ORDINANCE MODERNIZING FRENCH TRADEMARK LAW

Ordinance n°2019-1169, dated November 13, 2019, related to trademarks and service marks
Ordinance issued on the grounds of the Pact Law of May 22, 2019, allowing the transposition into French law of a European directive of December 16, 2015, aligning the laws of the Member States on trademarks.

The main objective of this ordinance and its application decree is to improve the effectiveness of trademark protection systems through several new measures, including:
– an enlarged possibility of opposing to a trademark application: this possibility is no longer only open to the holder of an earlier trademark, but also from now on to the holder of a domain name, to any legal entity on the basis of its denomination, as well to any person on the basis of the trade mark under which it carries out its activity or the sign designating the place where this activity is carried out;
– the transfer from judicial to non-judicial resolution of part of the current trademark lawsuits, with the creation of an administrative procedure in charge of dealing with certain invalidity or revocation of trademarks requests; henceforth, these lawsuits will fall within the competence of the President of the French National Institute of Industrial Property, and no longer within the competence of the judicial courts (with the exception of appeals) (French Intellectual Property Code, articles R. 411-19 et seq.);
– the modification of the terms of renewal of trademarks: the owner of a trademark is informed by the President of the French National Institute of Industrial Property at the latest six months before the expiration of the trademark registration; the new declaration must be submitted within a period of a year before the day preceding the expiration of the registration (French Intellectual Property Code, articles R. 172-13 et seq.) ;

LEGAL NEWS

– an enlarged group of persons authorized to take action for infringement, the legal provisions on this matter being now included in articles L. 716-4 et seq. of the French Intellectual Property: the action may now be brought, without the authorization of the trademark owner, by non-exclusive licensees and by persons authorized to use a collective or guarantee trademark;
– loosened requirements concerning graphic representation of trademarks, thus allowing sound, multi-media or so-called “moving” trademarks to be registered as such if their representation is clear, precise, easily accessible, comprehensible, sustainable and unbiased.
This ordinance became effective on December 15, 2019.
https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000039373287&categorieLien=id

BRUTAL TERMINATION OF TRADE RELATIONS AND ABUSE OF A DOMINANT POSITION

Decision: Paris Commercial Court, January 16, 2020, n°2020001069 (https://www.doctrine.fr/d/TCOM/Paris/2020/U953B021D5E565BE4A56A)
Main takeaway from the decision: article L. 420-2 of the French Commercial Code prohibits the abusive use by a company of a dominant position it holds on a market and specifies which behaviours may characterize such abuse: refusal to sell, tied sales or sales with discriminatory terms, or the brutal termination of established trade relations. This judgement provides an example of an abusive behaviour by a dominant company on a market, characterizing a brutal termination of the trade relations between the two parties. It thus allows to have a better understanding of the connections between brutal termination of trade relations and abuse of a dominant position.
In its rendered decision, the Paris Commercial Court illustrates the principle clearly established by the French Supreme Court in a judgement dated January 19, 2016 (n°14-21.67), according to which article L. 420-2 of the French Commercial Code only applies if the brutal termination of the trade relations has had an actual or potential anticompetitive purpose or effect. Thus, a brutal termination alone cannot be considered as abusive but may, in the event of a breach of the market, constitute an abusive of a dominant position.

CASE LAW

Such is the case in the facts presented to the judge in the decision rendered. Trade relations between Coca-Cola and Intermarché (a major French supermarket), where the soda company supplied the distributor, had been established for several decades. A termination of the relations announced by Coca-Cola, with only nine days’ notice, leading to a stock shortage and a risk of loss of customers for Intermarché (given the large share held by Coca-Cola on the cola market, set between 75% and 95%), constitutes a brutal termination of trade relations which only a company with a dominant position on a market would be able to carry out.
It is yet to be seen if the Paris Court of Appeal, which may be seized, will confirm this judgment or not.

BRUTAL TERMINATION OF TRADE RELATIONS AND GROUP OF COMPANIES

Decision : French Supreme Court, October 16, 2019 (n°18-10806) (https://www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT000039285463&fastReqId=463539339&fastPos=1)
Main takeaway from the decision: established trade relations, as understood by article L. 442-1, II of the French Commercial Code, shall not be assessed by considering the supplier’s relations with all the companies belonging to the same group. The principle of the autonomy of legal entities within a group of companies is recalled by the French Supreme Court, which confirms that “the notion of trade relations can only be understood as relations that are effectively and genuinely pursued between entities, and this excludes the possibility to assess this relations in a global manner at the level of a group of persons that are legally distinct from one another and independent.” The French Supreme Court also reiterates that a group of companies which does not have legal personality cannot constitute a trade partner within the meaning of the above-mentioned article of the French Commercial Code.
In the case of the decision rendered, a company specialised in the selection, import and sale of carpets had concluded contracts with several entities belonging to the Galeries Lafayette group (a French department store chain), for the exploitation of sales stands in various stores owned by these entities. These contracts were terminated between 2010 and 2011, and the carpet company contested the length of the notice periods granted: it sued one of the Galeries Lafayette Group’s company for brutal termination of established trade relations and extended its claim to the other brutal terminations of contracts practiced by the other entities of the Group.
The carpet company argued that a single trade relation existed between it and the group of companies, and that therefore the period of notice should be fixed according to the duration of all these relations and the various contracts concluded. In answer to this argument, the French Supreme Court first considered that a listing contract concluded between an entity of the group, acting in the name and on behalf of the others, and the seller did not constitute a single agreement governing all the relations between the seller and the group. Second, it considered that in spite of a group purchasing organisation, of interlocutors attached to the same management and of the fact that three of the four notice letters concerning the termination of the contracts took place on the same day, there is no “concerted policy” of the group’s entities that can be characterised.

BRUTAL TERMINATION OF TRADE RELATIONS AND SERIOUS MISCONDUCT

Decision: Paris Court of Appeal, October 2nd, 2019, n° 17/04523 (https://www.doctrine.fr/d/CA/Paris/2019/C19EB5AA6C10A5C0920FC)
Main takeaway from the decision: the French Supreme Court considers that the termination of established trade relations cannot be qualified as brutal when it is the consequence of wrongful conduct by the contracting party, consisting of significant and repeated late payments due.
In the case of the decision rendered, as a result of unpaid bills and late payments, a wine supplier terminated its long-established trade relations with a merchant distributor. The Paris Court of Appeal considered that the supplier’s refusal to supply the distributor if the sums owed by the latter were not paid was legitimate, given the damage and serious contractual breach which the default of payment characterised. Thus, default of and late payments of invoices constitute sufficiently serious breaches of contracts to legitimately justify a brutal termination of trade relations without notice.

BRUTAL TERMINATION OF TRADE RELATIONS AND AMENDMENT OF THE CONTRACT

Decision : Paris Court of Appeal, October 3rd, 2019, n° 17/01356 (https://www.doctrine.fr/d/CA/Paris/2019/C85D9AF91F978504617F0)
Main takeaway from the decision: the Court recalls that the brutal termination of trade relations may result from a party’s proposition to amend the contract on the triple condition that the proposal (i) is unfavourable to the other party, (ii) relates to a substantial aspect of the trade relation and (iii) is a condition to the pursuit of the relation.
In the case of the decision rendered, a group purchasing organisation concluded successive provision of service contracts with the company X, entrusting it with the selection, on its behalf, of suppliers, products and monitoring of purchases. A few years later, the group purchasing organisation opposed itself to the renewal of the contract because of a new group strategy to which it belonged aimed at centralising purchases within the group. The company X consequently sued the group purchasing organisation as a result of a brutal termination of the established trade relations.
The group purchasing organisation tried to blame the company X for the brutal termination of the trade relations, arguing that when the contract was renewed, the company X disrupted the contract’s equilibrium by wishing to add stipulations prohibiting the group purchasing organisation from contracting directly with suppliers selected by the company X. The Court of Appeal rejected this argument, and observed that the company X merely formulated simple proposals to amend the contract to which the group purchasing organisation did not respond, and in any case the company X had never set the amendment as a condition for the renewal of the contract. Consequently, it was indeed the central purchasing organisation which brutally terminated the trade relations, by ceasing orders without any notice given to the company X.

FRANCHISOR AND PRECONTRACTUAL DISCLOSURE REQUIREMENTS

Decision: Versailles Court of Appeal, October 24, 2019, n° 18/02778 (https://www.doctrine.fr/d/CA/Versailles/2019/C83A42BFDDE8F98DDF658)
Main takeaway from the decision: judgement providing an example of absence of any breach of a franchisor, regarding his obligation of pre-contractual information due to a franchisee as defined by article L. 330-3 of the French Commercial Code, in spite of his submission of projected accounts qualified as “fictitious” by the franchisee.
In this case, a franchisor operating a network of restaurants provided a prospective franchisee with pre-contractual information and projected accounts. The franchisee’s company was later declared bankrupt only seven months after opening the restaurant establishment. The franchisee hence sued the franchisor for a nullity of the franchise contract, on the grounds of the fact that he had submitted erroneous and incomplete pre-contractual information as well as misleading provisional accounts.
In regards of the pre-contractual information, the Versailles Court of Appeal points out that the state of the local market presented by the franchisor does not correspond to an analysis of the market, this analysis being the prerogative of the sole franchisee. Information on the local state of the market presented by the franchisor is merely a general presentation of the local situation, and the intended assistance of the franchisor to conduct the analysis of the market does not mean that the franchisor must carry it out himself.
Concerning the projected accounts, the Versailles Court of Appeal reminds that the franchisor is not bound to provide the franchisee with such document, but that if he decides to do so, the projected accounts must contain honest and truthful information: otherwise, the franchisor is liable for erroneous or misleading information provided. In this decision, the Court of Appeal adopts a position clearly in favour of the franchisor: the Court rules that a franchisor can avoid being liable if he shows sufficient restraint and reserves in the precontractual documents he provides the prospective franchisee with, even if he sends projected revenues (for example, by writing on the documents sent to the franchisee the mentions “non-contractual” or “draft”, or by specifying that the hypothesis formulated must be confirmed by a market analysis).
This decision which excludes any liability of the franchisor must be understood and read with caution, especially regarding the communication of projected accounts. Communication of objective historical data by the franchisor to the prospective franchisee for him to establish account forecasts, as was the case in the decision rendered, does not constitute completely uncertain projections constructed by the franchisor. It is therefore appropriate, as in the case of the judgement, to encourage the franchisee to have such assumptions evaluated by a market analysis or submitted to an accounting professional in order to avoid the franchisor being liable in any way.

SIGNIFICANT IMBALANCE & LEGAL ACTION OF THE FRENCH MINISTER OF ECONOMY (STATUTE OF LIMITATIONS)

Decision: Commercial Court of Rennes, October 22nd, 2019, n°2017F00131
Main takeaway from the decision: according to the Commercial Court of Rennes, the starting point of the statute of limitations of the claim on significant imbalance the French Minister of Economy can file on the grounds of article L. 442-1, I, 2° of the French Commercial Code is the day on which he knew or should have known the facts allowing him to file his claim. To recall, this legal action by the Minister of Economy designed to obtain the cancellation of an abusive contract clause has a statute of limitations of five years. The Commercial Court of Rennes considers, in the case presented to its Court, that the starting point of the statute of limitations for the Minister corresponds to the day on which the first acts of investigation into the litigious contracts were carried out. This position adopted by the Court is open to criticism, as it leads to the legal action brought by the Minister of Economy benefiting from an absence of statute of limitations.
In regards of the claim on significant imbalance the franchisees can file, the statute of limitations is fixed to five years and its starting point is the day of conclusion of the franchise contracts. Concerning the franchisees who voluntarily intervene in the Minister’s legal action, the Commercial Court of Rennes rejected the franchisor’s argument that the statute of limitation has its starting point also at the signature of the respective franchise contracts.
Instead, as with the Minister of Economy, the Court sets the starting point of the statute of limitations at the time where these voluntarily intervening franchisees knew or should have known the litigious facts, and in the case presented to the Court, on the date of their “hearing by the Minister’s services.” Again, this stance taken by the Court is dangerous in the sense that until the Minister investigates, the legal action would have no statute of limitations attached to it.