Intellectual property

Intellectual property law

Under what statutes, regulations or case law are intellectual property rights granted? Are there restrictions on how IP rights may be enforced, licensed or otherwise transferred? Do the rights exceed the minimum required by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?

Intellectual property rights are governed by the French Intellectual Property Code, which takes specifically the rules as established by the European Union in terms of intellectual property.

Intellectual property rights are subdivided essentially into two branches, depending on whether they relate to literary and artistic rights or industrial copyrights. In any event, certain of the conditions defined in the Intellectual Property Code must be fulfilled in order to benefit from an intellectual property right, whether the right of an author, patents, trademarks or designs.

Literary and artistic copyrights are not subject to any formalities to become enforceable as a work is protected under the copyrights of the author as of its creation, provided it is original and embodies the personality of its creator. On the other hand, industrial property rights are subject to a depositing and a registration procedure with the French National Industrial Property Institute (INPI). Once registered, these are then enforceable against third parties.

Intellectual property rights can be subject to licence or transfer contracts. There is, however, a framework for these contracts. In terms of copyrights, French law distinguishes between the economic rights (rights of reproduction and performance, adaptation) and moral rights (right of disclosure, right of attribution and respect for the work, right of withdrawal). This latter is inalienable and cannot therefore be licensed or transferred. In addition, any contract involving a transfer of copyright, a right of performance, presentation, reproduction or audio-visual production must be in a written form as of Law 2016-925 of 7 July 2016 relating to the freedom of creation, architecture and heritage. Furthermore, any contract covering economic rights, whether these are involve a transfer or not, is subordinated to the condition that each of these transferred right is referred to specifically in the transfer agreement and that the scope, purpose, location and period of exploitation of the transferred is stated. In addition, French law includes specific provisions covering software and works created by public agents. Finally, an industrial property right, subject to a licence or transfer contract must be registered with the INPI to cause the contract and associated rights for the licensee and transferee are enforceable on third parties.

French law defines, for certain intellectual property rights, a period of protection greater than the minimum period under the Agreement on Trade-Related Aspects of Intellectual Property Rights (ADPIC) (TRIPs). By way of example, works subject to protection under copyright are protected for the life of the author and for 70 years after the death under French law, while the ADPIC agreement allows a minimum period of protection of 50 years. The initial registration and each period of renewal of the registration of a trademark is for 10 years under French law, compared with a minimum period of protection of seven years under ADPIC.

Responsible authorities

Which authorities are responsible for granting, administering or enforcing IP rights?

INPI is the French body that registers and issues industrial property rights.

The INPI examines the registration application, checking that it meets all the conditions in terms of form and substance relative to the current legislative and regulatory requirements, without, however, researching availability and precedence. Once the rights have been registered, it administers these by maintaining an updated national register of trademarks, patents and designs in which all changes concerning these rights must be recorded.

The INPI is responsible for oppositions submitted and observations made regarding the applications to register rights, following which it rules and issues its decision. In the event of an appeal against a decision of the INPI, this is heard before a civil court (Court of Appeal). In other words, the opposition procedure, which is initially administrative, changes into a judicial process for an appeal. As a result, court judges can become involved in trademark registrations.

Finally, French Customs authorities can be requested to provide support at the border for the holders of trademarks in identifying counterfeiting of their products. For this, a Customs inspection declaration must be submitted to the department responsible for this inspection within the Customs service. Customs, even without a Customs infringement, can retain goods suspected of being counterfeited for a period of 10 days, during which time the copyright holder can enforce its intellectual property rights. This can involve the implementing of a simplified destruction procedure or court proceedings before the President of the competent district court to obtain the authorisation to take preventative measures or to take civil or criminal action.

Proceedings to enforce IP rights

What types of legal or administrative proceedings are available for enforcing IP rights? To the extent your jurisdiction has both legal and administrative enforcement options for IP rights, briefly describe their interrelationship, if any.

French law defines a number of administrative and judicial procedures that allow holders of intellectual property rights to protect their rights.

The administrative procedures

Holders of trademarks can oppose new trademark applications where they believe that the registration could cause them harm for a period of two months as of the publication of the trademark application in the French Bulletin Officiel de la Propriété Industrielle (BOPI). In the event that a third party opposes a trademark registration, the INPI notifies the applicant that an opposition has been submitted against the registration and they then have two months to present its comments in response to the opposition. This is an adversarial procedure in that all documents submitted to the INPI by either party are also sent to the other party. The INPI is responsible for implementing the opposition procedure once it has received the respective submissions. It gives its final ruling accepting or rejecting the opposition, which may result in the full or partial registration of the trademark application, or its rejection. In terms of patents, the INPI can also receive observations from third parties concerning any patent registration request. It also issues a decision at the end, on whether the patent can or cannot be registered.

In addition, the Trademark Package reform under European Regulation 2015/2424 and European Directive 2015/2436 allow the national offices to manage the nullity and forfeiture procedures for European trademarks. France thus has until 14 March 2023 to enable the INPI to manage these procedures.

In terms of patents, there is no opposition procedure. Patent holders can, however, submit observations concerning a new patent application that they believe pre-exists in a period of three months as of the publication of the patent application and the publication of the preliminary research report. The INPI must analyse these observations to determine whether the patent being applied for is, in fact, new. This means observations from third parties can result in the patent application being rejected by a decision of the INPI. This same rule also applies for registrations of new design applications.

The judicial procedures

Copyright holders can take action in civil courts, in particular for infringements of their rights, as well as to request the nullity or forfeiture on the ground of non-use for industrial property rights, within the limits of the legal provisions (as the principal issue).

In France, the Tribunals de Grande Instance (district courts) have exclusive jurisdiction in hearing cases concerning copyright, as of law 2007-1544 of 29 October 2007. In addition, for an appeal against the first instance, there are only 10 competent Courts able to hear these cases. The list of the competent Courts is contained in Decree 2009-1205 of 9 October 2009. Finally, there are certain areas within industrial property rights (patents, European Union rights in particular) where Paris courts can hear the cases.

Copyright holders can also take action in the criminal courts for counterfeiting.

Action cannot be taken on the same issue using both the administrative and judicial avenues. The administrative and judicial procedures are designed for different issues and can be complementary or successive, in particular in the context of opposition against a trademark registration application.

Remedies

What remedies are available to a party whose IP rights have been infringed? Do these remedies vary depending on whether one utilises judicial or administrative review or enforcement?

There is a range of appeal options for copyright holders. Most of these cases are heard before court judges, even though some administrative authorities, such as Customs, can be involved in initiating these cases. Law 2014-315 of 11 March 2014 added to this judicial arsenal in the fight against counterfeiting. In particular, it harmonised the statutory time limitations for counterfeiting actions or actions for recovery to five years for all copyright. Thus, the recourse options available to rights holders are as follows:

The right to information, with the procedure clarified by the law of 11 March 2014. Thus, an information request procedure can be initiated as of the moment the copyright is deemed to have been counterfeited, with this right enforceable both before courts empowered to rule on the merits of the case and in interim hearings. Previously, the judge could only invoke the right to information once the merits of the case were being heard. This procedure makes it possible to obtain additional elements of evidence.

The counterfeiting seizure procedure is standardised with regard to copyright. If the party using the seizure procedure fails to take the case to a civil or criminal court within 20 working days or 31 calendar days if this period is longer, or to have submitted a complaint to the Public Prosecutor, the entire seizure is cancelled at the request of the subject of the order or seized third party without this party having to provide reasons. This procedure also makes it possible to gather additional evidence (quantity of counterfeiting elements, invoices, etc).

The French Customs holding procedure allows holders of copyright to request the Custom authorities to hold, as part of its checks, goods that could be subject of counterfeiting. This mechanism is dependent on having made a free request to the Customs authorities to act (see question 3). 

Interim measures aimed at preventing an imminent infringement of a copyright or quickly prohibit the continuation of actions deemed to be in infringement. The competent judge is the judge hearing applications for interim measures, who can rule even if the case has yet to be taken to court. However, the applicant must assign the alleged counterfeiter subject to the same time limits as for the counterfeiting seizure.

Granting of damages: to repair damages arising from the counterfeiting, the court hearing the action takes into distinct consideration: (i) the negative economic consequences of the counterfeiting or the infringements of the rights including the loss of earnings and losses suffered by the injured party, (ii) the moral prejudice caused to this latter and (iii) the profits made by the counterfeiter or the person behind the infringement, including reduced intellectual investment, material and promotional costs that the counterfeiter has benefited from through the counterfeiting or infringement. As an alternative and on the request of the injured party, the court can award damages as a fixed sum. This sum must be greater than the amount of royalties or rights that would have been payable if the counterfeiter or the person behind the infringement had applied to use the right that was infringed. It should be borne in mind that this sum is not exclusive of the compensation for moral prejudice caused to the injured party.

Nexus between competition and IP rights

Do any statutes, regulations or case law in your jurisdiction address the interplay between competition law and IP law?

There are no specific provisions under French law concerning unfair competition in terms of intellectual property.

Thus, article L.420-5 of the French Commercial Code, which prohibits consumer price offers or pricing practices that are abusively low relative to the cost of production, conversion and marketing, where these offers or practices are intended to or could eliminate a market or prevent a company or any of its products accessing a market, applies to all contracts relating to copyrights.

In addition, article L.420-1 of the Commercial Code also applies. This forbids concerted actions, convention, and express and tacit cartels when these are intended to or could prevent, limit or distort fair competition in a market.

Furthermore, article L.420-2 of the Commercial Code forbids the abusive exploitation of a dominant position on an internal market or a substantial part of this. These abuses can take the form of refusals to sell, linked sales or discriminatory conditions of sale, as well as the ending of established commercial relations on the sole grounds that the partner refuses to accept unjustifiable commercial conditions. The abusive exploitation by a state company of the dependence on it by another company is also prohibited.

French legal precedence has already ruled on these types of offers and practices relating to copyrights (trademarks, patents, etc).

Patent cooperation treaties and other agreements

Does your jurisdiction participate in any patent cooperation treaties or other similar agreements?

France is a signatory to the Patent Cooperation Treaty, which allows the requesting of protection for an invention in a large number of countries simultaneously by submitting an international patent application to the INPI or directly to the World Intellectual Property Organization (WIPO).

France is also a signatory to the Patent Law Treaty designed to harmonise and rationalise the procedures concerning national and regional patent applications in order to make them easier to use.

The country is also a member of the European Patent Convention in its latest version of June 2016. The objective of the contracting states is in particular to increase cooperation between European states in terms of protecting inventions.

Finally, France is a signatory to various bilateral cooperation treaties dealing with fiscal matters and issues of national security, notably with the following countries: Brazil (10 September 1971), Iraq (13 September 1972).

Remedies for deceptive practices

With respect to trademarks, do competition or consumer protection laws provide remedies for deceptive practices?

The French Consumer Code defines a commercial practice as being misleading when it causes confusion with the brand of a competitor.

Such misleading commercial practices are punished by imprisonment of two years and a fine of 300,000 euros for natural persons (article L.132-2 Consumer Code) and in excess of €1.5 million for corporate entities (article L.132-3 Consumer Code). This fine can be increased, in proportion to the profits from the infringement, to 10 per cent of the annual average turnover, calculated on the annual turnover for the last three known years as at the date of the infringements, or to 50 per cent of the expenses incurred for the advertising or the practice constituting the offence. The staff of the Competition, Consumer and Fraud Agency are empowered to investigate and report misleading commercial practices, as the holder of the competitor brand can undertake unfair competition against the author of the misleading advertising.

In 2016, the Supreme Court ruled on a well-known case involving a Commune, renowned in particular for its craft knives, against several holders of brands composed from the name of that Commune. The High Court overruled the Court of Appeal, ruling that this later had not determined whether the use of the name of the Commune in designating the products of the brand owners, was likely to lead the average consumer to make a mistake, believing that these products were in fact sourced from that Commune, and whether this was likely to make a significant difference in the behaviour of this consumer, leading him or her to make a purchase decision that he or she would not have otherwise made (Cass. Com. 04.10.2016, 14-22.245, Commune de Laguiole c/ Lunette Folomi, etc).

Technological protection measures and digital rights management

With respect to copyright protection, is WIPO protection of technological protection measures and digital rights management enforced in your jurisdiction? Do statutes, regulation or case law limit the ability of manufacturers to incorporate TPM or DRM protection limiting the platforms on which content can be played? Has TPM or DRM protection been challenged under the competition laws?

The Intellectual Property Code in its article L.331-5 governs the effective technical measures designed to prevent or limit unauthorised uses by the holders of a copyright or right related to copyright in a work, other than a software, an interpretation, a sound recording, a video recording or a programme.

These measures are defined as any technology, device, component that, in the normal context of its operation, prevents or limits unauthorised use by the rights holders. These are deemed effective when a use is controlled by the rights holders by means of the application of an access code, a protection process (encryption, scrambling, any other conversion of the protected object or a copy control mechanism that achieves this protection objective).

These technical measures, however, cannot inhibit the free use of the work or protected object within the limits of the legal rights and those as granted by the rights holders.

In the event of a refusal of access to essential information for interoperability, any software publisher, technical system manufacturer and service operator can ask the High Authority for the dissemination of works and the protection of rights on the internet (HADOPI) to guarantee the interoperability of existing systems and services respecting the rights of the parties and obtain the essential information for this interoperability from the rights holders for the technical measures. HADOPI then has a period of two months to rule as of the date of the request. This Authority has in particular a regulatory and supervisory role in the field of technical protection and identification measures for works and objects protected by copyright or a right related to copyright.

The French Competition Council has ruled on a case opposing Apple and VirginMega relating to the incompatibility of the DMR that each of these companies has instituted (Decision 04-D-54 of 9 November 2004). This incompatibility prevented consumers who had downloaded music using the VirginMega platform from transferring this to their Apple iPod. To resolve this incompatibility concern, VirginMega had made a request, which was refused. The Competition Council then had to rule on the question of knowing whether this refusal was a result of and characterised an abuse of a dominant position by Apple. It concluded, however, that the facts presented were not supported by sufficiently convincing elements that would characterise the existence of practices that were intended to hinder the free play of competition under the applicable competition rules in France.

More recently, Econocom referred practices of its competitors in certain IT markets to the Competition Authority. It accused them of having created a global strategy aimed at keeping hold of the market and squeezing out third parties. It claimed in particular cartel practices and abuse of dominant positions by these companies that refused access to the updates for the microcodes required for the maintenance of equipment, or by subjecting this access to excessive and discriminatory pricing conditions. The Competition Authority, however, concluded that the practices and strategies of the companies in question were not likely to harm competition in the relevant market (Ruling 18-D-10 of 27 June 2018, Econocom c/ IBM, Hewlett-Packard Entreprise and Oracle).

Industry standards

What consideration has been given in statutes, regulation or case law to the impact of the adoption of proprietary technologies in industry standards?

French law does not contain specific rules relating to proprietary technologies in industrial standards.

However, the guidelines for the application of article 101 of the Treaty on the Functioning of the European Union (TFEU) to the horizontal cooperation agreements of the European Commission refer to standardisation agreements. Thus, the Commission states that, while these agreements can produce substantial positive economic effects, they can also produce restrictive effects in terms of competition by potentially reducing competition by price and by limiting or controlling the production, the markets, innovation or technical developments. The Commission, however, states, that if the procedure for adopting the standard does not impose restrictions and is transparent, that the standardisation agreements do not set out obligations concerning compliance with the standard and allows access to the standard on fair, reasonable, non-discriminatory terms, then there is no limitation on the free play of competition.

In terms of intellectual property rights, holders who wish to see their rights included in the standards must commit irrevocably and in writing to grant the licences for their essential rights to all third parties subject to fair, reasonable, non-discriminatory terms, thus guaranteeing effective access to the standard. This FRAND procedure, is intended to guarantee that the essential technology protected by the intellectual property rights incorporated in the standard are accessible to the users of this standards under the above conditions.

In 2014, the Competition Authority decided to examine the French standardisation and certification process in terms of competition law. In its report issued on 16 November 2015 (Avis 15-A-16), it held that the competitive operation of the standardisation and certification process could be improved by means of simplification and by bringing more transparency to the process as implemented. It believes that the adopting of standards promotes competition by encouraging a diversity in the supply and making it easier for actors to compare the goods. It does, however, temper its position by adding that standardisation can have negative effects if it is poorly managed. The Competition Authority therefore recommends improving the standardisation process upstream by reducing and rationalising the number of standardisation bodies and by strengthening the steering role of AFNOR in the process. Finally, it made several recommendations aimed at increasing transparency. It thus recommended (i) publishing the list of fields or sectors in which accreditation was mandatory as well as the estimated costs with regular comparisons with those of its European counterparts, (ii) invite AFNOR to take measures to prevent the emergence of situations that could benefit its subsidiaries or hinder competing operators and (iii) invite the public authorities and AFNOR to decide on a positioning for the NF brand and to draw the conclusions of this for the label certification network. AFNOR is the French standardisation association that oversees the standardisation process.

In a European Commission decision of 29 April 2014 in a case between Motorola and Apple, the Commission took the opportunity to point out that a holder of an essential patent that is committed to granting a licence subject to FRAND commitment conditions has the right to take reasonable measures to protect its interests by seeking and enforcing a cease and desist order against a potential licensee under limited conditions. In this case, Motorola was criticised for holding a dominant position in the technology licence concession market. The European Commission, however, decided not to penalise Motorola because of the lack of legal precedence within the European Union legal systems on this issue, dealing with the legality of cease and desist actions based on essential patents, stating in addition that the conclusions of national courts and tribunals diverged on this issue.

In a case on 16 July 2015 (Aff. C-170/13, Huawei Technologies Co. Ltd v ZTE Corp and ZTE Deutschland GmbH), the Court of Justice of the European Union (CJEU) reiterated that the exercising of the exclusive right associated with an intellectual property right by the holder of this can, under exceptional circumstances, give rise to abusive behaviour within the meaning of TFEU article 102 and that the granting of a licence subject to the FRAND commitment creates legitimate expectations for third parties that the essential patent holder will grant it such that a refusal of the holder to grant a licence subject to these same conditions can constitute, in principle, an abuse within the meaning of TFEU article 102. Nevertheless, it added that in the context of an action to prohibit alleged counterfeiting actions or to withdraw counterfeited products, the essential patent holder is not abusing its dominant position if (i) prior to the start of the proceedings, the patent holder firstly warned the alleged counterfeiter of the counterfeiting it is accused of and secondly offered to grant a licensing contract under FRAND conditions, and (ii) the alleged counterfeiter continued to exploit the patent and does not respond to the licensing offer from the holder in good faith in accordance with normal commercial practices.

Competition

Competition legislation

What statutes set out competition law?

The French Commercial Code contains a section entitled Pricing Freedom and Competition, containing the regulations on anticompetitive practices. Thus, article L.420-1 of the same Code prohibits consumer price offers or pricing practices that are abusively low relative to the cost of production, conversion and marketing, where these offers or practices are intended to or could eliminate a market or prevent a company or any of its products accessing a market. Article L.430-1 covers economic concentration.

The Code also defines the rules relating to the conditions of sale to consumers as well as practices restricting competition.

In the event of unfair competition, the provisions of the French Civil Code relating to tort applies.

Finally, at the European level, the provisions of the TFEU concerning restrictive competitive practices and the various exemptions apply in France. By way of example, on the basis of articles L.420-2 of the French Commercial Code and TFEU 102 , the French Competition Authority penalised the company Boule Obut with a fine of €320,000 for abusing its dominant position in the competition petanque ball market as of 2009, by requiring specifically its resellers to apply recommended prices and thus preventing the setting of the final price for the consumer through the free play of competition (Decision 17-D-02 of 10 February 2017, Sté Boule Obut).

IP rights in competition legislation

Do the competition laws make specific mention of any IP rights?

There are no specific provisions under French law concerning unfair competition in terms of intellectual property. However, European Union regulations in terms of competition do refer to intellectual property. Thus, the following Community regulations apply in France, in terms of intellectual property:

Regulation No. 316/2014 21 March 2014 relating to the application of article 101, paragraph 3, of the TFEU to technology transfer category agreements;

Commission Regulation (EU) 1218/2010 of 14 December 2010 relating to the application of article 101, paragraph 3, of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements;

Commission Regulation (EU) 1217/2010 of December 14 2010 relating to the application of article 101, paragraph 3, of the TFEU to certain categories of research and development agreements; and

European Commission guidelines on vertical restrictions of May 19 2010 (non-binding regulations, interpreting the above-mentioned regulations).

Review and investigation of competitive effects from exercise of IP rights

Which authorities may review or investigate the competitive effect of conduct related to exercise of IP rights?

The Competition Authority is an independent administrative body that specialises in analysing and regulating the operation of competition on markets, to protect the economic public order. It is specifically concerned with supervising the free play of competition in France, but also provides support at the European and international levels. It can issue an opinion on the investigations it carries out, which can be subject to appeal only to the Paris Court of Appeal. The rulings of the Court of Appeal can also be the subject of recourse to the Supreme Court.

The Ministry of the Economy also has a power of injunction and settlement for regulating local anticompetitive practices.

Finally, any judicial action relating to an infringement concerning the application of competition law can be taken before the Marseilles, Bordeaux, Lille, Fort-de-France, Lyon, Nancy, Paris and Rennes Commercial Tribunals or the First Instance jurisdictions (article D.442-3 Commercial Code and Annex 4-2-1).

Competition-related remedies for private parties

Can a private party recover for competition-related damages caused by the exercise, licensing or transfer of IP rights?

A private individual, other than an individual consumer, can refer matters to the Competition Authority. The Authority can take interim measures in cases that require urgent action and can suspend the practice in question as well as issue injunction on the parties to return to a prior state. It can also issue financial penalties, as well as injunctions requiring the interested parties to modify their behaviour. It can finally order the publication of the decision or certain elements of this in the press.

The parties can also take legal action before civil and commercial jurisdictions to obtain a judgement against the anticompetitive practice or so the injured party is paid damages for the prejudice suffered.

Competition guidelines

Have the competition authorities, or any other authority, issued guidelines or other statements regarding the overlap of competition law and IP?

A study was carried out at the request of the European Commission in November 2011, on the issue of the interaction between competition policy and the protection of intellectual property rights (analysis of cross-licensing, regroupings of technologies and retrocession obligations).

In addition, the Competition Authority, in its 2004 annual report, published a thematic study on intellectual property, concerning the relationship between competition law and intellectual property. Thus, it affirmed that the competition authorities must not be directly involved in the definition or the implementation of policies concerning the protection of intellectual property rights. However, it said that the need to distinguish between agreements made between competitors in a single relevant market and the agreements made between non-competitors.

In its 2005 annual report, the Supreme Court considered the issue of interpenetration between intellectual property law and competition property. It noted first of all that intellectual property law contributed to defining the conditions for the functioning of the market. It secondly noted that competition law was also a factor in the field of intellectual property by prohibiting (i) abuses of dominant positions and (ii) anti-competitive agreements and (iii) blocking anticompetitive mergers or concentrations, and their implementation could require the intellectual property right holders to relinquish certain rights in order to prevent the free play of competition being distorted. An examination of the contractual clauses in intellectual property right licence agreements and the refusal to grant licences are checks that enable the civil courts and administrative authorities to assess whether free competition is likely to be maintained.

Exemptions from competition law

Are there aspects or uses of IP rights that are specifically exempt from the application of competition law?

French competition law does not allow specific exemptions applicable to intellectual property rights.

Copyright exhaustion

Does your jurisdiction have a doctrine of, or akin to, ‘copyright exhaustion’ (EU) or ‘first sale’ (US)? If so, how does that doctrine interact with competition laws?

Article L.122-3-1 of the Intellectual Property Code lays down that as of the first sale of one or of material examples of a work authorised by the author or the rights holders in a member state of the European Union or a state party to the European Economic Area agreement, the sale of these examples of that work can no longer be prohibited in the member states of the European Community and of the European Economic Area. The exhaustion of the right, exception of the exclusive right of the holder of the mark obeys the specific rules of evidence defined in particular be legal precedence. In this context, the burden of proof is on the person being accused of counterfeiting, who must prove that they are covered by the rule of exhaustion. This burden of proof can be reversed if there is a real risk of compartmentalisation of the markets (a risk that the person claiming it must prove).

Import control

To what extent can an IP rights holder prevent ‘grey-market’ or unauthorised importation or distribution of its products?

The holder of intellectual property rights can request a Customs investigation that allows the Customs authorities to intercept any items it suspects of being counterfeited at the French border. This approach is preventive and available to the holder even if it has no knowledge or evidence of the infringement of its rights.

In terms of the rights of a brand, the holder cannot prohibit the use of the brand for products that have been marketed in the European Economic Community under that brand by itself or with its agreement and if it cannot provide legitimate grounds relating to subsequent modifications or alterations made to the products. Thus, the holder of a brand organised as a selective distribution network can prevent the import or distribution of items relating to its brand in only certain cases: (i) to maintain the luxury image of the holder’s products, (ii) the choice of resellers must be on the basis of objective qualitative criteria, defined uniformly for all potential resellers and applied without discrimination, (iii) the defined criteria must not exceed what is actually necessary.

However, any restriction applied to the possibility for the brand holder to prevent the import and/or distribution of products bearing its brand can be disallowed if the brand is famous or well known. This also applies when the brand has a specific reputation and image (particularly a luxury brand), or if a selective distribution network has been set up. In this regard, consider the ruling of the CJ EUof 6 December 2017, C-230/16, Coty Germany GmbH c/ Parfumerie Akzente GmbH, in which the Court ruled that article 101 -1 of the TFEU does not apply when a contractual clause prohibits the approved distributors in a selective luxury product distribution system aimed at protecting the luxury image of these products from making visible use of third party platforms for internet sales of the contractual products, provided that this clause complies with the above mentioned conditions.

On the other hand, the Competition Authority ruled that the prohibition placed by the suppliers on distributors against selling products of certain brands on their websites through an unlawful understanding in the context of a selective distribution network for machine farming equipment was an anticompetitive practice within the meaning of articles 101 of the TFUE and L.420-1 of the Commercial Code. Note that the selective distribution network was not called into question by the Authority. Thus, while this type of network is in principle allowed and considered as not inhibiting competition provided it is legitimate (in this case, the legitimacy of the network was linked with the hazardous nature of the products sold requiring the provision of assistance and advice), some internal practices within the network could be anticompetitive. The Competition Authority has, effectively, decided that the exemption by category applicable to vertical restrictions cannot be applied in this case (Decision 18-D-23 of 24 October 2018).

However, in the case C-230/16 of 6 December 2017, the European Union Court of Justice (EUCJ) ruled that the prohibition against the online sale of Caudalie products, which are sold exclusively through the intermediary of a selective distribution network, on a platform did not constitute a hardcore restriction of competition. Caudalie has structured its selective distribution with two contracts, one for pharmacy sales and the other for internet sales with marketing of its products limited solely to the website of pharmaceutical distributor and excluding platforms and market places. Taking the Coty precedence of 6  December 2017, the EUCJ held that such a network was justified to maintain the luxury image of the products on sale because the choice of resellers is based on objective criteria of a qualitative nature. It therefore ruled that the prohibition on resale through a platform was proportional to the objective of protecting the luxury image, in the sense that the conditions of the platform presentation were likely to cause harm to the luxury image that Caudalie legitimately wants to maintain.

Jurisdictional interaction between competition laws and IP rights

Are there authorities with exclusive jurisdiction over IP-related or competition-related matters? For example, are there circumstances in which a competition claim might be transferred to an IP court to satisfy subject matter jurisdiction? Are there circumstances where the resolution of an IP dispute will be handled by a court of general jurisdiction?

Refer to questions 3 (for exclusive competence for disputes relating to intellectual property law) and 12 (for exclusive competence for disputes relating to competition law).

Merger review

Powers of competition authority

Does the competition authority have the same authority with respect to reviewing mergers involving IP rights as it does with respect to any other merger?

The Competition Authority has the same powers of supervision for mergers involving an intellectual property right of not.

Analysis of the competitive impact of a merger involving IP rights

Does the competition authority’s analysis of the competitive impact of a merger involving IP rights differ from a traditional analysis in which IP rights are not involved? If so, how?

The Competition Authority supervises the effects of a merger in terms of competition law to ensure that the operation does not result in an abuse of dominant position or in the economic dependence of another company. To summarise, the Authority checks that the proposed operation does not distort the free play of competition.

In principle, its supervision does not vary depending on whether intellectual property rights are involved in the merger or not. It does, however, take these among other factors into account in its analysis. It will also determine whether the merger of intellectual property rights might lead to a dominant position or any other anticompetitive situation on completion of the merger.

Thus, in its decision 17-DCC-53 of 25 April 2017 concerning the taking of exclusive control of Adria Mobil by Trigano, the Competition Authority ruled because there was no risk of anticompetitive effects on the construction and leisure vehicle markets, whether through a brand effect that, following the merger, that would enable the new entity to strengthen its market position and increase its brand portfolio.

At the European level, however, the European Commission authorised the acquisition by Thales of Gemalto, provided that Thales dispose of its business in general security equipment modules, noting that the acquisition would lead to a very large market share that could result in price rises, a reduction in choices for customers and a reduction in innovation (European Commission press release of 11 December 2018).

Challenge of a merger

In what circumstances might the competition authority challenge a merger involving the transfer or concentration of IP rights? Does this differ from the circumstances in which the competition authority might challenge a merger in which IP rights were not a focus?

In this case, the merger could have had negative consequences for the free play of competition in that it would involve an anticompetitive practice, the Competition Authority could challenge such a merger involving the transfer of intellectual property rights.

The circumstances under which the Competition Authority could challenge a merger do not differ depending on whether or not the merger involves a transfer of intellectual property rights.

Remedies to address the competitive effects of mergers involving IP

What remedies are available to address competitive effects generated by a merger when those effects revolve around the transfer of IP rights?

In the event of a merger involving the transfer of intellectual property rights implying an anticompetitive practice, the Competition Authority can require the notified party to take specific measures to avoid such a negative impact on competition. If the notified party does not accept the measures required by the Authority or the refusal decision of this latter to proceed with the merger, the notified party becomes liable to penalties.

Thus, the Competition Authority can require the disposal of certain intellectual property rights, whether industrial property rights or copyrights. In addition, it can require that the scope of the intellectual property rights is reviewed involving, for example, revisions to the contracts covering these.

As a result, concerning the acquisition of the Beauty products division of Procter & Gamble by Coty, the European Commission asked whether this purchase would reduce competition and lead to higher prices for these consumer goods in Europe. The Commission concluded that competition in the relevant perfume and cosmetics product markets would be strong enough to prevent price rises for European consumers.

In another case, regarding the proposed acquisition of Gemalto by Thalès, the European Commission made its approval of the acquisition conditional on Thalès disposing of one of its business division in order to prevent any distortion of competition (European Commission press release of 11 December 2018).

Specific competition law violations

Conspiracy

Can the exercise, licensing or transfer of IP rights create price-fixing or conspiracy liability?

Under certain circumstances, a licence or transfer of intellectual property rights can involve an anticompetitive practice if the objective or effect of the operation is to prevent, restrain or distort the free play of competition in a market.

This situation could arise in particular in the context of cross-licences or a patent pool leading to:

  • limitations on access to the market or the free exercise of competition by other companies;
  • obstacles to the setting of prices by the free market play by artificially favouring higher or lower prices;
  • limitations or controls on production, outlets, investments or technical advances; and
  • market or supply source allocations.

Reverse payment patent settlements

How have the competition laws been applied to reverse payment patent settlements in your jurisdiction?

The practice of reverse payments takes the form of agreements covering payments from rights holders to the manufacturers of generic products who challenge them. We are not aware of any legal precedence relating to reverse payments concerning agreements on patent rights.

However, this is a practice on which the CJEU has already ruled, in particular in the pharmaceuticals sector. Thus, in the case T-472/13 of 8 September 2016, the CJEU pointed out that TFEU article 101-1 can be applied to amicable agreements that could be agreed with regard to patents.

It stated that the existence of a reverse payment in the context of an amicable settlement relating to patents is not necessarily problematic. It gave the example of a payment linked with the strength of the patent such as perceived by the parties, necessary in reaching an acceptable and legitimate solution for each of the parties and without any restrictions intended to delay the introduction of generics onto the market.

On the other hand, when a reverse payment is associated with the exclusion of competitors from a market or a limiting of elements encouraging the entry of generics on the market occurs, this could be deemed as being a ‘buyout of competition’. Any such practice, where the aim is to distort the play of competition, therefore constitutes an anticompetitive restrictive of competition practice.

The absence of a clause allowing generic producing companies to bring their products to the market on the expiry of the agreements without any fear of charges of counterfeiting by the patent holders, for instance, can be an indicator of the presence of reverse payments.

 

(Resale) price maintenance

Can the exercise, licensing or transfer of IP rights create liability under (resale) price maintenance statutes or case law?

Under the terms of the provisions of the Commercial Code relating to anticompetitive practices, the artificial promotion of higher or lower prices is forbidden. The action by any person to impose, directly or indirectly, a minimum sale price for a product or a good, a service provision or a commercial margin is punishable by a fine of €15. However, the setting of a ceiling price is allowed.

Thus, the exercising, licensing or the transferring of intellectual property rights could result in the liability of the rights holder being invoked in the event that a minimum price was imposed or if an artificially high or low price is promoted in the context of the agreements relating to the intellectual property rights concerning the distribution or resale of products or services.

In addition, under article 4 of Regulation 316/2014 of 21 March 2014 concerning the application of article 101-3 of the TFEU to the technology transfer agreement category, agreements that directly or indirectly, individually or combined with other factors controlled by the parties to the agreement, are intended to restrict the ability of one of the parties to set its sale prices to third parties are deemed as restricting the free play of competition. 

Exclusive dealing, tying and leveraging

Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to exclusive dealing, tying and leveraging?

French law allows an intellectual property rights holder to grant an exclusive right to its rights to a third party. This practice, in principle, does not constitute an anticompetitive practice.

However, the acquisition and holding of exclusive rights can be subject to scrutiny by national and community Competition Authorities to ensure that any such exclusive exercising of rights does not constitute a cartel or a dominant position.

The Competition Authority thus had to rule on the proposed acquisition of the Orangina brand by Coca-Cola, as well as the corresponding industrial facilities, sold by Pernod Ricard. Following the refusal by the Minister for Economic Affairs, Pernod Ricard proposed entering into a commitment to grant an independent third party an exclusive licence for the marketing and distribution of these drinks. In its opinion 99-A-14 of 28 September 1999, the Competition Authority was opposed to the acquisition, stating that it involved a danger of collusion between the licensee and Coca-Cola.

In another case, the Competition Authority issued its opinion 02-A-07 of 15 May 2002, stating that it did not object to the takeover of Moulinex by SEB, believing that the market share of the new joint entity including all the intellectual property rights of the two companies would not enable the new entity to achieve a dominant position.

More recently, concerning the acquisition of the Beauty products Division of Procter & Gamble by Coty, The European Commission asked whether this acquisition would reduce competition and lead to higher prices for these consumer goods in Europe. The Commission concluded that competition in the relevant perfume and cosmetics product markets would be strong enough to prevent price rises for European consumers. In another case, regarding the proposed acquisition of Gemalto by Thalès, the European Commission made its approval of the acquisition conditional on Thalès disposing of one of its business division in order to prevent any distortion of competition (European Commission press release of 11 December 2018).

Abuse of dominance

Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to monopolisation or abuse of dominance?

French law forbids concerted actions, conventions and express or tacit cartels when these are intended to or could prevent, limit or distort fair competition in a market, namely by:

  • limitations on access to the market or the free exercise of competition by other companies;
  • obstacles to the setting of prices by the free market play by artificially favouring higher or lower prices;
  • limitations or controls on production, outlets, investments or technical advances; or
  • market or supply source allocations.

Monopolies are associated with abuses of dominant positions. The Competition Authority thus issued its decision 04-D-09 of 31 March 2004 relating for article L.420-2 of the Commercial Code. It specifically pointed out that the behaviour of the company in question had the effect of restricting the right of competitors to exploit their own innovation capacities by developing and marketing, to benefit consumers, alternative teaching materials to those that the company in question had developed. The Authority imposed a fine of €140,000 on the grounds of the exercising of a dominant position by the company in question in the relevant market.

Refusal to deal and essential facilities

Can the exercise, licensing or transfer of IP rights create liability under statutes or case law relating to refusal to deal and refusal to grant access to essential facilities?

A ‘facility’ is an installation or an infrastructure needed to reach customers or to enable competitors to carry out their business. A facility is essential when its reintroduction is impossible or extremely difficult because of physical, geographic, legal or economic constraints.

The refusal to negotiate or grant a licence or a transfer of intellectual property rights can constitute an abuse of dominant position. In such a situation, it is the abuse and anticompetitive practices that are relevant, and not the validity or legitimacy of the intellectual property rights in question.

Such a refusal will be deemed as being an abuse of dominant position under three conditions:

  • this refusal blocks the introduction of a new product for which there is exists a potential demand among consumers;
  • it is not justified by objective conditions; and
  • it is likely to exclude all competition in the derived market.

This was confirmed by the CJEU in its ruling C-418/01 of 29 April 2004. In this case, a company that held a dominant position had refused to grant a licence for the use of an intellectual property right to another (relating to a base of modular structures enabling pharmaceutical laboratories to obtain data on regional sales of pharmaceutical products in Germany). The Court held that only if the three conditions as mentioned above were fulfilled would such a practice constitute an abuse of dominant position.

Remedies

Remedies for violations of competition law involving IP

What sanctions or remedies can the competition authorities or courts impose for violations of competition law involving IP?

The Competition Authority can make final or provisional decisions, open to appeal before the Paris Court of Appeal. It can also impose penalties.

It can implement interim measures for cases requiring urgent action. These measures can only apply if the alleged practice represents a serious and immediate threat to the overall economy, that of the sector in question, consumer interests or a plaintiff company. These can include the suspension of the practice in question as well as an injunction on the parties to return to the previous state. These must be strictly limited to what is necessary to deal with the urgent matters.

In addition, it can impose heavy financial penalties, that are either applicable immediately, or in the event of the non-performance of the injunctions, or a failure to comply with commitments agreed to. These financial penalties are proportional to the severity of the facts in question, the scale of damage caused to the economy, the situation of the penalised body or company or the group of which the company is a member and the eventual repetition of the practices prohibited thereby. These are set on an individual basis for each penalised company or body, with a statement of the reasons for each penalty. The maximum amount is, for a company, 10 per cent of its global turnover net of taxes, and €3 million if the offender is not a company. It can finally order the publication of the decision or certain elements of this in the press. 

Competition law remedies specific to IP

Do special remedies exist under your competition laws that are specific to IP matters?

French competition law does contain specific provisions applicable to appeals relating to problems relating to intellectual property rights.

Scrutiny of settlement agreements

How would a settlement agreement terminating an IP infringement dispute be scrutinised from a competition perspective? What are the key factors informing such an analysis?

An amicable settlement terminating a dispute relating to intellectual property rights could be scrutinised in terms of competition law, both national and European Union.

All of the provisions referred to in the preceding answers in this questionnaire could provide the basis for any such scrutiny, whether national of community rules.

Economics and application of competition law

Economics

What role has competition economics played in the application of competition law in cases involving IP rights?

The Competition Authority has an economic team consisting of eight people.

The specific market, an economic element, is of particular importance in characterising any anticompetitive practice. Thus, the relevant market is defined by the Competition Authority as being the place where the supply and demand for a particular product or service meet. The Authority considers in particular what is substitutable, and thus located in the same market, the products and services that we could reasonably think of as being seen by buyers looking at them as the means they could choose between to satisfy the same need.

Under the provisions of article L.420-1 of the Commercial Code, any practices that are intended or that could have the effect of preventing, limiting or distorting the play of competition, namely by limiting or controlling production, outlets, investments or technical advances. Thus, economic elements are a part of the analysis and assessment of competition.

In terms of intellectual property rights, economic elements will be specifically taken into account in evaluating the essential or otherwise nature of the intellectual property right relating to the distribution of products or services in a relevant market (in the context of a refusal to grant a licence for instance, etc). 

By way of example, an arbitration clause cannot be enforced on the actions of the Minister for Economic Affairs. In principle, the judge hearing a dispute concerning a contract containing an arbitration clause must decline jurisdiction, so that the arbitrator rules, as a priority, on its jurisdiction, unless the clause is clearly inapplicable. In this case, the Minister for Economic Affairs had summonsed Apple before the Commercial Tribunal to rule on the invalidity of certain clauses in the distribution contract signed with Orange, which were deemed to be illegal. Apple raised the lack of State jurisdiction on the grounds of the arbitration clause contained in the distribution contract. The Court of Appeal ruled, considering the role of the Minister for Economic Affairs in protecting the operation of markets and competition, that the arbitration clause could be put aside. Article L.442-6, III of the Commercial Code reserves to the Minister for Economic Affairs the ability to take legal action to halt illegal practices and impose civil law fines (Cass, Iv 1, 6 July 2016, 15-21.811, Apple c/ Orange).

Recent cases and sanctions

Recent cases

Have there been any recent high-profile cases dealing with the intersection of competition law and IP rights?

An important case was referred to the Competition Authority in 2014 relating to Nespresso. The market leader in France for machines and capsules, Nespresso could link the purchase of its capsules with that of its coffee machines, thereby excluding manufacturers of competing capsules. The companies DEMB and Ethical Coffee thus referred this to the Competition Authority stating that the exclusionary practices of Nespresso constituted an abuse of dominant position.

The Authority actually noted a number of practices that forced consumers to use only Nespresso capsules when they have purchased that brand of machine:

in technical terms, the successive modifications through patented inventions was intended to make the capsules of its competitors incompatible with Nespresso machines;

in legal terms, Nespresso recommended in a number of documents that only its own brand capsules should be used; and

in commercial terms, the promotion and communication of the brand strongly and even exclusively encouraged consumers to buy only Nespresso capsules.

In the decision issued by the Competition Authority 14-D-09 dated 4 September 2014, Nespresso was required to make several commitments intended to remove the obstacles to the entry and development of other manufacturers of capsules that would work with the brand’s coffee machines.

In another case, the Paris Court of Appeal confirmed the ruling of the Competition Authority finding that Cegedim had abused its dominant position (CA Paris, 24 September 2015, 2014/17586) on the grounds that it had in a discriminatory manner only refused to sell its database of medical information to the customers of its competitor Euris. The Paris Court of Appeal had deemed this medical database as being an essential infrastructure. In its ruling 15-25.941 of June 21 2017, the Supreme Court confirmed the position of the Paris Court of Appeal by confirming the abuse of dominant position exercised by Cegedim and rejected further appeal by this latter.

Also, on 12 December 2018, the European Union Court noted that Servier had implemented an exclusionary strategy constituting an abuse of dominant position, by imposing agreements on generic companies that included clauses for not challenging patents and the non-marketing of products.

These practices were threefold:

technical: subsequent changes to Nespresso machines had the effect of rendering capsules produced by competing manufacturers incompatible with the new models;

contractual: in particular by the wording put on Nespresso machines (and specifically in the warranty) to encourage consumers to only use Nespresso brand capsules; and

commercial, through its communication in the media and within the Nespresso Club.

 

In a decision of the Court of Appeal of Paris, dated 24 September 2015, Cegedim was condemned for abuse of a dominant position for having refused to grant a licence on its database to the company Euris. Cegedim’s database was used by medical sales representatives to present their products to healthcare professionals and required the use of management software also proposed by Cegedim. Euris, which commercialises its own software, wanted to have access to Cegedim’s database. Cegedim refused to grant a licence on its database that would have allowed Euris to commercialise its own software. Cegedim argued that Euris infringed its database to justify such refusal. Although the Court ruled that the database was not an essential facility, it considered that the behaviour of Cegedim was a discriminatory refusal to sell, constituting an abuse of a dominant position. The fact that Euris was potentially infringing Cegedim’s IP right did not allow Cegedim to refuse to grant a licence to Euris. This decision was confirmed by the French Supreme Court on 21 June 2017.

 

Remedies and sanctions

What competition remedies or sanctions have been imposed in the IP context?

Nespresso was ordered to comply with a number of commitments, that is, to:

  • communicate information relating to the technical modifications to its competitors at the moment that it placed the order for the production of new machines, without waiting until the start of their sales;
  • make sure that this information was communicated within a minimum safety period of at least four months prior to the bringing of the machines to the market;
  • appoint a ‘trusted third party’ to act as the intermediary to prevent the transfer of any confidential information between its competitors and itself when communicating the technical information;
  • make available to its competitors through the trusted third party, prototypes of the new machines for them to test them for compatibility with their capsules; and
  • be more transparent on the reasons for technical modification to the machines and for new technical specifications, namely, by communicating to the Authority a file explaining the reasons behind each technical change.

Cegedim was ordered to pay a fine of €5.7 million for abuse of a dominant position.

Servier was ordered by the European Union Court to pay a fine of €228 million in application of TFEU articles 101 and 102 for its abuse of dominant position arising from its exclusionary strategy.

Update and trends

Update and trends

Are there any emerging trends or hot topics in the law of IP and antitrust policy? Have changes occurred recently or are changes expected in the near future (through either legislation or court decisions) that will have an impact on the application of competition law to IP rights? (For example, has there been any development with regard to assessment of the appropriate basis for royalty determinations (eg, ‘smallest-saleable unit’ versus total cost of product?)

No updates at this time.