Tuesday 6 September 2011

Contractual Fines in Undertakings to Cease-and-Desist

PatLit has posted a message on a fine of EUR 5000 for the breach of a cease-and-desist order. Apparaently, the Nichia PR dept. does a good Job and I the blogosphere (including me) is helping them doing viral marketing.

I would like to take this occasion to explain some legal background on this

According to the Nichia press release , there was no court order to cease-and-desist but rather an out-of-court settlement including a confession statement. This is cease-and-desist agreement rather than a court order and ordinary contractual law applies.

It is very common that such an undertaking to cease-and-desist contains an entitlement to a contractual fine. 5000 EUR is a very common amount for this type of fine.

Since inappropriate amounts for the fine lead to the nullity of the entire claim, the undertakings often do not specifically fix the amount but rather say that the amount "shall be appropriately fixed by the right owner and re-assessed by disctrict court in the case of dispute" (so-called "Hamburger Brauch").

It appears to me that this is what has happened here.

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