AGORA DSI & CIO - The Legal Minute - 29 June 2023

In its decision of 5 October 2022 (Cour de cassation, Civil Division 1, 5 October 2022, 21-15.386), the First Civil Division of the Cour de cassation handed down an important ruling, settling the legal saga over whether a software publisher can bring an infringement action for failure to comply with the terms of a licence agreement.

An open source publisher had designed software enabling a single authentication system to be set up, distributed under an open licence or a commercial licence. Orange and OBS integrated this software into an identity management solution marketed to the French government.

Taking the view that making its software available in this way did not comply with the terms of the free licence, the publisher, after having an infringement seizure carried out, summoned the Orange companies for copyright infringement.

The judgment of the Paris Tribunal de Grande Instance, upheld on this point by a decision of the Paris Court of Appeal (19 March 2021, Division 5, Chamber 2, 21-15.386), declared the infringement action inadmissible. The publisher of the authentication software then appealed to the French Supreme Court.

European regulations. European Directive 2004/48 of 29 April 2004 on the enforcement of intellectual property rights requires Member States to provide minimum procedural guarantees and compensation for any infringement of intellectual property rights. These include the possibility of ordering the seizure of counterfeit goods and awarding a lump sum in damages, based in particular on the amount of royalties that should have been collected.

When asked about the interpretation of this directive, the Court of Justice of the European Union, in a decision handed down on 18 December 2019 (IT Development v. Free Mobile, aff. C-666/18), had already concluded that this directive covers infringements resulting from breaches of a contractual clause relating to the exploitation of a computer program. However, the European court specified that the national legislator remains free to define the nature, whether contractual or tortious, of the action available to the rightholder.

The decision of the Paris Court of Appeal. The above-mentioned decision of the Paris Court of Appeal, which is the subject of the appeal, reminds us that under French law, a person cannot be held liable in both contract and tort for the same facts. Liability in tort must be set aside in favour of contractual liability where the parties are bound by a contract and the damage suffered by one of the parties results from the other party's failure to comply with the terms of the contract.

The Court of Appeal noted that the Court of Justice of the European Union had not called into question this principle of the non-accumulation of tort and contractual liability. Where the parties were bound by a contract and were claiming breach of a clause in that contract, liability in tort had to be set aside in favour of contractual liability. As a result, the infringement action, which was treated as a tort action, had to be declared inadmissible.

The position of the Cour de cassation. The aforementioned decision of the Paris Court of Appeal, which is the subject of the appeal, recalls The First Civil Chamber of the Court of Cassation censured the decision of the Paris Court of Appeal on the basis of four texts: article L. 335-3, paragraph 2, of the French 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 and Article 1 of Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs.

For the Court of Cassation, the question submitted to the Court of Appeal did not relate to the accumulation of liability but to the effectiveness of the guarantees granted to the author in the event of infringement of his copyright.

Although the Court of Justice of the European Union has left it up to the Member States to define the nature - contractual or tortious - of the action available to the rights holder, the latter must in any event have the minimum guarantees provided by Directive 2004/48/EC on the enforcement of intellectual property rights.

The Court of Cassation points out that, in principle, damages for breach of contractual obligations cannot exceed what was foreseeable or what the parties agreed to.

It then points out that the Code of Civil Procedure does not offer a mechanism as effective as the seizure for infringement provided for in the Code of Intellectual Property.

Consequently, the Court held that only an infringement action offers the holder of copyright in a computer program the guarantees provided for by Directive 2004/48/EC on the enforcement of intellectual property rights.

Scope of the decision. The owner of the copyright in a computer program is therefore entitled to bring an infringement action in the event of a breach of its intellectual property rights resulting from a breach of a clause in the licence agreement.

In both licence and SaaS contracts, the publisher, who holds the copyright, authorises the customer to access and use the software hosted by the publisher. This authorisation is usually subject to a number of reservations, such as the maximum number of users and other usage limits.

Customers who use the application beyond the licence conditions stipulated in the contract are thus exposed to the rigours of criminal infringement proceedings and risk having to make very costly adjustments.

The prior negotiation of clear licence metrics, accompanied by control and warning mechanisms if these metrics are exceeded, is therefore essential for the customer of an on-premise or SaaS IT solution.