OLG Munich decides on GI’s generic character and exploitation of GI reputation in the Habana II case

The German Federal Court of Justice (BGH) has recently denied the request for appeal against the ruling of the Munich’s Higher Regional Court (OLG Munich) in the Habana II case (6 U 120/22). This has prompted this Kat to comment on the OLG Munich’s ruling in Habana II, which is now final.

Background

“Habanos” (Spanish for “from Havana”) is a Cuban designation of origin (DO) [a type of geographical indication, GI, if this Kat may simplify this] for cigars that are produced in the entire territory of Cuba. It was registered in Cuba in 1967, in the name of the state-owned tobacco company, Cubatabaco. Similarly to what occurred with Cuban rum, after the 1959 Cuban Revolution private tobacco companies were nationalized by the Castro government and agglomerated under a single state monopolist.

“Habanos” is not registered as a GI in the European Union (unlike “Cuba” for rum, which has been applied for in 2021). However, it was included in the 1954 German-Cuban bilateral agreement on the protection of geographical indications.

Cubatabaco sued Davidoff, a Swiss brand of cigars, for infringement of its GI rights through sales of cigars produced in Dominican Republic, Ecuador and elsewhere in Latin America. Cubatabaco contested a variety of advertising practices by Davidoff, such as “Piloto Cubano a powerful tobacco from Cuba – transplanted on our fincas”, “San Vicente a mild Cuban tobacco – also transplanted”, “[e]ach Escurio cigar consists of Cubra (the noble fire of Cuban Criollo) and Brazilian Mata Fina”, “A unique creation, created from the crossing of three Cuban* tobacco seeds. [*grown in Ecuador]” and others (emphasis by this Kat).

Davidoff argued that this followed a practice, known as “Cuban seed”, where tobacco seeds that were once grown in Cuba are now planted elsewhere and used for manufacturing cigars in other Latin American countries. According to Davidoff, this was the result of the Cuban Revolution, when Cuban tobacco producers were expropriated of their assets, became refugees and were forced to restart their business outside of Cuba but with Cuban tobacco seeds.

German legislation on geographical indications

Under Art. 127(3) of the German Trade Mark Act,

If an indication of geographical origin enjoys a particular reputation, it may not be used in trade for goods or services of a different origin even if it is not likely to mislead concerning the geographical origin if use provides without good cause an opportunity for goods or services of a different origin to take unfair advantage of or be detrimental to the reputation of the indication of geographical origin or its distinctive character.

Art. 127 “Scope of Protection” exists in addition to (and in parallel to) the EU-wide norms on GIs, which currently include Regulation (EU) 2023/2411 for non-agri GIs and Regulation (EU) 2024/1143 for wine, spirit drinks and agricultural products.

According to German jurisprudence, Art. 127 does not necessarily apply to the GIs registered in the EU (known as protected designations of origin, PDOs, and protected geographical indications, PGIs). At different points of time, it has been relied on for: (i) geographical collective marks “Hohenloher Landschwein” and “Hohenloher Weiderind”; (ii) PGI “Bayerisches Bier”, registered under EU GI law; (iii) unregistered geographical indication “Himalaya Salz”, protected under the Unfair Competition Act.

Ruling

First the Munich Regional Court (LG Munich), then the Munich Higher Regional Court (OLG Munich) sided with the plaintiff. The rulings essentially discussed two points: whether “Habanos” had become a generic term; and whether “Habanos” possessed the “particular reputation” that the defendant effectively exploited.

Generic character (paras. 65-70)

Davidoff argued that “Habanos” had become a generic term for cigars (this would make it non-eligible for protection as a GI). To prove that, the defendant relied on press articles, from 1957 and 1987, as well as on the fact that the designations contested by the plaintiff are in fact registered plant varieties for tobacco seeds.

OLG Munich discarded these arguments, finding that “Habano” had not become a generic term. According to the court, strict requirements must be fulfilled to prove the generic character of a GI. This only occurs when only a very insignificant part of the public sees the designation as an indication of the geographical origin of the goods or services, with the burden of proof lying on the alleged infringer.

The German public (in this case: “potential buyers of cigar products, which include occasional cigar smokers as well as non-smokers who purchase cigar products as gifts”, cf. para 67 of the ruling) does not perceive “Cubano”, “Habano” and their derivatives as being generic. Evidence from specialist literature is unknown to the relevant public. Nor do they know that terms such as “Cuban seeds” or “Piloto Cubano” designate seeds that originated from Cuba, but now grow elsewhere. Isolated press articles are not sufficient to prove the contrary.

Exploitation of special reputation (paras. 71-81)

OLG Munich first confirmed the analysis of the lower court in that “Habano” has a special reputation among the relevant public within the meaning of Art. 127(3). The relevant public, including non-smokers, associates a particular prestige with the terms “Habano” or “Habana” or the term “Cuba” and its derivatives in relation to cigar products. This perception has not changed because of the Cuban revolution and continues until today.

By its actions, Davidoff is taking advantage of the GI’s attraction, reputation and prestige, as well as exploiting the GI’s distinctive character. The relevant public will easily make a mental connection between the advertised products and the positive image, enjoyed by Cuban cigars.

In the view of OLG Munich, even if the statement that the seeds were originally from Cuba is true, tobacco leaves are also influenced by Cuba’s terroir: its soil and climate. Using delocalizers such as “grown in Ecuador” is not sufficient to change the public’s perspective. Nor will the relevant public know that “Cubra” identifies Cuban and Brazilian seeds.

OLG Munich thus ordered Davidoff to refrain from the marketing practices, described above, and to compensate damages.

Kat’s comment

This Kat notes, with a bit of curiosity, how German courts discard that Cuban refugees may be carrying the GI reputation with them. As our GI-focused readers know, the EU GI system essentially evolved from two different approaches: that of France, where a GI is made by its terroir, that is, the soil, the climate and the human know-how surrounding the product; and that of Germany, where a GI is based on reputation, achieved through a collective human effort.

Unlike what happens with the terroir, producers of a reputation-based GI may move and bring the GI with them. This was the approach found in German jurisprudence pre-EU GI acquis. After the World War 2, BGH ruled that Germans displaced from Pomerania (part of Poland) and from the town of Coswig (then falling under the East Germany) were entitled to continue using, respectively, “Rügenwalder Teewurst” and “Coswig” as GIs. The ruling in Habana II shows how the EU GI system is impacting the philosophy of German courts on the matter.

Another point of interest is how the German legislation exists in parallel to that of the EU, despite settled case-law of the Court of Justice of the European Union (CJEU). In the latest case in this regard, C-35/21, the CJEU concluded that the uniform and exhaustive character of the EU GI system precludes a parallel national system for agricultural products and foodstuffs in Bulgaria. Yet, the German courts continue protecting certain rights under national GI laws, including German-only bilateral agreements.

Lastly, our readers might remember that the original proposal for the 2023/2024 GI Reform foresaw that for evocation to be established there had to be harm for the GI’s reputation. This requirement (that could have limited the over-expanding scope of evocation) was later dropped. This Kat is now left with the German GI cases to see how it could have been applied.