The judgement of the German Supreme Court of 17th May 2001, Docket No. I ZR 216/99 (“Mitwohnzentrale.de” – short-term letting agency)

The defendants, an association of 25 German letting agencies in different cities in Germany, had registered the domain name "Mitwohnzentrale.de". This was objected to by over 40 other letting agencies. The plaintiffs claimed that generic terms should be kept free in the internet. The term "Mitwohnzentrale" has become generally accepted to mean short-term rental of accommodation and the use of this term by an organisation that only consists of part of the sector could lead to a substantial risk of an unfair competitive distortion.

The Regional Court in Hamburg held that the use of the generic domain name “Mitwohnzentrale.de” was anti-competitive. The Regional Appeal Court in Hamburg upheld the lower court’s decision, reasoning that the use of the domain name was unfair the Unfair Competition Act since potential clients would be diverted to the defendants’ website if they typed in the generic term. The court held that - instead of using a search engine to find sites relevant to their subject matter - many users would simply type in the generic domain name. This would bring them to the defendants’ website and even if they realised that not all letting agencies were listed there, they would probably not conduct any further search. Therefore, the Regional Court and the Regional Appeal Court in Hamburg ordered the defendants to relinquish using the domain name "Mitwohnzentrale.de" without distinguishing additions.

The German Supreme Court overturned the lower courts’ decision and

acknowledged as lawful the widespread practice of using generic terms as Internet addresses. The court held that merely channelling customers to one’s services did not constitute unlawful competition in violation of public policy. Drawing customers away would only be unfair if the advertiser interfered between the competitor and his customer, so to speak, to force the latter to change his decision to buy. This was not the case here. Using the generic domain name merely gave the defendants a marketing advantage, without unfairly influencing customers to be already attributed to the competitor. The court rejected the analogy with trade marks. The need to keep use free as cited by the Regional Appeal Court in Hamburg - generic terms must not be registered as trademarks - was not affected here. Unlike a trademark, the defendants’ internet address did not give rise to a broad, exclusive right. The plaintiffs and other competitors were not hindered from using the term "Mitwohnzentrale" in their advertising or business names. In relation to users who might merely type the generic URL as a search method, the court considered that such users were generally aware of the shortcomings of this method, in particular the chance nature of the result found.

However, the court still expressed some reservations about the use of generic domain names and explained that if the owner also blocked the generic name in other top-level domains, this could be anti-competitive. It could be abusive if the user not only used the generic name under a top-level domain (here ".de") but simultaneously blocked other spellings or the use of the same name under other top-level domains. Also, if the use of the generic name was misleading, in that it led the consumer to believe that the domain name owner was the only provider of the services, it could be anti-competitive and on this basis the court asked the Regional Appeal Court to reconsider this aspect of the case.

The plaintiff had also criticised that consumers were misled by the defendants’ internet address because it aroused the impression that the defendant was the only, or at least the main, association of short-term letting agencies. The Regional Appeal Court must now investigate this accusation of an inappropriately asserted position for one person only. If it were to find that the use of the domain name created a misleading effect, the Supreme Court instructed them to permit the use of the domain name, but only if the user clarified on their home page that there were other providers of the services.