Once in a while, a complex and long-lasting patent case gives rise to a simple and straightforward ruling.
Only longtime readers having an exceptional memory will remember that, a few years ago, I reported on a first cassation ruling in a Time Sport International v. Décathlon France et al. case. This ruling dealt with a priority issue.
It turns out that another cassation ruling has recently been issued in the same litigation. So this is one of these few never-ending cases in which the judiciary pingpong seems to go on eternally. Is it a bug or a feature of the French legal system? We may never know for sure.
Anyway, there is probably no need to go over the entire case in detail: as I said, the point made in this new ruling is quite simple and straightforward.
Suffice it to say that Time Sport International owns European patent No. EP 0682885 on a device for the adjustable occipital fixing of a helmet, and that Décathlon France and DHG Knauer were found to have infringed the French part of this patent. The only outstanding question is the computation of damages.
Damages were awarded to Time Sport by the Paris Cour d’appel in a judgment dated September 22, 2017 (corrected on May 4, 2018). Several amounts were awarded in consideration of different periods of time and defendants. The total amounted to more than 800,000 euros for Décathlon France, but (only) approximately 71,000 euros for Knauer.
The Cour de cassation, which only rules on points of law and does not reassess the facts, let the 2017 ruling stand for the most part, but took issue with one amount in particular, namely the one supposed to address Knauer’s infringement for the period running from November 1, 2007 to September 8, 2012.
Time Sport’s claim amounted to 1,754,483 euros. But the 2017 appeal ruling only granted them 28,620.90 euros. If the staff mathematicians are correct, this means that the court granted Time Sport 1.6% of what they asked for – obviously quite a disappointment for them.
The amount claimed by Time Sport was based on an expert’s report and was said to correspond to the profit made by Knauer. It seems that Knauer refused to communicate its sales figures relating to the infringing helmets to the expert, so that he made an estimate based on a minimum number of helmets sold by Knauer to Décathlon, on Décathlon’s average unit price and on Décathlon’s gross margin (not Knauer’s gross margin).
But the appeal judges noted that Knauer and Décathlon have different activities. Knauer is a manufacturer and wholesaler while Décathlon is a retailer. Therefore, the expert’s estimate based on Décathlon’s gross margin did not correctly reflect Knauer’s profits. As a result, the court decided that the damages should rather be computed by applying a 6% royalty rate to a certain turnover – how exactly this turnover figure was obtained is unfortunately not very clear to me when reading the judgment.
Time Sport argued in front of the Cour de cassation that this approach was incorrect.
The key provision here is article L. 615-7 Code de la propriété intellectuelle.
In the relevant version which was in force between October 30, 2007 and March 13, 2014, the article read:
To set the damages, the court takes into consideration the negative economic consequences suffered by the harmed party, including lost profits, the profits made by the infringer, and the moral prejudice caused to the right owner due to the infringement.
However, the court may, as an alternative and upon request of the harmed party, award a lump sum as damages, which cannot be lower than the amount of royalties or rights which would have been due if the infringer had asked for a permission to use the right which was infringed.
The amended version of the article currently in force is not much different from this one.
In summary there are at least three modes of computation laid out in the statute (leaving aside the moral prejudice aspect, which rarely gives rise to significant indemnification): the first one based on negative economic consequences for the IP right owner, the second one based on the infringer’s profits and the third one which is royalty-based.
The Cour d’appel applied the third one.
But these different modes of computation are not equally available to the court. In particular, the phrase underlined above shows that the third modality has to be requested by the plaintiff.
The Cour de cassation confirmed that there is no getting around the underlined phrase, and that the plaintiff indeed has the right to choose whether or not to be indemnified by way of a royalty:
The Cour d’appel, by ruling thusly, by refusing to take into account the indemnification claim based on one of the evaluation criteria set in article L. 615-7, first paragraph […] and by awarding the amount of royalties which would have been due to Time Sport if there had been a permission to work the patent, although a claim for enhanced royalties had not been filed, violated this provision by refusing to apply the first paragraph and by wrongly applying the second paragraph.
The case is therefore again remitted to the (regular) appeal level to have this portion of the damages award reassessed.
This cassation ruling can be viewed as a useful clarification – although, frankly, I would say the provision at stake in the Code de la propriété intellectuelle was in fact clear enough.
What remains fuzzy to me is how the court should “take into account” both the first and second modes of computation (negative economic consequences and infringer’s profits). I am not sure the case law is crystal-clear in this respect (see also this previous post on the same topic).
What is also somewhat fuzzy is what happens if the defendant refuses to open its account books, as seems to have been the case here. Wouldn’t it be logical in such a situation for the court to simply follow the plaintiff’s estimate?
Today’s post will be quite exotic. All right, let’s not overpromise; not quite Seychelles-exotic. But exotic nonetheless, for this blog at least.
For starters, the decision reported on was brought to my attention by my German colleague Frank Steinbach, from the law firm Zimmermann & Partner. Besides, the decision is a judgment issued by the General Court of the European Union, further to an appeal against a decision by a Board of appeal of the EUIPO (European Union Intellectual Property Office).
Not exactly my comfort zone, and yet this decision does belong on this blog. As you will see, it also has a strong patent law flavor.
Here are the – highly unusual – facts of the case.
On October 26, 2017, the German company The KaiKai Company Jaeger Wichmann GbR (hereafter KaiKai) filed a PCT application No. PCT/EP2017/077469 on a sports device for supporting a handlebar for performing push-ups. Approximately one year later, on October 24, 2018, KaiKai filed a multiple community design application for 12 designs, on a sports device, claiming the priority of the PCT application.
The EUIPO examiner refused to acknowledge the priority right, as the community design application was filed after the expiry of the 6-month priority community design deadline. The applicant requested an appealable decision, which was issued on January 16, 2019. KaiKai filed an appeal, and the decision was issued on June 13, 2019 by the Board of appeal of the EUIPO.
At this point, let’s marvel for a moment at the swiftness of soft IP procedures. For a patent person, it looks almost preternatural.
Anyway, the Board agreed with the examiner and rejected KaiKai’s appeal. KaiKai did not waver and filed a further appeal in front of the General Court of the European Union, which gave rise to the decision commented upon today.
Before we continue, we should probably have a look at the relevant legal provisions, both in the Paris Convention and in Council Regulation (EC) No. 6/2002 of December 12, 2001 on Community designs (the Community design regulation).
Let’s start with Article 4.A.(1) of the Paris Convention:
Any person who has duly filed an application for a patent, or for the registration of a utility model, or of an industrial design, or of a trademark, in one of the countries of the Union, or his successor in title, shall enjoy, for the purpose of filing in the other countries, a right of priority during the periods hereinafter fixed.
The periods in question are specified in article 4.C.(1):
The periods of priority referred to above shall be twelve months for patents and utility models, and six months for industrial designs and trademarks.
But then article 4.E.(1) contains the following specific provision:
Where an industrial design is filed in a country by virtue of a right of priority based on the filing of a utility model, the period of priority shall be the same as that fixed for industrial designs.
Turning next to the Community design regulation, the relevant part is article 41(1):
A person who has duly filed an application for a design right or for a utility model in or for any State party to the Paris Convention for the Protection of Industrial Property, or to the Agreement establishing the World Trade Organisation, or his successors in title, shall enjoy, for the purpose of filing an application for a registered Community design in respect of the same design or utility model, a right of priority of six months from the date of filing of the first application.
It is important to note here that article 41 does not mention the possibility to claim priority from a patent application, only from a utility model application.
The Board of appeal of the EUIPO held that article 4 of the Paris Convention applies to the European Union, via the TRIPS agreement. However, the Board added that there is no primacy of the Paris Convention over the Community design regulation, since the latter is not a “special agreement” as provided in article 19 of the Paris Convention.
The Board then held that article 41 of the Community design regulation unambiguously sets a 6-month priority deadline from the first filing, which can be an application for a design right or a utility model.
Referring to the Guidelines for examination of registered Community designs (section 22.214.171.124), the Board found that it is not possible to claim priority from a patent application. However, a PCT application can be considered as a utility model application, by virtue of article 2.(i) PCT: “references to an ‘application’ shall be construed as references to applications for patents for inventions, inventors’ certificates, utility certificates, utility models, patents or certificates of addition, inventors’ certificates of addition, and utility certificates of addition“. Therefore, according to EUIPO practice, claiming priority to a PCT application is allowed. But then, it is considered as an application for a utility model, so that the 6-month priority deadline must be observed.
The Board finally added that this is consistent with article 4.E.(1) of the Paris Convention, which provides a 6-month priority deadline when an industrial design application claims priority to a utility model application.
In front of the General Court, KaiKai criticized the Board’s reasoning as follows:
Article 41 of the Community design regulation does not explicitly handle a priority claim to a PCT application.
Therefore, the Paris Convention should be applied, and more specifically article 4.C.(1) which provides a 12-month priority deadline for patent applications.
Indeed, a PCT application cannot only be considered as a utility model application.
What was the General Court take on this?
As a first step, the General Court approved the EUIPO and the Board for acknowledging that a Community design may claim priority to a PCT application despite the absence of mention of patent applications in article 41 of the Community design regulation.
Indeed, a PCT application can, in some contracting states, be considered as a utility model application. Says the court (my own translation, since the ruling is available in many languages but not in English):
In these circumstances, in order not to unjustifiably exclude some of the utility model applications, the EUIPO’s extensive interpretation allows all international patent applications filed under the PCT to be accepted as a basis for aright of priority, thus avoiding impeding the legal protection of industrial property rights covered by the PCT.While international patent applications may thus give rise to a priority right for designs under Article 41 of Regulation No 6/2002, however, this does not necessarily transform patent applications into modelutility applications or automatically subject them to the rules designed for them.
As a second step, the court noted that article 41 of the Community design regulation does not contain any provision on the priority deadline for a priority claim to a patent application.
Looking at the Travaux préparatoires and at the wording of article 41 itself, the court found that the purpose of this article was to conform to the rules of the Paris Convention and the TRIPS agreement. Therefore the Paris Convention should be taken into account when interpreting article 41 of the Community design regulation. The court added that this is not really a matter of primacy of the Paris Convention over the regulation, but rather a matter of filling a gap in the regulation owing to the Paris Convention.
This led the court, as a third step, to look more closely at the articulation between article 4.C.(1) (12-month priority deadline related to patent and utility model application filings) and article 4.E.(1) (6-month priority deadline for an industrial design claiming priority to a utility model application filing) of the Paris Convention:
It follows from the logic inherent in the priority system that, as a general rule, it is the nature of the earlier right which determines the duration of the priority period. In this regard, it should be noted that the reason why […] the priority period applicable to patents and utility models is longer than that applicable to designs and trademarks results from the more complex nature of patents and utility models. In fact, given that […] the procedure for the registration of patents or utility models is longer than that of designs or trademarks, the priority right resulting from the filing of a patent or utility model application would run the risk of expiring if the same relatively short period of six month was applied to all rights that could give rise to a right of priority. However, the advantage that the right of priority is supposed to provide is to allow the applicant to assess the chances of obtaining protection for the invention concerned on the basis of the earlier patent application filed in a state before possibly seeking, by a subsequent application, to obtain protection in another state by carrying out the necessary steps and preparations and by setting out the costs and formalities relating thereto.
In addition, it appears consistent that the nature of the earlier right determines the duration of the priority period, since […] it is the application for registration of this earlier right which gives rise to the right of priority. Furthermore, it is from the date of filing of the said application that the priority period begins to run. If the actual birth of the right of priority as well as the start of the period of said right depend on the earlier right and the application for its registration, it is logical that the duration of the right of priority also depends on the earlier right.
The court also reviewed the Travaux préparatoires of the Paris Convention which seem to confirm this view.
But then how should we deal with article 4.E.(1)? Well, the court interpreted this article as being a specific, exceptional provision – based on a textual analysis of the article and based on a historical analysis of the adoption of the article. They considered that the reason for the exception was the short registration procedure for utility models. In particular, utility models are generally published before the 12-month milestone – but patent applications are not:
[…] the objective behind Article 4, Section E, paragraph 1 of the Paris Convention does not concern patent applications. Indeed, the risk of a long-published patent being re-filed as a design is almost non-existent, as is confirmed by the present case […].
This finally brings us to the court’s conclusion:
It must be noted that the arguments that the EUIPO puts forward in support of the contrary position are not such as to call into question the conclusion that the general rule underlying the Paris Convention is that the nature of the earlier right is decisive for determining the duration of the priority period. In particular, the EUIPO does not make any argument that could establish that the special rule created for utility models should also apply to patents.
Consequently, it must be concluded that the Board of Appeal erred in considering that the time limit applicable to the claim by the appellant of the priority of the international patent application PCT/EP2017/077469 for all twelve designs for which it applied for registration was six months.
Congratulations to Frank and his colleagues, for this nice result! The matter may still be referred as a last stage to the highest level, namely the Court of justice of the European Union – wouldn’t it in fact be surprising if this were not the case?
Now, assuming that this ruling holds, how far-reaching is it? Is it now possible to file a Community design, claiming priority to a patent application other than a PCT application, within a 12-month deadline? This is actually not so clear based on the judgment.
Indeed, the court seemed to approve the EUIPO’s practice to consider a PCT application to be a proper basis for a priority claim by a Community design, because a PCT application can also be considered as a utility model applications. If this is so, the reasoning would not necessarily extend to other patent applications (for example to a direct European application, or a national application). And yet, a patent application is a patent application, PCT or no PCT…
Furthermore, it seems somewhat far-fetched to consider that priority based on a PCT first filing may be claimed because said first filing is (at least virtually) a utility model application, but then, for the purpose of computing the deadline, to consider this first filing as a patent application, and thus to skip article 4.E.(1) which sets a special rule for claiming priority to a utility model application.
Wouldn’t things be more consistent if all patent applications gave rise to a 12-month priority right for design rights, based on articles 4.A.(1) and 4.C.(1) of the Paris Convention? This would require taking the “filling the gaps in the regulation” approach one step further. Would it be one step too far for the Court of justice?