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Introductory example

The company FamilyTrack is about to enter the market with its newly developed tandem bar. In addition to organizational and economic tasks, legal issues are increasingly coming to the fore. The entrepreneur does not know whether competitors will simply try to imitate the tandem bar – or whether it will subsequently turn out that certain features are already blocked by third-party property rights. Both scenarios are worrying for him: if his product is copied, he risks losing time, money, and his competitive edge. If he himself unintentionally infringes on the property rights of others, his entire market entry could potentially be jeopardized. This uncertainty accompanies him every step of the way and makes it clear that entering the market involves not only economic but also legal uncertainties.

Following the introduction to the various industrial property rights and their protection requirements, the question now arises as to how these rights can be enforced if they are infringed. The question of whether a particular action actually infringes a property right is deliberately excluded. This issue—the so-called “scope of protection”—varies from property right to property right and will be dealt with in more detail in later sections.

This section deals with the consequences of an infringement. The owner of an infringed property right has various civil law claims at their disposal that enable them to take action against the infringement. These usually include injunctive relief, claims for damages, and other legal means to prevent unauthorized use.

For the manufacturer of the tandem bar, this means that if a competitor uses the folding mechanism or the double S-shape without permission, they could seek an injunction and claim damages in court. This would effectively prevent unauthorized use by competitors and allow the manufacturer to earn money from their intellectual property right.

In addition, later sections also take a closer look at the perspective of the infringer. Here, we analyze the legal consequences and sanctions that the infringer may face if they unlawfully use an industrial property right. These range from discontinuing further use to high damages payments and potential criminal consequences.

If the manufacturer of the tandem bar infringes a third-party property right—such as a similar, already protected mechanism or a registered design—it would have to expect to stop production, pay damages, and, in the worst case, even face criminal consequences.

Risks posed by third-party intellectual property rights

From a business perspective, innovation is often profitable, but in addition to general business risks—such as product safety, supply bottlenecks, or problems with contractual partners—it also carries the risk of infringing third-party intellectual property rights (“third-party IP”).

For the bicycle company, this means that even if the development of new models is promising, it must take into account that existing property rights of other market participants could be affected.

Competitors also have patents and other property rights. The transition from innovator to potential infringer can happen quickly – even without any intention to imitate. It is even possible for a company to infringe on older rights despite having filed its own patent application.

For the bicycle company, this means that even if the newly developed folding lock or the joint of the bar is innovative and protectable, a third-party patent on a similar process or the double S-shape could still exist.

Intellectual property infringements arise in various ways and often lead to legal disputes. While deliberate imitations do occur, many infringements arise unintentionally due to carelessness or a lack of research.

For the tandem bar company, this means that even without any intention to imitate, it could find itself in conflict if existing intellectual property rights are not observed. Careless actions can quickly lead to costly lawsuits.

In the area of copyright and design protection, unintentional infringement is less likely because the areas of protection are more narrowly defined and copyright law requires the use of the original.

Therefore, the risk of the bicycle company unintentionally infringing on third-party designs or copyrighted works is low. A design conflict would be more likely to arise if a very similar form were deliberately adopted.

In the case of trademarks and technical property rights, however, there is a higher probability of unintentional infringements. Brand names can be similar, and technical solutions may already be protected by third-party patents.

This risk is particularly relevant for the bicycle company: the name of the product (“FamilyTrack”) could conflict with an existing trademark, and a developed mechanism could already be protected by a third-party property right.

To minimize risks, it is advisable to conduct thorough research in advance, known as “freedom-to-operate analyses.” This allows you to check whether existing third-party rights (e.g., patent or trademark rights) would be infringed by entering the market. This analysis is standard practice, especially for projects with high investment volumes.

Before introducing new bar models, the bicycle company should therefore search for similar trademarks and, if necessary, also conduct a patent search. This will help to avoid conflicts as far as possible and create legal certainty for market entry.

Claims for money and damages

The following section discusses the consequences of infringing industrial property rights. The focus is on the consequences of infringing the property rights, i.e., the monopoly rights of your competitors.

The consequence of an infringement of property rights is that the owner of the infringed property right has a claim to compensation for the financial disadvantage suffered as a result of the unauthorized use by the infringer. In case of doubt, this damage consists of the loss of a license. The claim is directed against the infringer, i.e., the owner can demand money from the infringer and also enforce this claim in court. For the manufacturer of the tandem bar, this means that if they infringe on third-party intellectual property rights, they could be obliged to pay damages to the rights holder. Conversely, they could themselves claim damages if a competitor infringes on their intellectual property rights to the tandem bar.

Such a claim, often referred to as a monetary claim or claim for damages, always relates to the past. It covers losses or lost profits incurred by the intellectual property rights holder as a result of the infringement. In legal disputes, the court usually assesses the amount based on the sales revenue generated by the infringer with the product in question. The higher the sales revenue, the higher the damages.

If a competitor of the bicycle manufacturer unlawfully sells tandem bars with the protected double S-curve and achieves large sales volumes, the value of the claim increases significantly. However, if our company itself unintentionally infringes the rights of third parties, a correspondingly high claim for damages could arise.

The exact amount of the claim is often determined by comparative calculations. These can be negotiated directly between the parties or after a court decision. For example, an entrepreneur may be obliged to pay a percentage of the sales revenue. Typically, this percentage is in the single-digit range, but depends on the significance of the infringed invention or trademark for the product. If a competitor of the entrepreneur infringes third-party rights and sells, for example, 5,000 tandem bars, they would have to expect to pay a percentage of the sales.

The percentage of sales that the owner of the infringed property right can claim varies depending on the importance of the property right. In the case of particularly important technical solutions or trademarks, it may be above average. If the protected double S-shape or the folding mechanism is considered an essential factor for the product's success, a competitor could enforce particularly high shares of sales.

Injunction

If an entrepreneur has been ordered to cease using a particular patented technology, any further use of this technology is subject to a so-called coercive penalty. This sanction is intended to ensure that the court ruling is actually complied with. The owner of the property right has the right to monitor compliance and to apply for such penalties to be imposed in the event of infringements. These penalties can be substantial, especially in the case of repeated infringements. The court can even impose a penalty for each individual day on which the technology continues to be used unlawfully.

Larger companies with considerable financial resources could deliberately use the patented tandem bar technology, simply factor in the monetary claim, and pay. While the bicycle company is dependent on its intellectual property rights to compete in the market, the large corporation could use its financial power to effectively force the small company out of the market: It offers the copied product at a lower price, quickly achieves higher sales volumes, and thus weakens the market position of the bicycle company, even though the latter is in the right.

The economic consequences of such a ruling are not only manifested in the fines imposed directly, but also in particular in the impact on the business itself. Discontinuing the use of a key technology can have far-reaching consequences for a company, affecting both the production and distribution of the product in question. The speed and difficulty with which an alternative solution can be implemented depend largely on how important the technology is for the product in question.

If the patented double-S curve of the tandem bar is merely considered a “nice-to-have” feature and the product can still be sold without it, the situation can be dealt with relatively easily. Although the costs of product adaptation could represent a financial expense, this would not be a change that would threaten the company's existence.

For companies that are particularly dependent on the success of a specific product—such as a start-up with only one product—such a situation can pose a potential threat. In contrast, a large corporation with a diversified product range is potentially better able to cope with such an injunction, as it is less dependent on the success of a single product.

However, if the double S curve is essential for the sale of the tandem bar and without it a sale is not possible, an injunction could lead to considerable problems.

The economic relevance of an injunction claim depends largely on the central importance of the patented technology for the product in question and on the availability of alternative technical and economic options. Companies are therefore obliged to carefully weigh up the risks of patent infringement, especially if the technology plays a decisive role in their business success.

For the relatively small bicycle company, this means that it should check before the market launch whether the patented technology of the tandem bar is potentially blocked by third-party property rights. If it turns out that a technology is indispensable, it would be sensible to negotiate a license agreement with the rights holder at an early stage rather than run the risk of an injunction. If alternative technical solutions exist, the bicycle company should examine them and, if necessary, switch to an independent, legally compliant solution. This will prevent a court injunction from paralyzing the entire production process.

The injunction does not only apply in the field of patent law, but also applies to the infringement of other industrial property rights, such as trademarks, designs, and copyrights. Similar to patent law, a coercive fine can also be imposed in trademark law if the competitor disregards the court injunction. If the competitor continues to use the protected brand name, the trademark owner can apply to the court for the imposition of coercive fines, which are associated with considerable financial penalties for the competitor.

In the case of trademark infringement, this means, for example, that the owner of a trademark—in this case, “FamilyTrack”—can prohibit the use of this brand name by third parties, in particular by competitors in the same business area. The use of the brand name “FamilyTrack” by a competitor in the field of bicycle technology therefore constitutes trademark infringement. In such a case, the owner of the trademark can enforce the injunction in court, with the result that the competitor must refrain from using the brand name in the protected area.

However, an injunction does not imply the complete elimination of the competitor from the market. As a rule, they can find a new brand name and continue to offer their product under this new name. However, this name change is associated with considerable disadvantages for the infringer. Changing the brand name involves a considerable amount of time, money, and communication effort. The competitor is forced to develop a new, marketable name and establish it in the public eye, which usually involves considerable effort and investment. In addition, they must ensure that all customers, business partners, and the public are informed of the name change in order to ensure the continuity of their business.

A competitor initially uses the name “FamilyTrack” unlawfully and is forced to abandon this name due to the injunction. In order to remain in the market, they decide to market their product under the new name “BikeConnect” in the future. The competitor now has to invest heavily to anchor “BikeConnect” in the minds of customers—new advertising, new packaging, a new domain, and the conversion of all communication channels. During this transition phase, the bicycle company gains a competitive advantage because it can continue to use its brand name “FamilyTrack” without interruption, thereby consolidating its market position.

The right to injunctive relief in trademark law thus proves to be an extremely effective instrument. It guarantees the trademark owner the exclusive use of the trademark-protected sign and protects its trademark from unlawful use by third parties. The right to injunctive relief means that only the owner is authorized to operate on the market with the trademark-protected sign.

Enforcement of claims

In practice, the enforcement of intellectual property rights infringements, such as injunctions or claims for damages, often takes place through legal proceedings, which are to be regarded as a last resort. Apart from large companies that have the financial resources to bear the costs of lawyers and courts, legal disputes in the field of patent or trademark law are generally not a preferred option. Rather, legal proceedings are often only the very last resort for resolving a dispute.

One of the main reasons why companies avoid legal proceedings is the length of time such proceedings take. Patent or trademark disputes can drag on for several years without either party achieving legal certainty. This leads to ongoing uncertainty as to whether the alleged infringer's product may remain on the market or not. This uncertainty poses significant risks for both parties.

A and B are two small bicycle companies. Bicycle company A develops a tandem bar with a novel folding mechanism and applies for a patent. Shortly thereafter, bicycle company B launches its own tandem bar with a similar mechanism. A sues B for patent infringement. A lengthy legal battle ensues: B is allowed to continue selling its bars for the time being, but with each unit sold, the risk of having to pay retroactive damages increases. A, in turn, invests in lawyers and court costs without being sure whether the patent will actually hold up in the end. Both companies are reluctant to make major investments in advertising or production capacity because it is unclear who will be able to serve the market in the long term. For years, the outcome of the dispute hangs in the balance—and while large corporations can sit out such lawsuits, small companies like A and B quickly reach their economic limits.

The costs of legal proceedings are considerable. Legal and court costs in infringement disputes usually amount to between €10,000 and €100,000, with these costs ultimately being borne (at least in part) by the losing party. However, the loser of a lawsuit is not determined until the proceedings have been concluded, so that until then both parties bear their own costs provisionally. For smaller companies in particular, such a dispute can take on existential proportions. The question of whether it is worthwhile for the plaintiff to invest tens of thousands of euros in legal proceedings to prevent a competitor from using its own technology must therefore always be carefully considered. In many cases, it may be more advantageous for the patent holder to invest the money in new, innovative ideas rather than spending it on lengthy legal disputes. Legal proceedings are also not an advantageous option for the alleged infringer. Pending patent infringement proceedings are not attractive to investors and can increase the company's financing costs. As a result, legal proceedings usually entail considerable economic disadvantages for both the plaintiff and the defendant.

This places an enormous burden on the two small bicycle companies involved in the patent dispute: both bicycle company A (the patent holder) and bicycle company B (the alleged infringer) have to continuously pay large sums for lawyers, expert opinions, and court hearings without knowing whether they will ever recoup these costs. A invests in defending its patent in order to secure exclusivity in the market, while B tries to save its existence by proving that its folding mechanism is not covered by the patent. Every court hearing, every expert opinion, and every round of briefs consumes further capital. Even if one of the two is ultimately proven right, it is possible that both will be so weakened economically that they will no longer be able to serve the market successfully. For small businesses such as A and B, such a legal dispute can therefore threaten their very existence – regardless of the outcome of the proceedings.

Taking into account the aspects outlined above, it seems advisable in many cases to seek an out-of-court settlement before resorting to legal action. This can be achieved through direct negotiations or by concluding license agreements. In patent law, for example, it could be agreed that certain technical designs may not be used, while modified forms do not constitute an infringement. In trademark law, one solution could be that the previous brand name is no longer used, but a new name is accepted instead. An agreement offers the advantage of clarifying the legal situation immediately and amicably. If both parties are willing to do so, this is faster, less expensive, and less risky than lengthy legal proceedings. In addition, out-of-court settlements can help preserve the business relationships between the parties and find a solution that is satisfactory to both sides.

For the bicycle company, this could mean agreeing with the competitor that they may no longer use the double S-curve of our tandem bar in its identical form, but that a slightly modified form is permissible. At the same time, a compromise could be reached in the trademark dispute: the bicycle company retains exclusive rights to the name “FamilyTrack,” while the competitor is required to switch to a new name, such as “BikeConnect.” This would avoid a lengthy and costly legal battle without completely forcing either party out of the market.