Can an American company stop an action for trade mark infringement in Germany by arguing that a German court has no jurisdiction to hear a case in circumstances where the American’s subsidiary is in Holland, and although it is the Dutch firm’s subsidiary which is in Germany, the German firm does not qualify as an ‘establishment’ for the purposes of the Community Trade Mark Regulation?
A Danish firm sells sports and ‘athleisure’ clothing such as trainers, and holds IR image marks for Class 25, which apply throughout the EU including Germany.
Taking the view that its rights were being infringed by a company in Germany, the Danish firm mounted an action for trade mark infringement and dragged the German firm before the local German court.
Joined in the action was the German company’s American parent company, one of the world’s largest fashion firms, with its corporate seat in the USA. Also joined in the action was a Dutch company who was responsible for running the American company’s websites (with domain names ending in .com and .de) and processing the orders placed through the website.
By way of defence, the American company submits that the German court has no jurisdiction to hear the case as the company has its corporate seat in America, and the German company cited in the action is but a subsidiary of the Dutch company, which in turn is but a subsidiary of the American company.
At first instance, the German court thought it had competence to hear the dispute. The court reasoned that because the German company was an ‘establishment’, the German court was competent to hear the dispute pursuant to Article 97(1) of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark. That finding was appealed by the Americans.
On appeal, the judges at the Oberlandsgericht in Düsseldorf recognised that the concept of ‘establishment’ in the context of the Community Design Regulation was something of a hot topic of debate among the authors of the various practitioner texts.
However, the judges also appreciated that the concept of ‘establishment’ was a concept that was found in other pieces of EU legislation and case law emanating from the CJEU. It was possible to interpret EU legislation systematically.
For example, there was Article 5(3) and Article 18(2) of EU Regulation 44/2001, as elaborated in the CJEU’s judgment in Case C-154/11 Ahmed Mahamdia v République algérienne démocratique et populaire, ECLI:EU:C:2012:491.
Paragraph 48 of the Grand Chamber’s ruling in Ahmed Mahamdia reasoned:
In interpreting those concepts of ‘branch’, ‘agency’ and ‘other establishment’ the Court has identified two criteria which determine whether an action relating to the operations of one of those categories of establishments is linked to a Member State. First, the concept of ‘branch’, ‘agency’ or ‘other establishment’ implies a centre of operations which has the appearance of permanency, such as the extension of a parent body. It must have a management and be materially equipped to negotiate business with third parties, so that they do not have to deal directly with the parent body (see Case 139/80 Blanckaert & Willems  ECR 819, paragraph 11). Secondly, the dispute must concern acts relating to the management of those entities or commitments entered into by them on behalf of the parent body, if those commitments are to be performed in the State in which the entities are situated (see, to that effect, Somafer, paragraph 13).
However, it was not clear to the appellate court whether that reasoning could be applied by analogy to the present case. Indeed, the uncertainty was increased by the Opinion of the Advocate General Mengozzi in the Ahmed Mahamdia case, who had said:
42. It remains to be seen whether and in what way the embassy of a non-member country can satisfy this definition, established in case‑law, of the notions of ‘agency’, ‘branch’ and ‘establishment’ within the meaning of Article 18(2) of Regulation No 44/2001.
Furthermore, there also seemed to be a discrepancy between using international competence to sue a company that would not at the end of the day be bound by the judgment. In that context, the German court remembered the words of the Court of Appeal of England and Wales in Samsung Electronics (UK) Ltd v Apple Inc  EWCA Civ 1339 in which Sir Robin Jacob had reasoned:
The Oberlandesgericht apparently also thought it had jurisdiction because the party before it was SEC whereas the party before the English court was SEC’s UK subsidiary. With great respect that is quite unrealistic commercially – especially as I shall recount below, Apple at least took the view that SEC would be liable for the subsidiary’s actions. They were all one “undertaking”. I use the word of EU law for this sort of situation.
That said, the CJEU had also considered independent legal persons to be an ‘establishment’ for the purposes of Article 5 of Regulation No 44/2001. In Case C-131/12, Google Spain ECLI:EU:C:2014:317, the Grand Chamber had reasoned:
48 In this regard, it is to be noted first of all that recital 19 in the preamble to Directive 95/46 states that ‘establishment on the territory of a Member State implies the effective and real exercise of activity through stable arrangements’ and that ‘the legal form of such an establishment, whether simply [a] branch or a subsidiary with a legal personality, is not the determining factor’.
The only problem was that is was not clear to the appellate court whether the CJEU’s reasoning about the purpose of the Directive could really be applied by analogy to Article 97(1) of the Community Trade Mark Regulation.
By way of conclusion, the Oberlandesgericht Düsseldorf mentioned to the CJEU that the Danish company was seeking an injunction that would apply across the whole of Germany. In that context, the appellate court considered that that matter had already been dealt with by the CJEU’s judgment in Case C-360/12, Coty Prestige Lancaster Group ECLI:EU:C:2014:1318.
According to the website of the UK’s Intellectual Property Office, the Oberlandesgericht Düsseldorf has asked:
Under which circumstances is a legally distinct second-tier subsidiary, with its seat in an EU Member State, of an undertaking that itself has no seat in the European Union to be considered as an ‘establishment’ of that undertaking within the meaning of Article 97(1) of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark?
In 2015, the Oberlandesgericht Düsseldorf has been thrice puzzled on how to apply EU jurisdiction law to the disputes before it. The first preliminary reference was docketed Case C-163/15, Youssef Hassan. Just before Christmas, Advocate General Wathelet handed down his Opinion in that case. The second preliminary reference is Case C-419/15, Thomas Philipps – licensees and standing.
However, the application of the EU’s jurisdiction rules to American companies with subsidiaries in the EU is also the subject of a couple of other preliminary references which are currently before the CJEU; see further, Case C-322/15, Google Ireland and Italy – refusing to let the Italians look at their financial books; and Case C-191/15, Verein für Konsumenteninformation – Amazon’s unfair online forum shopping.
Update – 22 January 2016
The Oberlandsgericht Düsseldorf has made another two references concerning jurisdiction, subsidiaries and parent companies; see further, Case C-24/16, Nintendo – jurisdiction by design.
Update – 2 October 2016
Case C-617/15, Hummel Holding is due to be heard by the Second Chamber on 6 October 2016.
Update – 11 December 2016
The Opinion of Advocate General Tanchev is due on 12 January 2017.