Both parties were engaged in selling books through book clubs. They advertised by using abbreviations of their firm name. The plaintiff called itself "German Home Library", the defendant chose the name of "Stuttgart Home Library".
A book club bearing the name of "German Home Library" existed from 1916 until 1945. Since its owner at that time had been the official publisher of the National Socialist Party, the business was taken over by the Allied Control Commission and was continued subsequently in reduced form under the name of "Hamburg Book Circle". In 1949 the business of the "German Home Library", including all its assets and liabilities, was transferred to a German trade union, which founded a new firm which began operations on 2 July 1950 and advertised under the name of "German Home Library".
The defendant was established on 4 June 1949 and took on the firm name of "Stuttgart Home Library" on 24 August 1949.
The plaintiff contended that he was the successor of the business established in 1916, that the term "Home Library" had acquired the reputation of a slogan identifying it with the plaintiff and had been accepted as such by the book trade and by the reading public. He alleged that 12 BGB (name and para. 16 of the Law of Unfair Competition and para. 25 of the Trademark Law) had been violated.
The defendant denied that the plaintiff was the successor of the original business carrying the name "German Home Library". He also claimed that the plaintiff could not claim the name "Home Library" as his own, but, at best, only that of "German Home Library". However, no danger of confusion existed between that name and the name of the defendant. In any event, due to laches the plaintiff had lost any right to complain about a possible confusion, seeing that, as a result of several years of advertising the defendant had acquired a valuable position which was protected in law.
The District Court of Hamburg gave judgment for the plaintiff. The Court of Appeal of Hamburg rejected the claim. Upon a second appeal by the plaintiff the case was referred back for the following
Among the points to be considered by the Court of Appeal in respect of the remaining question of laches (Verkwirkung) ... the following must be noted:
I. As this Court had stated several times, following a constant practice of the Reichsgericht [references] the doctrine of laches starts from the notion that the person committing the injurious act was entitled to assume in the particular circumstances of the case that the injured party was prepared to tolerate the permanent use of the description in issue with the result that a belated claim based on trademarks, get-up or other rights of identification of the injured party was contrary to good faith. Contrary to earlier practice the Reichsgericht in its later discussions required no longer for a defence of laches to be successful that the party committing the injury must have obtained common acceptance of his use of the description; instead it is regarded as sufficient if the party committing the injury is in a state of possession which deserves protection [references]. This practice has been attacked by a number of writers especially in the post-war period [references]. This Division has not taken a final position on this question. In so far as the present facts should give rise to the Court of Appeal to consider this question the following general observations should be noted.
This Division does not regard it as necessary in every case that the description in issue must have obtained at least a geographically limited public acceptance [references]. Also the protagonists of the opposite view must admit that the acquisition of a public reputation cannot, as such, justify the defence of laches. Thus Reimer [references], among others, requires that the injured party must have tolerated the injurious act in the knowledge, or in the culpable ignorance, of the public recognition does not matter by itself; it matters, in addition, whether or not a balancing of interests in the particular case, having regard to all the circumstances governed by the principles of good faith in accordance with para. 242 BGB, justifies the rejection of the defence of laches. It becomes clear that satisfactory results can only be achieved by this method if a situation is envisaged in which the injured party behaved unquestionably in a manner which entitled the injuring party to believe that his acts were being tolerated; in this case he cannot be blamed under any circumstances for having built up a valuable possession [references]. Simply to deny the injuring party the defence of laches in such a case on the ground that public recognition had not yet been acquired would not be in accordance with equity. This is so, in particular, if having regard to the size of his business and the extent of his advertising campaign determined thereby, the injured party could not even acquire public recognition of the disputed description if only in a limited area, or could only do so after a comparatively long time. In order to allow the defence of laches it is therefore unnecessary, as a rule, that the injuring party should enjoy a full right; instead it is sufficient, following the more recent practices of the Reichsgericht, that a more continuous, honest and undisturbed use of a description has created a situation which is of important value for the customers, which should be retained by him according to good faith and which even the injured party cannot context, if he had facilitated it by his conduct [references]. The observation [references] to the effect that it is unjust if the registered owner of a mark may have to give way, even if the injuring party cannot even assert his right against a third party, does not suffice to support the opposite view. The notion of laches applies not only in the law of trade marks and of Unfair Competition, but constitutes an aspect of the admissible exercise of rights, which is valid in all branches of law. The decision must not rely on absolute standards, in the present case on the acquisition of an exclusive right towards third parties. Instead it may accord entirely with equity if the injuring party is not restricted in his defence against a careless holder of a right, even if the injured party is unable to proceed against third parties on the strength of an exclusive right of his own. It is evident that in considering the prerequisites outlined here for admitting the defence of laches judicial discretion may be exercised broadly and that the parties feel a certain element of uncertainty as to the outcome of the dispute. In this respect matters are not different in all other branches of law where the notion of good faith is in issue, that is to say when the facts in their manifold variety do not lend themselves to be judged by a system of rules which are fixed once and for all. Consequently there is no reason why the defence of laches should be judged by different standards and made to depend on different conditions, in the law of Trademarks and Names, which may lead to grave injuries in individual cases. On the other hand, it would be wrong to assume that the continuation of the more recent practice of the Reichsgericht may be intended to facilitate a successful plea of the defence of laches. No such effect is either intended or to be feared if the courts weigh and examine all these circumstances which are required according to the principles developed by the practice of the courts, before the defence of laches can operate.
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