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Case:
RGZ 58, 24 IV. Civil Senate (I 418/03)
Date:
27 February 1904
Judges:
Professor Basil Markesinis
Copyright:
F H Lawson and B S Markesinis

Three designs were entered in the Register of Designs on behalf of the defendant firm . . . In the summer of 1901 the defendant, under threats of an action for damages and a criminal prosecution, forbade the plaintiff to copy the designs. He did so, at all events by a letter of 2 September concerning carpets, mats, and rugs made of jute pile and, under the same date, by letters to two of the plaintiff’s weaving managers. The plaintiff alleged that the defendant had also forbidden the manufacture at an earlier date. In consequence the plaintiff had already, on 10 June 1901, discontinued the manufacture of jute pile in his business. On 15 September 1901 the defendant prosecuted the plaintiff for an offence against section 10 of the Act of 1 June 1891, whereupon a preliminary enquiry was instituted against the plaintiff.

Before that enquiry was concluded the plaintiff sued the defendant claiming that he should (i) agree to a cancellation of the design and (ii) pay compensation for the damage arising from the prohibition against manufacture and the prosecution. The claim under (i) was based on the fact that the design was already, at the time of the notice, a matter of common knowledge.

The defendant admitted that claim.

The Landgericht granted the claim. On appeal by the defendant the Oberlandesgericht made the order to pay compensation depend on the failure of the proprietor of the defendant firm to deny on oath his knowledge of the design when the notice was sent. On application for review that judgment was set aside for the following

Reasons

The Court of Appeal starts with the statement that the plaintiff ceased manufacturing the articles corresponding to these designs in consequence of the defendant’s demand referring to their registration and that, as a result, the defendant was not entitled to contend that the plaintiff was not forced to accede to his demand. No precise moment is indicated when the demand and the cessation occurred and it is left undecided whether they had not, as the plaintiff alleged, already taken place before the defendant’s letter of 2 September 1901 to the plaintiff and his weaving managers. The Court of Appeal finds that the defendant’s designs had been wrongly registered since they were not entitled to protection and that, therefore, the defendant had no right to prohibit the plaintiff’s business activity. For the damage, however, occurring to the plaintiff from the stopping of production and the prosecution, the court is prepared to make the defendant liable only if there was knowledge of the lack of justification and not merely negligent ignorance. It considers that the evidence so far obtained does not point to knowledge at the critical time and so decides to tender an oath to the defendant proprietors of the firm. According to the original form of the oath, each of the two partners was to swear that on 2 September 1901 he did not know that the registered article was a matter of previous knowledge. The form of the oath was later modified to read that each of them should swear that ‘It is not true that at the time when the plaintiff was required by our company to stop manufacturing the objects protected by our designs nos. 156083, 156084 and 156465, I knew . . .’. Even if one assumes that the appellate judge’s view of the law is to be approved, this form of oath must still give rise to doubt. For no precise moment is indicated to the swearer as to which he must affirm on oath the truth of the fact of his ignorance; it is left to his conscience to consider which moment to specify among several possible incidents to which his sworn ignorance would refer. Thus the formulation of the oath contains a serious degree of subjective uncertainty. Whether that alone would suffice to justify setting aside the appellate decision may be left undecided. But there are further grounds. The compensation to which the plaintiff is entitled as a result of the prosecution also depends on the oath. According to the accompanying criminal records the prosecution bears the date 4 September 1901. Hence that moment is decisive for liability under the prosecution. The present uncertain form of oath has its basis in the fact that so far there has been no finding about the factual correctness of the disputed allegation of the plaintiff that the stopping of production consequent on the defendants’ demand had already taken place on 10 June 1901. If now the oath is refuted, so that the bad faith of the defendant partners is established, there is clearly no interest in specifying more closely the moment when their knowledge began. Assuming, however, that the oath is sworn and also that the request mentioned in the oath occurred before 4 September, in particular on 10 June 1901, it is obvious that the earlier moment of ignorance would be quite irrelevant to the claim for compensation arising out of the prosecution. These considerations would be enough to lead to a setting-aside of the contested judgment.

The setting-aside, however, must also result for a second and more comprehensive reason. The Court of Appeal makes an error of law when it denies the applicability of § 823 I BGB and, therefore, is prepared to make the defendants’ liability depend only on their knowledge that their design lacks protection. At the time when the defendants, invoking their right to have their design protected and threatening civil and criminal proceedings, forbade the production of the jute pile in question, the plaintiff had already taken up the manufacture of those objects in its business, although there is up to now no certainty of the extent to which that had happened. The defendants, therefore, are chargeable with having encroached on the established business of the plaintiff by virtue of a right that did not belong to them and hence in a manner contrary to law. The plaintiff, who claimed that he already at that time had ten looms devoted to the manufacture and would, but for the prohibition, have extended the application to 50 looms, believes that the defendant’s conduct constitutes also an invasion of his property rights, in that it had unlawfully hindered the full use of manufacturing installations owned by him. That view can indeed not be approved. Against the property itself of the plaintiff, which was never in question, no invasion was intended or directed. It was and remained in its content and legal signification the same as if the plaintiff had done his manufacturing not on his own but on some one else’s looms. On the other hand, it is both accurate and to the point when the appellant, associating itself with the plaintiff’s explanation of first instance, adopts the point of view that the business was disturbed.

§ 823 I BGB obliges anyone who recklessly or negligently injures the life, body, health, freedom, property, or other right of another contrary to law to make good all damage that ensues.

It is acknowledged that it is not the liability for doing economic damage as such that is here in question, but only that economic damage which is a consequence of the violation of the particular legal interests and rights specified by the Code. Hence the question is whether the defendants have violated such a particular legal interest or right of the plaintiff.

One can first of all consider the injury as an interference with the plaintiff’s freedom inasmuch as the plaintiff was reduced by outside interference with his will to discontinue the manufacture of jute pile. But this point of view would not lead to the desired result. Admittedly, in the dispute about the meaning attached to freedom by the Code, notable authors have expressed the view that it must be understood quite generally as the free exercise of the will. But even if one were willing to follow that broadest interpretation, finding a basis for compensation would always presuppose an unlawful injury to the free exercise of the will, and it is out of the question that the Code intends to declare the encroachment on another’s will unlawful for the reason only that there is no particular right so to encroach. The encroachment on the free exercise of the will would acquire the character of unlawfulness only through the form in which it occurs, such as deceit, threats, force, and these facts would also have to include, as in § 826 BGB (which was applied by the Court of Appeal), at least the defendant’s consciousness of the legal invalidity of the registration of the designs. (Cf. Decisions of the Reichsgericht in Civil Cases, vol. 48, 123.)

Then there is the view that the law raised the interests mentioned by it (life, body, health, and freedom) to the status of objects of an especial right to them and through the words ‘or a similar right’ intended to extend its protection beyond those expressly mentioned to other vital interests. This did not find favour in the case-law of the Reichsgericht. It has been held already that the theory which wished to construct from the not yet limited range of particular interests, special rights to personality and individuality to an extent which has not yet been determined finally does not appear particularly suitable as a basis for interpreting the law. Thus, for instance, it has been denied that either the freedom to do business or the faculty to exploit one’s labour without hindrance is protected by § 823 I BGB. There is no need to go further into this matter. For as distinct from the legal possibility of pursuing the occupation of one’s choice, as it is accorded generally by § 1 of the Gewerbeordnung, it has already been accepted in several decisions of different Senates that a subjective right is to be recognized to an actually established and active business which is capable of being directly infringed. And, it has already been held that attacks on the exercise of a business can lead to an injunction [references follow]; but they can also found a claim for compensation arising from injury to the exercise of a business. This view formed the basis, in part, of the judgment delivered by the Senate on 25 June 1891 (RGZ 28, 248, especially 247, 249) before the enactment of the Wettbewerbsgesetz (Act on Unfair Competition). That the exercise of a business can be the object of legal advice under § 823 I BGB was decided by the IV Civil Senate in a judgment of 6 March 1902 and the VI Civil Senate in a judgment of 29 May 1902 (RGZ 51, 369, in particular 373), and also in a judgment of 14 December 1903 (RGZ 56, 271) though with some reservations. This Senate believes that it ought in principle to take the same position. That the established independent exercise of a business not only involves the free manifestation of the will of the person exercising it, but that will has also found in it its embodiment as an object, is the firm foundation for the acceptance of a subjective right to that exercise. Disturbances and encroachments aimed directly against the exercise of a business may therefore be looked upon as injuries falling under § 823 I BGB. Such an attack, directed against the exercise of a business, clearly exists when the legal admissibility of that exercise is denied to a certain extent and its restriction demanded on the ground of an industrial property right to the contrary. That attack is, however, contrary to law when the alleged protected industrial property right does not in truth exist, because it is no longer a question of permitted competition. The law under certain conditions puts at the disposal of persons exercising a business valuable exclusive rights in the form of the protection of patents and designs, by virtue of which they can secure the products of their inventive activity against attacks by way of parallel competition and reserve them for their own advantage. It is only a counterpart of their privileged position that they also answer for the existence of the right they enjoy to the self-seeking restriction of the free exercise of their business by their opponents, and must not only enjoy the advantages but also bear the risks that are involved in the assertion of such exclusive rights to patents and designs. In taking that view this Senate believes that it does not dissent from the opinion expressed by the VI Senate especially in the second of its decisions, mentioned above. Admittedly the protection of the exercise of a business against unfair competition is said in that decision to be found according to positive law in the provisions of the Wettbewerbsgesetz, of § 823 II BGB in combination with the penal rules concerning defamation and undermining credit, as well as in §§ 824 and 826 BGB, whereas the notion is rejected that any disturbance or encroachment on another person in the exercise of his business constitutes a violation of a law falling, as contrary to law, under § 823 I BGB. That, however, is not to deny that in some circumstances such an attack may be seen to be an injury contrary to law. The VI Civil Senate did not, as now, have to decide the particular case where the encroachment of another’s exercise of his business was based on an alleged exclusive industrial property right that did not in reality exist.

Accordingly, the contested judgment cannot be upheld, since by not applying § 823 I BGB it contravenes the law. But on the merits itself no decision is possible. The Court of Appeal has so far only found that, apart from the results of the submission to the oath, the knowledge of the invalidity of their design on the part of the defendants has not been proved. On the other hand the question whether that ignorance is to be treated as negligence or whether there is a sufficient excuse has not yet been examined. Even so the Court of Appeal has indeed affirmed the causal connection between the demand of the defendants which, as stated before, remained somewhat uncertain, and the suspension of the plaintiff’s business. It will, however, have to be investigated in addition whether on this occasion the plaintiff’s conduct also constitutes contributory negligence that would justify the application of § 254 BGB. Wherein the legal defect in the defendants’ design consisted has not yet been sufficiently elucidated. According to certain indications it does not appear to be excluded that already from the start the plaintiff at least suspected the invalidity of the registration and in course of time soon obtained a more exact knowledge of it . . .

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