When they procure (public) contracts, contracting authorities use technical specifications to prescribe the characteristics required of a material, product or supply. In order to prevent that certain undertakings are favoured, it is not permitted to refer to a specific brand or make. This can only be done under specific circumstances, for example when the reference to a trademark is followed by the words "or equivalent". How does this work in practice? And when is something “equivalent”?
Basic principle: ban on reference to trademarks
Section 2.76 (3) of the Dutch Public Procurement Act (Aanbestedingswet, “Aw”) takes as a starting point that including a reference to a trademark in technical specifications is prohibited. There are two exceptions to this main rule:
- the reference to a trademark is justified by the subject-matter of the public contract (cf. Section 2.76 (3) Aw), or:
- a sufficiently precise and intelligible description of the subject-matter of the public contract is not possible and the reference is accompanied by the words “or equivalent” (cf. Section 2.76 (4) Aw)
Case law has shown that these exceptions deserve a restrictive
interpretation. This means that a contracting authority cannot simply suffice by adding the words “or equivalent” in a reference to a trademark. References to a trademark are only permitted in cases where a sufficiently precise and intelligible description of the subject-matter of the public contract is not possible. The contracting authority will have to substantiate the necessity of the reference.
Complaining about a reference to a trademark
Public procurement law uses the principle of “ask first, complain later” When a tenderer discovers a reference to a trademark in technical specifications, it can take the initiative to inquire about this. The procurer will then have to explain why it believes it can make a justified reliance on a ground for exception. If the procurer cannot do so, it will have to remove the reference to a trademark and use a functional description instead.
If a tenderer fails to notice and/or file a complaint about a reference to a trademark during the tendering procedure, it runs the risk of forfeiting its rights. After the contract has been awarded, a protest against the reference to a trademark – when the tenderer wants to offer another product – will be dismissed as late. This doctrine, also known as the “Grossman doctrine”, arises from EU case law.
The consequences of a failure to complain about a reference to a trademark are apparent from a recent ruling dated 8 January 2024 of the Dutch Arbitration Board in Construction Disputes (no. 37.630). In the case concerned, the municipality had prescribed a specific type of road gullies (street drains) of a specific supplier, accompanied by the words “or equivalent”. The (winning) tenderer had not commented on this during the tendering procedure. It offered four alternative road gullies. It was not until all alternatives had been rejected (because the municipality considered them not to be equivalent to the prescribed road gullies) that the contractor complained about the unauthorized reference to a trademark in the technical specifications. The arbitrator fully ignored this argument: “However, in the opinion of the arbitrator this procurement-law opinion is not relevant to the question whether the municipality was allowed to reject the alternatives offered by the contractor. The specifications simply demand gullies of a specific trademark and type, or equivalent.”
Once a tendering procedure has been completed, the arbitrator will no longer decide on the question whether a reference to a trademark was permitted under procurement law (read: whether the procurer could successfully rely on the exceptions of Section 2.76 (4) Aw). In this phase, this aspect is no longer relevant. After the award the specifications are basically fixed, and the arbitrator can (only) still assess whether the contractor’s alternatives offered are sufficiently equivalent.
What is an equivalent product?
In the same ruling of the Arbitration Board in Construction Disputes, the arbitrator clarified how the equivalence of products should be assessed.
Only the objectively apparent characteristics are relevant to the assessment. The arbitrator held that this definition concerns not only the characteristics mentioned expressly in the specifications, but that all objectively apparent relevant characteristics of that product are relevant. In the case concerned, the alternatives offered were assessed by the municipality based on the brochure of the supplier mentioned in the specifications. The relevant safeguards regarding dislodging, watertightness, damaging and sustainability were compared using this method. Equivalence means that the alternative offered has to be equivalent in all relevant objectively apparent characteristics of that product, which means: at least just as good. The arbitrator held that the alternatives offered had rightly been rejected by the municipality, since they were not equivalent to the product prescribed.
Conclusion
The basic principle is that references to trademarks in technical specifications are prohibited. If specifications do contain such references, it is up to the tenderer to check actively whether a procurer makes a justified reliance on a ground for exception. The tenderer has to ask questions about this, and if necessary complain, in good time.
A procurer who uses references to trademarks in technical specifications must be able to substantiate the need for this. It will also do wise to mention the desired feature of the (branded) product expressly in the specifications. This will clarify the relevant and/or objective recognisability of this feature, and prevent discussions. This way, it can be assessed better from the start whether an alternative offered is indeed equivalent, and the parties will not be unpleasantly surprised afterwards.
At Kennedy Van der Laan we closely monitor developments in construction and procurement law. Should you have questions about this article or a specific issue, please contact Gracia de Vries.