A man of two jobs

In today’s case, the facts and the timeline are everything, and they are far from straightforward, so bear with me.

  • Flex Elektrowerkzeuge (“Flex”) is a German company marketing electrical appliances and tools such as sanders.
  • In 1990 a French company called Flex Electroportatif Machines et Accessoires (“FEMA”) was set up to distribute Flex’ products in France.
  • In 1992, a Mr. B (remember his name! I mean, his initial) became the CEO of FEMA.
  • In 1995, Mr. B founded another company, Accessa.
  • In 1999, yet another company, MBH Développement (“MBH”) was founded by Mr. B and a Mrs. H.
  • In 2005, a first dispute arose between the German company Flex and Mr. B. Flex discovered the existence of MBH and learned that MBH had registered several trademarks (such as “Asflex”) covering products typically marketed by Flex. The dispute ended with a transaction signed in 2007, per which the trademarks at stake were assigned to Flex.
  • In 2007, Flex discovered that MBH had filed two patent applications on sanders, listing Mr. B as an inventor. Flex was again (unsurprisingly) quite unhappy. The matter was however resolved with MBH granting a free, exclusive license agreement to Flex in 2008. Another license agreement was executed between MBH and FEMA in 2009.
  • In 2011, Flex agreed to the acquisition by MBH of part of the shares of FEMA. Further to this acquisition, the major shareholders of FEMA were Flex and MBH.
  • In 2014, an exclusive distribution agreement was signed between FEMA and Accessa, while MBH took control of Accessa.
  • Later in the same year, Flex acquired most of the shares of FEMA, took full control of the subsidiary and replaced Mr. B as the CEO.
  • In 2016, FEMA filed a complaint against Mr. B, MBH and Accessa in front of the Paris TGI.
  • In 2018, both Accessa and MBH went into liquidation.
  • In November 2019, the Paris TGI issued its judgment.
  • MBH appealed and FEMA counter-appealed, which leads us to the appeal decision dated September 22, 2020 and discussed today.

The first instance lawsuit had several prongs: infringement and invalidity claims on the one hand, and an ownership claim on the other hand.

I have almost no information to share on the infringement and invalidity aspect, as this part was not challenged on appeal – and as the first instance judgment is not readily accessible online (yes, the outrageous unavailability of first instance judgments in France still persists to this day). I will thus focus on the ownership part of the litigation, which is addressed in the appeal ruling.

The dispute on appeal centered on a number of patents and patent applications filed from 2005 to 2014. Here is the full list: FR 3026668, FR 3025447, FR 3024063, FR 3021889, FR 2980502, FR 2980501, EP 2572828, EP 2314422, FR 2936439, EP 2113338, FR 2882913, EP 1632311, EP 1570932.

All of them, it seems, were filed by MBH, with Mr. B as the inventor. FEMA claimed full ownership of this portfolio.

The first instance judges granted this request, which is why MBH (or rather the administrator in charge of its liquidation) appealed.

The Cour d’appel essentially confirmed the first instance ruling. In its reasoning, the court relied on a whole body of evidence rather than a single fact.

First, they noted that FEMA had an R&D department, in which a Mr. B was employed – not the same Mr. B as defendant-Mr. B, mind you, but since the judgment has been extensively redacted, it is not always easy to get your bearings. This was evidenced, inter alia, by the employment agreement of this second Mr. B (shall we say Mr. B’?), an organization chart as well as industrial drawings (one of which was quite similar to the figure of one of the patents in suit).

Second, looking at MBH’s management reports, they were not persuaded that MBH had any actual R&D activity. As from 2008, the reports started mentioning an R&D activity justifying a tax rebate, but the court was of the opinion that this only corresponded to patent costs. An accounting report dated 2019 mentioned the existence of R&D costs and tools, but the court did not trust this report as it was issued by Mrs. H, who is none other than Mr. B’s former partner at MBH and who happens to be currently involved in another lawsuit against FEMA.

The court was thus convinced that the inventions can only have been developed using FEMA’s resources.

Mr. B appears to have been a man of two jobs. Or as we would say in French: he had a double hat.

The appellant emphasized that the mother company Flex was aware of the existence of MBH as well as of its patent filing activity as early as 2006. However, the court deemed that this did not amount to a consent to MBH’s filings.

The license agreements signed in 2008 and 2009 did not imply any consent to MBH’s filings either. Indeed, FEMA was headed by Mr. B at that time, and he thus signed the MBH / FEMA contract on behalf of both parties. As to the MBH / Flex contract, it was analyzed by the court as an attempt by MBH to avoid litigation. More importantly, the agreements only covered one patent filed in 2005, and cannot be interpreted as a consent by FEMA concerning the later filings that took place from 2008 to 2014.

The fact that MBH became a shareholder of FEMA in 2011 cannot be interpreted as proof of consent to the patent filings either.

Another interesting defense raised by MBH was that FEMA’s action was time-barred. As a reminder, the patents / applications were filed from 2005 to 2014. The first patent in the portfolio was granted in 2007, and FEMA filed its complaint only in 2016.

According to article L. 611-8 Code de la propriété intellectuelle, the limitation period applicable to claims for ownership is in principle five years from the grant of a patent. But, “in case of bad faith at the time of grant or acquisition of the right, the limitation period is five years from the expiry of the right“. Depending on which starting point is used (grant or expiry of the patent), FEMA’s action would be time-barred with respect to at least part of MBH’s portfolio.

The court analyzed Mr. B’s behavior and concluded that he acted in bad faith. Said the court, Mr. B consistently concealed his activities, as evidenced by the successive discovery by Flex of the existence of Mr. B’s other companies, of his trademarks filings, and then of his patent filings. He was thus dishonest with FEMA. The court went on to consider that Mr. B’s bad faith also meant that MBH acted in bad faith, since Mr. B was the CEO and almost sole owner of MBH.

Therefore, MBH’s defense based on the statute of limitations also failed.

The court further noted that, until 2014, Mr. B remained FEMA’s CEO, so that FEMA was in practice not able to file suit before his departure.

The court concluded:

Mr. B, owing to his position as CEO of FEMA, used the financial, material and human resources of this company to develop inventions for the company MBH Développement that he created and headed, although they should have benefited FEMA, which should have been their owner, since the inventions related to products within its business perimeter. Therefore, the appealed judgment must be confirmed in that the ownership of the following patents and patent applications to FEMA was ordered: [….]. 

The court also ordered that all agreements on the patents between MBH, Accessa and FEMA be canceled. Besides, since the transfer of ownership is ex tunc, MBH must pay back FEMA any money earned through the exploitation of the patents. The court awarded provisional damages of EUR. 100,000 and ordered the communication of accounting information to enable a full assessment of damages.

MBH argued that the costs of patent filing and prosecution should be deduced from the damages, based on the general provision on unjust enrichment (article 1303 Code civil). The court disagreed, since MBH acted for its own profit and can thus not benefit from the unjust enrichment provision.

FEMA further requested that Mr. B be held personally liable in addition to MBH. However, the court deemed that this claim was time-barred, since FEMA was aware of Mr. B’s actions as early as 2006 (more than three years before the writ of summons filed in 2016). At first sight, this may seem contradictory with the finding that the claim for ownership of the older patents / applications was not time-barred, but the difference seems to be that the statute of limitations for an ownership claim explicitly contains a provision extending the limitation period in case of bad faith.

So, why is this case unusual? Well, first off, I think everyone will agree that the facts appear to be quite colorful, to say the least. But maybe this is always so in an ownership dispute.

Other than that, I do find the court’s reasoning unorthodox, to some extent.

Let’s go back to article L. 611-8:

If an IP right was filed on an invention either stolen from the inventor or their beneficiary, or in breach of a statutory or contractual obligation, the harmed party may claim ownership of the application or of the granted right. 

As a basic principle, an invention belongs to the inventor or his/her beneficiary. In order to know to whom a patent portfolio should belong, we must thus in principle 1) determine who the inventors are for each invention, and 2) establish whether there is an entity that holds the rights on the invention as a result of employment agreements signed by the inventors or as a result of any other statutory or contractual obligation.

But the court did not carry out this analysis. Assuming that Mr. B was the true inventor of the inventions at stake (which the judgment does not say), it should be borne in mind that inventions made by the head of a company who is not an employee do not necessarily and automatically (i.e. by way of the patent statute itself) belong to the company. The same applies for instance to an intern, who is not an employee either. So, did FEMA hold the rights on Mr. B’s inventions by way of an employment agreement? If not, what is the exact statutory or contractual obligation assigning his (presumed) inventor’s rights to FEMA and which was breached?

The court broadly stated that “Mr. B, owing to his CEO position at FEMA, used the financial, material and human resources of this company to develop inventions”.  While this of course sounds wrong and actionable, I am not sure it is in itself sufficient to conclude that FEMA was the true owner of the inventions. In particular, financial and material resources do not characterize ownership, I would venture. Human resources are an entirely different story, but again this aspect is not really addressed in the decision.


CASE REFERENCE: Cour d’appel de Paris, pôle 5 chambre 1, September 22, 2020, SAS MBH Développement et al. v. Flex Electroportatif Machines & Accessoires FEMA, RG No. 20/00471.

The neverending story

Happy new year to all readers!

And, to make sure that we are off to a good start in 2019, consider this: it has been a while since we last heard of Nergeco and Maviflex, right? One of the longest and messiest examples of French patent litigation, perhaps only equaled by the pravastatin case. 

But a few weeks ago, Jean-Martin Chevalier, from the law firm Cousin & Associés, was the first one to kindly draw my attention to the latest episode of the saga. 

Drum roll… Ladies and gentlemen, we now have a 4th (yes, fourth) cassation ruling partly setting aside a previous judgment by an appeal court.

My previous post on the saga was entitled Groundhog case.

I might as well copy here the timeline of the case from this post and simply add the latest developments at the end of the list:

  • At the end of the nineties, Nergeco (patentee) and Nergeco France (licensee) sued two companies, Mavil (now Gewiss France) and Maviflex, for infringement of a European patent.
  • On December 21, 2000, the Lyon Tribunal de grande instance (TGI) held that the plaintiffs’ claims were admissible but ill-founded. The plaintiffs appealed.
  • On October 2, 2003, the Lyon Cour d’appel set aside the first instance judgment and concluded that the patent was infringed. The court ordered an expertise to assess damages.
  • On October 15, 2005, the Cour d’appel issued a second judgment further to the expertise. The amount of damages was set to 60,000 euros to the patentee (Nergeco) and 1,563,214 euros to the licensee (Nergeco France). The defendants then filed an appeal on points of law.
  • On July 10, 2007, the Cour de cassation partly set aside the 2005 judgment regarding the damages to be paid to the licensee. The reason for the reversal was that the Cour d’appel had not addressed the argument that the license agreement had been registered in the patent register only in 1998, so that it was not enforceable against third parties before that date. The case was thus remitted to a different Cour d’appel, in Paris this time.
  • On June 2, 2010, the Paris Cour d’appel held that all claims against Mavil (now Gewiss France) were in fact inadmissible as Mavil no longer existed when they were initially sued; and reduced the amount of damages to be paid by the second defendant Maviflex to the licensee Nergeco France by approximately half (taking into account the date at which the license agreement was registered and became enforceable against third parties). Both sides filed another appeal on points of law.
  • On September 20, 2011, the Cour de cassation set aside the 2010 judgment. First, because the Cour d’appel should have ruled on an argument of invalidity of the license agreement (there was no res judicata on this issue, as it was not addressed in the 2003 and 2005 judgments). Second, because the argument that the claims against Mavil were inadmissible should not have been given any consideration, as Mavil / Gewiss France acted in the proceedings as if their designation in the initial complaint was correct. In fact, this part of the decision became very famous since it is one of the few illustrations of an estoppel principle in this country.  The case was again remitted to the Paris Cour d’appel.
  • On June 21, 2013, in a new judgment by the Cour d’appel, the case was reexamined pursuant to the instructions of the Cour de cassation. But the actual outcome was pretty much the same as in the previous judgment. In particular, the damages award to Nergeco France was similar to the one ordered in 2010. The defendants filed a third appeal on points of law.
  • On December 16, 2014, the Cour de cassation set aside the 2013 judgment. Once again, the supreme court ruled that the appeal judges should have ruled on some arguments relating to the inadmissibility of Nergeco France’s claims.
  • On October 28, 2016, the Paris Cour d’appel held that the agreement containing the license provision was invalid. Nergeco France further filed a claim based on unfair competition, but this claim was held as new and thus inadmissible at this stage.

This leads us to the latest development: on September 26, 2018, the Cour de cassation set aside the 2016 judgment and remitted the case once more back to the Cour d’appel in a different composition.

As Forrest Gump would say, this case is like a chocolate box, you never know what you’re gonna get.

There were two parts in Nergeco’s appeal. According to the first part, the agreement containing the license provision should not have been held invalid. This part of the appeal was rejected by the Cour de cassation.

As explained in my previous post, there are two reasons why the license agreement was held invalid by the Cour d’appel.

First, the agreement was allegedly executed at a date when Nergeco France was not yet registered in the commerce register. But the agreement mentioned that Nergeco France was registered in the commerce register of Le Puy, under a certain number – which was untrue, as this registration only took place later. The agreement was thus executed by a company with no legal capacity. It can be surmised from these facts that either the execution date was erroneous, or the document was forged – although the appeal decision did not go down that road.

Second, the agreement only licensed the European patent at stake in the lawsuit but failed to license the corresponding French
priority patent. Under French law, this omission made the license invalid.

In front of the Cour de cassation, Nergeco argued that the parties to the agreement had proven their willingness to renew or continue the agreement after the cause for nullity of the agreement had disappeared.

In particular, the agreement was filed at the national patent register several years later, and amendments were signed, at a time when Nergeco France was properly registered (as indicated in the original agreement) and the French patent had ceased to be in force (due to the substitution of the European patent).

The supreme court was not convinced. If an agreement is invalid due to an “absolute” ground for nullity, it cannot be retroactively confirmed. Nergeco did not argue that another, valid license agreement had been executed at a later stage, but rather argued that the initially invalid agreement later became valid, and this is not possible according to the court.

But then there was the second part of Nergeco’s appeal, per which the Paris Cour d’appel wrongly held Nergeco’s unfair competition claim inadmissible. Here, the cassation judges sided with Nergeco.

Here is my translation of the Cour de cassation’s take on this. First point:

[…] The judgment [under appeal] stated that Nergeco France’s claim is inadmissible because [the court] cannot rule on a claim for damages on a different ground from the patent infringement ground, on which the claim was originally based, and on which the Lyon Cour d’appel ruled in a final ruling that it could in principle be indemnified.

By ruling in this manner, the Cour d’appel [erred] as the judgment of the Lyon Cour d’appel of October 2, 2003 did not decide, in the order, on the dispute relating to the ground for damages [now] filed by Nergeco France.

Second point:

[…] Partie’s submissions [on appeal] are not new when they have the same purpose as those filed in front of the first instance judge, even if the legal ground is different.

[…] The judgment [under appeal] stated that Nergeco France’s claim for remedy further to the acts of infringement of patent No. EP 0398791 is inadmissible because this company cannot file a claim for damages on a ground which is different from the patent infringement one, on which its claim was initially based.

By ruling in this manner, the Cour d’appel [erred] as the claims successively filed by Nergeco France based on article L. 615-2 Code de la propriété intellectuelle and then on article 1382, now article 1240 Code civil, both had the purpose of obtaining a remedy further to the harm caused by the patent infringement.

So if I understand correctly the court’s reasoning, Nergeco France’s claim is not “new on appeal” (and thus inadmissible) because Nergeco France simply changed the legal ground for its claim for damages, but the damages are still requested for the same purpose, in view of the same acts. And on the other hand, this more recent legal ground was not previously examined and there was thus no res judicata.

I have to say that I am a little bit surprised by this reasoning.

There is case law aplenty per which an unfair competition claim cannot be based on the exact same facts as a patent infringement claim.

If this is correct, then how can Nergeco France’s unfair competition claim not be “new” relative to the original patent infringement claim?

Besides, irrespective of the correctness of the legal reasoning, the practical outcome of this cassation ruling appears to be most unfortunate.

I find it preposterous that this is the tenth ruling in this litigation, and that it is still not yet the final one. You can probably count on at least two more: a further judgment of the Paris Cour d’appel, and then back again to the Cour de cassation, unless of course there are yet additional twists in the story.

Fortunately, this case is exceptional and is not representative of IP litigation in France in general. But seriously, what a terrible example…


CASE REFERENCE: Cour de cassation, ch. com., September 26, 2018, Nergeco France et al. v. Gewiss France et al., pourvoi No. Y 16-25937.

Money money money

It is always about the money, isn’t it?

No, not life. But patent litigation? Maybe so.

Today’s lawsuit pits an optician businessman – and inventor – against the major French-based ophthalmic optics group, Essilor.

This inventor filed a French patent application concerning a nose pad invention in April 2013. On January 1, 2014, he assigned his invention to Essilor International. I should add that he was independent from Essilor, so we are not talking about an employee’s invention here.

The litigation between them later arose because the inventor was dissatisfied with the money he made from the assignment.

We thus need to look at the consideration provided in the assignment for the transfer of rights.

Based on the excerpts mentioned in the judgment, a lump sum of 400,000 euros was provided. In addition, a variable price was set, over a period of time of 19 years, according to a sophisticated formula taking into account the number of countries in which patent applications would be filed and patents would be granted, as well as the number of devices incorporating the invention which would be sold.

As far as I understand, only the lump sum was paid. In 2016, the assignor claimed additional money corresponding to the variable part of the deal. Essilor replied that there were difficulties in working the invention, and that prosecution of the patent applications on the invention was still ongoing.

In January 2017, settlement discussions were initiated, in which Essilor offered 85,700 euros as a complementary payment – to no avail. In May 2018, the inventor filed a complaint with the Paris Tribunal de grande instance (TGI), alleged a breach of contract and claimed damages.

The inventor provided several estimates for these damages. His first estimate amounted to more than 3 million euros for the period of 2015-2017, and then more than 2.7 million euros per year from 2018 to 2034. His second, auxiliary estimate was 4 million euros in total. The third, less preferred estimate was 600,000 euros in total.

Essilor fought back and requested that the action be dismissed. They also provided their own calculation for the minimal amounts to be due, as an auxiliary argument, namely 16,666 euros from year 2 to year 10 and 3,333 euros from year 11 to year 20. This corresponds to the amounts due in consideration of the current state of the patent portfolio, and does not take into account any sale.

After the nose pads… muzzle pads.

Turning now to the judges’ decision, the first interesting point relates to the issue of whether the negotiations between the parties were loyal or not.

The inventor claimed that he was not properly assisted during the negotiations, which were uneven and led him to agree to a clause on the variable part of the consideration which was unfavorable to him.

The court looked at various email exchanges between the inventor and Essilor before the agreement was executed and could not find any evidence of unfair or disloyal negotiations. The court made the following comments:

It is thus the content of an oral exchange in a time frame very close to the execution of the agreement which led to the adoption of the proportion of granted and non-refused patents as the adjusting parameter for the “provisional amount” or minimal amount, in the drafting of the agreement. But it cannot be deduced that this criterion was never previously discussed […]. Contrary to the defendant, [the inventor] provides little information on the exchanges prior to the execution of the agreement, which, based on their contents, do not reflect the alleged weakness of the plaintiff but at best his desire to rapidly achieve the execution of the assignment agreement. 

[…] Even if it is surprising that the provision relating to the variable part of the price, which is so important […], was significantly modified without any written proposal before the final version, this circumstance is not sufficient to qualify the discussions leading to the execution of the assignment as dishonest. The correspondence filed as evidence […] actually proves the very active part taken by the claimant in the different steps of the negotiation, the stakes of which he always clearly understood. 

Next, the inventor blamed Essilor for filing a PCT application based on his first French application.

Indeed, using the PCT route instead of direct national filings results in a delay in the grant proceedings. I would add that this is actually one of the main reasons why applicants file via the PCT in the first place. But in this case, any delay in the grant proceedings leads to less money payable to the inventor – in view of the definition of the variable part of the price.

The court noted that the agreement does not explicitly mention that the patent filings abroad should be done through the PCT route. Nor does it exclude the PCT route. Therefore, the court had to determine the common will of the parties. The court first noted that, according to another clause of the agreement, the assignor explicitly represented that he had not filed any direct or PCT application. The fact that a distinction between PCT and non-PCT was made in this clause (unrelated to future filings), was interpreted by the judges as a pointer to the fact that a future PCT filing should have been explicitly mentioned, in order for it to be allowed.

As a main reason and as a conclusion, the court then held that:

In view of the importance of the patent grant timeline for the general object of the contract, clause 5.2 must be interpreted, despite its lack of precision in this respect, as not allowing Essilor to file an international application. This choice was thus made in violation of the provisions of the [agreement]. 

So that’s a first rebuke for the assignee.

Then came a second one, relating to the absence of exploitation of the invention.

The court first held that, when the assignment price comprises a royalty which depends on the exploitation of the invention by the assignee, this implies a duty for the assignee to exploit the invention; otherwise the clause would be wholly one-sided.

This obligation concerns the means implemented by the assignee, and not the outcome. In other words the assignee does not have to succeed in implementing the invention, but they have to try. And the assignee has the burden of showing that they have used all appropriate means for exploiting the invention.

In this respect, Essilor referred to two messages evidencing some difficulties in the development of the nose pads of the invention.

The court commented as follows:

These two sole exhibits relating to a time span of almost two years cannot possibly show that there is a technical impossibility of exploiting the invention. They merely reveal that each version at stake turned out to raise different development issues, and that in 2016 only the “tube” version was deemed as being able to be made and marketed. 

So, that was held as another fault.

Finally, what is generally the stodgiest part of a judgment (this case being no exception): the assessment of damages.

The court started by holding that the damages should compensate for the loss of opportunity for the inventor to get royalties. Then, they took note of the objections raised by the various patent offices and the amendments made in response which, they implied, lowered the prospects of exploitation of the invention.

The court also took into account:

  • the initial estimate of the annual royalty of 100,000 euros which had been made by Essilor during the negotiation phase;
  • the defects of one of the versions of the device which led to dropping production launch;
  • the fact that the inventor subsequently filed another patent application on a nose pad.

All in all, the court discarded both the claimant’s and the defendant’s estimates, and came up with a global figure of 300,000 euros of damages compensating for the inventor’s loss of opportunity.

There is a very French expression for this approach: “à la louche“, literally “with a ladle“. It means a very rough estimate, close to guesswork. And, à la louche it is in this case, I think.

On the other hand, we cannot really blame the court for this. First, the parties came up with hugely discrepant figures, as is not unusual. Second, loss of opportunity is all about what could have been in an alternate universe, which leaves a lot of room for imagination. Third, the court was not assisted by an expert and had only the partial evidence provided by the parties at hand.

I can’t help but wondering: the parties will continue to be bound by the agreement for many years to come. So, would a settlement not be still the best option for all of those involved?


CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre 3ème section, May 25, 2018, Jean-Luc B. v. SA Essilor International, RG No. 17/06753.

Competence? Competence!

When international private law meets patent law, things never fail to get interestingly complex.

Today’s case pits a German plaintiff, TerraNova Energy GmbH & Co. against a French defendant, Suez International SAS, and the litigation involves a number of patents and patent applications worldwide.

The background of the case is the following (according to the summary provided by the judge in the order to be discussed).

TerraNova developed a technology for recycling organic waste recovered from sewage sludge. Suez International, originally Degrémont, is now part of the Suez group, a major actor in the water and waste treatment industry.

Between April 2011 and October 2012, TerraNova presented its so-called “Ultra” technology to Suez in a demo plant in Germany. A non-disclosure agreement (NDA) was signed in November 2012. Both companies continued to cooperate, which led to the execution of a second, partnership agreement in April 2013. According to this partnership agreement, Suez had an exclusive right to the Ultra technology in France, and had a preemption right on the technology in other countries.

In 2013 and 2014, the Ultra technology was implemented in a sewage treatment plant in Compiègne, France and then in another facility in Maribor, Slovenia. In May 2014, the parties began negotiating a license agreement. November 2014 is the point in time when things started going south, as Suez informed TerraNova that they wanted to improve the Ultra technology, and to work on this new process in China. Then, they announced that they no longer intended to get a license, having developed their own improved process.

In January 2015, Suez offered to pay royalties for the ongoing Chinese project and for a potential second one, and requested exclusive rights in China. TerraNova refused. In October 2015, Suez opened a renegotiation of the 2013 partnership agreement and mentioned the development of its own, distinct technology. TerraNova then realized that Suez had filed three PCT applications, based on three French priority applications filed respectively in May 2013, July 2013 and November 2014. A number of granted patents and pending applications were later filed from these PCT applications, in Europe, China, the U.S., Canada, Australia and Brazil.

TerraNova was of the opinion that the patent applications disclosed confidential information communicated to Suez under the 2012 NDA. They filed a complaint with the Paris Tribunal de grande instance (TGI) in October 2016, claiming damages as well as the transfer of the various patents / applications.

Patent law meets international law.

As a legal defense, Suez argued that the Paris TGI lacked jurisdiction over this dispute. As an auxiliary argument, they said that the court lacked jurisdiction at least regarding the requested transfer of patent rights deriving from Suez’ PCT applications.

This legal defense was debated in front of the case management judge, which gave rise to the order discussed today. The merits of the case are not addressed in this order.

Let’s first deal with Suez’ general argument of lack of jurisdiction. The difficulty here is that the parties were bound by two successive agreements: the 2012 NDA and the 2013 partnership agreement.

Now, the NDA contained a jurisdiction clause, per which any dispute in connection with the agreement should be tried by the Paris courts. But the partnership agreement contained an arbitration clause, per which any dispute in connection with the agreement should be brought to the Swiss Chambers’ Arbitration Institution.

Suez claimed that, according to the competence-competence principle, only the arbitral tribunal had jurisdiction to decide on which forum had jurisdiction.

The court referred to article 1448 of the Code de procédure civile. According to this provision, if a lawsuit subjected to an arbitration agreement is filed in front of a national court, the court must decline jurisdiction unless (1) the case has not yet been brought to an arbitral tribunal, and (2) the arbitration agreement is manifestly null or inapplicable. These conditions (1) and (2) are cumulative.

In this case, condition (1) was fulfilled, as the case had not been brought to an arbitral tribunal. As to to condition (2), the court came to the conclusion that it was also fulfilled. The arbitration clause of the partnership agreement was manifestly inapplicable to the dispute, said the court. If there was the slightest doubt as to whether the arbitration clause was applicable, my understanding is that the judge had no other choice but to decline jurisdiction. Yet, in this situation, there was apparently no doubt at all.

Indeed:

  • It was clear that the parties to the NDA intended to subject this agreement to the jurisdiction of the Paris court.
  • The later partnership agreement did not state (be it implicitly or explicitly) that this jurisdiction clause in the NDA was no longer applicable.
  • The NDA contained a mention that the agreement would expire 3 years after the execution date, except some provisions which would still apply for 5 years after the end of the agreement. The jurisdiction clause was not cited among the surviving provisions. But the judge held that a jurisdiction clause was autonomous with respect to the rest of the agreement and necessarily continued to apply to disputes arising from the agreement.
  • Finally, the complaint did relate to an alleged breach of the non-disclosure provisions of the NDA, and not to an alleged breach of the partnership agreement.

Therefore, the overarching competence-competence principle in this particular instance did not apply, and the judge refused to decline jurisdiction.

This leads us to the second (auxiliary) part of Suez’ legal defense, i.e. that the judge should decline jurisdiction at least over the requested transfer of patent rights stemming from Suez’ PCT applications.

Indeed, the applications were filed after the execution of the partnership agreement, so that only this later agreement was applicable to TerraNova’s claim for ownership.

It is not perfectly clear to me when reading the order whether Suez also argued that the TGI had no jurisdiction over disputes regarding the ownership of foreign patent rights (as opposed to French patent rights) as a matter of principle. Anyway, in the past, French courts did not hesitate to rule on ownership claims regarding foreign patent rights, and the trend was not reversed in this case.

It is interesting to note, though, that TerraNova did not request that the foreign patent rights should be transferred to them by the court, but rather that the court should order Suez to perform the transfer of these patent rights to their benefit. The formulation of this claim probably makes it easier to avoid any potential argument that the French courts would encroach upon the prerogatives of foreign states.

As to the merits of Suez’ argument, the judge held that TerraNova’s transfer claim was analyzed as a remedy pertaining to the alleged breach of the NDA, so that the TGI did have jurisdiction also over this aspect of the case.

To summarize, Suez’ legal defense was rejected, and the proceedings will continue on the merits.


CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre 1ère section, ordonnance du juge de la mise en état, April 5, 2018, TerraNova Energy GmbH & Co v. Suez International SAS, RG No.16/16334.

Getting ready

Little by little, everything seems to finally come into place for the kick off of the UPC – pending the outcome of the constitutional complaint in Germany.

A major step has now been taken in France, with a modification of the Code de la propriété intellectuelle (CPI) to make national law ready for the UPC, by way of an executive order dated May 9.

And one of the most important amendments thus introduced… well in fact has little do with the UPC, and everything to do with this very French debate on the statute of limitations applicable to patent nullity actions.

Indeed, a new article L. 615-8-1 is introduced, per which the statute of imitations is simply not applicable to patent nullity actions. So, back to the situation that everyone took for granted ten years ago, and back into line with the practice of other European countries. Very good news indeed.

But, there is a but, or actually two.

First, this new provision will only come into force when the UPC agreement comes into force – since the overall purpose of the order is the application of the UPC agreement. Second, the new provision will not be applicable to nullity actions which are already time-barred at the time the provision comes into force.

So you can still expect a lot of discussion for a few more years on how the statute of limitations should be applied and how the limitation period should be computed, before this really becomes history.

Waiting for the entry into force.

Now, back to the other, truly UPC-related provisions. One important aspect is how double protection by a French patent and a European patent for the same invention is handled.

The current situation is that, when a French patent and a European patent granted to the same inventor or successor in title cover the same invention and have the same priority date, the French patent ceases to be in force at the expiry of the 9-month European opposition period (if no opposition is filed) or when the opposition proceedings are closed, the patent being “maintained” (either in amended form or as granted).

Under the new version of article L 614-13 CPI, this remains the case, but only for European patents that have been opted out from the exclusive competence of the UPC (under article 83 of the Agreement). For non-opted out European patents (including of course unitary patents) on the contrary, there will no longer be any such so-called substitution. Thus, applicants will be able to secure both a national patent, enforceable in front of our national courts, and a European patent enforceable in front of the UPC, for the same invention. This is of course primarily of interest for French applicants who do their first filings at the INPI and then file at the EPO. But of course foreign applicants could also use this tool, for super-important inventions, by filing at the EPO and then in France, or simultaneously at the EPO and in France.

Now, what happens if a European patent is opted out at a late stage, for instance after the 9-month opposition period? The answer provided in the new law is that double protection then ends at the time of the opt out, i.e. the French patent ceases to be in force on the date of the opt out.

By the way, any substitution is irreversible. If a European patent is invalidated or lapses or if the opt out is withdrawn after a substitution has taken place, the corresponding French patent does not come back to life.

Another amendment relates to the prohibition to transfer, or to grant rights on, a French patent or application independently from a European patent or application, for the same invention, having the same priority date, and filed by the same inventor or successor in title.

This prohibition remains in place for all non-opted out European patents (including unitary patents), as well as opted out European patents (before the substitution takes place). In addition, the recordal of a transfer at the French national patent register is only effective if a parallel recordal has taken place at the European national patent register.

Next topic, a particular procedural rule in connection with patent litigation.

Currently, if a French patent is asserted and there is a corresponding European patent or application, the court stays the proceedings as of right until the substitution takes place, or until the European patent or application disappears (by way of a withdrawal, refusal, revocation, etc.) before any substitution takes place. This rule will remain in place but solely for opted out European patents. When a non-opted out European patent / application is present, an action based on the French patent will be able to proceed independently of the fate of the European patent / application. It remains to be seen how this will play out in practice. The court will still have the possibility to order a stay anyway, under the general rules of civil procedure, if they deem that a stay is appropriate for a good administration of justice.

On a few other aspects, French law has been harmonized with the UPC Agreement.

This is especially the case regarding the wording used to define the acts of infringement and exhaustion of rights. Besides, non-exclusive licensees will now be allowed to assert a patent if this is expressly authorized by the license agreement, and provided that the patent proprietor is given prior notice. This is a new possibility under French law, which mirrors article 47(3) of the UPC Agreement.

The limitation period for infringement damages remains five years but the starting point will now be the date on which the applicant became aware, or had reasonable grounds to become aware, of the last fact justifying the action, in keeping with article 72 of the Agreement. In the current version of article L. 615-8 CPI, the starting point is “the facts” on which the action is based. The effect of this significant modification will be twofold: right holders will in some cases be able to claim more damages; and more complex debates regarding the determination of the starting point of the limitation period can be expected, as the new definition is more fuzzy than the traditional one.

Last but not least, new article L. 615-18 CPI clarifies that the UPC shall have exclusive jurisdiction over unitary patents and non-opted out traditional European patents.

So, now that the rules of the game are known, all readers can start looking for potential loopholes or ambiguities, and imagining unusual scenarios. Isn’t this what new laws are primarily for?