There are usually two ways to respond:
- The entrepreneur issues a declaration to cease and desist with a penalty clause as requested by the warning party and promises to pay a contractual penalty in the event of a further infringement. The amount of the penalty is either fixed from the outset or initially left open. It is then determined by the "contractual partner", i.e. the competitor issuing the warning, in the event of a specific infringement.
- The entrepreneur refuses to issue a cease-and-desist declaration because he considers his actions to be lawful and the warning letter to be unjustified. In this case, he risks the warning party taking legal action against him for injunctive relief in the form of an interim injunction and/or legal action. If the warned entrepreneur is unsuccessful in the legal dispute, this is associated with considerable legal fees and court costs amounting to several thousand euros.
In this case, however, the court does not order the warning party to pay a contractual penalty in the event of a repeated infringement. Instead, it threatens to impose an administrative fine in the event of a repeat infringement of rights If such an infringement occurs, the party issuing the warning must apply to the competent court to impose an administrative fine on the infringer.
If an entrepreneur assumes, after legal examination or consultation, that it is highly likely that he has committed an infringement, the "classic" remedy is a cease-and-desist declaration with a penalty clause. This eliminates the risk of a further infringement assumed by case law and fulfills the cease-and-desist claim of the party issuing the warning. The declaration to cease and desist avoids the aforementioned costs of legal proceedings. As a rule, the entrepreneur "only" has to reimburse the costs for the out-of-court warning by a lawyer or a competition or consumer protection association.
Reasons against a cease-and-desist declaration with penalty clause
Nevertheless, there may be valid reasons for the entrepreneur not to submit a cease-and-desist declaration with a penalty clause - even if the infringement is clear and the warning is therefore justified: The most significant difference for the entrepreneur being warned between submitting a cease-and-desist declaration with a penalty clause and accepting a court injunction with the threat of a fine lies in the legal consequences in the event that the entrepreneur being warned commits another similar infringement:
- If a declaration to cease and desist with a contractual penalty is issued, a cease and desist agreement is concluded with the party issuing the warning, often a direct competitor. In the event of a further breach of the contractual penalty, the entrepreneur usually has to pay several thousand euros to the warning entrepreneur (competitor). This will motivate him to take particular care to ensure that he does not commit the original infringement again. This is because the contractual penalty directly results in a "profit" for his competitor.
- The court injunction, on the other hand, can only lead to the repeated infringement of rights being sanctioned with a fine. This fine is paid to the state treasury. As a rule, this results in less "pursuit zeal" on the part of the injunction creditor, i.e. the original warning party (competitor).
For the latter reason, there are certainly entrepreneurs who accept a court conviction despite the higher costs. In the event of a repeated infringement, they prefer to pay the state rather than the competitor issuing the warning.
Alternative: Notarial declaration of submission
A court injunction (possibly in the form of an interim injunction) is an enforceable decision. As mentioned above, it is not a payment to the injunction creditor, i.e. the party issuing the warning, that is enforced, but a fine in favor of the state treasury.
However, an enforceable decision in this sense can also be obtained much more cheaply than by accepting court proceedings associated with legal fees and court costs.
Alternatively, the warned entrepreneur can have a declaration of submission issued by a notary. This is because a notary can also draw up enforceable documents, including those relating to an obligation to cease and desist. The costs of such a declaration are usually less than ten percent of the lawyer's and court costs.
The procedure: The entrepreneur provides the competitor issuing the warning with such a notarial deed. This contains the information that he still has to apply to the competent enforcement court to issue a ruling on the threat of an order. In this context, the entrepreneur offers to reimburse the (minor) costs incurred by the warning party.
In this way, a warning can be settled out of court without the warning party (competitor) having to be promised a contractual penalty. This procedure should be considered in any case in cases where it is feared that the warning party is primarily concerned with asserting claims for contractual penalties at a later date.
A notarized declaration of submission is legally quite complicated and can therefore only be handled with the help of a lawyer. However, it is generally advisable to seek legal advice in the event of warnings.
Addendum from 21.11.2017
Last year, the Federal Court of Justice published a decision that largely rejects notarial submission to immediate enforcement to settle a warning letter. As the handling of such a notarial declaration of submission is associated with a number of imponderables for the party issuing the warning and is not as practicable as accepting a cease-and-desist declaration, the Federal Court of Justice believes that the notarial declaration of submission is not sufficient to eliminate the risk of repetition. Although there are still authoritative voices in the legal literature that take a different view, the aforementioned path remains closed to the warned party for the time being, as it must assume that the regional courts and higher regional courts will be guided by the aforementioned BGH case law.
The warned party is therefore ultimately faced with only two alternatives: to submit a declaration to cease and desist, which particularly motivates the warning party to search for future infringements, or to be convicted by a court with a lower risk in this respect, but with an initially higher cost burden.