions on distributors in Germany”.

    On 30 March 2017, the hearing took place before the CJEU:

    • Coty defended its platform ban, arguing it aimed at protecting the luxury image of brands such as Marc Jacobs, Calvin Klein or Chloe.
    • France – seat of several luxury brands such as Louis Vuitton, Chanel and Christian Dior –supported Coty.
    • The distributor instead argued that established platforms such as Amazon and eBay already sold various brand-name products, e.g. of L’Oréal. Accordingly, there was no reason for Coty to ban the resale via these marketplaces. Germany also supported this view by emphasizing the importance of online platforms for small and medium-sized enterprises (where, however, the share of distributors using online marketplaces is 62% much higher than in all other Member States, see the Staff Working Document, „Final report on the E-commerce Sector Inquiry“, para. 452).
    • Luxembourg – the seat of Amazon – considers a general platform ban to be disproportionate and therefore as anti-competitive (cf. Reuters’ article here).

    Interest in the outcome of the Coty case is widespread, as the active participation of the various EU Member States illustrates (in addition to the abovementioned countries, also Italy, Sweden, the Netherlands and Austria). Simply put, the question is whether owners of luxury brands may generally or at least partially ban the resale via internet on third-party platforms.

    Indications on how the court may decide have just appeared on 26 July 2017, with the Advocate General giving his opinion. The Advocate General proposes that the CJEU answers the questions referred to the court as follows:

    “(1) Selective distribution systems relating to the distribution of luxury and prestige products and mainly intended to preserve the ‘luxury image’ of those products are an aspect of competition which is compatible with Article 101(1) TFEU provided that resellers are chosen on the basis of objective criteria of a qualitative nature which are determined uniformly for all and applied in a non-discriminatory manner for all potential resellers, that the nature of the product in question, including the prestige image, requires selective distribution in order to preserve the quality of the product and to ensure that it is correctly used, and that the criteria established do not go beyond what is necessary.

    (2) In order to determine whether a contractual clause incorporating a prohibition on authorised distributors of a distribution network making use in a discernible manner of third-party platforms for online sales is compatible with Article 101(1) TFEU, it is for the referring court to examine whether that contractual clause is dependent on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary.

    (3 The prohibition imposed on the members of a selective distribution system who operate as retailers on the market from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of the retailer’s customers within the meaning of Article 4(b) of Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) on the Treaty of the Functioning of the European Union to categories of vertical agreements and concerted practices.

    (4) The prohibition imposed on the members of a selective distribution system, who operate as retailers on the market, from making use in a discernible manner of third undertakings for internet sales does not constitute a restriction of passive sales to end users within the meaning of Article 4(c) of Regulation No 330/2010.”

    The Advocate General’s complete opinion can be found at CJEU’s website here.

    The updated overview of the procedure can be found at CJEU’s website here.

    Practical Conclusions

    1. The Coty case is extremely relevant to distribution in Europe because more than 70% of the world’s luxury items are sold here, many of them online now.
    2. The general ban to use price comparison tools shall be anti-competitive – according to the Bundeskartellamt, as confirmed by the Higher Regional Court of Düsseldorf on 5 April 2017. The last word is, however, still far from being said – see the post “Asics’ Distribution of Sporting Goods: Ban of Price Comparison Tools anti-competitive & void?!?”. Besides, also the Coty case’s outcome may influence how to see such bans.
    3. The Coty case is setting the course for future Internet sales. Depending on the decision of the CJEU, manufacturers of luxury or brand-name products can continue to ban the use of marketplaces like Amazon or eBay for the distribution of their products – or not any more or only under certain conditions. If the court follows the Advocate General’s conclusions, such platform bans appear possible, provided that the platform ban depends “on the nature of the product, whether it is determined in a uniform fashion and applied without distinction and whether it goes beyond what is necessary” (see above).
    4. For further trends in distribution online, see the EU Commission’s Final report on the E-commerce Sector Inquiry and details in the Staff Working Document, „Final report on the E-commerce Sector Inquiry“.
    5. For details on distribution networks and antitrust, please see my article „Plattformverbote im Selektivvertrieb – der EuGH-Vorlagebeschluss des OLG Frankfurt vom 19.4.2016“, in: Zeitschrift für Vertriebsrecht 2016, p. 278–283.

    Manufacturers of brand-name products typically aim to ensure the same level of quality of distribution throughout all distribution channels. To achieve this aim, they provide criteria how to resell their products. With the increase of internet sales, the use of such criteria has been increasing as well.

    Best example: Asics. Until 2010, the German subsidiary Asics Deutschland GmbH supplied its distributors in Germany without applying special criteria. In 2011, Asics launched a selective distribution system called “Distribution System 1.0“. It provided, inter alia, for a general ban on distributors to use price comparison tools in online sales:

    “In addition, the authorized B … distributor is not supposed to … support the functionality of price-comparison tools by providing application-specific interfaces (” API”) for these price comparison tools.” (translated]

    The German Federal Antitrust Authority (“Bundeskartellamt”) has determined by decision of 26 August 2015 that the ban of price-comparison tools against distributors based in Germany was void because it infringed Article 101 (1) TFEU, sec. 1 Act on Restraints of Competition (see the 196-page decision here). Reason given was that such ban would primarily aim at controlling and limiting price competition at the expense of consumers. Asics, instead, filed a complaint before the Higher Regional Court of Düsseldorf to annul the Bundeskartellamt’s decision. Asics argued that this ban was a proportionate quality standard within its “Distribution System 1.0“, aiming at a uniform product presentation.

    Now the Higher Regional Court of Düsseldorf on 5 April 2017 confirmed the Bundeskartellamt’s decision that within selective distribution systems the general ban to use price comparison tools was anti-competitive and therefore void (ref. no. VI-Kart 13/15 (V); see also the Bundeskartellamt’s press release in English):

    • In particular, the ban of price comparison tools was not exempt from Art. 101 (1) TFEU by way of teleological interpretation (“Tatbestandsreduktion”). According to the court, it was not necessary in order to protect the quality and the product image of the Asics brand (same argumentation as the Higher Regional Court of Frankfurt in its judgment of 22.12.2015, ref. no. 11 U 84/14 regarding Deuter’s functional back-up bags; the Federal Supreme Court will, however, still decide on this, ref. no. KZR 3/16). The court declared that the ban was intended to restrict the buyers, arguing that distributors would be restricted in entering into a price competition with others. The presentation of products in price comparison tools would not damage the quality or brand of Asics products. It would neither give a “flea market impression“, ostensibly also not from the simultaneous presentation of used products. Also, the ban of price comparison tools would not solve the problem of “free-riding“. In any event, the general ban of price comparison tools was not necessary and therefore unlawful.
    • The ban would also not be exempt under the Vertical Block Exemption Regulation. Instead, the court argued, the ban would limit passive sales (over the internet) to end customers, contrary to Art. 4 (c) Vertical Block Exemption Regulation (referring to the CJEU decision in the case of Pierre Fabre, 13 October 2011, ref. no. C-439/09). The “equivalence principle” (i.e. restrictions for offline as well as online sales should not be identical, but functionally equivalent) would not apply as there were no comparable functions to price comparison tools in the stationary trade.
    • Finally, the ban would also not benefit from the individual exemption under art. 101 (3) TFEU (“efficiency defence”).

     Conclusions:

    1. According to the Higher Regional Court of Düsseldorf, manufacturers might not generally prohibit their distributors from using price comparison tools. At the same time, the court also refused to grant leave to appeal against its decision – which, however, can be challenged separately by way of an appeal (sec. 74, 75 Act on Restraints of Competition).The future development of criteria limiting distributors in reselling online remains open, especially as (i) the Coty case is pending at the CJEU (see below) and (ii) the EU Commission in its sector enquiry into e-commerce currently appears to favour manufacturers of brand-name products (see below).
    2. The court has explicitly left open – arguing that they were not relevant for its decision – whether
    • the ban of search engines is anti-competitive (para. 44 et seq. of the decision);
    • the general ban of third-party platforms is anti-competitive (para. 7) – although Asics’ “Distribution System 1.0” also banned third-party platforms such as Amazon or eBay.
    1. Whether and how manufacturers of luxury or brand-name products can continue to ban their distributing via Amazon, eBay and other marketplaces in general in the future will likely be decided by the CJEU in the coming months – in the case of Coty (see our post “eCommerce: restrictions on distributors in Germany”) where a hearing has been just recently been held end of March 2017.
    2. Without prejudice to the Coty case, the EU Commission has however, in its sector enquiry into e-commerce of May 2017, declared that
    • “marketplace bans do not generally amount to a de facto prohibition on selling online or restrict the effective use of the internet as a sales channel irrespective of the markets concerned …,
    • the potential justification and efficiencies reported by manufacturers differ from one product to another …”,
    • (absolute) marketplace bans should not be considered as hardcore restrictions within the meaning of Article 4(b) and Article 4(c) of the VBER…,
    • the Commission or a national competition authority may decide to withdraw the protection of the VBER in particular cases when justified by the market situation”
      (41–43       Final Report on the e-commerce sector inquiry).

    Hence, on the basis of the EU Commission’s most recent position, there is room for arguments and creative contract drafting since even general marketplace bans can be compatible with the EU competition rules. However, the courts may see this differently in the single case. Therefore, especially the CJEU with its Coty case (see above) will likely bring more clarity for future online distribution.

    In a previous post we outlined how the German Copyright Act protects creative and artistic works and how Design Patents protects achievements in the aesthetic field.

    In this second of three posts on IP rights in Germany, we are going to focus the attention on Trademarks, Patents and Utility Patents, in order to verify how to best protect names, signs and technical inventions.

    Trade marks

    Trade marks identify products and services of an enterprise. By protecting such names and signs (such as words, letters, numbers, pictures, and even colours and sounds), the owner gets a monopoly on their use.

    Protection is usually granted by the registration of the trade mark at the DPMA, but can also exist if a trade mark gets well known in the relevant market. There are some absolute grounds for refusal of the registration, the most important one being the lack of distinctiveness of the requested trade mark for the considered products and services. Trade marks which consist exclusively of signs or indications which may serve to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service, and trade marks which consist exclusively of signs or indications which have become customary in the current language or in the bona fide and established practices of the trade shall not be registered. But the office will not check on their own, if the new trade mark infringes trade marks of others. It is up to the owner of an older trade mark to challenge the new registration. However, the older trade mark can only attack the new application, if the older mark has been used in business within the last five years.

    Registrations must be filed on a special form issued by the DPMA. It is important to include the list of goods and services for which the protection is sought. The exact fee for the application depends on the number of classes of such goods and services, starting at € 290,00.

    The registration at the DPMA covers only the use in Germany. The protection can be extended by a Community trademark for the use in the whole EU (application fee starting at € 850,00) or by an international registration at the WIPO (application fee depending also on the number of countries for which the protection shall be granted).

    A registered trade mark can be renewed indefinitely and last forever. However, the registration will be cancelled, if the renewal fee (DPMA: starting at € 750,00) is not paid every ten years.

    Before the launch of a new name or sign for a product or a service, we recommend to always check if the name violates existing trade marks of third parties. If this is not case, it is recommendable to think about the protection of the new name or sign by registering an own trade mark, choosing the register (Germany, EU, WIPO extension to other countries) by considering the intended geographic markets.

    Trade mark owners can sell and assign their trade marks to third persons. The owner of a trade mark can also grant others a right of use of the trade mark.

    The Trademark Act also recognizes the protection of commercial designations, such as company symbols (names, firm names or special designations of business establishments or enterprises) and titles of works. These designations are not registered, but are protected by the use in the course of business.

    Patents

    Patents are granted for new technical inventions, giving the owner a monopoly for 20 years (starting from the date of the filing, under the condition of the payment of annual fees). The technical invention must be new, based on an inventive activity (requiring a high level of inventiveness) and susceptible of industrial use. It is not new if it has been described in any manner accessible to the public anywhere in the world before.

    The most important part of the application is the publication of the invention. So other persons can challenge the validity of the patent on the one hand, and the patent can be a basis for further developments on the other hand.

    Before filing an application for a patent, we recommend to always check if the publication of the invention can conflict with a business interests that may require secrecy, in order to avoid the raising of a dispute.

    Patents granted by the DPMA are only valid in Germany. It is also possible to apply for a patent at the European Patent Office in Munich. It is also possible to file an international patent application under the Patent Cooperation Treaty. The advantage of such an international application is that there is only one application for more than one country. However, the application will be examined and the patent will be granted by the national patent offices of the countries which the inventor has selected for protection.

    The patent holder can sell and transfer the patent. He can also keep the patent and grant licences to third parties.

    Utility Patents and further technical protective rights 

    As the design patent is the small brother of the copyright, the utility patent is the small brother of the patent. The utility patent is also registered at the DPMA, but the substantive requirements for protection (novelty, inventive achievement and industrial application) are not examined during the registration procedure. The protection is granted up to ten years, but has to be renewed by paying maintenance fees after three, six and eight years. For the rest, utility patents and patents are very similar.

    Utility patents granted by the DPMA are only valid in Germany. There is no EU utility patent and no international application for other countries. In some countries, utility patents are not recognized at all.

    Finally, Germany acknowledges the statutory protection of semiconductor chip topographies and plant varieties.

    在分销合同中，制造商和供应商倾向于限制分销商在线销售商品(I.)。尽管这种做法相当普遍，但反垄断法对于是否有和有哪些限制得到允许并没有建立明确的规定(II.)，特别是有关于在选择性分销网络上销售奢侈品的情况(III.).。

    如今，上述问题将决定于欧盟司法法院（CJEU）对互联网上的销售限制的所做出的初步裁决（IV）。以此同时，出现一个问题：如何处理转售限制？(V.)。

     电子贸易销售限制

     电子贸易不断发展–在全球并且也在德国，它约占总零售额的10%（据“Handelsverband Deutschland” [德国贸易协会]2016年的数据）。同样，知名品牌制造商也试图利用电子商务的市场机遇，同时努力维护自己品牌的形象。因此，制造商对分销商进行了若干限制，特别是：

    • 全面禁止互联网销售，
    • 禁止通过第三方线上平台销售（特别是“市场”），
    • 经营一个实体店作为因特网销售的先决条件，
    • 双重定价，或
    • 互联网销售的质量标准。

     对网上转售限制的反垄断限制

    然而，反垄断当局最近对这些限制进行了审查，并在电子商务中实施反垄断规则。因此，有相当多的法院判决和反垄断当局的决定，赞成和反对这种限制的都有，例如：

    • 包（“Scout”第三方平台），
    • 运动（“ASIC”价格比较，标志条款，“阿迪达斯”第三方平台），
    • 电子（“森海塞尔”和“卡西欧”均为第三方平台），
    • 奢侈化妆品/香水（“科蒂”价格比较，第三平台），或
    • 软件（“谷歌”要求制造商预装应用程序，参见欧洲联盟委员会2016年4月20日的新闻稿）。

    现在，Coty德国奢侈化妆品案已达到欧洲水平。

    如今的科蒂案

    本案的事实如下:供应商（Coty Germany GmbH）成立了一个选择性分销网络。分销商可在以下限制下通过互联网销售。它们应:

    • 利用它们的网络商店作为其实体店的“电子商店窗口”，从而维持产品的奢侈品性质，以及
    • 禁止与第三方合作，因为这种合作是对外可见的。

    当事人的意图：供应商要特别实施最后的限制，阻止一个通过亚马逊的市场来销售供应商商品的分销商(Parfümerie Akzente GmbH)。很明显，分销商打算摆脱这种限制。

    一审法院，法兰克福区法院，根据《欧洲联盟运作条约》（“TFEU”）第101条，裁决认为通过第三方平台的销售禁令，即Regulation（EU）第330/2010（坚决豁免规定或“VBER”）第四条（C）款。然而，二审法院，法兰克福高级地方法院，显然没有给出明确的答案。因此，法院已要求欧盟法院（CJEU）对欧盟反垄断规则即《欧洲联盟运作条约》第101条和第4条（b）款和（c）款（ 19.04.2016, ref. no. 11 U 96/14 [Kart]的决定)如何解释作出初步裁决，

    提交给欧盟法院的问题

    欧盟司法法院已经为“科蒂德国”立案（reference no. C-230/16）。以下是欧盟司法法院需要回答的四个问题：

    1. 选择性的分销网络的目标在于销售奢侈品以及确保商品有“奢侈的形象”以保 持竞争，这与《欧洲联盟运作条约》第101条第一款可以共存吗？

    如果第一个问题得到肯定的回答：

    1. 在具体案例中，如果一个在零售业经商的选择性分销网络的成员被广泛禁止在公开的第三方线上平台进行网络销售，无论生产商的质量是否合法，其竞争性是否与《欧洲联盟运作条约》第101条第一款共存？

    是否欧盟法第330 / 2010第四条（b）款可被解释为，强制禁止在零售业经商的选择性分销网络的成员在公开的第三方线上平台进行网络销售，限制了零售商的消费群体有关于物品的选择？

    是否欧盟法第330 / 2010第四条（c）款可被解释为，强制禁止在零售业经商的选择性分销网络的成员在公开的第三方线上平台进行网络销售，限制了向终端用户通过物品的消极销售？

    如今如何对待限制

    在德国，关于网上销售的禁令有一些判例法，有些判决是赞成的，有些判决是反对的。网络销售的限制最近也被德国联邦卡特尔局所审查（联邦反垄断局），这种审查对反对这种限制有很关键的作用，包括对在第三方平台销售的限制。

    然而德国最高法院的判决仍旧下落不明。关于供应商和分销商是否可以有效地达成一致特别是对于奢侈品方面的问题也至今没有一个清楚的答案。欧盟司法法院的初步判决应该给予这些问题清晰的回复。

    直到欧盟司法法院初步判决下来，目前的法律现状应该特别建立在纵向限制标准2010（其不具备法律质量并且也不约束法庭，而是规定了指导欧洲委员会对纵向协议进行评估的原则，从而通过原则约束欧洲委员会本身）上：

    1. 全面禁止网络销售很难成立因为网络销售被认为是被动销售（参见纵向限制标准2010，第52段）。几乎没有一个批准是限制网络商店语言的因为这并不能改变这种销售的被动性质（参见纵向限制标准2010，第52段）。对互联网销售的营业额的限制也是如此。
    2. 然而，允许必须是，特别是
    • 对电子商务平台设计的定性要求（不造成全面禁止和不限制语言的使用）
    • 对在独占区域，或对供应商的独家客户群，或由供应商分配的另一个买家积极销售的限制（VBER第四条b款（i）项），比如在第三方网站上的区域性横幅（参见纵向限制标准2010，第53段）。
    • 成为供应商选择性分销网络成员的一般定性限制，例如要求分销商有一个或者多个实体店或陈列室（纵向限制标准2010，第54段，176）

    欧盟法院的判决将更加清晰——Legalmodo会持续更新科蒂德国案和其他对于网络分销有可能的影响。

    German Law recognizes protection for certain creations of the mind and grants a set of exclusive rights for these creations. While the Copyright Act grants protection for works of literature, science and art without any further conditions, other intellectual property rights basically require a registration at the German Patent and Trademark Office (DPMA) or in an international register. Furthermore, the imitation of products not protected by intellectual property rights can violate the Act against Unfair Competition, which grants protection against any kind of unfair practice in the course of the business. Unfair competition lawsuits are very similar to lawsuits in the field of intellectual property law and usually follow the same pattern.

    In this first post we will analyse the German Copyright Act, Neighbouring Rights and Design Patents. The next post will look into Trademarks, Patents and Utility Patents; while a third post will focus on the Act against Unfair Competition and the procedural aspects.

    Copyrights and Neighbouring Rights

    The German Copyright Act protects creative and artistic works, in particular linguistic works (for example books, speeches and software), musical works, works of pantomime including choreographic works, works of fine art including those of architecture, applied art and plans for such works, photographic works, films and illustrations of a scientific or technical nature. Ideas are not protected, as only the form of an individual and personal creation is the subject of copyright. The person who creates a work shall be deemed the author; several persons who have created a work jointly shall be deemed joint authors. As mentioned above, there is no registration of works, but in the case of anonymous or pseudonymous works the true name of the author can be submitted for entry in the Register of Authors at the DPMA.

    Copyright shall protect the author with respect to his intellectual and personal relationship with his work on the one hand, and with respect to the utilization of his work on the other hand. The right of exploitation of the work can be licensed to third persons, but the copyright itself cannot be transferred to others (except by way of inheritance). Copyright expires 70 years after the author’s death.

    The Copyright Acts grants also protection for economic efforts in relation to works. The so-called Neighbouring Rights cover for example the protection of the performer of a work, of the producer of an audio recording of a work, of broadcasting organizations and of the maker of a database

    Germany has signed the most important international copyright conventions and therefore grants copyright protection to authors of the most states in the world, while these states also grant copyrights to German authors, based on the respective national law. Several European Union directives on special parts of copyright legislation have been implemented in Germany, but the harmonization within the EU does not yet cover the whole copyright system.

    Design Patents

    The design patent is the small brother of the copyright, because it also protects achievements in the aesthetic field. However, the German Design Patent Act grants only protection after the registration of the Design Patent at the DPMA. The design has to be new and needs an individual character. A design shall be considered new if no identical design has been made available to the public before the date of filing of the application for registration. It has an individual character if the overall impression it produces on the informed user differs from the overall impression produced on such a user by any design which has been made available to the public before the date of filing of the application. The protection is granted up to 25 years, but has to be renewed every five years by paying renewal fees.

    The German design patent grants only protection for Germany. If the creator of an aesthetic form wants to exploit the design internationally, he can also apply for a European Design Patent at the European Office for Harmonization in the Internal Market for the EU or at the International Bureau of the World Intellectual Property Organization (WIPO). Newly, the European system even recognizes the protection of new designs that have not been registered, but only for three years since the design has been made available to the public.

    The GmbH is a capital company under German law. The liability of the shareholders in this kind of corporation is limited to the company’s share capital i.e. the company’s assets alone shall serve to fulfil the company’s obligations vis-à-vis its creditors. Being the GmbH – a limited liability company – a legal person, it holds autonomous rights and obligations; as such it may e.g. acquire ownership and other rights in real property and autonomously sue and be sued in court in connection with its rights and duties.

    The corporate bodies of the GmbH required by compulsory provisions of the Limited Liability Company Act (GmbHG) are the entirety of the shareholders, who regularly adopt resolutions at the shareholder meeting (Gesellschafterversammlung), and the managing director(s) (Geschäftsführer). The establishment of a supervisory board (Aufsichtsrat) is, with some specific exceptions, optional.

    Shareholders’ rights and duties

    The rights and duties of shareholders may be quite different in origin and nature. Shareholder rights and duties may exist by force of law or may be created by, or based upon, the articles of association (Satzung). Said rights and duties may attach to all shares as such or belong to, or be imposed upon, a shareholder personally (personal shareholder rights and duties). Shareholder rights and duties may be available to, or be imposed upon, all shareholders equally or upon one or several shareholders particularly. In principle such rights and duties pass to any transferee of the share, whether such a transfer is by assignment, inheritance, or otherwise, and cannot be assigned or otherwise transferred separately from the share itself.

    Both rights and duties attaching to shares, that are not created by law, and personal shareholder rights and duties can only be granted or imposed by the articles of association or by shareholder resolutions passed on the basis of the articles of association. These rights and duties must be distinguished from the ones provided within agreements between the shareholders, which are made “outside the articles of association”. Such latter agreements can only create contractual rights and duties among the parties thereto. If a share is transferred, the transferee can only exercise the contractual rights of the transferor, provided those rights were specifically assigned to him by contract; said transferee is accordingly bound by his transferor’s contractual duties only if he has agreed to take them over.

    Shareholder rights can be divided into administrative and property rights. Administrative rights include the right (i) to request the calling of the shareholders’ meeting (ii) to participate in the shareholder meeting (iii) to vote and (iv) to be provided with information about the corporate activities. The right to information basically entails that the managing directors must provide every shareholder with information about the affairs of the company upon their simple request and allow them to inspect the books and records of the company. Property rights include the entitlement to a quota of the annual profits, the right to dispose of the share and the entitlement to a share of the liquidation proceeds.

    The most important shareholder duties are the duty to render contributions, the fiduciary duty and the duty to ensure that the share capital, once provided, is preserved. Shareholder rights and duties can be expanded, restricted or excluded in the articles of association, as long as this is not in conflict with mandatory law provisions.

    Finally, once the company gets into economic trouble, a shareholder is obliged to either (i) inject new equity to the company, (ii) liquidate the company or (iii) cause the management to commence insolvency proceedings.

    Liability

    The GmbH is a legal entity separate from its shareholders. Therefore, the shareholders are in principle not liable for debts of the GmbH. There are only a few scenarios of shareholder liability in literature and court practice:

    • Shareholders may be liable for debts or losses of the company – on a contractual basis – if they undertake a contractual obligation towards the company’s creditors or the company (e.g. by means of a guarantee or a comfort letter).
    • A shareholder may be personally liable to the company for payments received from the company to the extent such payments cause the equity of the company to fall short compared to the registered share capital.
    • Shareholders may be held liable by the company if, disregarding the purpose of the company’s assets to serve as collateral for its creditors, they intentionally abuse their control to remove assets or business opportunities from the company, rendering it unable to satisfy its debts.
    • Additionally, a shareholder may become personally liable towards the company’s creditors if the assets are not clearly allocated to the shareholders or the company in the books of the company (intermingling of assets) and such allocation is not inferable from other circumstances, e.g. the physical separation.

     Shareholders’ meeting

    The shareholders’ meeting is the company’s ultimate decision-making authority. Shareholders usually exercise their rights in the shareholders’ meeting. Shareholder resolutions may also be taken without a physical meeting. In particular, a meeting is not necessary if all the shareholders confirm in text form that they agree with the resolution to be passed or to cast their votes in writing.

    Usually, the articles of association determine the powers of the shareholders’ meeting and the rules of procedure to be applied in its context. To the extent that the articles of association do not contain specific provisions regarding the procedures to be applied within the shareholders’ meeting, §§ 46-51 GmbHG apply as the relevant model framework.

    The shareholders’ meeting is exclusively entitled to:

    • amend the articles of association,
    • call in additional contributions of the shareholders,
    • liquidate the company and  appoint and dismiss the liquidators,
    • resolve upon measures pursuant to the Transformation Act (Umwandlungsgesetz – UmwG) such as mergers, spin-offs and changes of the company’s legal form.

    Except as otherwise provided in the articles of association, the shareholders resolve upon:

    • the formal approval of individual and consolidated annual financial statements and the distribution of profits,
    • the repayment of additional contributions,
    • the division, consolidation and redemption of shares,
    • the appointment and dismissal of managing directors, as well as their discharge,
    • the execution and termination of service agreements with managing directors,
    • the assertion of damage claims to which the company is entitled against managing directors or shareholders, as well as the representation of the company in litigation proceedings against managing directors or shareholders,
    • the rules of procedure for the management,
    • the appointment of a Prokurist (person vested with the general power of representation) and of persons vested with the commercial power of attorney for the entire business establishment (Handlungsvollmacht).

    The above mentioned tasks can be however transferred by the shareholders’ meeting to the supervisory board, if any, by adopting a relevant resolution.

    In addition, the shareholders’ meeting has the right to issue instructions to the managing directors and to appoint or dismiss members of an optional supervisory board.

    A shareholders’ resolution is deemed to be passed, when more than a half of the given votes are favourable. In exceptional cases a majority of ¾ will be necessary, e.g. with regard to amendments of the articles of association, the dissolution of the company, resolutions on mergers, spin-offs and other measures under the Transformation Act (UmwG), execution of domination agreements and of profit and loss transfer agreements.

    Managing director

    The company must have one or more managing directors (Geschäftsführer). The GmbH is not legally required to have more than one managing director except in particular cases (e.g. in case indicated by the Co-Determination Act. Both shareholders and non-shareholders (however only natural persons, no legal persons) may be appointed managing directors. In the articles of association the shareholders can set requirements regarding the qualification for the position of managing director.

    If the GmbH has only one managing director, he represents the company severally. If several managing directors have been appointed, they must represent the company jointly. However, if the company has more than one managing director, the shareholders can also grant the power of representation to the individual managing director derogating the statutory rule of joint representation, by a corresponding clause of the articles of association. In other words any modification of the statutory powers of representation must be based upon a provision in the articles of association. That provision must either itself define directly the extended power of representation in favour of an individual managing director, or permit the shareholders to extend the power of representation of the managing directors by passing a relevant shareholder resolution.

    In detail, the shareholders may grant each managing director, or one or several managing directors, the right

    • to represent the company acting alone,
    • to represent the company acting jointly with one or several other managing directors, or
    • to represent the company acting jointly with one or several managing directors or Prokurist.

    The managing directors have authority to represent and act on behalf of the company in all legal transactions in and out of court.

    A limitation of the authority of managing directors to represent the GmbH – even within the articles of association or resolved by shareholder resolution – will have no effect with respect to third parties. Should the articles of association e.g. set forth that the managing directors are not entitled to execute agreements with a value exceeding 5,000 € and the managing directors enter into an agreement with a 10,000 € value, such latter agreement shall be nonetheless valid vis à vis the contractual counterparty.

    The limitation of the power to represent the company, however, operates in individual cases where the third party interacting with the managing director is not entitled to rely on the unlimited power of the managing director. This occurs in particular where a managing director abuses his powers to represent the company and the third party knows or deliberately ignores the abuse.

    The power to represent the company is further limited by the prohibition of self-dealing and multiple representations. A managing director is in general not allowed to enter into legal transactions on behalf of the company with himself as counterparty (so called self-dealing) or as the representative of the company and of a third party (multiple representations). However, he can be exempted from such prohibitions. Such exemption may be granted in the articles of association or, if the articles of association allow it, by the shareholder meeting.

    In the context of the internal relations between the company and the managing directors, the managing directors must observe the restrictions contained in the articles of association, the instructions set within shareholders’ resolutions or in the management contracts of the managing directors. The shareholders can issue instructions ad hoc or in a general way by establishing rules of procedure for the management (e.g. make certain kind of transactions subject to the consent of the shareholders’ meeting). In case the managing directors do not comply with such instructions, they are obliged to compensate the company for any damages incurred as a consequence thereof.

    The shareholders may entrust specific fields of responsibility – i.e. administration, accounting, finance, employment and social matters, production, distribution, sales or marketing – to one or more managing directors. The shareholders may also introduce a hierarchic structure under which one managing director is granted an overall responsibility for any fields, while other managing directors are required to report to him with respect to matters regarding the specific field for which they are responsible. However, no managing director can be completely released from the joint overall responsibility for the well-being of the company. Thus, any managing director in charge of a special area of responsibility must report to the other managing directors whatever matters arise in his particular area if said issues may have an effect on the whole company; moreover any managing director may decide upon matters falling under the area of responsibility of another managing director if he believes that the overall well-being of the company may be affected by decisions taken with respect to those matters. In any case, such internal allocation of specific fields of responsibility does not lead to a limitation of the power of the managing directors to represent the GmbH and has no effect with respect to third parties.

    Supervisory board

    The creation of a supervisory board (Aufsichtsrat) is either optional or mandatory. It is mandatory if it is required by the One-Third Participation Act (Drittelbeteiligungsgesetz, in case of more than 500 employees), the Coal, Iron and Steel Co-Determination Act (Montanmitbestimmungsgesetz, in case of more than 1,000 employees), the Co-Determination Act (Mitbestimmungsgesetz, in case of more than 2,000 employees) or the Capital Investment Act (Kapitalanlagegesetzbuch, in case the company’s purpose is the management of investment funds).

    In companies with up to 500 employees, no supervisory board needs to be established. However, the articles of association can provide for the formation of a supervisory board. In this event, the articles of association can even set forth rules for the supervisory board, including the board’s composition, competencies and mode of procedure. The scope of the competencies can be limited to monitoring and advisory responsibilities or even comprise decision-making and representation of the company vis-à-vis the managing directors.

    Agency (regulations, duration, termination, indemnities – if any)

    Instead of direct distribution (by setting up a branch, a subsidiary or via e-commerce), one can also distribute ones’ products and / or services indirectly. Indirect distribution especially includes agents, distributors, franchisees or commission agents.

    Self-employed commercial agents solicit customers and can (but do not have to) have the authority to conclude a contract on supplier’s behalf. The supplier sells directly to end customers and bears the distribution risk, but may also control the margins. Contrary to employees, the agent’s remuneration (“commission”) can be exclusively profit-oriented, i.e. remunerated only in case of successfully soliciting customers, and in relation to the turnover. Commercial agents have to provide detailed market reports. If the commercial agent acts in the EU, protective agency law applies, including the indemnity claim.

    An agent would be treated as a supplier’s employee if the agent does not act independently. An agent acts independently if the agent – according to the overall picture of contractual rules and factual activity – freely organizes his activities and working time (sec. 84 (1) 2 HGB). This goes mutatis mutandis for other types of distribution partners. The treatment as employee especially has the following consequences:

    • employee protection, e.g. limited right of termination under Dismissal Protection Act;
    • continued payment of salary during public holidays, illness and holidays;
    • minimum wage under Minimum Wage Act of 11 August 2014;
    • obligation to pay contributions to social security;
    • income tax on salary;
    • adherence to worker participation and collective bargaining agreements if applicable.
    • exclusive competence of labour courts if the employee has, during the last 6 months of activity, earned an average amount which does not exceed EUR 1,000 per month.

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    Agency contracts are governed by sec. 84–92c German Commercial Code (HGB). The commercial agent is, next to the employee, strongly protected, e.g. by mandatory rules on remuneration, minimum notice periods, and goodwill indemnity. As regards remuneration, the agent is entitled to

        • “del credere commission” if the agent assumes liability for fulfilment of businesses (sec. 86b HGB);
        • an advance on commission once the principal has performed its obligation (sec. 87a para. 1 HGB);
        • accounting within maximum periods of three months (sec. 87c (1) HGB);
        • commission irrespective of delivery and payment, unless the principal is not responsible for non-delivery (sec. 87a ( 3) HGB);
        • request information, statements of account, an excerpt from the books, and inspection by an auditor (sec. 87c HGB).

    These rules are mandatory and cannot be contracted out. Further details on the payment of commission (if not agreed otherwise) are set in sec. 86b et seq. HGB.

    Besides, both parties have to safeguard each other’s interests (sec. 86, 86a, 90 HGB and sec. 242 BGB). Theagent is especially obliged to

      • check the customers’ creditworthiness,
      • inform the supplier immediately about any business procured,
      • keep confidential any information obtained during his activity, and
      • abstain from acting for the supplier’s competitors.

    Agency agreements can be terminated without cause if contractually agreed. However, mandatory notice periods have to be observed, staggered pursuant to the contractual term: from one month in the first year to six months after five years (sec. 89 ( 1) HGB). The notice periods cannot be shortened, and, in case of extension, the supplier’s notice period must not be shorter than the agent’s one (sec. 89 (2) HGB). A cause is only required if the agreement is terminated without notice period (sec. 89a HGB). It is given if the terminating party cannot reasonably be expected to continue the relationship until ordinary termination (considering all circumstances of the single case and weighing the interests of both parties).

    The agent is entitled to indemnity if the agent has brought new customers or has significantly increased the business volume with existing customers, which results in benefits for the principal, and if such payment of indemnity is equitable under the given circumstances (sec. 89b HGB). Indemnity is calculated on basis of the commission earned during the last 12 months of activity, earned with new customers, and existing customers towards whom the agent has substantially increased the sales. Indemnity is capped to a maximum of the past five year’s average annual commission (sec. 89b HGB). The claim cannot be waived before termination, but is excluded if the agent has not notified the principal within one year following termination. Indemnity is not payable if

    • the agent terminated the contract (unless justified by circumstances attributable to the principal or because of the agent’s age or illness),
    • the principle has terminated the contract because of default attributable to the agent (which would justify immediate termination for cause), or
    • the agent, with the principal’s agreement, assigns and transfers its rights and duties under the agency contract to another person.

    Indemnity cannot be contracted out, unless the agent acts outside EEA (sec. 92c HGB).

    Antitrust law does generally not apply to the agent-relationship, provided that the principal bears the commercial and financial risks related to selling and purchasing the products or services (Guidelines on Vertical Restraints of 10/05/2010, para. 12 et seq., 18, 49). Therefore, suppliers can control the price for which they sell the products / services via agents. Special limits apply only to post-contractual non-compete-obligations if concluded before termination. They must be limited to a two-year-maximum, to the agent’s territory or customers, and to the contractual products or services. Further, they must be done in writing and delivered to the agent. The principal has to pay an indemnity for the non-compete obligation’s term (sec. 90a HGB).

    Generally, the parties are free to choose the applicable law (art. 3 Rome-I-Regulation). If, however, all elements relevant for the choice of law are located in another country than that of the chosen law, the choice of law shall not prejudice the provisions which cannot be derogated from by agreement (art. 3 (3) and (4) Rome-I-Regulation).

    Overriding mandatory provisions of the forum’s law cannot be avoided by choosing another law. The courts may also give effect to overriding mandatory provisions of the country where the contractual obligations have to be performed (cf. art. 9 Rome-I-Regulation). Overriding mandatory rules are especially most of the protective agency law provisions. If, therefore, the agent acts within the EU, the agent’s claim for goodwill indemnity (based on the EU Directive on self-employed commercial agents of 1986) can hardly be contracted out – even if the parties choose a foreign law (cf. European Court of Justice, decision of 09/11/2000 [“Ingmar”], concerning, however, the former Rome Convention on Law Applicable to Contractual Obligations of 1980). Arguments against applying the same principles under the Rome-I-Regulation exist, but there is yet no case law which favors such interpretation.

    Generally, the parties are free to choose a court, especially if

    Besides, the parties may also choose arbitration (sec. 1029 et seq. ZPO, and art. 1 (2)d Brussels-Ia-Regulationand art. 1 (2)d Lugano-II-Convention).

    However, a choice of court or arbitration can hardly avoid overriding mandatory provisions, as ruled by the Higher Regional Court in Munich (decision of 17/05/2006), and confirmed by the BGH (decision of 05/09/2012).

    Suppliers and distribution partners are free to use any means of dispute resolution, especially out-of-court-negotiation, mediation, arbitration, litigation. Restrictions exist only insofar as overriding mandatory provisions can hardly be avoided by means of dispute resolution (see above). Suppliers and distribution partners can expect fair treatment in German courts since the judges are well-trained, have been determined beforehand, and the parties are entitled to due process of law (art. 101, 103 German Constitution). Advantages of resolving disputes in Germany are (inter alia) that court rulings are quite foreseeable and that court proceedings are quite quick (8.2 months for proceedings in the district courts according to the latest statistics).

    Distribution or Concession of sale

    Distributors buy and sell products on their own behalf. Consequently, they bear distribution risks, and, in return, gain profit from the difference between purchase and resale price, while suppliers’ margins are rather low. The distributor is obliged to market and distribute the supplier’s products, and to safeguard the supplier’s interests. Distributors are less protected than commercial agents (exceptions: see below). The supplier is obliged to assist and take care of his distribution partner, subject, however, to the supplier’s economic freedom.

    Distributorship contracts are – as in most EU member states – not explicitly regulated by statutory law. However, there is extensive case law, e.g. whether the supplier has to take back products unsold at termination of contract. Agency law applies by analogy if the distributor is:

    • integrated into the supplier’s sales organization; and
    • obliged (due to agreement or factually) to forward customer data during or at termination of contract.

    Further, distributorship contracts have to conform to antitrust law. Generally, the antitrust law of any affected market applies (art. 6 (3a) Rome-II-Regulation). Agreements which aim at or result in restraints of competition are prohibited by antitrust law, namely by the German Act Against Restraints of Competition (“GWB”) andart. 101, 102 Treaty on the Functioning of the EU (“TFEU”). Unless agreements contain hardcore restrictions, asafe harbor is provided by the De Minimis Notice of 30/08/2014 and the Vertical Block Exemption Regulation no. 330/2010 [“VBER”]). Hardcore restrictions are generally prohibited, regardless of the parties’ market shares, especially price fixing, restricting the geographic areas or categories of customers, or cross-supplies between distributors within a selective distribution system. If one party’s market share exceeds 30%, any restriction of competition can only benefit from the individual exemption under the strict criteria of art. 101 (3) TFEU(“efficiency defense”). Here are the most relevant types of clauses.

    As regards non-compete-obligations, they are enforceable if they conform to antitrust law:

    • Such agreements between non-competitors are safe if each party’s market share does not exceed 15% on any relevant market affected. If one party’s market share exceeds 15%, but none exceeds 30%, a non-compete-obligation during the contractual term is valid if limited up to 5 years at most. Where products are sold on premises owned or leased by supplier from third parties, the five-year maximum does not apply. However, the non-compete obligation cannot exceed the term the buyer is occupying the premises.
    • After the contractual term, a non-compete obligation where one party’s market share exceeds 15%, but none exceeds 30%, is valid if it is necessary to protect know-how transferred to the distributor, and if limited to competing products, the concrete distributor’s premises, and a 1-year-term.

    A supplier can generally not fix a resale price or price level at which its distributors or franchisees resell (except for suppliers that manufacture newspapers, magazines and books, sec. 30 GWB). An agreement or behaviour that aims at establishing such resale price maintenance is treated as hardcore restriction and thereforegenerally void (cf. Guidelines on Vertical Restraints of 10/05/2010, para. 48, 223). By way of – rare – exception, the supplier can plead the efficiency defense (e.g. when introducing a new product or a coordinated short term low price campaign).

    However, resale prices can be influenced by recommending resale prices or setting maximum resale prices:Recommending resale prices or setting maximum resale prices is exempt from antitrust law if the parties’ market shares do not exceed 30% (beyond, there is only room for the efficiency defense), and only if it does not result in a minimum or fixed sale price because of pressure or incentives from one party (art. 101 (1) TFEU andart. 4 (a) VBER).

    Establishing a minimum advertised price policy is exempt if it works as mere recommendation. If, however, it results in minimum resale prices or a fixed or minimum price level, it can only be exempt under the efficiency defense.

    By contrast, a supplier shall not announce not to deal with distributors or franchisees that do not follow its pricing policy because it will be treated as fixing the selling prices (see above).

    Most-favored nation or most-favored customer clauses are those which specify that the supplier’s price to the distributor will be no higher than its lowest price to other customer. Such clauses are enforceable if agreed between non-competitors and if none of the parties’ market shares exceeds 30% (beyond, there is only room for the efficiency defense).

    The distributor on its side can generally charge different prices to different customers because of freedom of contract. However, a seller

    • may have to charge the same prices if it holds a dominant or similarly strong market position(sec. 19, 20 GWB and art. 102 TFEU);
    • may generally not charge different prices on grounds of race or ethnic origin. The same goes ongrounds of sex, religion, disability, age or sexual orientation if the respective sales contract is typically concluded without or with low importance of the buyer’s person, especially in “bulk business”. An exception exists if different treatment is based on objective grounds, especially where it serves to avoid threats, prevent damage etc. (sec. 19, 20 Anti-Discrimination Act, “AGG”).

    A supplier may not restrict the territory into which, or the customers to whom its distribution partner sells (art. 101 (1) b TFEU). Exempt are, however, restrictions of:

    • active sales into the exclusive territory or an exclusive customer group reserved to the supplier or another distribution partner;
    • sales to end users if the distribution partner operates at wholesale level;
    • sales from members of a selective distribution system to unauthorised distributors in the system’s territory; and
    • selling components, supplied for incorporation, to customers who would use them to manufacture the same kind of products (art. 4 (b) VBER).

    Active sales mean actively approaching individual customers (e.g. by direct, unsolicited mail, e-mail, visits) or a customer group in a specific territory trough promotions specifically targeted at that group. Passive sales mean responding to unsolicited requests from individual customers, including general advertising which reaches customers in other exclusive territories or customer groups if done reasonably. This also applies to the internet: sales via webshops cannot be excluded. A supplier may only, however, require its distribution partner to fulfil certain quality standards, especially in selective distribution (Guidelines on Vertical Restraints of 10/05/2010, para. 51, 54).

    At the end of the distribution chain, consumer protection laws apply, namely between the seller and the buying consumer. Statutory law grants a 2-year-warranty that products are free from defects at the passing of risk. In case of defect, the buyer is entitled to claim subsequent performance (remedy of defect or delivery of a defect-free product), alternatively price reduction or withdrawal (all regardless of fault), and, damages, provided that the seller has acted with fault (sec. 437, 280 et seq. BGB). Though fault is generally assumed by law, the seller can exculpate itself, especially if the seller has not manufactured the good (but its sub-supplier). Towards consumers, these rights cannot be contracted out (sec. 474, 475 BGB). Each seller within the distribution chain is entitled to have recourse against its own supplier if the product has already been defective at the respective delivery (sec. 478, 479 BGB). In order to maintain these rights, however, the buyer (unless consumer) already has to check at delivery if products are defective, and inform the seller accordingly (sec. 377, 378 HGB).

    Besides, special information duties towards consumers exist in:

    Statutory law also limits the fees which the consumer shall pay beyond for means of payment or consumer hotlines etc. (sec. 312a (3–5) BGB). Finally, the consumer has a right of withdrawal regarding distance and off-premises contracts (sec. 312g, 355 BGB).

    These consumer rights are similar throughout the EU because they are influenced by the EU Directives 1999/44/EC on the sale of consumer goods and 2011/83/EU on consumer rights.

    A supplier may limit the warranty rights granted by statutory law towards its distribution partners. In general, there are few limits to individual agreements: they must not contradict statutory prohibitions (sec. 134 BGB) and public policy (sec. 138 BGB), and must not limit or exclude liability for willful intent, fraudulently concealing defects, where a guarantee has been given, or according to product liability law (sec. 202, 276, 444, 639 BGB). If the product has been found defective at the consumer, and the defect has already been existing between the distribution partners, a limitation of warranty can only be enforced if the supplier provides another compensation of equal value (sec. 478 (4) BGB).

    In standard business terms, however, one may hardly deviate from statutory law – even in B2B-contracts (sec. 310 (1) and 307 BGB). One may only

      •  modify the rules of subsequent performance (time, place, number of attempts);
      • exclude liability for slightly negligent breaches of non-cardinal duties; and
      • limit liability for slightly negligent breaches of cardinal duties to the typical damages foreseeable at conclusion of contract.

    The same goes for warranties provided to each downstream customer, unless the customer is a consumer because a consumer’s statutory rights cannot be contracted out.As regards product recalls, statutory law does not set any requirements. According to case law, a manufacturer must keep its products under surveillance and, when detecting risks for legally protected goods (as health), adopt the necessary preventive measures.Extent and time of such measures depends on the single case, especially the good at risk and the extent of possible damage (BGH, decision of 16/12/2008). Distribution agreements can delineate which party isresponsible for a recall and its costs. Individual agreements are not subject to specific limits. Standard business terms, however, are subject to a strict review in court: they can be unenforceable if they are incompatible with essential statutory principles, if they limit essential contractual rights and duties, if they are surprising or ambiguous (sec. 310 (1), 307, 305c BGB). Therefore, such terms should consider who would typically be responsible for recall and costs, depending on the product (ready-made, or not, etc.).

    Distributor agreements with indefinite term can be terminated (sec. 314, 573, 620 (2), 723 BGB); the notice period depends, however, on the single case, considering also the distributor’s investments. E.g., one-year periods have been accepted in automotive distribution (BGH, decision of 21/02/1995 [Citroën]). In rare cases, antitrust law may demand a renewal of the relationship.

    The distributor can claim indemnity only by analogue application of agency law (see above). The distributor’s indemnity can amount to the distributor’s average annual net margin.As regards applicable law / choice of lawand details on dispute resolution (choice of court, choice of arbitration / mediation), please see above in the section on agents.

    Franchising

    Franchisees buy and sell products on their own behalf. The franchisee acquires licences of intellectual property rights (trademarks and know-how) from the supplier (franchisor) for using and distributing the products or services. The franchisee is entitled and obliged to design its shop according to the franchisor’s concept and corporate design, and use the management-/system-specific know-how. In return, the franchisee pays royalties. The franchisor is precontractually obliged to disclose the key risks and issues for running the franchise, and subsequently often provides assistance on know-how and business.

    Franchise contracts are not explicitly governed by statutory law (unlike e.g. in Italy). They combine elements of licensing, sales, and management of another’s affairs. Generally, agency law applies by analogy (cf. German Federal Court of Justice [“BGH”], decision of 17/07/2002).

    Within franchisee relationships, the same antitrust rules apply as within distributor relationships: generally, agreements which aim at or result in restraints of competition are prohibited by antitrust law, namely by the German Act Against Restraints of Competition (“GWB”) and art. 101, 102 Treaty on the Functioning of the EU (“TFEU”). For details, please see above in the section on distributors.

    Franchise agreements can be terminated according to agency law (mutatis mutandis). However, longer periods can apply in the specific case, e.g. if the franchisee made considerable investments due to the supplier’s product.

    The franchisee can likely claim indemnity based on analogue application of agency law, but this has not yet been ruled out (BGH, decision of 23 July 1997, Benetton). No indemnity, however, can be claimed where the franchise concerns anonymous bulk business and customers continue to be regular customers only de facto (BGH, decision of 5 February 2015).

    Trademark license

    If a company owns a brand or design, such trademark owner can also distribute the product or service bygranting a trademark license to another party (“licensee”). By way of such license agreement, the trademark owner (“licensor”) allows the licensee to make use of its trademark.

    The license agreement should especially cover:

    • the trademark;
    • the goods and/or services which the licensee is entitled to offer under the trademark and details on the use of the trademark (with or on the goods and/or services, promotion material);
    • the territory where the licensee is entitled to use the trademark;
    • any exclusivity of the license (if applicable);
    • royalty (in return for the license);
    • quality control (e.g. approval of samples prior to mass production and audit rights as regards the licensee’s facilities, the raw materials used and the final products);
    • the license’s term; and

    the usual boilerplate clauses (written form, no waiver, severability, choice of law, choice of court etc.).

    Selling via e-commerce (required licences, if any)

    Selling via e-commerce does not require special licenses in Germany. However, certain requirements have to be observed as regards the webshop, especially providing clearly

    • the basic information about the entity behind the webshop (“Contact“, “Imprint” or “Legal Notes”);
    • the terms and conditions of sale; and
    • the privacy policy (it should mention which kind of personal identifiable data [“data”] is stored, how data, cookies and web-tracking are used, and explain the customer’s right to inform about, correct and delete data, cf. sec. 13 German Telemedia Act).

    Relevant anti-trust regulations

    According to the effects doctrine, the antitrust law of any affected market applies (art. 6 (3a) Rome-II-Regulation). Within the European Economic Area (“EEA”), Agreements which aim at or result in restraints of competition are prohibited by antitrust law, namely by art. 101, 102 Treaty on the Functioning of the EU (“TFEU”) and in Germany also by the German Act Against Restraints of Competition (“GWB”). Unlessagreements contain hardcore restrictions, a safe harbor is provided by the De Minimis Notice of 30/08/2014 and the Vertical Block Exemption Regulation no. 330/2010 [“VBER”]). Hardcore restrictions are generally prohibited, regardless of the parties’ market shares, especially price fixing, restricting the geographic areas or categories of customers, or cross-supplies between distributors within a selective distribution system.

    Details are explained above with each kind of distribution channel.

    Stephan Dittl

    Practice areas

    • 知识产权
    • 诉讼
    • 商标和专利
    Contact Stephan