VELLUM infringed despite distribution agreement

The Arnhem District Court has ordered the former distributor of Ashlar Inc's VELLUM trademarked products in Benelux to cease all use of the mark in Benelux (Case 113989/KG ZA 04-362, August 12 2004).

In 1989 Ashlar of Austin, Texas created a computer program called Vellum. In 1992 Ashlar granted distribution rights to the program for German-speaking countries to Vellum Software GmbH of Germany. Vellum Software later set up Vellum Benelux, with which Ashlar entered into a distribution agreement in 1995. The agreement provided that the Vellum companies would not acquire any right and title in the VELLUM mark and name. However, Vellum Software had by then already registered in its own name VELLUM as a trademark for various European countries, including Benelux, under the Madrid Protocol.

Ashlar terminated the distribution agreements with the Vellum companies in 2001 and registered its VELLUM logo as a Benelux mark in 2003. Upon discovering that Vellum Benelux was (i) still using the VELLUM mark and trade name, and (ii) using advertising slogans similar to its own, Ashlar started preliminary infringement proceedings in the Netherlands, even though the distribution agreement provided that the courts in the Northern District of California were exclusively competent.

The Arnhem District Court upheld Ashlar's infringement claims. It held that it was competent to hear the case based on the Benelux trademark because the alleged infringement took place in the Netherlands and was therefore governed by Dutch law. The court found that the Vellum companies had been incorporated for the sole purpose of distributing Ashlar's software. This led the court to conclude that Ashlar had prior rights in the VELLUM mark and, therefore, Ashlar had not registered its VELLUM logo in Benelux in bad faith. Accordingly, the court ordered Vellum Benelux to:

• cease all use of the VELLUM trademark and trade name in Benelux;
  
  
• cease use of the slogans:
  
  
  • "design software that thinks";
    
    
  • "software that works the way you think"; and
    
    
  • "design and drafting software that thinks";
    
    
• transfer the registration of the domain name 'vellum.nl' to Ashlar; and
  
  
• submit to Ashlar full details of its stock of VELLUM-marked products and of its customers for these products.

Paul Steinhauser, Steinhauser Hoogenraad Advocaten, Amsterdam