Sometimes, French patent litigation can have the distinct flavor of a road movie.
OK, you may not get to travel that much: the plot usually takes place in Paris all along, from one courtroom to the next, from first instance to appeal and then cassation and sometimes back down to appeal. In fact, until very recently, all of these courtrooms used to be concentrated in a very small area – the Ile de la Cité.
But imagination has journeys of its own. And when a litigant called Texas ends up being stuck in Paris for a number of years, what can you do, pictures of a desert come to mind. This is just how evocative some titles are.
So, two years ago, I wrote a post on this road movie of a sort, Carrera & Texas de France v. Muller.
Can there be such a thing as free infringement, is the question I asked on that occasion. And I wondered whether the Cour de cassation would have to weigh in. Well it did, and the time has thus come to revisit the question.
As a reminder of the background of the case, Muller & Cie holds a European patent on a heating element for a heating or cooking apparatus. Carrera and Texas de France were found guilty of infringement of this patent by the Paris Tribunal de grande instance (TGI) in 2014. This verdict was confirmed on appeal. In parallel, the TGI issued a second judgment on the computation of damages: Carrera and Texas were condemned to pay Muller damages of respectively 327,733 euros and 280,130 euros for Muller’s commercial prejudice, plus 100,000 euros for moral prejudice.
The defendants appealed, and the Paris Cour d’appel completely changed course in December 2016, setting the amount of damages to zero euro.
The case went up to the Cour de cassation. The court dismissed various challenges of the appeal ruling regarding the appraisal of sufficiency of disclosure, claim interpretation and a request for information. But the real interesting part is the discussion on the damages award – or rather, on the lack thereof.
First, we need to go back to the reasoning of the Cour d’appel:
- Muller claimed damages amounting to an apportionment of the entire infringer’s profits (successfully so in first instance).
- However, the appeal judges held that infringer’s profits can only be taken into account in the context of the assessment of a commercial prejudice. The confiscation of the infringer’s profits is not an alternative option which would be available to the plaintiff instead of claiming the compensation of a commercial prejudice.
- In the case at hand, Muller did not personally exploit the patent. The patent was rather exploited through six licensed subsidiaries, which were not parties to the proceedings.
- Therefore, said the Cour d’appel, the sole proper methodology for assessing damages was the so-called indemnifying royalty, because the only profits lost by Muller were a lost royalty.
- But since Muller did not ask for such indemnifying royalty, the court could not grant this remedy – and thus could not take into account infringer’s profits either.
- Finally, Muller’s claim based on a moral prejudice was held to be insufficiently substantiated.
This last bullet point did not raise the cassation judges’ eyebrows. They simply noted that it was within the Cour d’appel’s power to determine whether the count of moral prejudice was sufficiently substantiated or not.
But the supreme court struck down the part of the judgment dismissing Muller’s claim based on the infringer’s profits.
Here is a working translation of the key paragraph of the judgment, broken down into shorter sentences as always:
[The court] refused to take into consideration the claim for damages based on one of the assessment criteria provided in article L. 615-7 par. 1 of the Code de la propriété intellectuelle. However, in view of the case law of the Court of justice of the European Union, Directive 2004/48/EC aims at providing a high level of protection of intellectual property rights, which takes into account the specificity of each case and is based on a mode of computation of damages corresponding to such specificity (CJEU, March 17, 2016, Liffers, C-99/15, item 24), the choice of which belongs to the harmed party. Therefore, the existence of an economic prejudice for the patent proprietor resulting from the infringement is not subject to the proviso that the proprietor personally exploits. Thus, the Cour d’appel breached the law.
This is a rather important ruling. If we go back for a minute to article L. 615-7, there is no denying that its wording is not crystal clear in terms of which options are available to the plaintiff:
In order to set damages, the court separately takes into account:
1° Negative economic consequences of the infringement, including lost profits and losses suffered by the harmed party;
2° Moral prejudice inflicted to said party;
3° And profits made by the infringer, including savings on intellectual, material and promotional investments made owing to the infringement.
However, the court may, alternatively and upon request of the harmed party, grant a lump sum in terms of damages. This lump sum is higher than the amount of royalties or rights which would have been due if the infringer had asked for the authorization to use the right that it infringed. This sum does not exclude the further indemnification of the moral prejudice of the harmed party.
What this Texas ruling means is that a patent proprietor has the right to choose its mode of damages computation, and in particular has the right to rely on option 3° regardless of whether they work the patent or not.
Overall, this is good news for IP right holders, as it gives them more flexibility in their argumentation and assessment of damages.
But that’s not to say that all is said and done on this issue. Article L. 615-7 recites that the court should “take into account” various factors, including the “profits made by the infringer“. Does this mean that the plaintiff is entitled to recover the full profits made by the infringer? Or only part of those?
I am not sure this is settled law. So again, and just as I wrote two years ago, I am looking forward to the next scene of the movie.
CASE REFERENCE: Cour de cassation, chambre commerciale, January 23, 2019, Carrera & Texas de France v. Muller et Cie, appeals No. R 16-28.322 & A 17-14.673.