Revue Francophone de la Propriété Intellectuelle

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Article published on ActuEL-RH and ActuEL-HSE

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On the 28th of September 2020, Thierry Mollet-Viéville took part in an AAPI session on the issue of proportionality in Intellectual Property. Today, he publishes his notes.

Presentation by Thierry Mollet-Viéville at the AAPI

Thank you President,

Dear Friends,

Like Mr. Charrière-Bournazel, Chief of the Bar, I am somewhat perplexed by the issue of proportionality in Intellectual Property.

Where are we going?

In the right direction, I hope. I must say that the case law I have seen in recent times does raise a number of questions.

Like many of us, my hesitations stem from the very novelty of this notion of proportionality, which is quite new in Intellectual Property.

Indeed, none of our international conventions mention proportionality—not the 1883 Paris Convention on Industrial Property, the Berne and Geneva Conventions on Copyright, or the more recent 1961 Rome Convention for Artists and Performers. Their main focus is on a minimum level of protection for creations.

As our Chief of the Bar said, this notion of proportionality, or fairness and balance, only made its first appearance in the European conventions: the ECHR in 1950, and the EU Charter of Fundamental Rights in 2000, which refers to the protection of Intellectual Property as one of its fundamental principles and, more generally, to the issue of proportionality, among other circumstances to be taken into account.

I would like to add one more notion to those mentioned by our Chief the of the Bar, namely “abuse of rights,” which is also prohibited by the 2000 Charter.

I would first like to make a few comments of a general nature:

It is difficult, especially when it comes to the question of remedies, to deal in the same way and all at once—as our legislators would have us do—with all areas of intellectual property. In my opinion, there are four, according to both a vertical and a horizontal division.

Following a vertical division, intellectual property is split into two main areas:

• Literary and Artistic Property which, for arbitrary works, particularly deals with each individual’s personality and culture, and
• Industrial Property, including patents, trademarks, and designs, which, for creations of a technical, functional and/or simply practical nature, deals with fundamental subjects such as health, biology, telecommunications, and now even artificial intelligence.

Following a horizontal division, whether in matters of copyright, design and trademark rights, and even patent rights, different kinds of infringement present highly diverse levels of gravity:

• piracy, which consists in passing off a fake as the real thing, must be promptly and strictly punished, particularly by the criminal courts;
• other infringements consist merely in the infringement of a right, and the question of whether or not such a right has been infringed often requires a much more sophisticated assessment.

In general, the civil courts will sentence an infringer even if its bad faith has not been demonstrated, and even in such a case, it seems fair and proportionate to put an end to the infringement and that the victim should be fully compensated for all its damages, per our general principles of civil liability.

The 1994 TRIPs Agreement and the 2004 Directive first require that the States protect intellectual property, and to provide “effective and dissuasive” measures for this purpose.

This comes up four times in the TRIPs Agreement [art. 41.1 and 2, 42, and 50], and only once in the Directive [art. 3].

Still, according to both instruments, such effective and dissuasive measures must be proportionate. The Directive mentions this four times in its recitals (22, 24, 25, and 31) and four times in its articles [3, 10, 12, and 14], whereas the TRIPs Agreement refers to it only once [art. 46].

However, it should be remembered that the purpose of these international instruments is not to harmonize intellectual property on exactly the same level in all countries worldwide, particularly in Europe. For a long time, it has been agreed that such conventions set a minimum threshold and allow their Members to institute measures in their positive law that are more favorable to rights holders, which is beneficial for both nationals and foreign holders.

This is what the TRIPs Agreement [art. 1.1] and the Directive (recital 21) [art. 2.1 and 16] clearly guarantee.

The Directive even provides that such more favorable measures should be offered to other EU states that do not yet have them, as the Paris Convention still allows today, without imposing a maximum threshold or even uniform harmonization for all countries.

I will return to this point later in discussing the procedure of “saisie-contrefaçon.”

There is one more question I would like to raise: what should be proportionate?

Is it the law intended by the legislator, or its application by the courts?

Don’t most legislators feel that they fulfill their duties by introducing rules that are in themselves fair and just?

Or is it up to the courts, in applying the law, to consistently seek to achieve and justify proportionality in the measures pronounced?

Of course, as a defender, I often tend to ask the court to take into consideration my client’s situation vis-à-vis its competitors or its partners.

Is the refusal to grant a “saisie-contrefaçon” in France disproportionate?

For more than a century, France has allowed infringement victims to obtain from a judge an order to perform a seizure in any location.

Given the accusatory system in countries of Latin culture such as France, is this not a more favorable measure for rights holders who can thus go beyond the simple option only contemplated by Article 7 of the Directive whereby the victim must provide indicative evidence persuasive enough for the judge to authorize such a seizure or, otherwise, to deny it?

Is this not a simple collection of evidence that the victim is required to bring the judge, failing which its claims will be dismissed, ultimately depriving the victim of access to justice? Moreover, the evidence must prove three facts: the copying or imitating object, the prohibited act, and lastly the person responsible.

In other words, should not the proportionality that these international instruments impose for measures like “saisie-contrefaçon” be assessed not only in light of the French judicial system and within the general framework of its positive law as a whole, but also in comparison with the systems available in the other countries covered by these instruments?

In these conditions and given France’s accusatory system, is not “saisie-contrefaçon”—which is always undertaken at the risk of the rights holder—by nature proportionate, particularly in Europe, since the victim:

• does not have access to the discovery and disclosure procedures available in Great Britain, or to the German rule whereby the parties have an obligation to expose the truth of the facts known to them (§ 178 ZPO)
• would see its claims dismissed by the judge without the defendant’s even having to challenge the alleged facts since it need only argue that the plaintiff has not provided sufficient proof, as is its burden?

Indeed, in defense in France, even when the infringer knows the truth about the facts alleged by the plaintiff, it is not required to acknowledge or admit them.

Consequently, would it be proportionate to deny a patentee in France the right to perform a seizure on the grounds that, in the absence of indicative evidence of an infringement, the judge is not convinced of its existence? Would this not be tantamount to considering that the petitioner’s statements are not true or sincere?

This means that a patentee would be incapable of providing a French judge with even indicative evidence of the implementation of its process in the facilities of its unfair competitor. Therefore, it would never be able to enforce its rights in France…

Likewise, the rights holder would be obliged to deal with several retailers on the market in order to be able to provide the judge with convincing indicative proof of the origin of the infringing products, even though its commercial network has already informed it of the source of the infringement and it would be more effective, expedient, and cheap to take action directly against this sole offender.

To enlighten the audience, I would like to refer to the preparatory work of the EU Parliament in the 2000s during the drafting of the 2004 Directive.

At the time, its members were not so much seeking to come to a single harmonized solution to enforce intellectual property rights in all EU countries, but rather to compile the advantages available in some States so that others could also benefit from them.

Thus, the propositions included, for example, the recall of infringing goods from outside The Netherlands, the profits generated thanks to the infringement outside Germany, the right of information outside the UK, the procedure of “saisie-contrefaçon” outside France, etc.

To which the British and Germans then replied that they did not need this French-style seizure [or that their courts could refuse it] since, in their countries, thanks to English discovery and disclosure, it is possible to ascertain all the facts during the proceedings and, before the German court, the parties are obliged to state the facts without deceit, which means that, in most cases, a “raid” on a competitor—a rather intrusive step even if they are at fault—would be useless and inappropriate.

It is true that the most recent French case law shows that our national legislators have not displayed any clear intent to transpose into French law the potential obligation to provide some indicative evidence of infringement as referred to in Article 7 of the 2004 Directive.

However, don’t our judges still impose these same requirements under the guise of proportionality?

In this respect, to authorize a “saisie-contrefaçon,” the requirement of complete diligence and transparency on the part of the petitioner is fully warranted.

Therefore, the judge petitioned to authorize a seizure must assess whether parallel proceedings or decisions may influence his decision. A reading of certain petitions clearly shows that the rights holder is not seeking to collect evidence of infringement, but to discover secret, confidential, or even simply personal information about a competitor which, additionally, bears no relation to the infringement.

However, as a matter of principle, shouldn’t “saisie-contrefaçon” always be authorized in order to collect, even by force, the triple evidence of:

• the object held to be infringing,
• the act prohibited by law,
• and the person responsible for it?

Of course, it is important and even necessary for the judge to remain free to refuse to authorize a “saisie-contrefaçon,” not only when the petitioner’s ownership appears uncertain (whereas the Offices generally presume that the applicant’s statements are true and sincere, even though it is only the apparent owner), but also when the judge senses that the circumstances claimed by the petitioner do not seem legitimate, this time based on an ad hoc reasoning that can be challenged before the higher courts.

And common sense demands that anything relating to the alleged infringement should never be hidden from the court, which is precisely what the German and British judicial systems confirm.

Therefore, the seizure need not be authorized or carried out on items unrelated to the infringement, but everything that does relate to the infringement must be seized, even when the items are secret, confidential, or personal.

Indeed, in the latter case, the seized party can simply claim just cause and have an expert appointed by the judge or the parties select such sensitive items having been placed in a sealed envelope within the context of a confidentiality club—a system we have known for decades.

Then, if the judge decides that an infringement has been committed, this selection of seized items kept in a sealed envelope can be pared down further, leaving only those that are of real interest. For example, this would apply to the names of the clients, the gross and net margins of the seized party, etc.

With globalization, we know that infringement is rarely domestic, but more often cross-border.

In this respect, in the context of judicial cooperation, at least within the EU, it seems essential to be able to bring evidence collected in France before a foreign court, and vice-versa from abroad before a French court.

Obviously, such evidence can only be used to defend the seizing party’s intellectual property rights in the EU and worldwide, and there is no question that it cannot be revealed to a journalist or another competitor!

Even a US court is ready to allow items from a discovery or even a protective order to be used before a foreign court, including in France.

Is an injunction always proportionate?

Once the judge considers that an infringement has been committed, is it always required to prohibit it for the future?

Until the 1970s, particularly in patent matters, injunctions only came into effect with the decision of the Court of Appeal.

Then with French procedural reform, the Courts of First Instance all consistently included provisional enforcement in their injunctions, notwithstanding appeal. Because of this, some people considered that litigants no longer truly had the right to benefit from an appeal.

In 1984, with the lengthening of legal proceedings, an immediate preliminary injunction was instituted. At the time, it was subject to five preconditions:

• the patent had to be exploited,
• the damage for the patentee would not easily be compensated by a financial award,
• the action on the merits had to be serious,
• and filed promptly,
• before a judge in the form of summary proceedings.

In other words, a judge would examine the merits of the case in the short time span of summary proceedings.

Since then, these five conditions have been removed and it is important to keep this in mind.

In particular, the French legislator has abolished the requirement that it should be difficult to compensate the patentee’s damage. Still, doesn’t proportionality recreate this condition today?
Is this not the case when the judge ruling on the preliminary injunction considers that the infringement is unlikely on the grounds that the patent’s validity is seriously challenged [often in a lengthy brief filed the day before the trial by the defendant who never challenged it before]?

Is there not an inconsistency here between our current case law applying the 2004 Directive, on the one hand, and our French Codes of Civil Procedure and Intellectual Property, on the other. Indeed, the latter literally requires only certainty as to ownership and belief in the likelihood of an infringement, whereas for the sake of proportionality, the judge ruling on the preliminary injunction may consider, despite the speediness of summary proceedings, that it is necessary to reexamine once again the validity of a patent even on the basis of inventive step, although the patent had already been examined before being granted?

This is precisely the criticism expressed by the Paris Court of Appeal in the 2010s, particularly in a decision handed down in a case where the appeal before the Supreme Court was unilaterally withdrawn by the generic drug company that had been enjoined.

In assessing the proportionality of the prohibition to be ordered or denied, should we not return to the essential purpose of titles such as patents and trademarks?

Is it a right to prohibit or simply a right to a reward?

Already in the 1970s, the Court of Justice in Europe considered that the essential purpose of a patent or a trademark right was to allow its holder to be the only one to market its patented or trademarked goods.

In these conditions, if someone does not exploit its title, does it have the right to exclude a company from a market it doesn’t occupy?

This is why the legislator now provides that there are no grounds for an injunction when the trademark owner has not used the trademark in the relevant market.

Shouldn’t the same apply when the patent has not been exploited, even though the patent owner’s rights cannot be lapsed?

• I would like to make a digression here to remind you that, already in the 1970s, the Brussels Commission considered that if the patentee had agreed to grant several licenses, in other words, if it had agreed to break up its market monopoly, it could then be discriminatory to deny the grant of an additional license to a newcomer.
• Today, there is a lot of talk about so-called “essential” patents, which must be implemented in order to comply with certain standards, for example, those of ETSI for mobile phones (2G, 3G, 4G, and 5G).

How can patent portfolio owners in this field consider they hold an industrial monopoly that the courts should protect when, having agreed to break it up for the benefit of several implementers on the same market, they only receive royalties from the exploitation of their patent rights? In such a case, having lost no industrial profits, should not their rights be reduced solely to obtaining such financial rewards?

The issue at stake here seems to me to be all the more important as the economic situation is entirely different today from what it was at the end of the 20^th century, when the patentees themselves manufactured or distributed their inventions. This is why they freely exchanged free cross-licenses of all their patents in these various standards committees…

But today, patent portfolios are no longer held by industrial companies or distributors, but by investors who are often more concerned with the value of their capital.

The questions I have chosen to raise here are all the more delicate because several professionals have officially acknowledged that only one-third of essential patents (declared as such by their holders, in effect unilaterally and without control) are actually relevant.

As is often the case with EPO-granted patents, one-third of such essential patents could be voided by a court [especially if the claims were drafted after the adoption of standards to which the owner may have contributed].

Another third of these essential patents covers features that are not always mandatory in the standards but are only recommended or optional.

Therefore, the fact that a company declares its product to be compatible with the standards does not evidence the materiality of the infringement since, according to these same statistics, there is a two in three chance that the product is not infringing.

Finally, I have noted that, particularly before ETSI, the rights holder “irrevocably undertakes to grant an irrevocable license—known as Frand—to any company that requests it.”

Is this not a waiver of patent infringement action, or in any event of the right to request (at least initially) an immediate provisional injunction to stop manufacturing and/or marketing a product that is generally very complex, on the pretext that a technical detail is allegedly compatible with the standard, although it is sometimes optional or only recommended?

Instead, isn’t it that essential patentee has a pre-contractual action or an action for abusive termination of negotiations, with the exploitation of  its rights being limited to cash receipts?

Here, I consider that an injunction would be a disproportionate measure, as it may lead to an imbalance in the parties’ situations, giving the rights holder an unfair advantage to impose, under threat of an injunction, a more expensive or more restrictive license inconsistent with good practices [when, in fact, the litigation generally only bears on a few patents for details that are part of complex products and cover only certain countries, and Frand licenses are worldwide and cover a wide range of patents of which, as we mentioned above, only one-third may be relevant].

This is also what the Paris Court of Appeal held when, in setting the amount of the compensatory royalty due for past infringements, it decided not to consider the fee rate set forth in the license that the sentenced infringer was given to sign the day after the decision ordering the injunction, so as to be allowed to continue to supply its main client.

Conclusion

My time is up, which means I cannot go into more detail on this issue of proportionate damages to compensate for losses suffered by infringement victims, particularly the difference between offenders in good faith or bad faith, or the generous idea suggested by my professor Jean Carbonnier, which is the special case “of a rich victim and a poor perpetrator…”

Indeed, the case law of recent years shows that it is necessary to maintain these principles of balance and proportionality. However, as counsel to businesses, I must admit that this still does not make court decisions more predictable.

Thank you President.

Thierry Mollet-Viéville

Attorney-at-Law

Good news for patent litigating in France!

On 7 December 2021, it was just decided that the Parisian Judges have jurisdiction and the power to assess the compliance of the essential patentee PHILIPS based in the Netherlands with its obligations under French law, and by the French Society governed by the French law of August 1. 1901, ETSI (European Telecommunications Standards Institute) based in Valbonne-Sophia Antipolis (France), even at the request of a third party like XIAOMI, the Chinese 3G and 4G mobile phone manufacturer [case docket number 20/12558].

The claims

In the absence of a license between them since 2016, in October 2020, PHILIPS sued XIAOMI for the infringement of several of the patents of its portfolio, before four separate courts under their own local law: German, Spanish, Dutch, and British.

One month later, as XIAOMI considered that it should have benefited from a license on FRAND terms, it sued both PHILIPS and ETSI before the Paris First Instance Court based in essence on the same factual grounds [p.15 final § of the Order of the Pre-trial Review Judge], which was that each of them had failed to comply with the intellectual property rights standards devised by ETSI. XIAOMI specified that the intent of its claims was to obtain that ETSI guarantee it access to the standards it establishes [p.4 § 4 of the Order], and consequently to the common market to which ETSI must aim [p.9 § 5 of the Court Judgment].

It also claimed that PHILIPS had failed to comply with its commitments as imposed by ETSI when it joined the association contract [p.4 final paragraph of the Court Judgment], particularly that of irrevocably granting XIAOMI, as well as any other manufacturer or operator that requests it, an irrevocable license on FRAND terms as described inter alia in articles 6, 8, and 15 of Annex 6 of ETSI’s Rules of Procedure [p.4 § 3 and p.5 § 3 and 4 of the Court Judgment].

The decisions

“Although the claim is contractual in nature, there is no doubt here that it requires the examination of the infringement of a patent right, and in this case of a portfolio of patents that its owner has declared to be essential” [p. 12 § 4 of the Order]. Consequently, the Paris Patent Court of Justice duly has material jurisdiction.

Referring to the law as stated by the CJEU on the jurisdiction of a Judge in EU, in the event of multiple defendants [p.12 final § et seq. of the Order], the Paris Pre-trial Review Judge considered that both the society contract between the defendant PHILIPS, although it is based in the Netherlands, and the other defendant ETSI, based in France, as well as the tripartite agreement to which XIAOMI is a third-party beneficiary through PHILIPS’ commitment to ETSI (through the French mechanism of “stipulation for third parties”, art. 1205 et seq. of the Civil Code) [p. 16 § 1 and 4 of the Order] are all subject to French law, which does not “prevent the recognition of an identical legal situation” [p.16 § 1, 2 and 4 of the Order].

Moreover, the following “would be irreconcilable and not simply divergent” [p. 16 § 3 of the Order]:

• “a decision enjoining ETSI to contribute to the grant of a license, if necessary by implementing the measures provided by its internal rules,” and
• a decision by another judge “finding that […] PHILIPS did satisfy [its] obligation to offer […] XIAOMI a license on FRAND terms,
• which could happen if XIAOMI’s claims were to be ruled upon separately.“

Lastly, there is no reason for the French Court to stay the proceedings pending a decision of one of the four foreign judges due to rule on the matter, since none of them is in charge of the license on FRAND terms requested by XIAOMI in France, particularly regarding the royalty rate and the basis thereof [p. 16 § 6 of the Order].

The future

It remains to be seen:

• in the event of failure of the Mediation proposed by the French Court, particularly under the auspices of WIPO [p.18 final § of the Order],
• whether XIAOMI’s claims are well-founded [p.10 § 3 and 4 of the Judgment], either:
  • on PHILIPS’ irrevocable undertaking to grant it an irrevocable license, or
  • on ETSI’s alleged “wrongful passiveness” [p.9 § 6 of the Judgment].

Conclusion

Above all, it is a positive step to see the French Court take an international perspective in assessing patent law situations outside France, especially when they are subject to French law.

Let us hope with equal force that, for patent infringements as well, it will likewise go on to assess acts of infringement committed also outside its territory – at least in Europe – according to their local law. As for victims of infringement of their works, trademarks, designs, and even of unfair competition, this would indeed be very useful for companies, especially French ones, which could not or may not want to face the challenges of our forthcoming “Unified Patent Court”.

Worldwide streaming has made the question of the applicable law even more complex and fundamental. In an article published in the French media law journal, Légipresse, Lucy Cronin and Julien Grosslerner address this question and look at the recent French case “Pucci versus H&M” to support their view.

-> Read the article here.

The article was published on Actuel RH

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The second edition of the book titled “Genuine Use of Trademarks” is out now. It was edited by Eléonore Gaspar, and published by Wolters Kluwer: IP Law in the AIPPI LAw Series. Eléonore also co-authored one of the chapters on French law with Laurine JANIN-REYNAUD.

-> For more information about the book 

 

The article was published on Vitisphère

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