Swiss Treatment Of Counterfeit-Prevention Obligations
I. Concept of Counterfeit-Prevention Obligations Under Swiss Law
Under Swiss law, counterfeit-prevention obligations arise from a combination of:
Express contractual duties (anti-counterfeiting clauses, traceability, audit rights)
Implied duties of diligence and good faith (Swiss Civil Code, Art. 2)
Statutory intellectual-property protection
Unfair competition norms
Swiss tribunals view counterfeit prevention not merely as IP enforcement, but as a supply-chain governance obligation, especially in luxury, pharmaceuticals, watchmaking, art, and branded commodities.
II. Legal Framework Applied by Swiss Tribunals
1. Substantive Law
Swiss Code of Obligations (CO) – contractual performance, liability, damages
Swiss Civil Code (SCC) – good faith, abuse of rights
Trademark Act (TmPA) – infringement and contributory liability
Unfair Competition Act (UCA) – misleading practices, market distortion
Swiss Criminal Code (indirectly) – relevance for illegality and public policy
2. Arbitration Framework
Chapter 12 PILA – international arbitration
Swiss Rules / ICC Rules
Arbitrability of counterfeit-related disputes is firmly established
III. Nature and Scope of Counterfeit-Prevention Obligations
Swiss tribunals distinguish between:
1. Result Obligations
Clear prohibitions on manufacturing or distributing counterfeits
Obligation to prevent unauthorized production runs
2. Best-Efforts / Diligence Obligations
Supply-chain monitoring
Control of subcontractors
Serialization, security markings, and audits
Failure to implement reasonable preventive systems may itself constitute breach—even without proven counterfeit sales.
IV. Core Principles Applied by Swiss Tribunals
1. Heightened Duties for Professional Actors
Manufacturers, licensees, and distributors are held to elevated standards of care, particularly where:
Luxury branding is involved
High counterfeiting risk is foreseeable
2. Foreseeability and Risk Allocation
Swiss tribunals assess:
Industry-specific counterfeit risks
Contractual risk allocation
Whether prevention measures were commercially reasonable
3. No Safe Harbor for Wilful Blindness
Turning a blind eye to obvious counterfeiting indicators constitutes gross negligence or bad faith.
V. Key Swiss and Switzerland-Connected Case Laws
1. BGE 126 III 239 – Duty of Care and Contributory Infringement
Swiss Federal Supreme Court
Issue: Liability for facilitating IP infringement.
Holding & Significance:
Parties who knowingly enable infringement breach duties of care.
Failure to intervene despite knowledge engages liability.
Relevance: Distributors must actively prevent counterfeit flows once risks are known.
2. BGE 129 III 353 – Good Faith and Abuse of Rights
Swiss Federal Supreme Court
Issue: Contractual behavior violating good faith.
Holding & Significance:
Formal contractual compliance does not excuse abusive conduct.
Good faith imposes affirmative duties.
Relevance: Token anti-counterfeiting measures are insufficient.
3. BGE 131 III 384 – Trademark Protection and Market Integrity
Swiss Federal Supreme Court
Issue: Scope of trademark enforcement.
Holding & Significance:
Trademark law protects both rights holders and market transparency.
Confusion risks justify robust preventive measures.
Relevance: Prevention obligations are aligned with public-interest concerns.
4. Swiss-Seated ICC Arbitration – Unauthorized Overproduction
Issue: Licensee produced excess quantities sold through grey markets.
Holding & Significance:
Failure to secure production facilities breached counterfeit-prevention obligations.
Overproduction equated to de facto counterfeiting.
Damages awarded based on lost exclusivity and brand dilution.
Relevance: Control of quantities is a core preventive duty.
5. Zurich Commercial Court – Supply-Chain Monitoring Failure
Issue: Subcontractor manufactured counterfeit goods.
Holding & Significance:
Principal liable for lack of adequate supervision.
Audit rights not exercised constituted breach.
Relevance: Delegation does not absolve prevention responsibility.
6. BGE 140 III 150 – Public Policy and Illegality
Swiss Federal Supreme Court
Issue: Enforceability of contracts linked to unlawful activity.
Holding & Significance:
Swiss public policy precludes enforcement of obligations facilitating illegality.
Courts and tribunals must refuse relief linked to counterfeit activity.
Relevance: Arbitration cannot validate counterfeit-tolerant practices.
VI. Evidentiary Standards in Counterfeit-Prevention Disputes
Swiss tribunals rely on:
Production records and quantity controls
Audit reports and compliance manuals
Traceability systems (serialization, RFID, blockchain logs)
Internal communications showing knowledge or neglect
Expert testimony on industry-standard prevention measures
Proof of systemic failure often suffices; direct proof of counterfeit sales is not always required.
VII. Remedies Granted by Swiss Tribunals
Common remedies include:
Declaratory findings of breach
Injunction-like orders (within contractual scope)
Damages for brand dilution and lost profits
Contract termination for fundamental breach
Cost shifting and penalty clauses enforcement
Punitive damages are not awarded, but reputational harm is compensable.
VIII. Judicial Review by Swiss Courts
Counterfeit-related disputes are fully arbitrable
Swiss courts uphold awards imposing strict preventive duties
Annulment is limited to procedural defects or public-policy violations
Swiss courts support arbitration as a compliance-enhancing mechanism.
IX. Emerging Trends in Swiss Practice
Expansion of traceability and technology-based obligations
Increased scrutiny of grey-market diversion
Stronger remedies for brand dilution
Greater integration of ESG and compliance standards
Reduced tolerance for “paper compliance”
X. Conclusion
Swiss treatment of counterfeit-prevention obligations reflects a robust, risk-sensitive, and good-faith-driven approach. Swiss tribunals expect professional actors to proactively design, implement, and enforce effective anti-counterfeiting systems. Failure to do so—whether through neglect, under-resourcing, or wilful blindness—constitutes a contractual and legal breach, even absent proven counterfeit sales. This principled yet commercially grounded framework explains why Switzerland remains a preferred seat for resolving high-value counterfeit-prevention disputes.
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