Smoke and Mirrors: The Legal Risks of Misleading Business Identifiers

1. Lawful use as an unwritten requirement for protection

According to Section 5 (2) sentence 1 German Trademark Act (MarkenG), business identifiers are signs that are used in trade as a name, as a merchant's business name or as a special designation of a business operation or an enterprise. The only requirement for protection mentioned here is use in trade. Indirectly, it can also be inferred from the provision that only those designations are protected from the start of their mere use in trade that indicate how the business or its owner is called and thus have a "name function" (see Goldmann, Unternehmenskennzeichen, 5th ed. 2023, § 2 para. 21 et seq. with a plethora of further evidence). Other signs do not have a name function and, pursuant to Section 5 (2) sentence 2 MarkenG, require a secondary meaning in addition to use in order to be protected.

The wording of the provision is imperfect and, above all, incomplete. Not even the key requirement for the protection of business identifiers with a name function, namely the distinctive character as a name (see only Federal Supreme Court GRUR 2008, 1102, 1103 para. 9 et seqq. - Haus & Grund I), is mentioned in the wording.

Another unwritten requirement for protection is that the business identifier is used in a lawful way (Federal Supreme Court GRUR 2002, 706, 707 – vossius.de; Federal Supreme Court GRUR 2010, 156, 157 Tz. 23 – EIFEL-ZEITUNG; Frankfurt Court of Appeals, judgment of June 29, 2017, Ref. 6 U 231/16 – Lullababy; Hamburg District Court, judgment of. October 8, 2015, Ref. 327 O 477/14 – poppen.de). The requirement of authorized use corresponds to the legislative concept of trademark protection in accordance with the wider legal system, as reflected for the registered trademark in Section 8 (2) Nos. 5-13 MarkenG.

According to the general rules, the burden of establishing and proving the circumstances from which the lawful use can be derived lies with the owner of the business identifier. This is often overlooked, just as is the unwritten requirement for the protection itself.

2. Misleading business identifier are not used in a lawful manner

In particular, misleading business identifiers are used unlawfully. Business identifiers that mislead about commercial aspects have always been denied protection (see Imperial Court MuW XXX, 316, 317 – Einkaufskommission für Beamte, Angestellte und Arbeiter der Stadt Berlin GmbH; Federal Supreme Court GRUR 1960, 434, 435 – Volks-Feuerbestattung) because the protection of business identifiers is subject to a fairness proviso (see Federal Supreme Court GRUR 1954, 271, 273 – DUN-Europa). This is rightly maintained to the present day. Business identifiers whose actual usage in the course of trade is misleading contravene Section 5 Act against Unfair Competition (UWG). This breach of the law makes the use unlawful (see Munich Court of Appeals, judgment of October 8, 2009, Ref. 29 U 3082/09 – Gufic; Frankfurt Court of Appeals, judgment of June 29, 2017, Ref. 6 U 231/16 – Lullababy). And no protection can arise from such unlawful use.

3. When are business identifiers misleading?

a) Misleading about business affairs

The use of a business identifier that is misleading in terms of the information it conveys may constitute a misleading commercial practice within the meaning of Section 5 (1) and (2) UWG. In principle, any kind of misleading information about circumstances relating to the business or its owner can be relevant , in particular regarding the legal form, the size, the nature or structure of the company or the qualification of the entrepreneur whose business identifier is at issue (Section 5 (2) No. 3 UWG). It is also conceivable that characteristics of the goods or services offered can be inferred from the company logo that are not in line with reality (Section 5 (2) No. 1 UWG). A precise differentiation between the two alternatives can sometimes be difficult, but is also not necessary (for more details on recognized case clusters, see 4.).

The unwritten requirement of lawful use is thus applied fundamentally differently in relation to misleading use than the ground for refusal of protection of misleading trademarks pursuant to Section 8 (2) No. 4 MarkenG. According to this provision, a trademark is only in illegible for protection if no single way of use is conceivable that would not be misleading. When assessing whether there is a ground for refusal pursuant to Section 8 (2) No. 4 MarkenG, it is only a question of whether the content of the sign itself is deceptive and not whether the sign may be capable of creating misleading ideas about the company for whose goods or services the mark is used in the course of trade if it is used in a particular way (Federal Supreme Court GRUR 2002, 540, 541 – OMEPRAZOK; Federal Supreme Court GRUR 2012, 272, 275 para. 26 – Rheinpark-Center Neuss; Federal Supreme Court GRUR 2014, 376, 378 para. 23 – grill meister; Federal Supreme Court GRUR 2017, 186, 189 para. 21 – Stadtwerke Bremen). In contrast, the ground for refusal under Section 8 (2) No. 4 MarkenG does not relate to deception about commercial aspects of the trademark owner's company (Federal Supreme Court GRUR 2017, 186, 189 para. 23 – Stadtwerke Bremen).

The protection of a business identifier, on the other hand, always depends on whether the specific use claimed as the basis of protection is misleading. Business identifiers do not owe their protection to an abstract registration, but to a concrete use in the course of trade in connection with a specific active business (see Federal Supreme Court GRUR 2005, 871, 872 – Seicom; Federal Supreme Court GRUR 2013, 1150, 1152 para. 29 – Baumann I). If the meaning of the designation is not consistent with the actual conditions of this business, its use is misleading and unlawful.

b) Relevant point in time

The decisive point in time is the date of the last oral hearing. A business identifier that was in line with the actual commercial conditions when it was first used becomes misleading at the point in time at which it is no longer in line with reality (see Federal Supreme Court GRUR 1954, 271, 273 – DUN-Europa; Federal Supreme Court, ruling of December 12, 1975, Ref. I ZR 48/74 – Volkshochschule; Federal Supreme Court GRUR 2003, 448, 449 – Gemeinnützige Wohnungsgesellschaft; Federal Supreme Court GRUR 2007, 1079, 1081 para. 24 – Bundesdruckerei).

The business identifier is then no longer used lawfully and loses its protection. This is logical and does not conflict with the legitimate interests of the owner in the continued use of his business identifier. From the viewpoint of preserving the status quo, the owner could at best be permitted, after a comprehensive weighing of interests, to continue using the misleading business identifier at all or, if appropriate, to keep a misleading business name in the register contrary to the basic intention of Section 18 (2) Commercial Code (HGB), the prohibition of misleading merchant's business names (see Federal Supreme Court GRUR 2003, 628, 630 et seq. – Klosterbrauerei). However, he cannot expect that the legal system will also provide trademark legal protection for a misleading designation.

c) Commercial relevance

The misleading effect caused by the use of the business identifier must also be commercially relevant in order to constitute an unfair trade practice pursuant to Section 5 (1) UWG if it is to lead to a refusal of protection. The misconceptions caused must therefore have a significance for the transactional decision of the consumers or other market participants addressed by the business identifier and be able to influence them in a relevant manner. As a rule, the commercial relevance of misleading information can already be inferred from the misconception created. However, the situation is different the circumstances about which misleading information is conveyed are only of marginal importance for the market behavior of the other side (see Federal Supreme Court GRUR 2007, 1079, 1081 para. 26 – Bundesdruckerei; Federal Supreme Court GRUR 2012, 1273, 1274 para. 25 – Stadtwerke Wolfsburg; Düsseldorf Court of Appeals GRUR-RR 2019, 301, 304 para. 52 – Anstalt).

A misleading information is in any case commercially relevant if the misconception of the relevant public has some significance for the purchase decision – In the sense of a rather general and vague notion of positive regard – without any particular quality expectations being required (see Federal Supreme Court GRUR 1977, 159, 161 – Ostfriesische Teegesellschaft; Federal Supreme Court GRUR 1982, 564, 566 – Elsässer Nudeln; Federal Supreme Court GRUR 2016, 406, 408 para. 22 – Piadina-Rückruf).

The Munich District Court I denied that a commercially relevant misleading statement was conveyed in a case in which a cosmetics and wellness institute operating under the designation "Villa Westfalia" was actually not located in a villa, but in a luxuriously furnished high-rise building. The quality of the services offered there and their value were not determined by the type of building in which they are provided (Munich District Court I, judgment of April 29, 2014, Ref. 33 O 7468/13 – Villa Westfalia). This is certainly a borderline case that could have been decided differently.

4. Selected examples of case clusters

a) Misleading about the legal form

Business identifiers that suggest a legal form other than the actual legal form of the merchant operating the business can be misleading in a commercially relevant way. For example, a combination of letters or syllables ending with the letters "AG" (e.g. "INDROHAG") as the core element of the merchant's business name of a limited liability company (GmbH) has been health to be misleading because the ending suggests a legal form as a stock corporation, since "AG" is a common abbreviation for "Aktiengesellschaft" which means stock corporation (see Federal Supreme Court, ruling of October 25, 1956, Ref. II ZB 18/56 - INDROHAG (on the old version of Section 18 (2) HGB). This dated case law must be questioned critically today. It is true that the legal form has an influence on the issue of liability. However, business people will generally not be misled because they regularly take note not only of the core element of the business name (on the term Goldmann, Unternehmenskennzeichen, 5th ed. 2023, § 3 para. 65), but also of the added designations required by law which clearly indicate the legal form and liability situation. In addition, in practice, business people generally inspect the commercial register or use providers of commercial data, analytics and insights before engaging in risky business transactions, so that the information conveyed by the core element of the business name is not decisive for the assessment of risk and creditworthiness anyway (see Düsseldorf District Court DB 1991, 1510). For consumers, on the other hand, the misconception that they are dealing with a stock corporation instead of a limited liability company, for example, is only relevant in very few cases.

However, a commercial relevance of a misperception in view of consumers cannot be ruled out if their business decision may indeed depend on the supposedly enhanced reliability or the larger share capital.

If, for example, a provider of online gambling that is not organized as a stock corporation uses the domain "tipp.ag", the consumer is misled about the legal form as a stock corporation. The top-level domain that can be perceived as pointing to a stock corporation evokes a concrete notion of enhanced reliability in the organization of such gambling services, which can be the decisive factor in a large number of cases for visiting precisely the homepage of this provider (Hamburg Court of Appeals, judgment of June 16, 2004, Ref. 5 U 162/03 – tipp.ag).

b) Misleading about the public character or ownership

A business identifier is misleading if it suggests a public, official or semi-official character or ownership of the business or at least that it is controlled by the public sector, but is in fact organized under private law and the majority is privately owned (Federal Supreme Court GRUR 1980, 794, 796 f. – Bundeszentrale für Fälschungsbekämpfung; Federal Supreme Court GRUR 2007, 1079, 1081 para. 28 et seq. – Bundesdruckerei; Düsseldorf Court of Appeals GRUR-RR 2019, 301, 302 para. 36 – Anstalt). This is because such business identifiers do evoke positive notions of qualities among the relevant public. This relates in particular to the expectation that – irrespective of the specific legal form – there is no real risk of insolvency because the company is backed by "the state" (see Federal Supreme Court GRUR 2012, 1273, 1274 para. 26 – Stadtwerke Wolfsburg; Bremen Court of Appeals, judgment of April 9, 2010, Ref. 2 U 7/10). Here are some examples:

The designation "Bundesdruckerei" (Federal Print Office) is misleading if this company is not majority-owned by the Federal Government (Federal Supreme Court GRUR 2007, 1079, 1081 para. 28 et seqq. – Bundesdruckerei).

The term "chamber" stands for a public corporation and may not be used for a private company (Hamm Court of Appeals WRP 1991, 497 – European Chamber of Commerce Society).

The name "Volkshochschule Kreis Köln e.V." (Adult Education Center Cologne District) becomes misleading if the district or the municipalities belonging to the district withdraw from the association operating the center (FEDERAL SUPREME COURT, ruling of December 12, 1975, Ref. I ZR 48/74 – Volkshochschule).

c) Misleading about the size, significance or manufacturing activities of the business

A business identifier must not give rise to any misconceptions about the size, significance and nature of the business. On the one hand, this applies to information about the size of the company (e.g. elements such as "Industrie" (industry), "Fabrik" (factory), "Werk" (work, referring to a large factory) or "Werke" (works, referring to a number of large factories) in the case of a smaller manufacturing company or a pure trading company without own manufacturing facilities), which the public can seriously understand in the respective literal meaning.

For example, the sign "Matratzen Factory Outlet" (matrasses factory outlet)used as a special business designation is understood in the sense of a factory outlet in which goods originating from the supplier's own manufacturing facilities are expected to be available at particularly low prices by avoiding the wholesale and intermediate trade (Federal Supreme Court GRUR 2013, 1254, 1257 para. 28 et seqq. – Matratzen Factory Outlet).

However, business identifiers in which terms such as "Werk" or "Fabrik" are used in combination with a generic term as a rather fanciful designation for a craft or service business (e.g. "Gastwerk" (guest work) for a hotel or "Lichtwerk" (light work) for a company specializing in the installation of lights; "Haarfabrik" (hair factory) for a hairdressing salon) are not understood as to their literal meaning and are therefore not misleading.

Misleading information about manufacturing activities can play a role in the case of holding companies that do not themselves engage in industrial manufacturing activities, but nevertheless use terms such as "Fabrik", "Industrie" or "Industries" in their merchant's business name. It is recognized that the term "Industrie" - and the same applies to the English plural "industries" – Is associated by the public with the idea of ownership of an industrial production, processing and manufacturing facilities. A merchant who uses such an element in his business name must maintain and manage its own industrial production, processing or manufacturing operations itself, and it must be a large industrial operation (general opinion, see only MüKoHGB/Heidinger, 5th ed. 2021, Section 18 para. 142 et seq.). However, this will generally not be the case for holding companies. This is because they are not operationally active as industrial manufacturers, but only hold interests in companies that in turn own industrial manufacturing facilities.

d) Misleading about the nature and range of goods or services of the company

The nature and range of goods or services offered by the company must also not be described in a misleading way. Here are a few examples:

The business name of a tax consulting firm as "JUS-Steuerberatungsgesellschaft mbH" allows for the assumption that the firm has a focus on or is particularly qualified in the legal field or specializes in tax consulting for members of the legal professions; if these assumptions are objectively incorrect, the business name is misleading (Federal Supreme Court GRUR 1985, 930 et seq. – JUS-Steuerberatungsgesellschaft).

Whoever calls his pub or beer tent "Bayern-Festhalle" but does not serve beer from Bavaria is misleading consumers (Cologne Court of Appeals NJWE-WettbR 1997, 282 – Bayerischer Biergarten).

When hearing the designation "Parkhotel", the public expects that the hotel's surroundings are characterized by spaces that have a park-like character, radiate a certain tranquility and closeness to nature and thus stand out from an urban, busy environment. If this is not the case, this amounts to commercially relevant misleading information (Karlsruhe Court of Appeals NJOZ 2013, 13, 14 - Parkhotel).

When hearing the designation "Hotel am Stadtpark" (hotel at the municipal park), the public expects proximity to the municipal park, but not a quiet location (Nuremberg Court of Appeals WRP 1996, 242, 245 - Hotel "Am Stadtpark").

e) Misleading about the artisanal character of the production

It is particularly recognized that information about the type of production that falsely suggests to the consumer that the production is artisanal, non-industrial, manufactory, traditional or farm-based is misleading (Federal Supreme Court GRUR 1961, 425, 428 et seq. – Möbelhaus des Handwerks; Stuttgart Court of Appeals LMMR 1975, 13 – Eiskonditor; Bremen Court of Appeals WRP 1979, 464 – Backstube; Cologne Court of Appeals NJW 1985, 1911 – frische Farm-Eier; Berlin Court of Appeals GRUR 1995, 133, 135 – Hohe handwerkliche Qualität; Frankfurt Court of Appeals, ruling of June 29, 2021, Ref. 6 U 46/20 – Manufaktur).

Therefore, business identifiers that convey such information contrary to reality are misleading. A respective misconception on the part of the consumer is also commercially relevant because it is significant for the public's purchasing decision, as craftsmanship that stands out from industrial mass production is particularly appreciated by the public (Stuttgart Court of Appeals LMMR 1975, 13 – Eiskonditor; Frankfurt District Court, judgment of February 20, 2020, Ref. 2-3 O 109/19 – Berliner Blechschild Manufaktur 1904).

f) Misleading about the tradition

Advertising with the company's tradition and longevity also evokes positive connotations in the relevant public. The public attributes to such a company a particularly high level of experience in the relevant field, economic strength, reliability and solidity as well as long-standing esteem within its customer base (Munich Court of Appeals GRUR-RR 2014, 300, 301 – Degussa; Düsseldorf District Court, judgment of April 3, 2019, Ref. 2a O 23/19 – Kiesgrube I).

Advertising with longevity and tradition therefore convey subliminal signals as to quality that are capable of influencing consumers' purchasing decisions. Whoever uses a business identifier to the company appear older than it really is therefore generally misleads the public in a commercially relevant manner (Federal Supreme Court GRUR 2003, 628, 629 – Klosterbrauerei; Frankfurt Court of Appeals GRUR-RR 2001, 67 – Eschweger Klosterbräu; Munich Court of Appeals GRUR-RR 2014, 300, 301 – Degussa).

Thus, the designation "Porzellan-Manufaktur Selb" (Selb Porcelain Manufactory) indicates a manufacturing facility with a long, historically significant tradition of producing high-quality porcelain with hand-painted decorations and is misleading if this is not actually the case (Berlin Court of Appeals GRUR 1976, 640, 642 – Porzellan-Manufaktur).

In contrast, the designation "Squash Center No. 1" is not misleading if the businesses operated is actually the first and oldest squash facility in the area (Saarbrucken Court of Appeals NJWE-WettbR 1996, 179 – Squash Center No. 1).

g) Misleading with doctoral degrees

According to the case law of the Federal Supreme Court, there may be a commercially relevant misleading information with considerable influence on the consumer’s purchase decision if not insignificant parts of the relevant infer from a doctoral degree contained in the business identifier that an academic with a doctorate is or was the owner of the business or a shareholder with a decisive influence on the company's affairs and infer from this that the special scientific or academic knowledge and skills of the named person in the specialist field of the business in question also determine the quality of the goods or services offered (Federal Supreme Court GRUR 2021, 746, 748 et seq. para. 24 – Dr. Z). The use of the doctoral degree as an element of the business identifier therefore generally requires that the respective business owner or shareholder is entitled to use it. If this is not the case, the public is generally misled in a commercially relevant manner (Federal Supreme Court GRUR 1992, 121, 122 – Dr. Stein ... GmbH; Munich Court of Appeals GRUR-RR 2006, 89, 90 – DSI; Stuttgart Court of Appeals GRUR-RR 2014, 454, 455 et seq. – akademischer Ehrengrad).

The use of a doctoral degree can even be misleading if the company owner actually holds a doctorate. A misconception is particularly relevant if, on the basis of the doctoral degree and in view of the nature of the business, it is expected that (one of) the company owner(s) hold(s) a doctorate from a particular faculty and for this reason possesses particular specialist knowledge and skills in the specialist field of his company (Federal Supreme Court GRUR 1990, 604, 605 – Dr. S.-Arzneimittel). If the doctorate was obtained in a field other than that of the professional activity, the faculty must therefore regularly also be stated in order to avoid misleading the public (Federal Supreme Court GRUR 2021, 746, 750 para. 31 – Dr. Z). Here are two examples:

If the owner of a radio and television business holds a doctorate in medicine and uses the doctoral degree without indicating the faculty in the company name, this does not constitute relevant misleading information (Federal Supreme Court GRUR 1959, 375, 376 – Doktortitel).

In contrast, the owner’s doctoral degree included in the designation of a naturopathic school ("Heilpraktikerschule Dr. A.") is misleading and creates a commercially relevant misconception if the doctorate was not obtained in the field of medicine but in chemistry (Frankfurt Court of Appeals NJOZ 2013, 1050 – "Heilpraktikerschule Dr. ...").

However, the use of an actually non-existent doctoral degree in the business identifier is only misleading if the public takes it seriously and actually trusts that the owner of the business has an academic background.

This is not the case with fanciful names such as "Dr. Kebap" for a kebab shop, "Lackdoktor" (paint doctor) for a car painter (Jena Court of Appeals GRUR-RR 2005, 354 – Lackdoktor), "Doktor Autoglas" (doctor car glass) for a car glazier (see Federal Patent Court, ruling of May 17, 2011, Ref. 33 W (pat) 5/10 – Doktor Autoglas), or "doctor bike" for a bicycle repair shop (see Düsseldorf District Court, judgment of September 7, 2011, Ref. 2a O 122/11 – Bicycle Doctor/doctor bike).

In contrast, the fanciful name "Dr. Z" in connection with the operation of a dental medical care center is understood by considerable parts of consumers as an abbreviation for a company owner with a doctorate (Federal Supreme Court GRUR 2021, 746, 751 Tz. 46 – Dr. Z).

5. Special aspects in relation to merchant's business name

a) Fundamentals of merchant's business name law under the German Commercial Code (HGB)

According to Section 17 (1) HGB, the merchant's business name ("Firma") is the trading name of the merchant. It is subject to special regulations which result from the HGB and apply in addition to the general rules that apply to all company names. The formal rules on the merchant's business name contained in the HGB sets out a few basic requirements in Sections 17 et seqq. HGB in order to ensure a minimum level of practicability, transparency and protection of the public. A business name must be suited to designate the merchant and have distinctive character. In addition, it must not be misleading and is subject to the principles of permanency, unity, exclusivity and publicity. Only merchants within the meaning of Section 1 et seqq. HGB can use a business name and obtain substantive protection for it as a business identifier pursuant to Section 5 (2) sentence 1 Alt. 2 MarkenG. The merchant must make it clear which legal form he has by including a respective element conveying this information.

The legislator wanted to grant legal protection as a business identifier only to those business names "formed in accordance with the applicable regulations" (motives for the third draft of a law to combat unfair competition on Sec. 8, a forerunner provision of Sections 5 and 15 MarkenG (cited in Bachem/Roeren, Das Gesetz zur Bekämpfung des unlauteren Wettbewerbes vom 1. Juli 1896, 3rd ed. 1900, p. 20, 36)).

A business name formed contrary to Sections 17 et seqq. HGB can therefore not claim substantive protection as a company name within the meaning of Section 5 (2)(1) alt. 2 MarkenG because its use is not lawful (Federal Supreme Court GRUR 1998, 391, 392 et seq. – Dr. St. ... Nachf.; Munich Court of Appeals GRUR-RR 2006, 89, 90 – DSI; Goldmann, Unternehmenskennzeichen, 5th ed. 2023, § 7 para. 27 with further references).

This also applies to a core element of the business name for which an own protection as a catchword-like element could be considered provided that the business name was used lawfully. Pursuant to standing case law, for an element of a business name, an own protection can be claimed as a business identifier within the meaning of Section 5 (2) MarkenG, whereby that protection is derived from the protection of the complete business name, provided that the element is a distinctive component of the business name and further provided that it, in comparison to the other parts of the business name, appears to be capable of establishing itself in trade as a catchword-like reference to the business. If this is the case, it no longer matters whether the element in question is actually used as a catchword in a stand-alone position and whether it has gained recognition in trade. So, the protection of an element contained in a business name as a catchword-like element pursuant to Section 5 (2) MarkenG requires, in addition to distinctiveness, that it is, according to the Federal Supreme Court GRUR 2018, 935, 937 para. 28 – goFit with further references; Goldmann, Unternehmenskennzeichen, 5th ed. 2023, § 3 para. 79). This protection has a very considerable importance in practice.

However, as it is derived from the protection of the full business name it is accessory to the protection of the business name in its complete registered form (Munich Court of Appeals GRUR-RR 2006, 89, 91 – DSI; Goldmann, loc. cit., § 3 para. 96; cf. also Federal Supreme Court, judgment of October 24, 1958, Ref. I ZR 102/57 – Alfa; Federal Supreme Court GRUR 2011, 831, 833 para. 16 – BCC; Federal Supreme Court GRUR 2013, 638, 641 para. 24 – Völkl).

In other words, if the business name is not used lawful because it is not in line with Sections 17 et seqq. HGB no component of it can be protected as a catchword-like element pursuant to Sections 15 (1); 5 (2) MarkenG. This applies irrespective of whether the catchword-like company component itself violates one of the formal rules on the business name contained in the HGB or any other component of the business name.

b) The prohibition of misleading statements in Section 18 (2) HGB

Pursuant to Section 18 (2) HGB, a business name shall not contain any information which is apt to be misleading with respect to business circumstances that are of material relevance for the relevant public. Information of only minor commercial relevance or of secondary economic importance is not covered by Section 18 (2) HGB (see explanatory memorandum, BT-Drs. 13/8444, p. 38; Stuttgart Court of Appeals NJOZ 2004, 1013, 1015 et seq. – Sparkasse Bodensee; Rostock Court of Appeals NJW-RR 2006, 784, 785 – J & Partner Rechtsanwälte; Stuttgart Court of Appeals NZG 2012, 551, 552 – Solar; Frankfurt Court of Appeals, decision of October 28, 2014, ref. 20 W 411/12 – Sehzentrum).

The prohibition of misleading information in Section 18 (2) HGB applies to the entire business name, i.e. both the core element of the business name any additions to it. A business name would be misleading in its registered form as a whole if any of its components are misleading. The prohibition of misleading information applies to the formation of new business names as well as to later changes.

Section 18 (2) HGB pursues the same purpose as the general prohibition of misleading statements in Section 5 (1) and (2) UWG and must generally be interpreted in accordance with the letter. However, the standard of Section 18 (2) HGB is not identical to that of the general prohibition of misleading statements pursuant to Section 5 (1) and (2) UWG. The (potential) divergence results from the overlapping but not completely congruent protective purposes underlying the prohibition of misleading information under business name law and the prohibition of misleading advertising under competition law. Even if, as a rule, it can be assumed that the substantive assessment standards in the HGB and UWG are in line, a relevant misleading statement in one area does not necessarily have to be relevant in the other area (Federal Supreme Court GRUR 2021, 746, 749 para. 25 – Dr. Z).

Business names that do not contravene Section 18 (2) HGB an still be misleading according to the standards of Section 5 (1) and (2) UWG. This can lead to "fine-tuning" by the UWG (explanatory memorandum, BT-Drs. 13/8444, p. 38; Federal Supreme Court GRUR 2021, 746, 749 para. 25 – Dr. Z). In any case, the standards of Section 18 (2) HGB, which the legislator intended as a "rough grid", are not stricter than those of the general prohibition of misleading statements (see explanatory memorandum, BT-Drs. 13/8444, p. 38).

c) "Counterclaim for cancellation" based on Section 37 (2) HGB

If a claim is brought against a business by merchant based on his earlier business name or its catchword-like element and the business name in its registered form is misleading pursuant to Section 18 (2) HGB and thus unlawful, a kind of "counterclaim for cancellation" can be raised based on Section 37 (2) HGB.

Pursuant to Section 37 (1) HGB, whoever uses a business name to which he is not entitled pursuant to the provisions contained in Sections 17 et seqq. HGB shall be induced, by imposition of a coercive fine by the court of registration, to desist from using such business name. In addition, however, pursuant to Section 37 (2) HGB, "any person whose rights are violated by another person's unlawful use of a business name can demand that this person desist from using such business name" and bring this claim before the competent court. Despite the wording, a violation of rights, such as an industrial property right, is not necessarily required. Claims can also be based on the direct impairment of legally protected interests of an economic nature (Federal Supreme Court GRUR 1970, 320, 322 – Doktor-Firma; Federal Supreme Court NJW 1991, 2023 – Unzulässiger Gebrauch einer Geschäftsbezeichnung; Court of Appeals, judgment of August 12, 1998, Ref. 6 U 97/97 – marketing-displays GmbH).

The test of violation of rights or impairment of interests must be applied liberally. It is merely intended to prevent a general public legal remedy and ensure that not just anyone can take the place of the registry court and obtain a company prohibition, but only someone who is also affected, i.e. whose legitimate commercial interests are tangibly affected by the business name. A legally protected interest of an economic nature is regularly affected if the plaintiff and defendant are competitors within the meaning of Section 2 No. 4 UWG (see the decisions cited above).

However, this is not necessary. Legally protected interests of an economic nature can also be infringed irrespective of a competitive relationship. Restricting the right to sue to competitors is not appropriate. This is because, in the event of misleading information, they can generally rely on claims arising from unfair competition law anyway (Sections 8 (1), (3) No. 1; 3; 5 (1) UWG). Section 37 (2) HGB would therefore be largely superfluous.

The meaning and purpose of this provision is only satisfied if it is considered sufficient, but also necessary, that the claimant demonstrates and, if necessary, proves that he is directly impaired in legal interests of a commercial nature (Goldmann, Unternehmenskennzeichen, 5th ed. 2023, § 16 para. 48 with reference to Federal Supreme Court GRUR 1970, 320, 322 – Doktor-Firma). For this to be the case, it is sufficient that the plaintiff is exposed to claims for injunctive relief claims of the owner of the business name which are based either on the business name or its catchword-like element (Goldmann, loc. cit.).

In the case of business names already registered, the claim for injunctive relief under Section 37 (2) HGB is automatically accompanied by a claim for removal directed at consent to deletion from the commercial register (RGZ 3, 120 f. – Prätorius; RGZ 22, 58 f. – A. B. Faber; RGZ 25, 1, 2 - Johann Faber; RGZ 37, 58, 59 – Seelig, Hille & Co.; Federal Supreme Court GRUR 1993, 576, 577 – Datatel; Hamm Court of Appeals NJW-RR 2005, 767, 768; Munich Court of Appeals NZG 2013, 1114, 1115 – BAVARIA Haus und Grund Immobilien-Treuhand GmbH).

The filing of an action based on Section 37 (2) HGB as a counterclaim in an ongoing infringement suit, which is based by the plaintiff on his business name or its catchword-like element, is unproblematically admissible pursuant to Section 33 (1) Code of Civil Procedure since it is connected.

Experience shows that the filing of such a "counterclaim for cancellation" exerts considerable pressure on the plaintiff. Not only does he run the risk of not being granted protection for his business name or its catchword-like element and his action therefore being dismissed. He is also exposed to the additional risk that his business name will be deleted as a whole, which can have considerable consequences. As the author knows from his own litigation experience, this pressure is likely to increase the plaintiff's willingness to settle.

6. Conclusion for your company

If a claim is made against you as the alleged infringer of an earlier business identifier, you should not ignore the following points:

• Consider whether the earlier business identifier could be misleading in a commercially relevant way. There are many more conceivable cases and case clusters than those outlined in this blog post.
• If there is sound reason to believe that it is misleading, then use this as a defense and question the lawful use and thus the protectability of the business identifier.
• If the older business identifier on the basis of which claims are brought against you is a merchant's business name or its catchword-like element and there are solid indications that some element of the business name is misleading, then consider asserting a claim under Section 37 (2) HGB according to the motto "attack is the best defense".

If you are yourself the owner of an earlier business identifier and want to protect yourself against an infringement, don't forget:

• Misleading business identifiers do not enjoy any protection, so the ability to mislead should always be on the "checklist" of possible risks. If there are no serious indications in this regard, so much the better. If there are, you should think about ways to minimize your risk.
• If you are relying on a business name or its catchword-like element and there is a risk that one of the elements of your business name could be misleading, you should consider deleting or changing this company element in good time. This may be particularly advisable if your opponent does not own any earlier rights himself.
• Even if the business name was used unlawfully and therefore does not intro protection as such, its catchword-like component may be protected in individual cases as a special business designation pursuant to Section 5 (2) alt. 3 MarkenG, so that claims can be based on this.

Of course, we shall be happy to provide you with comprehensive advice and assistance on all these issues. Please feel free to contact us.