No clear-cut terminology exists. While art. 15 Trademark Act uses the term “exploitation of reputation” (“Rufausbeutung”), art. 3 para. 1 let. e) Unfair Competition Act refers to an imitative comparison (“Anlehnung”). In literature also the term “associative risk of confusion” can be found. While some of the essential elements of these concepts have been specified by case-law, generally acknowledged clear definitions are missing, and the exact relation and delimitation of the concepts remains uncertain.

The concepts are not considered as forms of protection against dilution.

Under unfair competition law the fact of exploitation of reputation or dishonest link or association presupposes first that there is a good reputation of a competitor or of one of his products that could be exploited. According to art. 2 and art. 3 para. 1 let. e) Unfair Competition Act, any behavior with which a competitor unnecessarily follows the performances of a third party so closely or exploits his reputation regardless of the risk of a possible confusion is regarded as dishonest. The exploitation of reputation may consist in particular of the fact that others’ goods or services are deployed in one’s own advertising in such a way that the image is transferred to one’s own offers (so-called image transfer), and thereby creating in the addressees a mental association with the other trademark or products so marketed. Therefore, a party acts dishonestly, if it transfers with its promotions finally the good reputation of goods known under another trademark to its own goods by generating mental associations with these without the requirement of the risk of confusion. However, an image transfer is not necessarily required; on the contrary it is sufficient that the third party benefits from the other trademark by means of some increased attention. It is further required that the exploitation of reputation or dishonest association is unnecessary, meaning it is not covered by a need for information.

Application of art. 15 Trademark Act requires that the trademark is famous, which implies that it also has a reputation. The fame of mark has to be assessed in each individual case (see answer 5 a) hereinafter). In addition to the fame of the trademark, it is necessary that the variation of the fact of the exploitation of reputation is accomplished, namely that the reputation is exploited by a third party. As it is the case in unfair competition law, the fact of exploitation of reputation requires that a so-called image transfer takes place. However, it is controversial as to whether it is sufficient for the third party to achieve the effect of attracting attention by means of the other famous trademark. It is not a prerequisite for the reputation to be used intentionally.

In line with prevailing doctrine it follows from the nature of art. 15 Trademark Act that within the scope of the extended protection of famous trademarks action can only be taken against trademark use (“kennzeichenmässiger Gebrauch”) in case of a sufficiently similar third-party sign. In other words: the protected sign must be used in such a way that a third person might construe it as reference to a manufacturer or company, and thus the individualizing effect of the original trademark might be impaired by the created association.

Under unfair competition law, registration of the trademark in Switzerland is not a prerequisite for protection against exploitation of reputation. With respect to Art. 15 Trademark Act the predominant doctrine is of the opinion that registration of the trademark is not a requirement for protection against exploitation of reputation.

As indicated in question 1 a) above, the association is tolerated, if (1) the imitative comparison is justified by the need for information, or (2) the sign in question belongs to the public domain. In the first situation (1), the question is whether or not the imitative comparison with a competitor’s name, good, service, work or price is necessary in order to inform consumers. For example, the Federal Supreme Court held that when it is not possible to specify one’s good without comparing it with a competitor’s product, the comparison with the competitor’s product is necessary and thus not parasitical (decision of the Federal Supreme Court 4C.332/2006, consid. 3.1, “Rama”). In another case, the court stated that when spare parts are advertised, it is necessary to indicate in the advertisement which product the part is compatible with (BGE 116 II 471, consid. 3.a.bb, “Kotflügel”). According to the court it is not a parasitical behavior to apply a presentation of the product on the package in the same manner as a competitor does because the purpose of this use is to give proper information about the product to the consumers. The court therefore states that “considering the proximity of the products for which the concerned packages are intended and the identical advertising message of the lightness of the products, it seems comprehensible that they [the advertisements] are similar” (BGE 135 III 446, consid. 7.5, “Maltesers II”).

Furthermore, expressions describing the nature or properties of the product often belong to the public domain and in such circumstances their use has to be tolerated (decision of the Federal Supreme Court 4A_168/2010, consid. 5.1, “Pneus-online”) (situation [2]). In some cases concerning product packaging, the court refused to admit a risk of confusion or parasitism for elements belonging to public domain (Schlosser, Remarque à propos de l’arrêt “Pneus-Online”, sic! 2010, 797). For example, the use of the same red color for a product packaging may respond to a market need (red captures the attention of the consumer) and therefore is not a parasitical behavior (BGE 135 III 446, consid. 7.5, “Maltesers II”).

Defendants often invoke that they did not intend to act in bad faith. However, as long as a behavior objectively violates the principles of good faith and fair dealing, it violates unfair competition rules. Neither bad faith nor intention are required to behave unfairly (BGE 116 II 365 consid. 3b, 369, “Nivea”; decision of the Federal Supreme Court 4C.347/1998, consid. 3b; decision of the Federal Supreme Court 4A_128/2012, consid. 3, “Vogue”).

In Switzerland there is no parody exception neither under trademark nor under unfair competition law. When a sign has been parodied, freedom of expression and the rights of the sign owner have to be balanced (Gilliéron, Les marques notoirement connues et les marques de haute renommée en droit Suisse, PI/IP – Propriété intellectuelle – Intellectual property Band/Nr. 3, 2011). However, when the right of the sign’s proprietor outweighs freedom of expression, if there is a risk of confusion, the parody violates art. 3 para. 1 let. d) Unfair Competition Act, and if there is no risk of confusion, it violates art. 3 para. 1 let. a) Unfair Competition Act (BGE 59 II 15, 16, “Vim”; decision of the Commercial Court of Bern, RSPI 1991, 234, “kopulierende Krokodile”; decision of the Appeal Court of Ticino, sic! 1997, 583–584, “Beck/Beck’s Stage”; Killias, La mise en œuvre de la protection des signes distinctifs, CEDI-DAC – Centre du droit de l’entreprise de l’Université de Lausanne Band/Nr. 50). Swiss case law about parody in the field of unfair competition was often dealing with confusion and dilution, but less frequently with parasitism. Nevertheless, in one case a cantonal court held that the use of the name Harry Popper for condoms was parasitism (decision of the District Court of Schwyz, 17 August 2010, ZK 2008 19, consid. 7c.bb, “Harry Popper”; Abegg, Der Gebrauch fremder Marken im Geschäftsverkehr – Eine marken- und lauterkeitsrechtliche Untersuchung nach schweizerischem und europäischem Recht, SMI Schriften zum Medien- und Immaterialgüterrecht Band/Nr. 99).

As indicated in question 5. b) above, the burden of proof is on the party that derives rights from a certain fact – unless the law provides otherwise (art. 8 Civil Code). Thus, the rights holder who accuses the free rider of infringing his rights has to prove the facts that establish an impermissible behavior. Furthermore, the free rider does not need to have a “due cause” to use a descriptive term, because the use of such a term cannot be “unfair” (decision of the Supreme Court of the Canton of Zurich, HG110066, 10 April 2013, consid. 1.1.10.3, “Comparis”). Yet again the burden of proof is on the rights holder: He has to prove that the free rider’s behavior taken as a whole is “unfair”.

An exception of the above-mentioned burden of proof applies, if an advertisement is concerned. The Unfair Competition Act provides that the judge may reallocate the burden of proof and require the advertiser to prove truthfulness and accuracy of its advertisement and of the statements contained therein (art. 13a Unfair Competition Act). Thus, this provision leads to an obligation of disclosure and justification of the advertiser (who might be a free rider).

As shown above, the free rider does not violate unfair competition rules if the comparison created with the competitor’s sign is necessary. Thus, the only imitative comparison allowed is the one remaining within the boundaries of the “necessary imitative comparison”, i.e. is either justified by the need for information, is merely descriptive, or otherwise belongs to the public domain. The free rider has no right to go beyond this limit.

Trademark law and unfair competition law pursue two different goals; none of them must be given priority over the other and they are independent. The Federal Supreme Court has confirmed this rule in many cases (BGE 129 III 363, consid. c.3.3; 135 III 446, consid. 4.1, “Maltesers II”). Thus, both laws have to be applied independently. For example, in case where it was held that neither art. 2 nor art. 3 para. 1 let. e) Unfair Competition Act was violated, trademark rules could still be applied. If either the free rider (“a third party”) or the sign owner wants to register the sign, he has to respect the trademarks rules. For example, signs belonging to the public domain are not registerable.

• a) court in civil proceedings;
• b) court in other proceedings, and if so what other proceedings (e.g. criminal proceedings);
• c) opposition proceedings;
• d) any other, and if so what, proceedings?

Protection can be invoked in civil and criminal court proceedings, according to art. 3 para. 1 let. b), d), e), art. 9 and 23 Unfair Competition Act and art. 15, 52 et seqq., and 61 et seq. Trademark Act; in particular

• – against any commercial use of a sign;
• – against a trademark registration; or
• – against a court action based on a trademark or commercial sign;

which are considered as an act of unfair free riding or parasitism.

Contrariwise, no protection against unfair free riding can be invoked in administrative proceedings and administrative court proceedings, such as:

• – registration proceedings;
• – opposition proceedings;
• – nullity proceedings (a future remedy, according to a pending trademark law revision); and
• – (except for famous trade marks) detention proceedings with the customs authority.

Administrative proceedings with regard to commercial signs or registrations are suspended when a civil or criminal court action against free riding or parasitism of the same signs is taken. In particular, as a rule, opposition procedures are suspended until the decision of the civil or criminal court is rendered.

Civil and criminal law actions must fulfil the same conditions under unfair competition law. Only who is threatened or hurt in his economic interests, e.g. by loss of custom, credit or reputation, is entitled to invoke protection both at civil and criminal courts (art. 9 para. 1; art. 23 para. 2 Unfair Competition Act).

In Switzerland, free riding was initially an issue of unfair competition. In the meantime, trademark law grants famous trademarks a broader and more effective protection. Basis for protection is insofar relevant, as the legal remedies and the right to sue depend thereon.

Basically, the owner of a trademark can request the court to issue prohibitory injunctions. If liability has been established, the owner is further entitled to claim for damages or surrender of profit (art. 55 Trademark Act, art. 9 Unfair Competition Act). According to the Unfair Competition Act, such actions might also be brought by competitors or customers whose economic interests are threatened or infringed, specific professional and trade associations, organizations of national or regional significance, or, in certain circumstances, even the Swiss Confederation (arts. 9 and 10 Unfair Competition Act). In legal writing, it is disputed to what extent such third parties might request surrender of profit (see Rüetschi/Roth, Basler Kommentar zum UWG, UWG 9 N 119 f.).

According to the Trademark Act, the owner of the trademark can further request the court to order cancellation or – if additional requirements are met – assignment of an infringing trademark (art. 53 and 55 Trademark Act). It is questionable whether such claims might be based on the Unfair Competition Act as well (see Fraefel/Meier, LPM 2 N 156; Noth, MSchG, MSchG 2 let. d N 29). There is, however, case law ordering cancellation of a trademark infringing a right to a name (decision of the Federal Supreme Court, sic! 1997, 493, “Anne Frank”) or ordering assignment of a domain name as a means of removing infringement (decision of the Federal Supreme Court, sic! 2012, 109, 112, “Go Fast II”).

Assistance from customs authorities (custom seizure) is available under the Trademark Act, but not under the Unfair Competition Act. Only based on the Trademark Act (art. 55), the defendant can be required to disclose information about the infringing products (origin and quantity of the products in its possession, addresses and extent of any transfer to commercial recipients).

Finally, the Trademark Act and the Unfair Competition Act contain penal law provisions. As to unfair competition, however, they refer to acts of unfair competition within the meaning of art. 3 Unfair Competition Act and do not cover infringements of the general clause only.

In Switzerland, all questions raised in administrative proceedings can be answered in court proceedings as well. Administrative proceedings tend to be quicker and cheaper than civil or criminal court proceedings. Furthermore, administrative authorities of first instance are not entitled to hear witnesses. An action against free riding or parasitism, however, often needs a deeper clarification of facts. Hence, in our view, administrative proceedings should not be burdened with additional arguments or supplementary ways of protection. The possibility to take court actions, wherever needed, will suffice.

As the protection against taking of unfair advantage of trademarks is governed by three different statutes, it is difficult to achieve a consistent jurisprudence in Switzerland. This is shown for instance by the terminology used in the existing court decisions (the courts use the term “[unlautere] Anlehnung” as well as the term “Rufausbeutung” which are used as synonyms although they have a slightly different meaning in the common language, see BGE 135 III 446, consid. 7.1, “Maltesers II”). A first step of improvement might perhaps be an agreement on a common terminology.

Furthermore, the individual requirements are not distinguished by the courts exactly. For example, in BGE 135 III 446, consid. 7.1. and 7.5, “Maltesers II”, the Federal Supreme Court considers that free riding is not covered by an information requirement. In other court decisions, this requirement is not even mentioned (for example decision of the Federal Supreme Court 4A_103/2008, “Botox”). It would be desirable if the courts were more precise in future.

Another point that should be improved is the fact that the courts focus, inter alia, on the price of the goods in question when determining whether a free rider takes advantage of the reputation of the trademark or not (decision of the Commercial Court of Aargau, sic! 2006, 187 et seqq., consid. 5.6.2, “Laufrad”). This does not seem plausible as trademarks which are used for everyday consumer goods can also be especially well known to the public (e.g. Nivea, Nestlé, Tempo) and deserve being entitled to protection against free riding.

Finally, the likelihood of confusion and the taking of unfair advantage of trademarks are often mixed (see for this the definition used by the Federal Supreme Court in BGE 135 III 446, consid. 6.1, „Maltesers II”: „bei denen das Publikum durch die Schaffung von Verwechslungsgefahr irregeführt wird, insbesondere, um den Ruf der Wettbewerber auszubeuten”). Up to now, the taking of unfair advantage has led a shadowy existence in comparison to the likelihood of confusion. There is even an attempt being made to legally analyze some matters only in relation with the likelihood of confusion and not with the taking of unfair advantage (see BGE 82 II 346, consid. 2d, “Schwarzenburger”; BGE 114 II 106, consid. 3b, “CebBit”; BGE 116 II 463, consid. 2, 4, “Coca Cola”). A clear distinction should be drawn due to substantial differences between the likelihood of confusion and the taking of unfair advantage of trademarks.

There is a general consensus of the Swiss group that an international harmonization is desired, provided that such harmonization would neither complicate the protection of trademarks against free riding in Switzerland nor unduly broaden this protection compared to the current situation. Infringing activities in the area of intellectual property are still growing and pose a serious threat to all national economies and governments. It is a visible and commonly known phenomenon on an international scale that existing national legal disparities may influence the choice of where such infringing activities are carried out. In particular, it should be ensured that at least famous trademarks are protected against free riding in every jurisdiction.

However although legal rules may be harmonized, perception and use of a sign will always be dependent on cultural background in question, and harmonization should therefore leave room for such considerations.

• a) the taking of unfair advantage of trademarks as defined in these Working Guidelines; and/or
• b) use that you consider similar but outside the scope of the definition in these Working Guidelines?

If so, please provide any definition you consider to be appropriate

Although harmonization is welcome, the creation of a new type of mark is not regarded as desirable. Protection must always be linked to the reputation of the sign in any single case. As the scope of protection will mainly depend on what is deemed to be an “unfair manner”, any definition must contain specific indications which allow distinguishing between fair and unfair use.

The basis for protection/cause(s) of action shall be both trademark law and unfair competition law for the following reasons:

First, due to the different purposes of trademark law and unfair competition law, the requirements for actions under these acts differ (see Question 4). Secondly, the actions provide for different remedies (see Question 12). Thirdly, the scope of application of the Unfair Competition Act is broader, it does not only cover parasitism of trademarks, but unfair competitive conduct in general and, in particular it protects also famous designs against free riding. Finally, trademarks are better protected under the Trademark Act (e.g. assistance from the customs authorities according to art. 70 et seqq. Trademark Act).

• a) what level of reputation, if any, in the trademark should be required; and
• b) who should bear the burden of proof?
• – a) A certain reputation should be sufficient to defend a trademark against exploitation of reputation. The level of reputation could be considered as reached, if the adoption of a trademark leads to the result that the third party benefits from increased attention.
• – b) The Swiss group is of the opinion that the allocation of the burden of proof as applied in Switzerland is reasonable. The party who asserts any claims must substantiate the exploitation of reputation. In any event no too excessive demands should be made with regard to proof, since it is often quite difficult to provide proof of exploitation of reputation.

Some may argue that any exploitation of a competitor’s investment should be prohibited. However, the need for information and the public domain limitations, as well as any other necessary use of a specific sign are – from an objective view – essential for the functioning of the market. Therefore, protection should not be absolute, and reasonable limitations ensuring that legitimate information requirements can be satisfied and the public domain remains free, as can be found in the Swiss legal system, appear justified. The criterion that the imitative comparison with a competitor’s name, good, service, work or price is authorized if the use made is a necessary and reasonable one. As a matter of fact, many limitations fall under this criterion and could be analyzed in the light of it. The need for information and the public domain limitations are examples, but it is conceivable that other limitations might be applied by the Swiss courts because they consider a specific use of a sign as a necessary one.

The Swiss Group is of the opinion that the inclusion of an express parody exception is not needed. We can imagine situations where a sign is parodied, but it is not held to be parasitism because the association resulting from the parody is necessary. In situations where this criterion would not apply, there is still the system of balancing between freedom of expression and the rights of the sign owner, which is a satisfactory system.

As seen in questions 5 b) and 7 above, the rights holder bears the burden of proof in respect of any defences and/or limitations according to art. 8 Civil Code. The Swiss Group is of the opinion that the mechanism of the conventional allocation of burden of proof does not lead to unnecessary hardship cases.

The protection seems sufficient when it can be invoked in civil and criminal court proceedings.

Summary

Swiss law provides protection against the taking of unfair advantage of trademarks essentially based on art. 2 and art. 3 para. 1 let. e) of the Swiss Federal Act against Unfair Competition by prohibiting imitative comparisons (“Anlehnung”) and, as far as famous or at least well-known trademarks are concerned, based on art. 15 of the Swiss Federal Act concerning the Protection of Trademarks and Indications of Origin by protecting them against exploitation of their reputation (“Rufausbeutung”). Protection can be invoked in civil and criminal, but not in administrative proceedings.

Protection is, however, not absolute. As it is generally acknowledged that in a properly functioning competition regime a mere risk of association to leader products has to be tolerated, Swiss law provides for certain limitations of protection. In particular, associations are tolerated, if (1) the imitative comparison is justified by the need for information, or (2) the sign in question belongs to the public domain.

The Swiss Group is of the opinion that an international harmonization of protection against free riding is desired, provided that such harmonization does neither complicate nor unduly broaden such protection compared to the current situation in Switzerland. At least famous trademarks should be protected against free riding in every jurisdiction. Protection should always be linked to the reputation of a sign. However, the creation of specific new types of mark that would benefit from such protection is, in the view of the Swiss Group, not desirable. Protection should not be absolute, but provide for reasonable limitation requirements ensuring that legitimate information requirements can be satisfied and the public domain remains free. It would be sufficient if such protection can be invoked in civil and criminal court proceedings.