New IP law enters into force

A new IP law was passed on February 26 2014. The law was published on March 12 and entered into force on March 13.

The infringement of IP rights represents a serious threat to national economies (in France, it is estimated to amount to €6 billion in lost profits). Pursuant to the IP Rights Enforcement Directive (2004/48/EC) and the French Act on the Fight against Counterfeiting of October 29 2007, the purpose of the February 26 2014 law is to harmonise the various rules governing the different types of IP rights in France and to ensure an equivalent level of protection for all IP rights.

First, the new law seeks to improve the methods used to compute damages, with the aim of increasing the amount of damages awarded.

Although the courts generally have a sufficient legal basis and adequate powers to award damages, it is difficult for judges to assess the appropriate level of damages. The French legislature wanted to change the applicable rules because it is generally considered that the amount of damages awarded is not sufficient to compensate the actual prejudice.

Previously, there were three different computation methods on the basis of which right holders could claim damages. These were based on:

• the negative economic impact, including lost profits, suffered by the rights holder;
• any unfair profits made by the infringer; and
• the moral prejudice caused to the rights holder as a result of the infringement.

A flat amount was also an alternative.

According to the new law, the courts shall take into account three tests (the changes compared to the previous tests appear in bold), which are identical for all IP rights and are based on:

• the negative economic consequences, including lost profits and other losses suffered by the rights holder - for instance, the loss of opportunity to sign a licensing agreement should be compensated;
• any unfair profits made by the infringer, including the economies made due to the infringement (eg, intellectual and material economies) - the potential amount of damages awarded is increased as a consequence.
• the moral prejudice caused to the rights holder (the new law makes no change here).

In addition, judges may award damages as a lump sum on the basis of various elements, such as the amount of royalties or fees which would have been due had the infringer requested authorisation to use the IP rights at issue. The modification brought by the new law is that the amount of damages should be greater than the amount of royalties or fees which would have been due.

Second, the new law consolidates the saisie-contrefaçon procedure, which is a way of gathering proof of infringement. The new law facilitates the proof of infringement and aims to harmonise the saisie-contrefaçon for all IP rights.

Formerly, a seizure could be performed on the basis of patent, trademark, design and database rights. However, in cases concerning literary and artistic property rights, a different procedure was used. The new law thus harmonises the saisie-contrefaçon for all types of IP rights. Moreover, the new law allows for the seizure of any documents, even in the absence of counterfeit products.

Third, the new law strengthens the powers of Customs in three areas:

• Holding facilities used by Customs units - Customs withholding is a way to hold goods suspected of infringement, regardless of any Customs breach. The new law brings the national procedures into line with EU procedures. Formerly, Customs withholding could be compulsory (retenue d'office) or upon request in writing (retenue sur demande) depending on the IP right at issue. The new law extends the two procedures to all IP rights.
• Identification of infringers - by way of derogation to the rules set in Article 59bis of the Customs Code, the new law states which information can be obtained by the rights holder regarding the origin of the infringing goods. Rights holders may request information to identify the counterfeit products (eg, nature, quantity and photographs) and any third parties involved in the infringement (name and address).
• Simplified destruction procedure - with the consent of the declarant or of the holder of the goods, Customs can seize and destroy products. Customs do not need to wait for a court decision.  

Fourth, the law aims to establish harmonised rules relating to prescription. Previously, the Intellectual Property Code provided a limitation period of three years for some infringement actions (patents, drawings, models and trademarks). The limitation period is now fixed at five years for all IP actions.

Richard Milchior, Granrut Avocats, Paris