Oct 18, 2018 –

 

Can the licensee be qualified as an infringer? Evolution of the debate.

Failure by a software licensee to comply with the terms of a software license agreement (by expiration of a trial period, exceeding the number of authorized users or other unit of measure, such as processors that can be used to execute the instructions of the software, or by modifying the source code of the software when the license reserves this right to the initial holder) does it constitute:

– an infringement (within the meaning of directive 2004/48 of April 29, 2004) suffered by the copyright holder of the software reserved by article 4 of directive 2009/24/EC of April 23, 2009 concerning legal protection computer programs
– or can it obey a separate legal regime, such as the common law contractual liability regime?

If it is a counterfeit, the counterfeiter can be prosecuted according to the specific regime for counterfeiting, with in particular the possibility of criminal prosecution, seizure-counterfeiting;

If it is a simple breach of contract, the licensee is liable under the general regime of contractual civil fault.

The difference is considerable on the legal level, particularly with regard to the administration of evidence and the type of compensation that can be obtained in reparation.

 

Paris Court of Appeal, pole 5 – ch. 1, judgment of October 16, 2018

1 By a contract of August 25, 2010, modified by an amendment of April 1, 2012, the company IT Development granted the company Free Mobile, a telephone operator offering mobile plans on the French market, a license and a maintenance contract on a software package called ClickOnSite, centralized project management software intended to allow it to organize and monitor in real time the evolution of the deployment of all of its radiotelephony antennas by its teams and by its external technical service providers.

Arguing that modifications were made to the software in violation of the license agreement, and after having had an infringement seizure carried out on May 22, 2015 at the premises of the company Coraso, a subcontractor of the company Free Mobile, the company IT Development, by deed of June 18, 2015, summons the company Free Mobile for infringement of the ClickOnSite software and compensation for its damage.

In addition to the inadmissibility and ill-foundedness of these requests, the company Free Mobile brought a counterclaim in abusive proceedings.

2 IT Development appealed on February 3, 2017 against the contradictory judgment delivered on January 6, 2017 by the Paris tribunal de grande instance which:

  • Declared the company IT Development inadmissible in its claims based on tort liability,
  • Dismissed the company's claim for damages for abuse of process
    Free mobile,
  • Order IT Development to pay the costs and to pay Free Mobile the
    sum of 8000 euros on the basis of the provisions of article 700 of the code of
    Civil Procedure.

3 In its final conclusions of May 3, 2018, the company IT Development asks the court to:

  • On a preliminary basis, submit to the Court of Justice of the European Union (CJEU) a preliminary question in the following form:
    "The failure of a software licensee to comply with the terms of a software license agreement (by expiration of a trial period, exceeding the number of authorized users or other unit of measure, such as the processors that can be used to execute the instructions of the software, or by modifying the source code of the software when the license reserves this right to the initial holder) does it constitute:
    – an infringement (within the meaning of directive 2004/48 of April 29, 2004) suffered by the copyright holder of the software reserved by article 4 of directive 2009/24/EC of April 23, 2009 concerning legal protection computer programs
    – or can it obey a separate legal regime, such as the common law contractual liability regime? ".
  • Set aside the judgment under appeal, and:
    » Declare admissible the action for infringement brought by the company IT Development;
    » State that the allegedly infringing ClickOnSite software is identified and original;
    » Declare and judge that the modifications of the software by the company Free Mobile constitute acts of counterfeiting;
    Mainly, in respect of the infringement, order the company Free Mobile to pay the company IT Development the sum of €1,440,000 for compensation for the damage suffered by the company IT Development;
    In the alternative, on a contractual basis, order the company Free Mobile to pay the company IT Development the sum of €840,000 for compensation for the damage suffered by the company IT Development;
  • In all cases: Prohibit the Free Mobile and Coraso companies from using the ClickOnSite software and from extracting and reusing the data from the ClickOnSite software under a penalty of €500 per day of delay from the day after the fifteenth day of notification the decision to be made, it being up to Free Mobile to justify the cessation of use of the software by any means at its convenience (uninstallation or other);
    » Reserving competence for the liquidation of penalty payments;
    » Order Free Mobile to pay all the costs, including the costs of reports and the costs of seizure-infringement;
    » Order Free Mobile to pay IT Development the sum of €40,000 under Article 700 of the Code of Civil Procedure.

4 In its final conclusions of May 11, 2018, the company Free Mobile asks the court to:

  • Confirm in all its provisions the judgment entered into, except insofar as it dismissed the company Free Mobile's claim for damages for abuse of process, and except on the quantum of the sentence pronounced against the company IT Development on the basis of the provisions of article 700 of the code of civil procedure;
  • Reversing the judgment of these counts, and ruling again:
    » order IT Development to pay Free Mobile the sum of €50,000 (fifty thousand euros) in damages for abusive proceedings;
    » order the company IT Development to pay the company Free Mobile the sum of €50,000 (fifty thousand Euros) on the basis of Article 700 of the Code of Civil Procedure, for costs not included in the costs of the first instance;
  • Adding to the judgment:
    » Pronounce the nullity of the report of seizure-infringement drawn up on May 22, 2015
    by Maître Yves MAS, bailiff, at the registered office of CORASO;
    » Declare the nullity of the “Expert report” of May 30, 2015 and the “Freely established technical note” submitted to the proceedings by the company IT Development as exhibits n°12 and n°43, or at the very least declare them inadmissible as evidence and exclude them from the proceedings;
    » Declare the company IT Development inadmissible, and in any case ill-founded, in all of its claims against the company Free Mobile; dismiss it;
    » Order IT Development to pay Free Mobile the sum of €50,000 (fifty thousand Euros) on the basis of Article 700 of the Code of Civil Procedure, for costs not included in the costs of the proceedings call;
    » Order IT Development to pay all the costs, which may be recovered directly by SELAS Bardehle Pagenberg, Lawyers, in accordance with the provisions of Article 699 of the Code of Civil Procedure.

5 The closing order is dated May 15, 2018.

DISCUSSION

Pursuant to the provisions of Article 455 of the Code of Civil Procedure, reference is expressly made, for an exhaustive statement of the claims and means of the parties, to the written submissions that they submitted, as referred to above.

Admissibility and the question referred

6 In its summons and conclusions at first instance, the company IT Development maintained that the company Free Mobile had committed acts of infringement by modifying the ClickOnSite software, in particular by creating new forms. According to it, the defendant was not admissible to invoke the provisions of article L.122-6-1 of the intellectual property code authorizing it to modify the software for use in accordance with its intended purpose, therefore, d on the one hand, that these modifications would have been substantial, on the other hand, that the possibility of proceeding with them would have been excluded by the contract;

7 In order to declare it inadmissible in respect of these claims based on infringement, the court considered that the combination of articles 122-6 and 122-6-1 of the intellectual property code led to the recognition of two distinct liability regimes in the matter, the tort in the event of infringement of the rights of exploitation of the author of the software, as designated by law, the other contractual, in the event of infringement of a copyright reserved by contract; that in the present case, the company Free Mobile was clearly accused of breaches of its contractual obligations, relating to an action for contractual liability and not tortious acts of software infringement;

8 In case of appeal, the company IT Development requests on a preliminary basis the submission of a preliminary question to the Court of Justice of the European Union, then the reversal of the judgment, asking to declare admissible the action for infringement. For these purposes, it maintains, firstly, that the recognized right of the author of software to authorize or prohibit the modification of the source code of the software is a right of legal origin, and that the violation of this right by the licensee is not a simple breach of contract but a violation of the author's legal right, thus constituting an infringement; secondly, that if for all other intellectual property rights the action for infringement is expressly opened in the event of violation of a license contract, article L 335-3 paragraph 2 of the CPI which provides that is also an offense of counterfeiting the violation of one of the rights of the author of software defined in article L.122-6, is intended to apply both to cases of use without right (the "piracy ” in the strict sense), only to those of a use exceeding the license; thirdly, that the action for infringement is not an action of an exclusively tortious nature; that the distinction between contractual and tort liability is contrary to the objective of the European legislator to establish a single procedure following Directive 2004/48; that in reality, counterfeiting has a dual nature: criminal and contractual action, and it is blind, since the law of 2007, to the distinction between contractual and tortious; that fourthly, the directive on the fight against counterfeiting wanted to give counterfeiting the widest possible definition extending to any infringement of intellectual property rights.

9 Free Mobile, which considers that there is no need to ask any question for a preliminary ruling, requests confirmation of the judgment. It argues that the legal provisions establish two different liability regimes for two different categories of acts, on the one hand, acts infringing a right reserved by law, giving rise to a liability action for the benefit of the author of the software tort, the action for infringement, on the other hand, acts infringing a right reserved by contract, opening for the benefit of the author of the software an action in contractual liability against his co-contracting party; that in the present case, the incriminated acts, namely a violation of the contractual obligations of the licensee, do not open to the company Free Mobile an action for infringement; that the non-cumulation of contractual and tort liability is a cardinal principle of civil liability in French law and that it is in fact established that the creditor of a contractual obligation cannot prevail against the debtor of this obligation, even if - even there would be interest, rules of tort liability; that in reality, when the legislator intends to derogate from common law by allowing the injured party to take action in tort against a licensee who infringes one of the limits of his license when he could only do so in principle on the basis of contractual liability, it then expressly and very precisely provides for this derogation, thus in matters of patent licensing or in matters of trademark licensing; whereas, on the other hand, with regard to software licenses, the legislator has not provided for any derogation from the principle of common law according to which, in the presence of a license contract binding the parties, the regime of contractual liability prevails over that of tort liability; that no provision of Directive 2009/24/EC of April 23, 2009 on the legal protection of computer programs, nor any provision of Directive 2004/48/EC of April 29, 2004 on the enforcement of intellectual property rights, does not require Member States to make tortious liability prevail over contractual liability in the event that the legitimate user of software infringes the limits of the license from which he benefits; that the Court of Justice of the European Union has already itself established, in a judgment of April 18, 2013 (C-103/11, European Commission v. Systran) rendered in matters of software licensing, the principle of common law according to which contractual liability prevails over tort liability.

This being stated, the court

10               1 – The factual context

The court recalls that by a contract of August 25, 2010, modified by an amendment of April 1
2012, the company IT Development granted the company Free Mobile, operator of
telephony offering mobile plans on the French market. license and contract
maintenance on a software package called ClickOnSite, project management software
centralized system intended to enable it to organize and monitor in real time the evolution of the
deployment of all of its radiotelephony antennas by its teams and by its
external technical service providers.

The IT Development company accuses the Free Mobile company of having modified the ClickOnSite software, in particular by creating new forms.

In addition to the substantial nature of these modifications, it relies in particular on the stipulations of article 6 “scope of the license” to maintain that the company Free Mobile did not have the right to make such modifications:

In any event, the Customer expressly refrains (…) from:
– reproduce, directly or indirectly, the Software (…) with the exception of backup copies;
– decompile and/or carry out reverse engineering operations on the Software, except for legal exceptions;
– modify, correct, adapt, create secondary works and additions, directly or indirectly, in relation to the Software Package, it being understood that the Client will nevertheless have free read access to the database.
– (…)

If necessary, the Customer reserves the right to ask the Supplier, by simple mail, fax or email, for information necessary for the interoperability or compatibility of the Software Package with other software used by the Customer. In the absence of a satisfactory response as to the completeness and relevance of this information from the Supplier within a period of one month after receipt of the said request, the Customer will proceed on its own, in accordance with the provisions of article L 122 -6-1 of the Intellectual Property Code, to the operations of decompiling the source code of the Software Package for the sole purpose of ensuring the interoperability or compatibility of the Software Package with another software used by the Customer (…).

At first instance, the plaintiff based its claims exclusively on infringement. On appeal, it also bases them, in the alternative, on contractual liability.

In addition to the inadmissibility of the claims on the basis of counterfeiting, the company Free Mobile essentially argues, firstly, that the proof of the originality of the software is not reported, secondly, that the seizure operations- counterfeiting are void, as well as the report drawn up by an expert, thirdly, that the proof of an unauthorized modification of the software is not reported, lastly, that the modifications carried out concern only the database specific to the licensed operator and that the clause prohibiting modification of the software package, contrary to the public order provisions of article L.122-6-1 of the intellectual property code, must be deemed unwritten.

11               2 – Relevant texts

a – Community directives

Article 2 of Directive 48/2004/EC of April 29, 2004

1 – Without prejudice to the means provided for or which may be provided for in Community or national legislation, insofar as these means are more favorable to the holders of rights, the measures, procedures and remedies apply, in accordance with Article 3, to any infringement of intellectual property rights provided for by Community law and/or the national law of the Member State concerned.

Directive 2009/24/EC of April 23, 2009

Article 4 – Acts subject to restrictions

1. Subject to Articles 5 and 6, the Holder's exclusive rights within the meaning of Article 2 include the right to make or authorize:
(a) the permanent or temporary reproduction of a computer program, in whole or in part, by any means and in any form whatsoever (…)
b) the translation, adaptation, arrangement and any other transformation of a program
computer and the reproduction of the resulting program, without prejudice to the rights of the
person who transforms the computer program;
c) any form of distribution, including rental, to the public of the original or copies
of a computer program.

Article 5 – Exceptions to acts subject to restrictions

1. Except for specific contractual provisions, the acts referred to in Article 4(1)(a) and (b) are not subject to the holder's authorization when these acts are necessary to enable the lawful purchaser to use the computer program in a manner consistent with its intended purpose, including to correct errors.

b – Articles of the intellectual property code

Article L112-2

Are considered in particular as works of the mind within the meaning of this code: (…)
13° Software, including preparatory design material.

Article L122-6

Subject to the provisions of article L. 122-6-1, the right of exploitation belonging to the author of software includes the right to perform and authorize:

1° The permanent or temporary reproduction of software (…)
2° The translation, adaptation, arrangement or any other software modification and
the reproduction of the resulting software (…)
3° The placing on the market for consideration or free of charge, including rental, of the copy or copies of software by any process (…)

Article L122-6-1

I. The acts provided for in 1° and 2° of Article L. 122-6 are not subject to the authorization of the author when they are necessary to allow the use of the software, in accordance with its intended purpose, by the person having the right to use it, including to correct errors.

However, the author is entitled to reserve by contract the right to correct errors and to determine the specific terms and conditions to which the acts provided for in 1° and 2° of Article L. 122-6 will be subject, necessary to allow the use of the software, in accordance with its intended purpose, by the person having the right to use it.

Article L335-3

Violation of one of the copyrights of software defined in article L. 122-6 is also an offense of counterfeiting.

3 – Patterns

12 Since the 19th century, French civil liability law has been based on the cardinal principle of non-cumulation of tort and contractual liability, which implies:

– that a person cannot see his contractual liability and his tort liability engaged by another person for the same facts,
– that tort liability is excluded in favor of contractual liability when, on the one hand, the parties are bound by a valid contract and that, on the other hand, the damage suffered by one of the parties results from the non-performance or poor performance of one of the obligations of the contract.

Moreover, French law traditionally considers that counterfeiting, which is originally a criminal offence, arises from tort liability and not from non-performance of a contract.

13 The court deduced from this in this case, when the parties are bound by the contract of August 25, 2010 and it is alleged that the damage results from the non-performance of the clauses of this contract and particularly of its article 6, that tort liability must be set aside in favor of contractual liability, and consequently that the action for infringement, assimilated to the tort action, must be declared inadmissible.

The respondent company, which supports this analysis, rightly cites decisions of French courts going in this direction, including a judgment of this chamber of May 10, 2016.

14 However, it is not irrelevant that the appellant company maintains that infringement is not in essence a delictual action but could also result from the non-performance of a contract.

It is indeed true that counterfeiting is defined in its broadest sense as an infringement of an intellectual property right and, in the particular case of article L.335-3, as the violation of one of the rights the author of software [defined in article L.122-6].

Neither of these texts nor any other French text relating to counterfeiting expressly provides that the latter only applies when the parties are not bound by a contract.

Even if they can be presented as so many exceptions to the principle of non-cumulation, the texts below are also examples of what action for infringement can be brought in patent and trademark matters against the licensee who violates the limits of his contract:

Article L.613-8, paragraph 3 of the Intellectual Property Code

The rights conferred by the patent application or by the patent may be invoked against a licensee who infringes one of the limits of his licence.

Article L.714-1 of the Intellectual Property Code

The rights conferred by the application for registration of a mark or by the mark may be invoked against a licensee who infringes one of the limits of his license with regard to its duration, the form covered by the registration under which the mark may be used, the nature of the goods or services for which the license is granted, the territory in which the mark may be affixed or the quality of the goods manufactured or the services provided by the licensee.

In the case in point, Articles L 122-6 and L 122-6-1 of the Intellectual Property Code, if they provide in particular that the specific terms of a software modification can be determined by contract, do not do not provide that in these cases an action for infringement would be excluded. The same applies to Articles 4 and 5 of Directive 2009/24/EC of which they are the transposition.

Finally, it is true that Article 2 “scope” of Directive 48/2004/EC of April 29, 2004 on the enforcement of intellectual property rights generally provides that the measures, procedures and remedies are apply (…) to any infringement of intellectual property rights, without distinguishing between whether or not this infringement results from the non-performance of a contract.

The court considers under these conditions that a preliminary question must be submitted in the terms proposed to the Court of Justice of the European Union.

That there will be a stay of proceedings until the court of justice has answered it;


DECISION

15 The court, by contradictory judgment before saying right,

Refers to the Court of Justice of the European Communities for the purpose of answering the following preliminary question:

Failure by a software licensee to comply with the terms of a software license agreement (by expiration of a trial period, exceeding the number of authorized users or other unit of measure, such as processors that can be used to execute the instructions of the software, or by modifying the source code of the software when the license reserves this right to the initial holder) does it constitute:
– an infringement (within the meaning of directive 2004/48 of April 29, 2004) suffered by the copyright holder of the software reserved by article 4 of the directive 2009/24/EC of April 23, 2009 on the legal protection of computer programs
– or can it obey a separate legal regime, such as the common law contractual liability regime?

Stay to rule on the appeal of the company IT Development until the decision of the Court of Justice,

Holds that a copy of the judgment and a copy of the case file will be sent to the Court of Justice of the European Communities by registered post.

The originality of the software before the pretrial judge

Get support for your IT contracts

 

 

Paris Court of Appeal, Chamber 5, Pole 2, March 19, 2021, RG n°19/17493 confirming TGI Paris June 21, 2019 n°11/07081.

In this judgment, it is the contractual breach which is retained following a non-respect of the terms of the intellectual property license agreement (software license agreement).

This solution is nevertheless called into question by the Court of Cassation, which admits the action for infringement.

Court of Cassation, 1st ch. civil, judgment of October 5, 2022

Preliminary question: is the licensee of software an infringer or simply a faulty co-contractor?

Assignment of copyright

Reminder of the principle

The rules of intellectual property sanction criminally and civilly infringements of copyright, trademark or patent, copyright attached to software, that is to say the offense of counterfeiting.

 

Playdoyer for an exception

However, when a contract is at stake, involving a discussion and a partnership between two co-contractors, a form of confidentiality, it is surprising to invoke the wrath attached to the repression of the offense (criminal and civil) of counterfeiting to sanction the unscrupulous contractor.

The very notion of contract seems antithetical to the notion of offence, which presupposes an attack on public confidence, a public scandal. One is tempted to say here that the stop comes down to fundamentals.

However, it does not expand on the reasons for choosing the contractual liability regime, simply stating that:

 "when the event giving rise to an infringement of an intellectual property right results from a contractual breach, the right holder having consented by contract to its use subject to certain reservations, then only an action for contractual liability is admissible by application of the principle non-accumulation of responsibilities. »

The debate before the Court of Justice of the European Union

 The judgment reports above all and also the debate that there was before the Court of Justice of the European Union on the subject (judgment of the Court of Justice of the European Union (CJEU) delivered on December 18, 2019, case C-666-18)(judgment of December 18, 2019, IT Development v. Free mobile), on the basis of directives 2004/48 relating to the respect of intellectual property rights and 2009/24 on the legal protection of computer programs.

According to the CJEU:

[…] if Directive 2004/48 aims to establish the measures, procedures and remedies vis-à-vis the holders of intellectual property rights, which includes the copyright of computer programs provided for by Directive 2009/24 , this first directive does not lay down the exact terms and conditions for the application of these guarantees and does not prescribe the application of a particular liability regime in the event of infringement of these rights.

44 – It follows that the national legislature remains free to set the concrete methods of protection of the said rights and to define, in particular, the nature, contractual or tortious, of the action available to the holder of these rights, in the event of violation of its intellectual property rights, against a computer program licensee.

 

However, the doctrine remains divided on the subject, as well as recent case law (TJ Paris July 6, 2021, No. 18/01602), but tends to admit the action for infringement (see the aforementioned judgment at the beginning of article Court of Cassation, (1st ch. civ), October 5, 2022, Sté Entr'ouvert and Sté Orange)

NFTs and copyright

The originality of the software before the pretrial judge

 
 

 

Updated Nov 12, 2022

The Court of Cassation admits the action for infringement in the event of non-compliance with the license agreement.

In the Court of Cassation judgment, (1st ch. civ), October 5, 2022, Sté Entr'ouvert and Sté Orange, the Court of Cassation recognizes that the infringement of intellectual property rights can be sanctioned by counterfeiting regardless of the regime national responsibility, contractual or not.

Texts quoted:

Article L. 335-3, paragraph 2, of the Intellectual Property Code,

Articles 7 and 13 of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights

Article 1 of Directive 2009/24/EC of the European Parliament and of the Council of April 23, 2009 on the legal protection of computer programs.