Exploitation of Industrial Designs: Presented by: Nathalie Dreyfus

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1 Exploitation of Industrial Designs: Practical Contractual Aspects Presented by: Nathalie Dreyfus

2 Product Design Protection Introduction A product may be protected by design, copyright or trademark law. Designs may be registered at a national, community or international i level. l Copyright protection saves the cost of registration in the EU. The product s design is an important asset to a company. It can be transferred or licensed to other companies through various agreements. From a legal perspective, in order to profit from the design one must first be the owner of the design.

3 Securing ownership of a product s design when the user is not the designer Before entering into agreements, it is necessary to verify that the organisation has rights to the product s design. If a company fails to secure ownership, it may be considered as conterfeiting.

4 If design law is applicable In the case of Registered Community Designs The Registered Community Design belongs to its designer or the designer s succesor in title (Article 14.1 of the EC Council Regulation 6/2002, December 12, 2001). Presumption that benefits the registrant of the Community Design Registration (Article 17 of the Regulation). The registrant is presumed to be the design owner in any g p g y proceedings.

5 2. In the case of Unregistered Community Designs An Unregistered Community Design belongs to its designer or succesor in title (Article 14.1). However, it will be protected from the date on which it was first made available to the public within the community (Article 11).

6 3. In the case of French Design Registration The French IP Code provides protection of a design or model for the creator or for his successor in title. This Code provides a presumption similar to the one for Registered Community Designs: The applicant for registration is, failing proof to the contrary, considered to be the beneficiary of this protection. (Article L.511-9)

7 If copyright law applies... Presumption of ownership has been established Since the French Supreme Court decision in 1993, a presumption of ownership has been established for the design user. The presumption applies when the company or design user, not the author, makes the design available to the public. This presumption can be reversed by proof to the contrary by the legitimate author.

8 French Courts have broadly enforced the presumption of ownership. French Courts have attempted to connect the ownership presumption to the provision related to collective works. French collective works provision: collective works shall be the property, unless proven otherwise, of the natural or legal person under whose name it has been disclosed. The Courts have applied the collective works provision i even when the design was an individual work. The Céline case (March 26, 2008): The company Céline brought an action based on counterfeiting and unfair competition against companies promoting belts similar to their own. The Paris Court of Appeals ruled that a legal entity utilizing individual or collective works under its name should be deemed the copyright owner with regards to third party infringers. i The Court granted Céline the sole rights to the belt design.

9 French Courts extended the presumption of ownership to foreign companies. Foreign companies would normally establish their rights according to their domestic laws. Paris Court of Appeals case (May 30, 2008): The Court held that the presumption benefiting a French company may be transferred to a foreign company in a case of merger and acquisition.

10 Recently, the French Courts have taken a more restrictive approach to the presumption of ownership. French Courts have required more detailed proof of use in order for the presumption to apply. In one case, two affidavits were presented to demonstrate that: 1. the designs had been known for a long time, and 2. the design had long been distributed on the Chinese market. In another case, the Court refused to apply to collective works provisions i to an individual work. Hint: Because the presumption cannot be used as widely as in the past, it is advisable p p y p to secure ownership of the design rights prior to any use.

11 Practical aspects of the employer/employee relationship Creations by employees Employee created designs are addressed by Article 14.3 of European Council Regulation 6/2002 (December 12, 2001). The French IP Code does not include provision regarding the employer/employee relationship and the creation of designs. According to French law, copyright derives from the creation of the work itself. The author of a work of the mind shall enjoy in that work, by the mere fact of its creation, an exclusive incorpreal property right which shall be enforceable against all persons.(article L111-1, paragraph 1) The work relationship does not affect this principle. p (Article L111-1,,paragraph p 3)

12 Assignment of design rights from Employee to Employer French law does not require a written agreement for the assignment of design rights to the employer. No contract rules govern this assignment of ownership. French Courts have tended to derive rules using the collective works notion. When the work cannot be considered as collective, a specific agreement is required as evidence of the assignment. Courts are divided on whether a work contract implies an assignment of rights. Even if the Courts consider the employer as the owner of the design rights, the employer does not have all rights; a presumption of assignment is only valid in the normal framework business. Case (November 8, 1990): The Paris Court of Appeals held that the work relationship between the creator of dolls and his employer entitled the latter to sell the dolls, but did not imply the rights to use the doll s image in books and on postcards. The employee always keeps his moral rights (for example, to have his name appear on the design), even with the assignment of financial rights.

13 Securing rights may derive from different sources of rules. In this case, it is important to be aware of the interior regulations of the company, the collective agreements and the collective bargaining g agreements. In French law, collective agreements are not always sufficient to prevent claims from employees or former employees. Case (September 12, 2007): A journalist sought damages in a labour dispute based on violation of his financial rights. There had been new uses and assignments of his photographic works without his consent and without compensation. In the framework agreement on copyright regarding regional press, the signatories had renounced their claims for the period before its signature. The Social Chamber of the French Supreme Court held that the agreement could only bind the parties and upheld the jounalist s claim.

14 The Employer/Employee relationship may regulate creations by employees. In the absence of specific provisions in the work contract or specific rules binding the employer, it is highly recommended to negotiate an agreement each time an employee creates a design. (The agreement must comply with French IP Code, Article L131-3) A written instrument is advisable for evidence purposes, but it is not mandatory. Insert a precise clause in the work agreement binding the employee and employer to avoid conflict. If the clause is not precise, French Courts tend to consider that the right at issue has not been assigned. Specify which reproduction rights are assigned. It is advisable to negotiate an additional clause to the contract t each time you need to reproduce the design if it is i not specified in the work agreement.

15 Creations by an independent designer Commissioned designs are not governed in the same way in all Member States of the European Union. In countries like the UK or Spain, the rights in the commissioned design vest in the commissioner because the designer is assimilated to an employee. In France, author protection prevails and the rights in a commissioned design normally belong to the designer. As a result, if a company commissions the design of its product in France, it is strongly advised to secure ownership in the design. Rights in the product s design should be assigned by a proper assignment.

16 At a Community Level... There were doubts about whether the provisions of EC Council Regulation of December 12, 2001 applied to commissioned designs: Article 14.1 The right to the Community design shall vest in the designer or his successor in title. Article 14.3 However, where a design is developed by an employee in the execution of his duties or following the instructions given by his employer, the right to the Community design shall vest in the employer, unless otherwise agreed or specified under national law. Depending on the relevant national approach, the same Community commissioned design could be regarded as assigned to the commissioner or not. It all depends on the Member State where the issue was raised.

17 The FEIA (Fundacion Espanola para la innovacion de la Artesania) Case: The Alicante Court posed this question to the ECJ (Fundacion Espanola para la innovacion o de la Artesania) invoked its rights in the Community designs s of cuckoo clocks in a counterfeiting and unfair competition action. The FEIA had not created the designs, but obtained rights in the designs through assignment from another company. The latter commissioned various designers to create the designs. The defendants contested FEIA s capacity to invoke rights to the Community designs at issue. The Alicante Court hesitated on which paragraph of Article 14 of the EC Council Regulation to rely on, and referred the question to the ECJ. The Court ruled that Article 14.1 was applicable to commissioned designs, but that Article 14.3 was not.

18 Hints related to the use of product design Assignment of rights in the product design The EC Council Regulations contain a provision on the transfer of Registered Community Designs. However, only Article 28 explains the necessity of recording the assignment in order to be enforced regarding third parties. It does not provide indications as to the content of the assignment. In France, the rules applicable to registered designs indicate that the registration of a design or model confers to its holder a property right that he may assign or licence (Article L513-2 of French IP Code). However, registered design rules do not include a provision on the content of the assignment. Contents of an assignment should be examined with regards to copyright rules. The French IP Code includes provisions for specific assignments. But other types of assignments are possible without following the requirements of the law.

19 Assignment agreements must be drafted with great care Draft an extremely detailed clause. French Courts tend to consider that assignment cannot be presumed. What is not stated in the assignment agreement is not assigned. L Oréal case (March 16, 2010) - A decision of the Commercial Chamber of the French Supreme Court ended a dispute opposing L Oréal to the designer of the drawing reproduced on the box for the fragrance Loulou. The author had assigned rights to the drawing only for reproduction on packaging and boxes for products to be sold on the market. It could have been wrongly understood that this assignment would include the right to file a trademark corresponding to such a drawing. The Supreme Court applied the principle of strict interpretation of assignment. In the absence of specific provisions in the assignment agreement authorising L Oréal to file the drawing as a trademark, filing of the design was counterfeiting. The position of the French Courts is similar with respects to the broader agreement. The French Courts give a strict interpretation of the parties agreements.

20 The assignment regarding third parties The assignment of a Community Registered Design produces effects regarding third parties only if it is recorded in the Community Register. The French IP Code contains similar provisions. What are the consequences of design cancellation subsequent to the assignment? The French IP Code does not specify whether the assignment agreement is, in such a case, void only for the future or also void retroactively. Favour is given to cancellation with retroactive effect. This means that the assignor would have to reimburse the amount he received for the design assignment. In brief, according to French law, the parties have to address certain issues in the assignment agreements. Such agreements are strictly interpreted. The product s design may also be used for licensing.

21 Licensing the product s design Article 32 of the EC Regulation of December 12, 2001 requires that Community designs indicate the nature and effect of licence agreements. - Licences may be granted on an exclusive or a non exclusive basis. - Licences may be granted Community wide or for parts of the Community. - Licences confer the right to the Licensee to initiate counterfeit actions subject to Licensor s authorization or, in the absence of such an authorization, an action after notifying the Licensor. - Licences confer to the Licensee the right to intervene in counterfeit actions initiated by the Licensor in order to obtain compensation.

22 In France, the provisions of the French IP Code related to registered designs do not impose any substantial conditions for licences. Similarly, French provisions on copyright do not address the issue of licensing. In France, licences are subject to the will of the parties. They will be governed according to the French Civil Code (article 1134). This means that whatever is stipulated in an agreement, entered into lawfully, must be followed. However, the agreement is still subject to other legal rules that may affect the agreement: contract law and competition law.

23 Effects of the licence Registered licences may produce effects on third parties. A licence cannot be limited to certain products for which the Community design is registered. It is recorded for all products as if there were no limitations (part 6 of the OHIM s Directive on Licence). The licensee may seek protection of his rights in the design. The licensor may contest the poor execution of the licence agreement by the licensee. Contractual responsibility is grounds for action but counterfeiting may also Contractual responsibility is grounds for action, but counterfeiting may also be grounds.

24 Law applicable to the licence agreement If the licence is granted to a company located in another country, licensing raises the issue of applicable law. In France, persistent case law of the French courts provide that the law of the provider is applicable, not the law of the distributor, in the absence of stipulation by the parties. However, attention should be paid to the Rome 1 Regulation which replaces the Rome Convention and provides opposite solutions. I h f di ib i b F h di ib In the case of a distribution agreement between a French distributor and a Spanish provider, French law will be applicable according to Rome 1 Regulation.

Layout-Design (Topography) of Integrated Circuits Ordinance No. 17 of 1994 *

Layout-Design (Topography) of Integrated Circuits Ordinance No. 17 of 1994 * as last amended by the Adaptation of Laws (Courts and Tribunals) Ordinance No. 25 of 1998 Chapter 445 Section 1. Short title