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The Smiley Company is taking action against hundreds of German eBay and Etsy retailers

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The Smiley Company is taking action against hundreds of German eBay and Etsy retailers

In the past few days, hundreds of eBay and Etsy merchants in Germany have been caught unawares by emails from a US attorney asking them to obtain a restraining order against them in a US court over potential intellectual property infringement by The Smiley Company SPRL” were informed. This article shows what these letters are all about and how affected dealers should now behave.

I. US Injunctive Relief: What Happened?

1.) Reason for the procedure and course of the process

“The Smiley Company SPRL” is the owner of various word and figurative marks relating to the term “Smiley” and the associated, globally known smiling round face.

The company holds these intellectual property rights in the USA and has registered them with the United States Patent and Trademark Office for almost every conceivable class of goods.

Based on intensive research, “The Smiley Company SPRL”, which produces and sells products with the iconic smiling faces and corresponding smiley lettering itself, has identified various alleged infringement actions worldwide, mainly by platform dealers on eBay and Etsy, which use the company’s trademarks should have used for own products without permission.

On June 26, 2023, the company then applied to a district court in South Florida (District Court of the Southern District of Florida) for an injunction against these globally active platform dealers by way of a “collective proceeding”, which is not untypical for the USA to temporarily prohibit the alleged unlawful use of their trademarks for unauthorized products.

In order not to have to proceed against each identified infringer individually, US law offers the possibility to proceed collectively against any number of counterparties and obtain a court decision with effect for and against all these parties.

According to the company’s arguments, the infringement actions also had a specific effect in the US state of Florida, because the affected websites on eBay and Etsy could be accessed there and offers were also made to citizens of the state.
This justifies the jurisdiction of the seized US court.

The infringers would specifically use their foreign company headquarters to extend their activities in violation of intellectual property rights to the USA and to evade legal claims there.

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After issuing a court notice announcing that the request for an injunction would be granted, and after a three-day period for comment at the beginning of June, the US district court then issued the preliminary injunction on July 31, 2023 in accordance with the request.

At the same time, the court also issued an order for service that allows The Smiley Company SPRL to formally serve the injunction and necessary accompanying documents by e-mail.

An objection period against the ruling expired on August 7th, 2023.

2.) Hundreds of German dealers affected

In the period from August 8th to 10th, 2023, hundreds of German eBay and Etsy dealers were confronted with the legal proceedings in the USA and the injunction obtained against them.

You are accused of violating the intellectual property rights of “The Smiley Company SPRL” with the products you offer.

It is noteworthy that the dealers concerned were only informed about the injunction procedure, which had already been scheduled for June, after it had been completed and, in particular, only after the set objection and comment periods had expired.

II. Does the order affect German dealers at all and can it be enforced?

1.) US Court Jurisdiction and Jurisdiction

In principle, non-US companies can be effectively sued or held liable in a US court where jurisdiction is established.

In the case of legal disputes relating to the Internet, the so-called “minimum contact” principle applies. According to this, it is sufficient that the online activity of the person claimed has some effect in the local jurisdiction of the US court appealed to, i.e. that it can be accessed or commissioned there in particular.

If the online sales activities of the German eBay and Etsy dealers who are now being claimed had an effect in the state of Florida, i.e. offers could be called up and perceived there, the jurisdiction of the district court in Florida is justified and the injunction could be effectively issued .

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2.) Enforceability of the order in Germany

Another question, however, is the enforceability of the injunction in Germany, i.e. whether the injunction can also be effectively enforced with legal or administrative means in Germany.

This is not easily possible. Since there is no agreement on the recognition of court judgments and rulings between the USA and Germany, the ruling would have to be recognized in Germany for it to be enforceable.

For this purpose, an official recognition procedure must be completed, in which the reasons for the exclusion from recognition of the § 328 ZPO must be examined in detail.

The recognition procedure is based on the so-called “Hague Convention on the Exemption of Foreign Public Documents from the Legislation of October 5, 1961” and is completed with the issuance of an apostille.

For the proceedings now under discussion, it is true that the affected German dealers were effectively obliged under US law by means of an injunction to refrain from infringing on the intellectual property of “The Smiley Company SPRL”, but this obligation is not automatically imposed by the company in Germany as well can be enforced.

III. What should affected retailers do now?

Even if the enforceability of the injunction in Germany is suspended until the decision is recognized under the Hague Convention, the dealers affected should not remain idle.

This applies in particular because it cannot be ruled out that consequential claims such as damages or product destruction will be asserted in addition to the injunctive relief.

Even if the reaction deadlines have apparently expired due to the late “delivery by e-mail”, it is likely that the case can still be defended due to a lack of delivery.

Service at international level is based on the “Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters of November 15, 1965”.

This convention regulates various forms of service that have not been ratified by the Federal Republic of Germany. This includes, among other things, the delivery of documents such as a court order by e-mail.

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If the injunction was processed in accordance with the Hague Service Convention as in the present case, but service was effected using a variant that has not been ratified in Germany as part of the Convention, it has not been effectively served in Germany.

Consequently, due to the lack of service, the decided appeal periods are suspended and have not started to run effectively, so that the lodging of appeals should still be possible.

In order to prevent further escalation, affected traders should in any case consult a lawyer who is familiar with the US legal system, ideally also a lawyer based in the USA.

With his support, the allegations made must first be checked for their merits and procedural risks and consequences (including costs) must be analyzed.

It must then be evaluated whether, despite the alleged expiry of the established appeal periods, action can still be taken against the injunction (see above) and whether this makes procedural and financial sense with regard to any violations that may have occurred.

IV. Conclusion

Hundreds of German eBay and Etsy retailers have been confronted with an injunction from the “Smiley Company SPRL” in the past few days, which prohibits them from potentially infringing US trademark rights through their products.

Even if the injunction is not readily enforceable in Germany, those affected are strongly advised to contact US legal counsel with expertise in intellectual property law in order to effectively review the course of the process to date, the merits of the allegations and the prospects of further action let.

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