Case C-24/16, Nintendo – jurisdiction by design

Nintendo is suing companies in the German courts for the alleged infringement of its design rights. However, the German courts wonder if they have jurisdiction to decide the case and the scope of any measures they might impose. The first problem is that the German defendant is only a subsidiary and its parent company is domiciled in France. The second problem is that although the defendant’s website has images on it that correspond to Nintendo’s design rights, these have been put there so that consumers know immediately that the defendant’s goods can be used in Nintendo’s games consoles.

Nintendo makes and sells video games consoles. It also makes accessories for those machines. One accessory is a specially-designed remote control.

Nintendo uses intellectual property law to protect its products and accessories. Among the many rights it holds, there are Community design rights on its games consoles and Community design rights on its accessories.

Against that backdrop, Nintendo has brought an action in the German courts for design right infringements that are said to have been committed by a couple of defendants. The scope of the action relates not only to what Nintendo sees as the defendants’ design-right-infringing goods but also a website that is run by one of the defendants. This website is illustrated with Nintendo design images and advertises the defendant’s allegedly infringing goods. Consequently, Nintendo has asked the German courts for injunctive relief, and a whole host of other remedies.

However, Nintendo’s action is not straightforward. The main problem is the law governing the ability of the German court to hear the dispute, and the range of measures the court may take against the defendants. The legal difficulties stem from the fact that it is the second-named defendant in the action who is making remote controls and other accessories which can be used in Nintendo’s games consoles, and that second defendant is domiciled in France not Germany.

Compounding this difficulty, is the fact that the second defendant is selling his goods from France to customers in France, Belgium, and Luxembourg and potentially to other suppliers who are located elsewhere in the EU – such as to the first defendant, who is domiciled in Germany. The legal difficulty is increased still further by the fact that the German company is but a subsidiary of the French parent company and yet it this subsidiary that is selling the French parent company’s goods over the Internet to the subsidiary’s customers in Germany and Austria.

Unsurprisingly, in such circumstances, the parent company defendant is arguing that the German court lacks international competence to hear the dispute and order EU-wide measures. The parent company also disagrees with Nintendo about the applicable law that should govern Nintendo’s action. It is a case that has already been litigated up to the Oberlandesgericht in Düsseldorf.

At the Oberlandesgericht in Düsseldorf
In essence, there are three broad questions to this case. First, does the German court have jurisdiction to hear the case and impose sanctions with EU-wide effect on a defendant? Second, what should the German court do in respect of the defendant’s website that is decorated with Nintendo design-images but solely to inform consumers that the defendants’ products can be used in Nintendo’s machines? Third, what is the applicable law to this dispute and how should the national court work that out?

Despite the apparent simplicity of those questions, answering them has required the Oberlandesgericht, Düsseldorf to consider an intricate mesh of EU legislation that governs jurisdiction and another mesh of EU legislation that governs intellectual property rights.

The German court has also been required to take into account several judgments from the CJEU. Furthermore, the court has also considered a wide array of academic and practitioner commentary that has been devoted to understanding the interstecies of EU jurisdiction law and intellectual property law. For completeness, the German court also read judgments that have emanated from the Austrian courts.

Having considered so many legal materials, the German court decided to make a preliminary reference to the CJEU. Fortunately, the referring order of the Oberlandesgericht in Düsseldorf constitutes a rich and complex document. Unfortunately, the detail and level of analysis cannot be replicated in a quick report so what follows is merely a crude oversimplification of the arguments and case law cited by the parties.

Thus, in respect of international jurisdiction, the Oberlandesgericht in Düsseldorf took into account the CJEU’s recent judgment in Case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide SA. This 2015 judgment of the Fourth Chamber concerned ‘special jurisdiction’ under Article 6(1) in the context of an action that was brought against several defendants who were domiciled in various Member States but who had participated in a cartel contrary to Article 81 of the EC Treaty.

In Case C-352/13, Cartel Damage Claims (CDC), the CJEU had reasoned:

17 The rule of jurisdiction laid down in Article 6(1) provides that a person may, where he is one of a number of defendants, be sued in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings (judgments in Painer, C‑145/10, EU:C:2011:798, paragraph 73, and in Sapir and Others, C‑645/11, EU:C:2013:228, paragraph 40).

18 That special rule, because it derogates from the principle stated in Article 2 of Regulation No 44/2001 that jurisdiction is based on the defendant’s domicile, must be strictly interpreted and cannot be given an interpretation going beyond the cases expressly envisaged by that regulation (see judgment in Painer, C‑145/10, EU:C:2011:798, paragraph 74).

19 In accordance with recitals 12 and 15 in the preamble to Regulation No 44/2001, that rule of jurisdiction meets the wish to facilitate the sound administration of justice, to minimise the possibility of concurrent proceedings and thus to avoid irreconcilable outcomes if cases are decided separately (judgment in Painer, C‑145/10, EU:C:2011:798, paragraph 77).

20 Therefore, in order for Article 6(1) of Regulation No 44/2001 to apply, it is necessary to ascertain whether, between various claims brought by the same applicant against various defendants, there is a connection of such a kind that it is expedient to determine those actions together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings (see judgments in Freeport, C‑98/06, EU:C:2007:595, paragraph 39, and in Sapir and Others, C‑645/11, EU:C:2013:228, paragraph 42). In that regard, in order for judgments to be regarded as irreconcilable, it is not sufficient that there be a divergence in the outcome of the dispute, but that divergence must also arise in the context of the same situation of fact and law (see judgments in Freeport, C‑98/06, EU:C:2007:595, paragraph 40; Painer, C‑145/10, EU:C:2011:798, paragraph 79; and in Sapir and Others, C‑645/11, EU:C:2013:228, paragraph 43).

21 The requirement that the same situation of fact and law must arise is satisfied in circumstances such as those of the case in the main proceedings. Despite the fact that the defendants in the main proceedings participated in the implementation of the cartel at issue by concluding and performing contracts under it, in different places and at different times, according to Decision 2006/903 upon which the claims in the main proceedings are based, the cartel agreement amounted to a single and continuous infringement of Article 101 TFEU and Article 53 of the EEA Agreement. That decision does not, however, determine the requirements for holding the defendants liable in tort, jointly and severally as the case may be, since this is to be determined by the national law of each Member State.

22 As regards, finally, the risk of irreconcilable judgments resulting from separate proceedings, since the requirements for holding those participating in an unlawful cartel liable in tort may differ between the various national laws, there would be a risk of irreconcilable judgments if actions were brought before the courts of various Member States by a party allegedly adversely affected by a cartel.

23 Nevertheless, the Court points out that, even in the case where various laws are, by virtue of the rules of private international law of the court seised, applicable to the actions for damages brought by CDC against the defendants in the main proceedings, such a difference in legal basis does not, in itself, preclude the application of Article 6(1) of Regulation No 44/2001, provided that it was foreseeable by the defendants that they might be sued in the Member State where at least one of them is domiciled (see judgement in Painer, C‑145/10, EU:C:2011:798, paragraph 84).

24 That latter condition is fulfilled in the case of a binding decision of the Commission finding there to have been a single infringement of EU law and, on the basis of that finding, holding each participant liable for the loss resulting from the tortious actions of those participating in the infringement. In those circumstances, the participants could have expected to be sued in the courts of a Member State in which one of them is domiciled.

Although that seemed clear, questions arose as to the competence of the German court to hear the present dispute. At first instance, it was thought that the German court enjoyed competence to issue EU-wide measures albeit constrained by and in the context of the defendants’ supply-chain. However, on appeal, the defendants were arguing that a measure awarded by the German court should only have national scope, and should therefore be limited to Germany. Having considered the academic literature, the Oberlandesgericht Düsseldorf did not know the answer and therefore made this issue the topic of its first question to the CJEU.

However, a second issue concerned the Oberlandesgericht Düsseldorf: the defendants’ website. This website was furnished with images that corresponded to Nintendo’s Community designs but they were only being used for illustrative purposes. That is to say, the defendants were claiming that they were legally offering their own accessories which could be used in Nintendo’s machines. Consequently, they argued that it ought to be possible to use images corresponding to Nintendo’s Community designs when those illustrations were used as an unambiguous and simple way to inform consumers that the defendant’s own goods could be used in Nintendo machines. Nintendo disagreed.

The German court recognised that the law on this matter was not clear. The German court wondered what the conditions might be for a third party who was wanting to legitimately use a Community design in order to illustrate and advertise the sale of his own goods, an illustration which corresponded to the right holder’s design?

In that context, the German court contemplated whether the phrase ‘For use in’ a Nintendo TM console, could constitute a quote. The German court looked at the law governing quotations was regulated by EU copyright law. Of course, the present case was a design case but the German court also recalled that in Case C-500/14 Ford Motor Company, the CJEU had used design law in case about trade mark law. Hence, could copyright law or indeed Article 12(c) of the Community Trade Mark Regulation apply by analogy?

A third issue troubled the German court: the applicable law. This matter was governed by the EU’s ‘Rome II’ Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non‑contractual obligations (OJ 2007 L199/40).

The German court at first instance had determined the applicable law to be where the harm took place; thus, the applicable law was in part German law, Austrian law, and French law. On appeal, Nintendo took a different view and submitted that in respect of the first defendant, German law should be applied; and in respect of the second defendant, French law.

The Oberlandesgericht in Düsseldorf looked at the wording of Article 15 of the Rome II Regulation on the “Scope of the law applicable”. The Article states that: “The law applicable to non-contractual obligations under this Regulation shall govern in particular … (a) ‘the basis and extent of liability, including the determination of persons who may be held liable for acts performed by them; … [and] (g): ‘liability for the acts of another person’.

However, given the breadth of Nintendo’s claim and request for an injunction, and the fact that there was more-recent case law from the CJEU, the German court recalled the CJEU’s reasoning:

52 First, regarding the claim for destruction of the infringing products, it is clear from Article 89(1) of Regulation No 6/2002, which refers, in subparagraph (a) thereof, to an order prohibiting the defendant from proceeding with the acts which have infringed or would infringe the Community design and, in subparagraphs (b) and (c), to an order to seize the infringing products and to an order to seize materials and implements used in order to manufacture those products, that the destruction of those products falls within the ‘other sanctions appropriate under the circumstances’ referred to in Article 89(1)(d) of that regulation. It follows that, under Article 89(1)(d) of Regulation No 6/2002, the law applicable to that claim is the law of the Member State in which the acts of infringement or threatened infringement have been committed, including its private international law.

53 Secondly, regarding the claims for compensation for the damage resulting from the activities of the person responsible for the acts of infringement or threatened infringement and for disclosure, in order to determine the extent of that damage, of information relating to those activities, it must be found that the obligation to provide such information and to pay compensation for the damage suffered does not, by contrast, constitute a sanction within the meaning of Article 89 of Regulation No 6/2002.

54 Accordingly, pursuant to Article 88(2) of Regulation No 6/2002, the law applicable to the claims listed in paragraph 53 above is the national law of the Community design court hearing the proceedings, including its private international law. That finding is borne out, moreover, by recital 31 of that regulation, which states that the regulation does not preclude the application to designs protected by Community designs of the laws of the Member States relating to civil liability.

On this, the Oberlandesgericht in Düsseldorf noted that in paragraphs 52 and 54, the CJEU had used the phrase ‘including its international private law’. However, the German court wondered if that was correct since the matter was now governed by uniform EU law under the EU Regulation.

In any event, there was still the issue of the applicable law. What was still unclear was the phrase ‘the place where the harm has been committed’ – a corresponding phrase features in the EU’s jurisdiction regulation, and also in Article 8(2) of the Rome II Regulation. What was unclear to the German judges were the criteria which they should use to determine this. Again, the German court recalled parts of the CJEU’s recent case law. For example, there was Case C-360/12, Coty Prestige Lancaster Group, which was about jurisdiction and participation in trade mark infringement. The CJEU had reasoned:

34 With regard to the wording of Article 93(5) of Regulation No 40/94, the concept of ‘the Member State in which the act of infringement has been committed’ implies, as the Advocate General stated in point 31 of his Opinion, that that linking factor relates to active conduct on the part of the person causing that infringement. Therefore, the linking factor provided for by that provision refers to the Member State where the act giving rise to the alleged infringement occurred or may occur, not the Member State where that infringement produces its effects.

Furthermore, there was also the CJEU’s judgment in Case C-523/10, Wintersteiger. This case concerned the infringement of a national trade mark right but in a situation involving the Internet, websites and keyword advertising. More specifically, the CJEU had reasoned:

36 It is true that the technical display process by the advertiser is activated, ultimately, on a server belonging to the operator of the search engine used by the advertiser. However, in view of the objective of foreseeability, which the rules on jurisdiction must pursue, the place of establishment of that server cannot, by reason of its uncertain location, be considered to be the place where the event giving rise to the damage occurred for the purpose of the application of Article 5(3) of Regulation No 44/2001.

37 By contrast, since it is a definite and identifiable place, both for the applicant and for the defendant, and is therefore likely to facilitate the taking of evidence and the conduct of the proceedings, it must be held that the place of establishment of the advertiser is the place where the activation of the display process is decided.

38 It follows from the foregoing that an action relating to alleged infringement of a trade mark registered in a Member State through the use, by an advertiser, of a keyword identical to that trade mark on a search engine website operating under a country-specific top-level domain of another Member State may also be brought before the courts of the Member State of the place of establishment of the advertiser.

That said, it was unclear to the German court whether the CJEU’s reasoning in Wintersteiger could be applied by analogy to give the German court jurisdiction in the present situation which involved design rights. This was no easy matter as the issue of jurisdiction in situations involving the internet was a topic that divided opinion in German legal literature.

In view of the uncertainties surrounding the correct interpretation of EU law, the Oberlandesgericht in Düsseldorf decided to make a preliminary reference to the CJEU.

Questions Referred
My unofficial translation of the questions asked by the Oberlandesgericht in Düsseldorf reads:

1. Can a national court – whose jurisdiction in a Community design enforcement action arises from a defendant solely on the basis of Article 79(1) Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs when read together with Article 6(1) of EU Regulation 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil matters – take measures against the first defendant which apply throughout the Union and which prevail over the supplier relationships, when an individual domiciled in another Member State has supplied potentially infringing goods to defendants in the Member State concerned?

2. Is Council Regulation (EC) No. 6/2002 on the Community design […], and Article 20 (1)(c) in particular, to be interpreted as meaning that a third party may depict the Community design for commercial purposes, when he wants to sell accessories to goods that correspond to the Community design owned by the right holder? And if so, then which criteria are applicable?

3. How is the place “in which the infringement was committed” in Article 8(2) of Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations, to be determined in situations where the infringer of the Community design infringing goods
a) runs a website and this website is also directed not only to the Member State in which the infringer is domiciled but also to other Member States,
b) forwards to Member States other than the Member State in which he is domiciled?

Is Article 15 (a) and (g) of the Regulation to be interpreted as meaning that the choice of law is also applicable to the facilitating acts of other people?

This case was sent to the CJEU together with a similar one which also involved Nintendo. In that second reference, the German court asked the CJEU identically worded questions. The distinguishing feature of the second reference is that its subject matter concerns Balance Boards made by Nintendo, and Balance Boards made by the defendant parent company. This second preliminary reference has now been docketed by the CJEU as Case C-25/16, Nintendo.

Last year, the Oberlandesgericht Düsseldorf made a couple of other preliminary references to the CJEU about jurisdiction, subsidiaries, licensees, and the enforcement of intellectual property rights.

Update – 5 February 2016
Nintendo is a repeat player at the CJEU, and has been involved in these preliminary references: Case C-355/12, Nintendo – a proportionate response to game piracy or an unjust market foreclosure?