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By crossenetborowsky

The Freedom of Creation, Architecture and Heritage Act[1], sometimes described as a “catch-all” Act, contains new measures relating to the theatrical and television industry. Transparency for production and exploitation accountings, obligation to ensure a continuing exploitation and prior notice for the assignment of writer, director and composer agreements, are ones among the many changes which modify the current legal scheme and which we have summarized below. This summary is only a glimpse of the numerous measures adopted.

Production and exploitation accountings must be transparent: The Parliament decided to increase transparency in the motion picture and television sectors, following the implementation in 2010 and 2011, of regulations to harmonize and define the motion picture production cost and the recoupment of said production costs vis a vis directors, writers and composers (collectively “authors”). This reinforced obligation has been extended to apply to producers responsible for the completion and delivery of the applicable work (“producteurs délégués”) as well as distributors, and applies both upstream on the production accountings and downstream on the exploitation accountings. Authors are no longer the sole beneficiaries of such transparency and the list of the works concerned has also been expanded as these obligations apply to motion pictures and certain television works (including live action and animation) which are eligible for production subsidies from the CNC. In order to ensure compliance with these new obligations, administrative sanctions were established, such as financial penalties based on the turnover, or a reduction or reimbursement in the financial subsidies initially awarded.

A decree should be issued within the next few months to set forth the specific terms and conditions of these transparency rules, thereby delaying the effective implementation thereof.

With respect to the production accountings: this is new to the industry – in essence, the law now requires that producers must prepare and complete production accountings (comprising all expenses incurred for the preparation, production and postproduction of the work) within a specific timeframe, and must provide such accountings to coproducers and any third parties contractually entitled to a share of receipts after recoupment of the production costs (including the authors).

The Act provides that the definition of the type of accounting, the different categories of expenses and the nature of the financing sources should be determined by sectorial collective bargaining agreement[2] which agreement may be extended to bind all players in the audiovisual industry. However, in order to encourage collective discussion (which better reflects the interests of the different stakeholders involved) and ensure the rapid implementation of the law, definitions of the foregoing will determined by decree over the next few months[3].

The foregoing obligation must be included in all agreements which producer enters into with concerned parties, although it appears that the Act does not provide for any administrative sanction if the producer fails to include such language.

With respect to exploitation accountings: the Act requires that distributors and licensees complete and provide the “producteur délégué” with the exploitation accountings within specific deadlines in order for the latter to be able to provide such accountings to, inter alia, the authors and other co-producers of the work[4]. Such rule is consistent with the objective of harmonization by introducing common rules, such as the indication, on accounting statements, of the minimum guarantee recoupment status and the allocation of receipts between the media and territories.

Once again, in order to better assess and take into account the different interests at stake, the law provides that certain elements (including the type of accounting, the definition of gross receipts, distribution costs, etc.) shall be determined by sectorial collective bargaining agreement[5], which may also be extended to bind all players of the industry. The Conseil d’Etat will establish such definitions by decree in the absence of an industry-wide binding collective bargaining agreement within one year from this Act.

Distribution and licence agreements must include the aforementioned obligation to provide exploitation accountings, but it appears that no administrative sanction applies in the event of the parties fail to include such language.

Despite the negative impact on contractual negotiation, this transparency goal has at least the advantage of harmonizing the various elements used to prepare accounting statements, thereby facilitating and accelerating the calculation of sums due.

Producers shall ensure a continuing exploitation of their works in compliance with industry practice: Until July 2016, producers were required to ensure “an exploitation (of the work) in compliance with industry practice”. However, the law did not define what was encompassed by “industry practice”, making it difficult for concerned parties to avail themselves of such legislation.

The new Act reinforces this obligation by adding the term “continuing”, that is, producers must now ensure a continuing exploitation of their works. The scope and conditions for implementing such obligation are to be defined by sectorial collective bargaining agreement, which may be extended by decree to bind all relevant players of the industry and become industry-wide.

As a result, a sectorial collective bargaining agreement has been concluded on October 3, 2016[6], and extended by decree dated October 7, 2016[7] to bind all motion picture and television production companies, distributors and licensees.

These texts govern certain French theatrical and television works for which an author agreement is governed by French law, and apply as of October 7, 2016, although an adjustment period has been provided for with respect to the pre-existing works (i.e. those exploited before October 7, 2016).

The obligation for producers to ensure a continuing exploitation of their works is solely a means-driven obligation and not a result-driven obligation. Accordingly, the producers are solely required to undertake their best efforts to allow the work to be exploited in France and/or abroad, either by exploiting said work themselves, or through distributors or licensees. This obligation affects distributors as well, as the law consequently requires them to make their best efforts to enable producers to fulfill their obligations in respect of a work’s continuing exploitation.

Upon written request of the author or its authorized representative, producers are required to provide information relating to efforts undertaken and possible reasons that prevent producer from fulfilling this obligation. Producer may request the distributors and licensees to furnish information with respect to any exploitation that they have acquired the right to do.

These provisions are obligatory for producers and are particularly favorable to authors, although the industry-wide binding collective bargaining agreement has established compliance presumptions for the producers. For instance, the obligation is presumed to be satisfied when the work is subject to one or more license granting rights for no less than two among five forms of exploitation specifically laid out by the collective bargaining agreement. However, one form of exploitation in France only will suffice for television works, as well as theatrical works which are older than 8 years.

Grounds for exemption have also been provided under certain conditions, including in the event that producer faces an impossibility to renegotiate any exploitation rights constituting a legal obstacle to comply with this obligation.

Such system can be compared to the legal scheme applicable to publishers of literary works which are required to ensure permanent and continuing exploitation of said works, otherwise their assignment of rights can be terminated. However, although the binding collective bargaining agreement strongly encourages recourse to mediation, sanctions applicable to the motion picture and television industry for failure to comply with the continuing exploitation obligation have not been clearly defined.

It should be noted that this industry-wide binding collective bargaining agreement also establishes other obligations and undertakings applicable, inter alia, to producers, authors, distributors and licensees, including a measure which we find particularly promising and which compels authors and producers to negotiate in good faith in order to “encourage the renewal and/or renegotiation of agreements entered into for a limited duration, under conditions preventing the split of authors’ rights and neighboring rights in respect of a work for speculative purposes”.

Notification is now required prior to assigning of author agreements: In the event of an assignment by a producer of an author agreement to a third party, the Act now requires prior notice to co-authors, which notice shall take place no later than one month before the effective date of the assignment. Accordingly, author agreements must include appropriate language regarding the right of prior notice.

Certain conditions (such as form of the prior notice and scope of the assignment) in respect of this new measure are not very precise, and compliance with this obligation will undoubtedly be challenged in the short term given that assignments of contracts and catalogues occur every day in this industry. It would appear that any failure to so notify will affect the validity of the assignment. Corporate transactions, legal due diligence and assignment of catalogues are significantly affected by this new measure and particular attention must be paid to any future developments which will certainly help refine the conditions of this new obligation.

*

The Act contains many other terms and provisions, including in respect of assignment of authors’ rights agreements, agreements entered into between performers and phonogram producers, music mediator, publishing agreements, private copying, etc.

In view of the wide and important changes resulting from this Act, it is strongly encouraged to update all relevant agreements and/or seek specific advice.

 

 

[1] Act n°2016-925 dated July 7, 2016 regarding Freedom of Creation, Architecture and Heritage

[2] For audiovisual works, it seems that one or more sectorial collective bargaining agreements could establish such definitions, including the details for recoupment of production cost.

[3] It should be noted that a sectorial collective bargaining agreement has been entered into on February 16, 2016 between certain producers, distributors and broadcasters re: transparency in production accountings in the audiovisual industry, but such agreement has not been extended yet.

[4] It should be noted that specific provisions apply when the « producteur délégué » directly exploits the work.

[5] For audiovisual works, it seems that one or more sectorial collective bargaining agreement(s) could establish such definitions.

[6] Agreement entered into between a mojority of producers and publishers organizations, certain television channels and certain authors organization (including SACD and SCAM) for a tacitly renewable three-year period

[7] Arrêté dated October 7, 2016 pursuant to Article L. 132-27 of the French Intellectual Property Code and extending the Accord dated October 3, 2016 re: the continuing exploitation obligation for theatrical and television works

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By crossenetborowsky

After more than four years of negotiation, the new regulation on personal data (the “Regulation”) has finally been adopted on May 24, 2016[1]. However, it shall take effect only as of May 24, 2018. Data controllers and processors will have until this date to comply with the Regulation, including for those processing of data already implemented up until this date.

The purpose of the Regulation is to adapt the rules on personal data to the digital world and to harmonize said rules within the European Union (EU) member states. This text will replace the existing regulation.

Its scope is broad: it will apply when (i) personal data collected relate to a citizen residing in the EU, whether or not the data controller is established in such territory; (ii) the data controller or its processor resides in the EU, i.e. the Regulation would apply to a non-European citizen whose data would be collected or processed by a EU company. The place of establishment of the data controller, used until the new Regulation comes into effect to define the law applicable to data processing, has been significantly expanded. The aim is particularly to enable a regulation of data processing carried out over the Internet when one of the persons involved in the processing (the data controller/processor or the person whose data are processed) is located outside the European Economic Area.

The following essential points of the Regulation should be noted:

  • It establishes a high level of protection and control of citizens over their personal data, particularly by creating a right to data portability and enshrining a “right to be forgotten”;
  • It fundamentally modifies the liability regime. For instance, data controllers are no longer subject to the declaration obligation (however, the authorization scheme is maintained for certain cases) and will have to demonstrate that they have complied with the provisions of the Regulation; legal obligations will now apply to data processors;
  • Administrative penalties have been strengthened in the event of non-compliance with these rules: such penalties could range up to 4% of the annual worldwide turnover of the company and up to 10 or 20 million euros in other cases.

More particularly, among the obligations placed on companies processing personal data, the latter shall now:

  • Implement appropriate technical and organizational measures and be able to demonstrate such compliance with the Regulation at any time (the “accountability principle”). In this respect, data controllers should for instance guarantee the confidentiality of the data processing or ensure that, by default, only those data strictly necessary with regard each purposes be processed (the “minimization principle”);
  • If a company has more than 250 employees (subject to certain exceptions), maintain a record of processing activities comparable to an inventory of processing operations;
  • Appoint a data protection officer if the company belongs to the public sector, if its core activities consist of processing operations which require systematic monitoring of data on a large scale or if its core activities consist of processing (still on a large scale basis) “sensitive” data or data relating to criminal convictions;
  • Notify security flaws to the authorities (and the persons concerned if such breach is likely to result in a high risk to the rights and freedoms of a person) within a 72 hours delay after having become aware of it.

Given that the Regulation will apply to processing of data already implemented in May 2018, companies have an incentive to make the necessary changes as soon as possible in order to abide by these new rules which imply reshaping a new organization, particularly for data processors bound by legal obligations for the first time.

 

[1] Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC

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By crossenetborowsky

Team Reager AB, a company governed by the laws of Sweden, specialized in designing products and services for mobile phones, created an innovative “hands-free kit” called “Moobitalk”.

In order to ensure the sustainability of this product’s exploitation, the company filed the Community word mark “Moobitalk” on October 19, 2010.

However, it noticed that Mr. X, head of certain companies offering communication services grouped around the suffix “moobi” in the Middle-East and more particularly in Yemen, registered the domain name “moobitalk.com” on April 17, 2011 (that is to say after the aforementioned “Moobitalk” trademark) and accordingly requested transfer for its benefit of said domain name to WIPO in the course of a UDRP proceeding.

Such transfer was granted to the company Team Reager AB pursuant to a decision dated July 29, 2013.

Mr. X appealed to the Paris Court of Appeal which reversed the WIPO decision and recalled that if the use of a distinctive sign as a domain name over the Internet can constitute a use in the course of trade within the meaning of article 9 of the European Council Regulation (EC) n°207/2009 dated February 2009 (necessary condition to constitute the act of infringement), such use can only constitute an act of trademark infringement provided that the intended audience of the litigious website is located in the European Union territory.

In accordance with this principle and noting that, despite the identical feature of the “Moobitalk” trademark and the disputed domain name, the website associated with this domain name (i) is drafted in English or Arabic and (ii) offers eight versions each aimed at consumers of eight countries of the Near and Middle-East (Jordan, Kuwait, Iraq, United Arab Emirates, Palestine, Saudi Arabia, Morocco and Mauritania), the Court of Appeal ruled that the public located within the European Union territory was not a target of the website and that infringement was therefore not established.

The Court of Appeal further specified that the “.com” extension is common to all countries and accordingly does not convey any geographical indication. It does not necessarily reflect a willingness to reach the public everywhere in the world and more particularly in the European Union territory.

Whereas this decision is settled and established case law, it does stress to the right holders the limits of trademark law which are closely linked to its territoriality. In order to avoid similar inconveniences, it appears essential to establish a strong strategy for protecting trademarks and domain names portfolio. The trademark owner could have registered the domain name corresponding to its brand in different extensions (including .com, .eu, .biz, etc.) and/or plan to file its trademark in more appropriate territories.

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By crossenetborowsky

In a decision dated January 26, 2016, the French Data Protection Authority (CNIL) declared that the processing of personal data operated by Facebook Inc. and Facebook Ireland does not comply with French law and ordered said companies to take measures to comply accordingly. The CNIL clearly provided in its decision that each violation of French law would give rise to a formal notice as well as separate and cumulative penalties.

While this decision outlines the practices of the Facebook companies regarding data processing carried out (found to be illegal by the CNIL), the real change lies in the fact that the CNIL has, for the first time, declared itself competent to analyze and punish the processing of personal data operated by the Californian giant in accordance with French law, which the CNIL considered applicable to the facts at stake.

Until now, the CNIL had only sent simple letters to the Facebook companies. Indeed, the French Data Protection Authority took the view that to the extent that French law was not applicable, it could not impose any penalties if Facebook failed to respond or implement new measures. This situation has now changed.

By recognizing that French law applies to Facebook Inc. and Facebook Ireland, the CNIL endorses the recent <em>Google Spain</em> (C-131/12) and <em>Weltimmo</em> (C-230/14) decisions of the Court of Justice of the European Union which significantly expanded the definition of “establishment” which determines the application of the rules and regulations of a Member State to data processing operated by a data controller located outside the European Economic Area (in accordance with articles 4 of Directive 95/46/EC and 5 of the French Data Protection Act n°78-17 dated January 6, 1978).

Accordingly, when a non-EU data controller has an “establishment” located in a EU Member State – please note that an “establishment” does not necessarily comprise a registered company but any stable installation which, without directly processing data, intervenes within the scope of the data controller activities (by ensuring promotion and sale of advertising spaces for instance) – the national law of said state would apply.

The CNIL demonstrates, by applying the extension of the “establishment” standard and by declaring French law applicable to the case at hand, its intention to be positioned as a leader in the protection of personal data in Europe, in accordance with the European Commission<a href=”#_ftn1″ name=”_ftnref1″>[1]</a>’s strategy to hold the internet players located abroad liable.

This decision can be considered as the first compelling action of a personal data protection authority against a Web giant. It is therefore likely that foreign companies operating data processing in France will soon also face investigations by the CNIL and possible penalties should said companies fail to comply with the obligations provided by French law.

Given that a company’s image will undoubtedly be harmed by those penalties, and in view of the cumulative nature of the fines incurred, the data controllers who believed French law would not apply to their processing should now better think twice before setting up said data processing.

This is all the more true with the entry into force of the European regulation which provides that the regulatory authorities’ administrative fines may be calculated as a percentage of the data controller’s annual worldwide turnover (within a limit of 1,000,000 euros).

Companies’ compliance with EU law, and particularly French law, has now clearly become a priority. &nbsp; <a href=”#_ftnref1″ name=”_ftn1″>[1]</a> Indeed, the future European regulation provides that EU law shall apply to processing of personal data relating to those persons whose domicile is located within the EU when the processing activities are linked to the (i) supply of goods or services, or (ii) observation of their behavior

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By crossenetborowsky 0

In our last Newsletter, we introduced the new tax measures applicable to the production of theatrical and audiovisual works as of January 1<sup>st</sup>, 2016.

These measures concerned both the domestic tax credit, applicable to the French producers, and the international tax credit (aka TRIP), which benefits foreign producers.

The French 2016 Finance Act aims at strengthening the domestic tax credit, principally applicable to theatrical motion pictures, mainly due to the impulse of Luc Besson who threatened to produce his motion picture “Valerian” outside of France because of the current legal framework.

“Valerian” is an English-language theatrical motion picture produced by a French producer with the highest budget ever seen for a French film. As a French producer, the only tax credit available to EuropaCorp was the domestic one with the overall result being that EuropaCorp was in a less favorable position that a foreign producer. In the first instance, the English language simply disqualifies the film from being eligible for the domestic tax credit.

Further, assuming that the film was even eligible, the domestic tax credit is limited to 20 % for such works, while, as of January 1, 2016, 30% is available for the same works under the TRIP with funding caps being higher than those applicable for the domestic tax credit.

In light of the current structure, the various subsidies and tax schemes proposed by other European countries became more attractive than those proposed when filming in France.

The internationalization of French productions in terms of the use of English as a shooting language, as well as the level of the production budgets for these types of films, necessitated certain changes to the domestic tax credit system in order to keep the French market competitive and avoid delocalization.

The fact that “Valerian”’s budget approximates 170 Million Euros Illustrates the importance for the French film industry and economy to prevent the delocalization of these types of productions. The 2016 Finance Act therefore provides for two sets of modifications: the expansion of the eligibility criteria and the increase of the amounts of the tax credit available.

The following changes apply in respect of drama and animation works: – With respect to the eligibility criteria: <ul> <li>The language criterion no longer applies to theatrical animation pictures.</li> <li>Live action theatrical motion pictures shot in a foreign language are eligible when (i) at least 15% of the shots are processed digitally for certain specific purposes set by the Act (such theatrical works are assimilated to theatrical animation productions), or (ii) the use of a foreign language is justified by artistic reasons resulting from the screenplay.

</li> </ul> – With respect to the amount of tax credit available: <ul> <li>The tax credit percentages applicable to production companies are modified as follows:</li> </ul> <table> <tbody> <tr> <td></td> <td><strong>Animation</strong></td> <td><strong>Drama</strong></td> </tr> <tr> <td><strong>Audiovisual productions</strong></td> <td>    25%</td> <td>25%</td> </tr> <tr> <td><strong>Theatrical productions</strong></td> <td>    30%</td> <td>20%, or 30% when: (i) the picture is shot in French or in a French regional language; or (ii) at least 15% of the shots are processed digitally for certain specific purposes set by the Act</td> </tr> </tbody> </table> &nbsp; <ul> <li>The tax credit cap has been increased to 30 Millions Euros for theatrical productions.

</li> <li>Although the overall cap remains at 4 Million Euros, the per minute tax credit cap applicable to television drama programming has also been increased. The ceiling, originally set at 1,250 Euros per minute delivered, now fluctuates between 1,250 Euros and 10,000 Euros per minute delivered, based on the production costs per minute actually produced.

These new limits also apply to international television drama co-productions satisfying certain conditions regarding the budget and financing plan.</li> </ul> These new measures must be approved by the European Commission for the purpose of determining their compliance with the European Union legislation applicable to state aids. If so approved, such measures will apply to tax years beginning as of January 1, 2016.

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By crossenetborowsky 0

The decision of the European Court of Justice (CJEU) dated October 6, 2015[1] invalidated the “Safe Harbor” framework which authorized, since 2000[2], the transfer of personal data from within the European Union to companies with “Safe Harbor” certifications located in the United States.

For memory, the United States does not provide for an adequate level of protection and consequently the transfer of personal data to companies located in said country is generally prohibited[3]. However, by way of exception, prior to such decision, European companies could transfer personal data to American providers/data processors only if the latter i) self-certified that they will commit to implement processes ensuring an adequate level of protection or ii) entered into agreements with the European data controller, including “model contract clauses” issued by the European Commission[4].

In its decision dated October 6, 2015, the CJEU underlined that the “Safe Harbor” certification no longer provided a sufficient level of privacy protection, in view of the disclosures of mass surveillance programs of the NSA by Edward Snowden in 2013. The decision being effective immediately, any and all transfer of personal data made on the basis of said certification are consequently illegal and should in theory be terminated or otherwise modified to conform to the decision.

Following this decision, the French Data Protection Authority (CNIL) and its European counterparts (Article 29 Working Party) met on October 15 to prepare a common action plan to permit the creation of a new legal framework. Accordingly, the Article 29 Working Party called on the European institutions and governments to implement a new legal framework enabling the transfer of data between Europe and the United States, before January 31, 2016. Such solutions could be sought during intergovernmental agreement negotiations and the implementation of a new “Safe Harbor” framework could be considered.

The Working Party continues its analysis of the consequences of the CJEU decision on the other means available to transfer data to the United States, particularly regarding the aforementioned “model contract clauses”. The Working Party indicated that, pending the implementation of the new regulations, European companies are still permitted to employ these “model contract clauses” for the transfer of personal data to the United States.

However, the personal data of European companies or individuals which have been transferred to American providers using these “model contract clauses” may still be subject to the intrusion of the NSA to the same extent as when the “Safe Harbor” framework was employed. A court decision or a CNIL recommendation could also invalidate the use of such clauses[5].

Pending the signature of a new intergovernmental agreement or the implementation of new transfer means, what strategy should the companies adopt today?

Given the current context, European companies wishing to transfer their data to the United States should act with caution and accordingly should implement legal and technical solutions to limit the potential risk taken when transferring their personal data. The foregoing essentially involves setting up restrictive contractual clauses with the providers receiving said data in the United States.

Such clauses should notably include:

  • at a minimum, all of the obligations provided in the “model contract clauses”;
  • the following additional obligations for American providers operating a Cloud Computing service:
  • information regarding data processing (compliance with the French Data Protection Act[6], definition of the processing methods in place, obtaining client’s consent should the data processing be entrusted to another data processor, limitation of the data retention period and ensuring that said obligations are included in subcontracting contracts);
  • the implementation of a complaints system and measures to avoid security flaws;
  • the possibility for the client to audit the provider;
  • the destruction of data and its restitution at the end of the services provided or in case of early termination of the contract, in a format chosen by the client;
  • the detailed specification of the provider’s obligations regarding data security (including physical and technical security measures, traceability, continuity of services, level of service, backup) and specification that the latter can only act on instructions from the client;
  • the cooperation of the service provider with the relevant data protection authorities and obligation to provide the client with any and all useful information in order to make the statement concerning data processing to said authorities;
  • the clear and exhaustive indication of the countries hosting the data and guarantee of an adequate protection in said countries.

iii) finally and most importantly, to prevent any potential changes of position by the CNIL, the following specific obligations to ensure the legality of the transfer under any circumstances:

  • the obligation to take all necessary technical and legal measures in order to comply with the developments of the French Data Protection Act and with the CNIL recommendations;
  • in the event of the inability or impossibility to comply with the developments of the French Data Protection Act, the inclusion of an automatic termination clause with the obligation to restitute such data in addition to the removal of such data without additional charge for the client.

Up until now, the recourse to “Safe Harbor” data processors was principally insured by signing standard terms and conditions or boilerplate agreements which European clients were unable to negotiate. The situation of the formerly “Safe Harbor” American providers is unclear and will necessarily force said providers to amend their contracts in order to adapt them to the requirements of their European clients. The decision of the CJEU may have the merit of rebalancing the forces in play between the European data controllers and the American service providers.

[1] CJEU decision dated October 6, 2015, Case C-362-14 Maximillian Schrems v. Data Protection Commissionner

[2] Commission decision dated July 26, 2000

[3] Indeed, under directive 95/46, the transfer of personal data to countries outside the European Union which do not provide an adequate level of protection should be prohibited.

[4] It should be noted that another contractual means to transfer data was provided for companies that are part of a same group (« Binding Corporate Rules »)

[5] In this respect, it should be specified that a German data protection authority expressed its wish to also invalidate the model contract clauses and to authorize data transfer to the United States only subject to changes in its legislations

[6] Act n°78-17 dated January 6, 1978[:]

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By crossenetborowsky 0

Considering the changes introduced by our digital environment and the constantly emerging new technologies, the European Commission has launched various studies, brainstorming, consultations and plans of action since 2011 in order to modernize and harmonize copyright protection in the European Union. This initiative forms part of the Commission’s strategy to establish “a single market for Intellectual Property rights”. The former Commission, however, did not succeed in presenting practical measures since the proposed reform was considered insufficient for certain European officials.

The current Commission, which took office in November 2014, made a priority of growth and employment matters and accelerated the reform process; and the president of the Commission considered the single digital market as a key element for economic growth. To achieve said priorities, it was clearly stated that it was necessary to “dismantle national barriers with respect to copyright regulations” in order to “unlock creativity”, with minimal regulations.

Julia Reda, Member of the European Parliament and member of the Pirate Party, was appointed at the end of 2014 to draft a report, which was presented to the European Parliament early 2015. Said draft report suggested in particular:

  • The removal of territorial restrictions to copyright and promotion of cross-border access to content;
  • The harmonization of conditions for protection, especially by introducing a single European title applicable in all Member States (which would also contribute to the removal of obstacles resulting from the territorial restrictions applicable to copyright as indicated above), and the duration of copyright;
  • The harmonization and strengthening of exceptions and limitations to copyright[1].

This text has been the subject of heated debates and substantial lobbying from intellectual property professionals and certain Member States, especially and most importantly France. The disputes were essentially centered around the following competing interests: on the one hand, liberalization of creativity and rights of consumers, and on the other hand, protection and security of authors and rights holders. The debates also focused on the balance of power between industries and authors and artists, as well as the particular interests of each Member State. Another important issue which was discussed was the level of copyright protection each Member State could provide in the event of general harmonization.

In the end, more than 500 amendments were submitted to the draft report: the European Parliament adopted a non-legislative resolution on July 9, 2015[2] which substantially modified certain proposals considered as too “drastic”.

By way of example:

  • Regarding exceptions and limitations to copyright:

(i) Whereas the draft report contemplated a total harmonization and a mandatory application of the exceptions and limitations to copyright, the Members of Parliament considered that each Member State should be free to legislate further on such exceptions according to its specific cultural and economic interests, however with the implementation of minimum standards to said exceptions and limitations;

(ii) Certain exceptions proposed in the draft report, and which could have considerably broaden the forms of exploitation of the works by consumers, have either been removed (including the acknowledgment of a ‘right of quotation’ in the audiovisual sector) or limited (the proposal implementing a compulsory exception enabling libraries to lend books to the public in digital format irrespective of the location of access was for instance regulated regarding the use contemplated, duration, goal, and possible introduction of a fair compensation to the authors).

  • Regarding territoriality and accessibility of content and services:

While territoriality was questioned in the draft report, the Parliament finally called “for a reaffirmation of the principle of territoriality” in order to enable each Member State “to safeguard the fair remuneration principle”. Indeed, certain Members of Parliament argued that territoriality enables an increase of the revenues generated in each territory, thereby contributing to the financing of the works, and consequently ensuring fair compensation to authors and rights holders.

The Members of Parliament, nonetheless, emphasized the importance of improving accessibility and portability of services and content in order for consumers not to be denied access to content services for geographic reasons, and urged the Commission to propose appropriate measures in this regard.

It therefore appears that the debate is still open.

However, the Parliament confirmed its willingness to potentially harmonize the duration of copyright or to invite the Commission to analyze the impact of a single European copyright title for Member States. It also expressed its wish to adapt and create new exceptions in the digital era[3].

Considering the growth of services such as Netflix, the issues at stake in this reform are essential for competitiveness and development of European services as well as for reinforcement of consumers’ rights. Such issues are, however, subject to objections and claims from certain intellectual property actors. Copyright harmonization at the European Union level seems therefore quite complicated and must necessarily take into consideration the various interests. The European Commission should present a proposal of legislative revision at the end of the year and we look forward to hearing the position taken by the Commission.

[1] The draft report contains numerous proposals that we have not presented nor developed for purpose of this article.

[2] European Parliament resolution of 9 July 2015 on the implementation of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society

[3] The non-legislative resolution includes various proposals and suggestions which are not presented nor developed for purpose of this article. You can find the resolution via the following link: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2015-0273+0+DOC+XML+V0//

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By crossenetborowsky 0

Software providers and IT consultants: Be careful to what you agree to, even in the absence of a written agreement.

In a recent ruling by the Court of Appeals of Grenoble (CA. Grenoble, June 4, 2015, n°2009J386), the company CIMM Franchise, which exploits a network of 120 real estate agencies, ordered from the consulting company E-Développement Conseil the creation of software to improve the management of its assets. E-Développement Conseil entrusted the conception of such software to a company called 3C Evolution.

It should be noted that no agreement or technical specifications were formalized in order to detail the missions of both providers or the conditions of the software’s creation.

However, meeting minutes helped establishing that the parties decided the software to be delivered on January 2008.

The ordered software was finally delivered in June 2008, and showed many malfunctions, making it unfit for use. CIMM Franchise consequently decided to sue both providers in order to have the agreements terminated, to be reimbursed for all sums already paid, and to be granted damages.

The Court of Appeals of Grenoble, considering that:

  • the developer had breached its obligations by not respecting the delivery date, such an obligation being an obligation of results, even in the absence of an agreement or of technical specifications;
  • the developer had also breached its obligations by not providing software conforming to the client’s needs, such an obligation being an obligation of results as well, even in the absence of an agreement or of technical specifications;
  • the consulting company had breached its obligation of counseling because, on the one hand, they did not organize a call for bids before selecting the developer and therefore did not assess its competency and, on the other hand, had not detailed the technical specifications expressing the needs of the client,

decided to terminate the agreements to the exclusive fault of both service providers and to order the reimbursement of the down payments. However the court refused to grant damages.

Clearly, the lack of written agreements proved to be detrimental to the two service providers.[:]

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By crossenetborowsky 0

In an objective to render the French territory more attractive for the production of theatrical and audiovisual programs, Law n°2014-1655 dated December 29, 2014 modifies the tax credits available for such programs. Applicable as of January 1, 2016, the law incentivizes both producers (with respect to the national tax credit) and line producers (with respect to the tax rebate for international productions, also known as “TRIP”) to spend production costs in France.

 

With respect to the national tax credit:

 

The changes made by this law are mainly oriented toward animation programs in order to reduce the delocalization of the production of such programs abroad, notably to Canada or the US. Accordingly, the percentage of French eligible expenditures used to calculate the amount of tax credit available to French companies is increased to 25% for both theatrical and audiovisual animation programs. Additionally, the overall cap to the tax credits that can be received for one single program is increased from 1,300€ to 3,000€ per minute produced and delivered.

 

These changes also address low budget theatrical motion pictures. Indeed, the increased percentage of 30% of French eligible expenditures, which has been available solely for programs with budgets below or equal to 4 Million Euros until now, has been extended to motion pictures with a budget comprised between 4 Million Euros and 7 Million Euros. This measure will enable additional financing solutions for “middle-range” pictures which are the most prejudiced by the financing decrease, according to Frederique Bredin, President of the Centre National de la Cinematographie et de l’Image Animee (CNC).

 

With respect to the TRIP:

 

The modifications provided by the law increase the percentage of French eligible expenditures used to calculate the amounts available for the tax credit (from 20% to 30%) as well as the overall cap to tax credits received on one program (from 20,000,000€ to 30,000,000€). The objective of these measures is to improve how France is perceived by the entire world as a cultural, touristic and economic destination (we note that the television series “Merlin”, which benefited from the TRIP, has generated a significant increase in visits of the Castle of Pierrefond).

 

These new measures are welcome at times when the financing of theatrical and audiovisual programs is suffering (reduction of approximately 20% in the financing of the French theatrical productions, and of approximately 13% with respect to international theatrical co-productions for 2014). The parliamentarian deputies which initiated such changes are convinced that they will generate a significant economic return. Let’s hope that the future will prove them right.

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By crossenetborowsky 0

Is a trademark coexistence agreement sufficient to protect your trademark?

 

The question is legitimate, as reveals the decision of the French Supreme Court (Cour de Cassation) from February 10, 2015 (Cass. Com., n°13-24979).

 

In this case, the company Laboratoires Lehning, which manufactures pharmaceutical preparations, is the owner of the French and European trademarks “Lehning” in connection with, notably pharmaceutical veterinary and disinfectants products registered in class 5. Having realized that the company Ecophar had registered the French trademark “Lehring Naturellement efficace” (“Lehring naturally efficient”) before the French trademark office (INPI), to designate products that overlapped with some of the products bearing Lehning’s trademarks (also in class 5), Lehning opposed this trademark application. The dispute was settled when the two companies signed a coexistence agreement in June 2008. However, during the year 2012, considering that Ecophar had not respected its undertakings under the coexistence agreement, in particular because they reproduced the word “Lehring” alone and in big lettering on its website, Lehning filed a lawsuit against Ecophar on the basis of trademark infringement and unfair competition.

 

On appeal, the Court of Appeals of Paris judged that because Ecophar had generally performed the coexistence agreement, there could not be a finding of trademark infringement, nor of unfair competition. The Court of Appeals had simply drawn a simplistic parallel between coexistence agreement and counterfeiting or unfair competition. The general performance of the former implying automatically the lack of materialization of the other.

 

Nevertheless, the Supreme Court overturned the decision from the Court of Appeals, explaining that the Court should have analyzed “as it was invited to, whether, due to the similarities of the trademarks and the products designed to be registered, the failure to perform the agreement could generate a risk of confusion in the eye of the public…”

 

The Supreme Court then used the same reasoning for the unfair competition claim.

 

The consequence is that a finding of infringement and/or unfair competition is in no way automatic. The breach of an agreement constitutes infringement and/or unfair competition only in so far as it impacts the monopoly of the trademark owner, in accordance with the applicable law. It thus falls upon the injured party to prove the infringement and the unfair competition, regardless of the breach of the coexistence agreement.

 

Consequently, the signing a coexistence agreement only offers a relative protection of the trademark subject to this agreement[1].

 

Therefore it is important to be particularly careful when drafting such agreements and potentially to tie the breach of these agreements to a constraining indemnification clause which will deter the co-contracting party from breaching the agreement.

 

[1] Even more so since, as decided by the European Court of Justice (ECJ, 3rd ch., Sept. 19, 2013, case C-661/11), no one is bound to remain in a state of coexsitence.

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