The duty to remain silent

Design rights. A mysterious territory for patent folks like me.

There is this irrational fear that I would completely lose my bearings without any technical feature and interminable claim verbiage to hang on to.

So coming across a design right judgment is always intimidating. And actually contemplating commenting on it on this blog even more so. But today’s ruling is a special case. Indeed, the focus is not on design rights per se but rather on a transversal aspect of IP law which is equally of interest to patent practitioners.

Here is the context.

Israeli company Keter Plastic was the owner of community designs. In August 2012, it filed a complaint for infringement of these designs in front of the Paris tribunal de grande instance (TGI) against Italian company Shaf, specialized in garden furniture.

In June 2013, the Paris TGI dismissed the infringement complaint. This was confirmed on appeal in January 2015.

In parallel, another litigation started in February 2013, this time initiated by the initial defendant Shaf. Shaf sued Plicosa France, which is Keter Plastic’s distributor in France, for disparagement. The complaint was initially filed in front of the Bobigny Tribunal de commerce, but the case was later transferred to the Paris TGI as it was related to the initial infringement case.

In October 2014, the Paris TGI ruled in favor of Shaf and issued a severe damages award of 950,000 euros. The Paris Cour d’appel overturned this verdict in January 2017 and canceled the damages award.

Shaf filed an appeal on points of law in front of the Cour de cassation, which leads us to the present ruling of January 9, 2019.

Interestingly, the Cour de cassation vacated the appeal 2017 judgment and remitted the case back to the Paris Cour d’appel.

That was for the history of the case. Let’s now move on to the facts underlying the disparagement case.

The issue at stake is that, in August 2012, just after the infringement proceedings against Shaf were initiated by Keter Plastic, its French distributor Plicosa France communicated with a number of Shaf’s distributors (such as Leroy Merlin) to let them know about the infringement proceedings. Some of them stopped working with Shaf.

In the 2017 appeal judgment, the court analyzed in detail the evidence at hand, namely a number of messages received by Shaf from its distributors, in which they expressed concerns regarding infringement exposure. The court held that some of the messages were not specific enough to conclude that they had learned about the alleged infringement from Plicosa itself.

Other messages were definitely more specific and proved the existence of some actual communication from Plicosa. See for instance the following excerpt of email from Leroy Merlin:

We were informed on August 29 by Plicosa that Keter initiated legal proceedings against your company due to “copying their design and patent rights”. […] Since the action is still pending and since we received information on a risk of infringement, we are sorry that we will now not be in a position to list the Diva product […] in 2013. Our forecasts of orders to be validated concerning 15,000 sets are thus void. Our decision is solely motivated by Keter’s action. 

However, the court decided that there was no demonstration that Plicosa’s communication lacked objectivity, was excessive or disparaging.

Therefore, the existence of acts of unfair competition was not demonstrated.

But the appeal judges erred in reaching this conclusion, according to the Cour de cassation.

The reason for this fits in a single paragraph (the cassation judges not being a loquacious crowd by any standard):

[…] Since Plicosa disclosed an infringement action which had not led to any judgment to customers, without any sufficient factual basis because they only relied on the sole complaint filed by the rights holder, this disclosure represented blameworthy disparagement […]. 

As a result, Plicosa France is liable. The Cour d’appel will now have to determine whether Shaf suffered from any harm as a result of Plicosa’s acts. I think the answer is very likely to be positive, in view for instance of Leroy Merlin’s message quoted above. Then the main issue will be the assessment of damages. It remains to be seen whether the amount awarded in first instance (950,000 euros) will be equaled – or even exceeded.

Always tempting to speak up your mind, but sometimes you really shouldn’t.

This Shaf v. Plicosa France ruling is probably applicable by analogy to patent cases. In other terms, disclosing the existence of an infringement action to customers (or potential customers) of the alleged infringer before any court decision is issued is probably an act of unfair competition regardless of the possible objectivity and neutrality of said disclosure.

This is significant in the context of patent law because infringers that are not manufacturers or importers of the infringing goods are generally not liable for infringement until they are made aware of the infringement, usually by way of a warning letter.

Much caution should be exercised when drafting a warning letter and when deciding to whom it should be sent, as this prerogative can sometimes turn into an act of unfair competition. See this previous post by way of example.

Among the precautions to be taken, it is certainly wise not to refer to a pending lawsuit before a (final?) decision is issued. So, you may draw the attention of the third party to a certain patent right, but you may not state that this patent right was asserted against someone.

Now let me share a personal impression. In the case at hand, the main reason why Plicosa’s communication was indeed wrongful is that the infringement case was finally dismissed by the court. Retrospectively, it would probably look much less wrongful if Keter Plastic’s action had been successful.

So, on a purely practical standpoint, I wonder if it would be possible to consider that a party is liable for mentioning a pending lawsuit only if said lawsuit does not ultimately result in a finding of infringement. In other terms, parties would be free to take their responsibilities but would have to live with the consequences if they are too optimistic. Could a parallel be made with a right holder who may enforce a preliminary ruling at its own risks?

CASE REFERENCE: Cour de cassation, ch. com., January 9, 2019, Shaf v. Plicosa France, appeal No. 17-18350.

One thought on “The duty to remain silent”

  1. This is exactly what happened many years ago when the holder of an application, and later a patent wrote to hospitals not to buy allegedly infringing machines put on the market by 5 alleged infringers. Those infringers had been filing third parties observations during examination. Those led to the application being revoked, but following an appeal, a patent was granted.

    Following an opposition by all of the alleged infringers, the European Patent was revoked for added subject-matter, and the original French application did not survive either for lack of inventive step.

    If I remembered correctly, the proprietor was letter sentenced to damages for libel. I also remember that the patent holder went bankrupt later. This might not exclusively have been caused by the loss of the libel case, but since the French health authorities did not accept the treatment to be reimbursed by the French NHS, the whole action was also in vain.

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