An Infringement of IP Rights that is also a Breach of Contract is still an Infringement of IP Rights

The distinction between liability in tort and for contractual breach can have various implications, depending upon the jurisdiction. For example, the statute of limitations, the available remedies, the procedural rules or the calculation of the financial compensation, may all differ as between these two heads of liability. 

Navigating the Enforcement Directive

A week before Christmas, the Court of Justice of the EU handed down its judgment in IT Development SAS v. Free Mobile SAS (case C-666/18). The question, referred to the CJEU by the Paris Court of Appeal was, in short, whether the Enforcement Directive (2004/47) and the Software Directive (2009/24) are applicable to those cases in which the infringement of IP rights (the unauthorized alteration of a computer program) also constitutes a breach of contract (typically a licence agreement) between the parties. 

In the case, the plaintiff, IT Development, granted a licence to the respondent, Free Mobile, for use of a software package. The plaintiff alleged that the respondent had modified the software in breach of the licence agreement and, accordingly, it sued for "contrefaçon" (a non-contractual type of IP infringement action under French law). The Tribunal de Grande Instance dismissed the suit, arguing that there was no case of liability in tort, given that the respondent "was clearly alleged to have failed to perform its contractual obligations, providing a basis for an action for contractual liability, and not for the tortious act of infringement of software copyright". 

On appeal by the plaintiff, the Paris Court of Appeal asked the CJEU--

whether Directives 2004/48 [Enforcement Directive] and 2009/24 [Software Directive] must be interpreted as meaning that the breach of a clause in a licence agreement for a computer program relating to the intellectual property rights of the owner of the copyright of that program falls within the concept of ‘infringement of intellectual property rights’, within the meaning of Directive 2004/48, and that, therefore, that owner must be able to benefit from the guarantees provided for by that directive, regardless of the liability regime applicable under national law.

The Decision

Under French law (as explained by the Court of Justice), liability in tort and for contractual breach are mutually exclusive. In addition, contractual liability excludes tortious liability where the damage results from non-performance of a contractual obligation. 

Under Art. 4 of the Software Directive, the exclusive rights of the right holder include, inter alia, the right to authorize the translation, adaptation, arrangement and any other alteration of a computer program. Thus, the Software Directive does not make the protection of the rights of the copyright owner dependent on whether the alleged infringer is also in breach of a licence agreement. Therefore, it is applicable irrespective of a licence agreement between the parties. 

Art. 2(1) of the Enforcement Directive sets forth that the Directive applies to "any infringement of intellectual property rights". The Court of Justice stresses that the word "any" must be interpreted as also covering infringements that result from a breach of contract. It is the objective of the Enforcement Directive to ensure a "high, equivalent and homogeneous level of protection of IP in the internal market". As such, the scope of the directive is very broad. 

As a result, the Court ruled--

…the breach of a clause in a licence agreement for a computer program relating to the intellectual property rights of the owner of the copyright of that program falls within the concept of ‘infringement of intellectual property rights’, within the meaning of Directive 2004/48, and that, therefore, that owner must be able to benefit from the guarantees provided for by that directive, regardless of the liability regime applicable under national law.

Thus, the Court of Justice confirms that the infringement of a clause in a licence agreement for use of a computer program falls within the ambit of "infringement of intellectual property rights" within the meaning of the Enforcement Directive. 

Enforcement of software protection

Nevertheless, the CJEU underscores that neither the Enforcement Directive nor the Software Directive lays down the "exact means of implementation of those guarantees and does not lay down the application of a specific liability regime in the event of infringement of those rights". It is for the law of each member state to set out all "specific practical arrangement for protecting those rights", as long as the requirements of both Directives are complied with. 

Even though the determination of the liability regime applicable for copyright infringement is a competence of the member states, the application of any regime must not be an obstacle to the effective protection of IP as laid out in both Directives. 

National courts are required to interpret national law in conformity with the requirements of EU law and must apply national law "so as not to produce a result contrary to that sought by EU law". In the case at hand, the CJEU finds that an interpretation of national law in conformity with the requirements of the Enforcement Directive and the Software Directive is possible, "subject to verification by the referring court".

Comment

The outcome of the case is hardly surprising, given the facts of the case: the alteration of copyrighted works without authorization of the right holder amounts to copyright infringement, whether or not the act (also) amounts to a breach of an agreement between the parties. 

For the same reason, however, it is still worth underscoring that the rule set out by the Court of Justice seems to be worded too broadly. In the case at hand, the breach of the licence agreement also amounted to a violation of IP. But this may not always be so: for instance, the breach of certain ancillary obligations of the licensee (such as the duty to disclose certain commercial information or the duty of co-operation) does not amount to an IP violation. 

Thus, instead of the broad rule that "[…] the breach of a clause in a licence agreement […] falls within the concept of 'infringement of intellectual property rights' […]", perhaps the better way to view the decision is that it merely establishes that the infringement of intellectual property rights can also amount to the breach of a licence. It is then still an infringement of an intellectual property right within the meaning of the Enforcement Directive.

Picture on the right by Gerhild Klinkow in the public domain