Gaëlle Bloret-Pucci, Partner, and her team decipher the latest news in the field of intellectual property:

Digital Service Act: Draft European Regulation on digital services

On December 15^th, 2020, the European Union initiated two projects: the Digital Service Act regulation on digital services) (hereinafter “DSA”) and the Digital Market Act (regulation on digital markets) (hereinafter “DMA”). While the DMA has been agreed between the Council and the Parliament, the DSA is in the final stages of negotiation in the trialogue (European Commission, European Council and European Parliament).

The draft regulation follows the same philosophy as the Directive on electronic commerce of June 8^th, 2000 (Directive 2000/31/EC), of which it takes up the principles, while imposing new tools to ensure the effectiveness of the established rules.

The main novelty is the creation of a Digital Services Coordinator (“DSC”) within each State, whose role will be to verify the proper application and enforcement of the DSA within that State. In France, the prospective body is the ARCOM (French public authority for the regulation of audiovisual and digital communication) born from the merger of the CSA and Hadopi.

The draft regulation, like the Directive on electronic commerce, establishes an exception to the liability of “intermediary service” providers and does not impose a general obligation to monitor content. However, the DSA introduces a new obligation for these providers to benefit from this exemption from liability: they will have to carry out “good Samaritan” investigations on their own initiative, in order to detect, identify and disable illegal content. They will not be deemed to have knowledge of the content of the information if they undertake voluntary investigations.

In parallel, the DSA requires intermediary service providers to provide a tool for users to report illegal products and content. This reporting creates a presumption of knowledge of the illegal fact by the providers. The latter will have to remove or at least quickly disable access to them so that they are not held liable.

Other obligations may be listed, such as the obligation to provide information when ordered to do so by the national judicial or administrative authorities or to state in their general terms and conditions the restrictions they may impose on the use of their services.

As regards sanctions for non-compliance with the DSA, the Regulation leaves it to each Member State to determine the applicable sanctions, while limiting them to 6% of the company’s annual revenue or turnover.

Unlike the Directive on electronic commerce, for which the transposition in each Member State led to the establishment of different regimes according to the Member States, the DSA, as a Regulation, will be directly applicable throughout the Union, thus guaranteeing the effectiveness of the measures put in place.

Law modernizing regulation of the auction market

After two years of parliamentary shuttle, the law modernizing regulation of the auction market finally came into force on March 1^st.

Among other things, the Law reforms the composition and scope of the missions of the “Conseil des Ventes Volontaires”, which becomes the “Conseil des Maisons de Vente”. It will be composed of a majority of auctioneers elected by their peers: 6 members out of 11, whereas until now all were appointed by the Government and in practice there were more magistrates than professionals. Now with a disciplinary body, the regulatory authority can sanction and conciliate professional disputes.

The major contribution of the law is undoubtedly the opening of voluntary auctions to intangible goods. Those sales were indeed previously reserved for tangible goods. This opening up raises the question of the sale of digital works, that auction houses were previously unable to sell.

In this respect, the NFT (or token) is indeed an intangible good and can therefore now be the subject of an auction. The NFT registered in a blockchain is a kind of certificate of ownership of a digital good, which has a proper value, such as that of a work of art.

Sotheby’s is the first auction house to launch a digital space reserved for NFT collectors and a bi-annual sale of these digital objects.

Patent: when an infringement action and amendment of a patent during a dispute escalate into an abuse of the right to bring an action

The Court of cassation has confirmed the decision of a Court of appeal which condemned companies SAN-EI, joint owners of a patent, for abuse of the right to bring an action by wanting to unfairly disrupt their competitor, company NEXIRA.

This dispute began with a formal notice sent by companies SAN-EI to NEXIRA, claiming this company was infringing their patent. Talks followed during which NEXIRA indicated that in the event of an infringement action against it, it would seek to invalidate the patent, even presenting its arguments on invalidity, namely an extension of the patent beyond the scope of the application as filed. The patent had indeed been amended in its claim 1.

Subsequently, NEXIRA effectively sued companies SAN-EI for invalidity of their patent. In response, companies SAN-EI first had infringement-seizures carried out in NEXIRA’s premises, and then sued for infringement of their patent. Following the judgement which declared their patent invalid, NEXIRA finally brought companies SAN-EI before the Commercial Court to have them condemned to pay damages for abusive proceedings.

The Court of cassation, in this decision of January 26^th, 2022 (No.20-16.425), dismissed the appeal and confirmed the analysis of the Court of appeal which, after examining the context of this dispute, (i) noted that the amendment of claim 1 by companies SAN-EI had been made for a questionable purpose, and (ii) pointed that companies SAN-EI, as professionals in their field, could not have been unaware of the fragility of their amended patent. Consequently, the Court of cassation ruled that the Court of appeal had rightly considered that the infringement-seizures and infringement action, initiated after the action for invalidity of the patent was launched by NEXIRA, “could only be explained by the will to persist in unfairly disrupting a competitor”, thereby qualifying as an abuse of the right to bring an action.

Author’s rights: recognition of the implicit assignment of author’s rights on a bracelet created by an employee in 1938

In a decision dated January 11^th, 2022 (No.20/15934), the Court of Appeal of Paris confirmed the judgement that had recognized HERMES SELLIER’s capacity to act for infringement of author’s rights on the emblematic “Chaîne d’ancre” (“anchor chain”) range of jewelry, the assignment of such rights having been recognized as valid.

HERMES SELLIER had brought an action for infringement of author’s rights and designs, and unfair and parasitic competition, against CREATIONS GUIOT DE BOURG, a jewelry wholesaler marketing products that it considered similar to its own.

As a defense, CREATIONS GUIOT DE BOURG questioned HERMES SELLIER’s status as owner of the author’s rights, on the grounds that the initial assignment of the designer’s rights had not been recorded in writing.

The Court, like the Tribunal, noted that the HERMES jewelry in question had been created in 1938 by an employee who later became Deputy General Manager and then Chairman of the company, and that the latter had implicitly assigned his rights, as the law applicable at the time did not require that such an assignment be recorded in writing. The Court also noted the absence of any claim on the part of the creator regarding the exploitation of this jewelry by the company. Finally, it considered the documents submitted by HERMES SELLIER, justifying the successive transfers of these rights to different entities, validating the chain of rights invoked.

The infringement of author’s rights and designs, as well as unfair and parasitic competition, were confirmed, as the amount of damages imposed on CREATIONS GUIOT DE BOURG.

While current case law is strict as to the requirement of a written document stating the assignment of author’s rights on a creation made by an employee to his employer, this decision reminds us that such a written document, which in any case “is only a rule of proof and not of form“, is only applicable to creations made after the Law of 1957.

Intellectual property rights: is the assignment of an intellectual property right made free of charge a donation?

In a judgment dated February 8^th, 2022 (No.19/14142), the Hight Court of Paris ruled that an assignment of trademarks and designs made free of charge is a donation that must be executed before a Notary under penalty of nullity.

In this case, two individuals jointly registered a trademark and some designs. One of the co-owners assigned these intellectual property rights, without any financial consideration, to a third party, a legal entity, without the authorization of the second co-owner. In this context, the co-owner sued his former partner and the beneficiary of the assignment for nullity of the assignment contract.

In order to invalidate the assignment of the trademark and the models, the Hight Court of Paris relied on the provisions of the Civil Code relating to donations, and in particular Article 931 which provides that “All deeds of donation inter vivos shall be executed before a notary in the ordinary form of contracts” under penalty of nullity, except as otherwise permitted under case law such as for “manual gifts”.

The Court ruled that the assignment contract, by transferring the ownership of the trademark and designs, free of charge, was an “undisguised donation of intangible rights” which should therefore “be executed before a notary“, and cancels the assignment contract.

With this judgment, the scope of which will be determined in the future, the judges apply the strict formalism of inter vivos donations to intellectual property rights, although in practice this is not always appropriate (intra-group transfer or transfer between a partner owning a trademark and a company).

Particular care should therefore be taken when determining the assignment price.

Trademark law: the intrinsic distinctiveness of Citroën’s figurative trademark confirmed by the EUIPO in a decision of April 1^st, 2022

In the context of the dispute between the two car manufacturers Polestar and Citroën, Polestar brought an action for invalidity against Citroën’s European figurative trademark  before the EUIPO for lack of distinctiveness, for all the goods and services covered by the registration.

The European Office considered that the figurative sign is not a “simple design“: its geometric shape is not basic and is therefore likely to be perceived by the public as an indication of commercial origin and not as a typical decorative element or one imposed by the technical function of the goods.

The Office did not rule on the demonstration of distinctiveness acquired through the use of the contested trademark raised in the alternative by Citroën, since it considered the European figurative mark to be intrinsically distinctive.