Trademark licensees watch out! New rules on right to bring suit against trademark infringers

Under Austrian law, holders of exclusive trademark licenses used to be allowed to take legal action against infringers by virtue of the exclusive license, i.e. even if the license agreement did not expressly confer such right to the licensee [OGH 4 Ob 178/00f, BOSS-Brillen II]. Only the non-exclusive licensee required an express grant of right to bring suit in order to enforce the trademark  [OGH 4 Ob 209/02f, Brühl, ÖBl 2003, 87 (Hiti)].

Since a recent amendment of Section 14 (3) of the Austrian Trademark Protection Act that took place in 2019, each licensee (i.e. also the exclusive licensee) requires the consent of the licensor in order to enforce the licensed trademark against third parties. However, the holder of an exclusive license may bring such proceedings if the proprietor of the trademark, after having been noticed by the licensee, does not himself bring infringement proceedings within an appropriate period.

The new rule is based on the revised EU Trademark Directive. This change to the licensee’s legal standing has remained largely unnoticed by the public but may have far-reaching consequences for exclusive licensees, who are now in a worse position compared to previous Austrian (case) law:

If the license agreement does not provide for a right to sue, the new rule requires the exclusive licensee first to request the licensor to act against the infringer within an appropriate period. What is “appropriate” can of course be subject to debate and may depend on the circumstances of the individual case.

Particularly in cases where there is an active licensee and a passive licensor or there are tensions between the licensee and the licensor, the new mechanism of asking and waiting for the licensor’s action or permission to take action could become burdensome.

Against the background of this new legal situation, it is more advisable than ever to pay attention to the right to sue already in the course of contract negotiations and agree on a feasible mode how to deal with infringers.

Of course, there may also be good reasons for deliberately not granting a licensee a right to sue; for example because the licensor does not want to risk that his licensees will start disputes behind his back, which in turn can trigger counter-attacks on the trademark, upset business partners or impair the brand’s image.

These and other aspects in connection with the right to bring must be taken into account when drafting a reasonable enforcement clause in a trademark license agreement. Sometimes even a well negotiated and differentiated clause on the licensee’ right to enforce a trademark turns out as invalid, if the general agreement is no genuine IP licence agreement but a mere distribution agreement, which – under the Austrian Rules of Civil Procedure – does not grant legal standing in proceedings against infringers at all. This can lead to a bad awakening once an infringement occurs or proceedings have to been filed by the “wrong” party.

GFR will be pleased to advise you on these and other questions in connection with licensing agreements.

PS: If you are interested in a general overview of the trademark law amendment 2019, we recommend the article “MSchG-Nov 2019 – Abschluss der österreichischen Umsetzung der Modernisierung des europäischen Markenrechts in ÖBl 2019/2” (in German), to which our partner Manuel Wegrostek contributed as an author and as a member of a working group of the Austrian Association for the Protection of Intellectual Property (ÖV).