Facts
Parties and proceedings: [A. AG] (defendant, appellant), based in [U.] /SG, operates an automobile workshop and trades in new and used vehicles, including the VW brand. Volkswagen AG (plaintiff 1, respondent 1), based in Wolfsburg, holds the international word marks 'VW' and 'VOLKSWAGEN' and the word/figurative mark 'VW im Kreis'. AMAG Automobil- und Motoren AG (plaintiff 2, respondent 2), based in Zurich, is the general importer in Switzerland and is entitled to use plaintiff 1's trademark rights and to grant sublicences.
Contractual relationship: At the end of 2004 or the beginning of 2005, plaintiff 2 concluded with the defendant a dealer agreement and a service partner agreement for VW commercial vehicles, whereby the defendant obtained the status of an official VW representative and the right to use the marks. The dealer agreement was terminated by mutual consent as of 31 December 2013, and the service partner agreement as of 30 June 2014. The defendant thereafter continued to offer predominantly VW vehicles and services.
Subject matter of the dispute: The defendant used the designation 'VW-Land Toggenburg' on roof advertising panels, flags and a freestanding sign, and, at least earlier, the logo 'VW im Kreis' on licence plate holders. Following warnings dated 4 and 25 August 2014, it removed the designation from its website; further warnings followed on 7 May and 10 July 2015.
Proceedings before the Commercial Court: On 30 September 2016, the plaintiffs filed an action with the Commercial Court of the Canton of St. Gallen. Request for relief 1 sought a prohibition on using 'VW-LAND' or 'VW-LAND TOGGENBURG' in business dealings, subject to the penalty under Art. 292 SCC. Request for relief 2 concerned the logo 'VW im Kreis' on licence plate holders. The interim measures proceedings were written off on 26 January 2017. By decision of 3 October 2018 (HG.2016.142), the Commercial Court upheld request for relief 1, wrote off request for relief 2 as moot, and ruled on costs.
Proceedings before the Federal Supreme Court: The defendant filed a civil law appeal and requested that dispositive paragraphs 1, 3 and 4 be set aside and that request for relief 1 be dismissed. The respondents requested dismissal. The lower court waived a response. By orders of 26 February 2019 (superprovisional) and 20 March 2019, the appeal was granted suspensive effect.
Considerations
Admissibility: This is a civil dispute under TmPA and UCA with a sole cantonal instance (Art. 5 para. 1 lit. a and d CPC; Art. 75 para. 2 lit. a FSCA). The civil law appeal against a final decision is admissible irrespective of the amount in dispute (Art. 74 para. 2 lit. b FSCA; Art. 90 FSCA). The Federal Supreme Court examines admissibility ex officio and applies the law ex officio (Art. 106 para. 1 FSCA), but in principle only addresses the complaints raised and is subject to the strict principle of complaint (Art. 42 para. 2 and Art. 106 para. 2 FSCA). It is bound by the facts established by the lower court (Art. 105 para. 1 FSCA); complaints concerning facts must be clear and substantiated (Art. 105 para. 2 FSCA). The appellant largely departed from this framework, so its new factual allegations, in particular regarding the knowledge and conduct of the respondents and the competition issue, were disregarded.
Trademark co-use: The appellant complained of an incorrect application of Art. 13 para. 2 lit. e in conjunction with Art. 3 para. 1 TmPA. Under Art. 13 para. 2 lit. e TmPA, the trademark holder may prohibit third parties from using a sign on business papers, in advertising or otherwise in business dealings where the sign is excluded from protection under Art. 3 para. 1 TmPA. According to case law, a dealer may use a third party's mark to describe its own goods and services, provided the advertising clearly relates to its own offerings; general promotion of the mark without reference to a range of goods remains reserved to the trademark holder, and the boundary lies where a misleading impression of a special relationship with the trademark holder arises (BGE 128 III 146 E. 2b; 126 III 322 E. 3). The Federal Supreme Court confirmed that the enseigne 'VW-Land Toggenburg' is distinctive, as it individualises the business (Art. 954a para. 2 CO). There was therefore a trademark-related co-use falling within the…