Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Christophe CHAPOULLIE Avocat Associé

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Two different kinds of IP infringements:  Counterfeits: obvious infringement (“Brand protection”): Criminal proceeding  Infringement : questionable infringement : Civil Litigation   Two parts (disproportionate): 1 - Criminal proceeding 2 - Civil proceeding 2

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Advantages: Police authorities and Customs watch any possible infringement. Particularly, the rights holders can request customs services to watch and to hold all potential infringements of their IP rights coming from abroad (Airports, harbors, premises…). 3

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Mechanism: 1 - Customs inform the IP rights holders that they discovered products presume to be infringing goods.  2 - The rights holders have 10 days to confirm the infringement and to request the release of the professional secrecy concerning the (i) origin of the products (ii) their destination (iii) the quantities.  3 - In the same 10 days dead line, with such information, the rights holders have to file a claim before the Public Prosecutor. 4

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Consequences  The Customs seize the products which are not going to be released.  The Public prosecutor decides to (i) press charges or not and to (a) order further investigations (b) to refer the matter to the Criminal Court. 5

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Advantages Very effective to stop and seize counterfeit products. Inexpensive Daily used for trade-marks and designs holders to stop counterfeit import. 6

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Disadvantages  No control of the right holders on the proceedings: The schedule, the next steps, the investigations, legal proceedings…  Especially, no control on the time-line.  The hearing before the Criminal Court often takes place often more a year after the seizure.  The Customs act only if the products come from abroad (imported products).  The Criminal courts allow low damages. 7

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  Positive side effect:   No need to introduce a legal proceeding, even if the law states that it must be done…   Even if the Public prosecutor decides to close the case (no criminal proceedings) the Customs maintain the seizure of counterfeit products which could even be destroyed with the agreement of their owner. 8

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  The practice has been largely influenced by the French Act, October 29th, 2007 which has implemented the European Directive April 3rd,   Different steps:   infringement seizure,   competence of the Courts,   damages granting,   information rights. 9

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Increasingly used  Type of demands :  cessation  written acknowledgement of rights  possible compensation Effective when the infringement is obvious  Limit : seldom obtained:  more than the cease of the infringement acts  Written commitment from the infringer Not to comply with the cease & desist letter does not have direct consequence before the judge 10

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  Necessary step before introducing a litigation (exception only in case of emergency).  The infringer is asked to give an undertaking to cease enforced by penalty for each case of breach of the undertaking.  Not to comply with a Cease & desist letter puts you at risk of an exparte injunction, which can be obtained in few days.  The whole procedure is often based on this demand for a Cease & desist letter. 11

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte 12 A – Evidence : pre-requisite Essential requirement of all proceedings Principle : freedom of evidence, by any means In practice: search of written evidence oral statements are not trustworthy

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  without any judicial proceedings  by a bailiff Advantages  flexible and quick  no validity time-limit Inconveniences  the bailiff can only witness, without any intervention,  the bailiff cannot enter private properties(company, store),  only with regard to the acts of infringement (ie but not with regard to the extent/origin of counterfeited goods). Has become almost essential before requesting seizure for counterfeiting 13

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  Germany:  - No purchase report by bailiff, who don’t have such attribution  - A test purchase test can be done by any third party or even by the rights holder.  - The prove of this test purchase can be made by written statement or/and testimony; the product can be brought before court as a proof.  - The court where the product has been delivered will have territorial jurisdiction. 14

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  without any judicial proceeding,  by a bailiff. Essential to prove facts on the internet Mere paper prints not admissible  Advantage justify territorial jurisdiction report in Paris  Paris’ Court  Inconvenient Formalism must be followed by the bailiff 15

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Specific procedure, only for IP Same procedure since the Act of October 29 th, 2007 for all IP rights Granted on application, ex parte proceedings Right owners may obtain the authorization to mandate from the President of the District Court : ► a bailiff, eventually assisted by experts (no lawyer), computer engineer, locksmith and law enforcement authorities :  With no previous warning,  on private premises,  to obtain evidence concerning:  acts of infringement  origin  extent of the infringement 16

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte To grant the authorization, Judges require evidence of the alleged infringing acts (ie : bailiff report). Exception : commercial fairs and exhibitions, due to the short time to proceed.  the most efficient evidence proceeding  Possibility to search evidence at the infringer’s premises,  the distrainee cannot oppose to seizure,  all evidence may be seized (invoices, purchase order …),  taking samples. 17

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Usually detailed descriptive records, but physical seizure may be implemented as well requirements of physical seizure :  obvious infringing character,  products are likely to disappear. Inconvenient : the judge may require :  payment of the distrainee’s stocks (which may seem ironic),  payment of financial guarantees 18

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  Formal proceedings should be introduced within:  20 working days  30 days otherwise automatic nullity of the seizure for counterfeiting will occur. 19

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte 1. Jurisdiction over the matter  Exclusively : 10 District Courts of First Instance Paris: Patents, CTM and Community designs. Exclusive jurisdiction as well as related actions regarding unfair competition and parasitism acts. Relatively new : before 2007, Commercial Courts were competent for designs and copyrights. 20

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Advantage : Specialization of Courts Caution :  Length of courts’ procedures when the action is not brought in Paris,  for instance, Lyon (2 to 4 years …) or Lille (2 years). 21

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte a. Principle : No ex parte procedure in France. Judges are reluctant to render a binding decision based on the claims made by a sole party, without the defendant’s hearing. 22

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte b. Exception : Theoretically, since the Act of 2007, measures for the cease of the infringing acts could be ordered ex parte. Limited to obvious and very serious acts in order to prevent their extension. This possibility has been implemented to fight against organized crime networks. But criminal proceedings are more adapted for these cases. 23

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte 24 Difficulties : Provide the necessary upstream evidence before the judge regarding the gravity and the importance of the facts at stake and that “ any delay would cause irreparable harm to the applicant ”. Judge reluctant to grant such measures without adversarial debate. In practice rarely applied.

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  Cease of the infringing acts, under financial penalties, eventually withdrawal of the market,  compensation for the damages suffered,  publication of the decision (in particular if the infringement has been advertised),  fees reimbursement.  Most of them have evolved since the Act of October 29 th, 2007 which implemented the Directive of April. 25

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte  Choice of the procedure, according to:  the seriousness of the infringement,  the “strength” of the right at stake,  the quantitative importance/the number of products involved,  the emergency,  the fact that the litigious products have already been on the market for a long time. 26

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte 1. Injunction proceedings Oral procedure : Statements can be added Adversarial principle Demands :  Cessation of the acts, with financial penalties,  Withdrawal (serious cases),  Damages : relatively new (Act of 2007). Duration  3 weeks to 2 months,  Serious emergency : “Référé d’Heure à Heure”. Advantage Decision immediately enforceable notwithstanding appeal. 27

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Limits :  Jurisdiction over the evidence : if a serious legal difficulty arises the Judge will reject the claim.  One formal brief.  Proceeding does not allow validating seizure for counterfeiting. 28

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Duration: 15 to 18 months (Paris) Written procedure:  all arguments must be brought to the other parties in writing,  no testimony,  no expert’s hearings. The judges:  do not request the evidence before the main hearing,  rarely acknowledge the content of the brief before the main hearing,  are not necessarily interventionists during the debates. 29

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Germany  The written elements of evidence must be attached to the complaint : the judge have them at their disposal since the beginning of the proceeding.  In plenary proceedings, judges often incite the parties to find a settlement agreement.  Injunction proceedings are frequently used, plenary proceedings rather rare in these matters. 30

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Debates are conducted as follows :  procedure’s validity,  IP’s right validity, which is  very often contested,  almost automatically contested for patents.  infringing acts,  unfair competition,  damages evaluation. 31

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Important difference : The validity of the IP right for lack of protectability (esp. distinctiveness) cannot be submitted to the same Court (this can only be made before the German and Trade mark Office – DPMA). Only « relative » grounds of invalidity (priority, cancellation for non use …). If the defendant contests the validity of the IP right before the Office, the court can suspend the proceeding in order to avoid contrary decisions. Unfair competition rules are subsidiary. 32

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Paris : the number of briefs exchanged between the parties is theoretically limited. But in practice, judges take into account the case’s difficulties. Provisional execution of the judgment, at least with regard to prohibitive measures, unless some doubts remain. 33

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Requirements :  serious emergency,  number of products involved,  Judge’s authorization must first be obtained on ex- parte request. Advantages:  date of the hearings scheduled within 2 to 3 months,  judgment within 3 to 4 months. 34

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Disadvantages  the defendant may submit a brief before court until the date of the hearing,  the applicant may not reply by writing but only orally. Conclusion: may be very efficient, but :  the IP’s rights must not be open to serious question (nullity, cancellation …),  the case must be well prepared. 35

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte C. Damages calculation New : Act of October 29 th, Remedies : a) shortfall from the right owner b) profits made by the infringer c) moral prejudice caused to the right owner 2. Alternative: royalties 36

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Consequences: Relative increase of damages awarded since the law enforcement. Recurrent topic :  Right owners complain about low damages,  Judges complain about unprepared cases. 37

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Objective:  improving damages compensation. Request the Judge to order the defendant to provide information about the (i) origin, (ii) volume and (iii) destination, of the alleged infringing facts, Difficulties in applying, a lot of denial:  Judges dislike order binding enforceable measures before having stated on infringing acts. 38

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Combination of plenary proceeding and right to information (droit à information) Request the Tribunal at the stage of the plenary proceeding to:  Qualify as an infringement the alleged facts,  Order prohibition measure and allocation of estimated damages,  Grant the right to information (droit à l’information) and request the Court to order the defendant to produce an affidavit accountant and/ or auditor to provide (i) the number of bought and sold counterfeit products, (ii) of turnover, (iii) of profit margin. The Courts normally award this request if :  - the infringement is admitted and  - the defendant does not provides any figures. 39

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Rarely granted in view of the extremely inconvenient, expensive and vexatious nature of the measure. Practical difficulties because products are often already sold (semi-wholesalers, retailers). Consequences: This measure is only ordered in the event of product piracy, rarely between competitors, except if the infringement is obvious. 40

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte The Courts often order the publication of the decision provided that :  it has been asked by the right owner,  infringement is obvious and/has been advertised Advantage : Important to restaure the image 41

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Judges usually do not allow the full fee’s reimbursement. The amounts awarded are more important if:  evidence of the amount of fees is given,  expenses incurred by the proceeding are substantial Different in Germany : Fees for lawyers and patent attorneys must be paid by the underlying party on the basis of the legal rates. 42

Hertslet Wolfer & Heintz hw & h Avocats & Rechtsanwälte Ch43 Christophe CHAPOULLIE Avocat Associé