France: JM Weston wins against The Frye Company in a counterfeiting and parasitism case
JM Weston (France) sued The Frye Company (USA), a subsidiary of Global Brands GroupHolding Ltd. (Hong Kong), before the Paris court of first instance for counterfeiting and unfair competition (TJ Paris, 3rd ch., 3rd sect., May 29, 2020: No. RG 19/10042 – No. Portalis 352J-W-B7D-CQSRQ). The Frye Company had reproduced and imitated JM Weston trademarks on thefryecompany.com, amazon.fr, the packaging, and the invoices. This judgment offers an opportunity to discuss a few significant aspects of infringement and unfair competition under French law: the collection of evidence (1), the infringement of intellectual property rights per se (2), and remedial measures (3).
1. The collection of evidence
Lawyers use many means and procedures to prove an infringement of intellectual property rights (IPR) on the Internet. To begin with, the owner of the intellectual property right can use monitoring tools developed to detect counterfeits in the vastness of the digital ocean. In cases where counterfeits are detected, the IPR holder may, subject to the protection strategy and the circumstances of the case, decide to mandate a bailiff with the mission to report the facts. In this case, the bailiff’s statement established that The Frye Company had reproduced the WESTON brand on its site and on amazon.fr to designate leather shoes and gloves. He also transcribed the purchase and receipt of the counterfeit goods:
“The purchase report (…) and the receipt of the corresponding goods (…) establishes the identical reproduction, without modification or addition, of the trademark ‘WESTON’ on the packaging of the products, on the product label (…) and on the invoice (…)“.
Finally, to establish the extent of its damage, JM Weston asked the court to order the defendant to communicate the accounting information relating to the counterfeit products. The court denied this request without providing any reasons. However, several deductions can be put forward, one of which should draw attention: despite a cease and desist letter, and the summons (Convention of November 15, 1965, relating to the service abroad of documents and extrajudicial in civil or commercial matters: hcch.net), the defendant did not take part to the judicial proceedings. However, the penalty requested by JM Weston (500 euros for each day of delay) could have been tough enough to compel The Frye Company.
2. Infringements of intellectual property rights
For the court, The Frye Company has committed acts of counterfeiting by reproduction and imitation under Articles 9 of Regulation (EC) No. 1001/2017 of June 14, 2017, L. 713-2, and L. 713-3 of the French Intellectual Property Code.
Under French law, under certain conditions, the IPR holder can sue a faulty operator for both counterfeiting and unfair competition (for another recent example, see E. Gillet, “Parasitism: the filing of a mark used by a competitor and unprotected (for certain products) to capture the visibility created by this competitor on Amazon”, Lexology.com, July 5. 2019). To this end, the complainant must demonstrate acts of unfair competition that are distinct from counterfeiting, as the court recalled:
“Are punishable under unfair competition, based on Article 1240 of the Civil Code, behaviors distinct from those invoked under counterfeiting, faulty because contrary to the practices in the business life, such as those aiming at creating a risk of confusion in the minds of customers on the origin of the product, or those, parasitic behaviors, where faulty operators take advantage of the economic asset of others, giving them an unjustified competitive advantage which is the fruit of know-how, intellectual work and investments, without spending a penny”.
In this case, the court found that The Frye Company had committed two types of parasitic acts.
First, by using the term “WESTON” in such a way as to create a likelihood of confusion in the mind of the consumer, the defendant has infringed the distinctive signs other than marks, that is to say, the corporate name, and the trade names, to which should be added domain names.
Secondly, the court considered that:
“The actions of the defendant are also harming the distribution network organized by the JM WESTON, both on the internet in France and Belgium, and physical shops, generating continuous expenditure and investments, and for the maintenance of which the applicant company bears high operating costs of approximately 10 million euros per year“.
Consequently, unauthorized distribution, outside a selective distribution network, to benefit from investments without being subject to constraints, constitutes an attack on the network and, legally, an act of parasitic competition. The solution is old since in 1992, the French supreme court had listed as unfair competition the fact, for an unauthorized seller, to market the products of a network” without being subject to the usual constraints of authorized distributors [by benefiting], in addition, the advertising value of the trademark to develop its own marketing” (Légifrance.gouv.fr). In the digital age, the principle is all the more relevant.
3. Remedial measures
The court ordered several remedies against The Frye Company: the unavoidable prohibition of using the trademarks (3.1), the economic compensations (3.2.), and the publication of part of the judgment (3.3.).
3.1. The prohibition of using the trademarks
To begin with, the court prohibited the defendant from reproducing or imitating the plaintiff’s marks under penalty of 200 euros per infringement (JM Weston had asked 1,000 euros), the penalty being enforceable for one year.
3.2. Economic reparations
In terms of trademark infringement, the methods of calculating pecuniary compensation are set out in article L. 716-4-10 of the French Intellectual Property Code:
“To fix the damages, the court takes into consideration distinctly:
1 ° The negative economic consequences of counterfeiting, including the loss of profit and the loss suffered by the injured party;
2 ° The moral damage caused to the injured party;
3 ° And the profits made by the counterfeiter, including the savings in intellectual, material, and promotional investments”.
However, the court may, as an alternative and at the request of the injured party, award a lump sum as damages. This sum is greater than the amount of royalties or rights that would have been due if the infringer had requested authorization to use the right which he infringed. This sum is not exclusive of compensation for moral damage caused to the injured party“.
In this case, JM Weston had estimated its damage at 200,000 euros. The judgment does not indicate whether it had explicitly requested, primarily, an amount based on 1° and/or 2° of the 1st paragraph of article L. 716-4- 10 and, on an alternative basis, a lump sum based on paragraph 2 of the same article. Additionally, the judgment also does not specify the method of calculation used to decide the amount of 20,000 euros. It merely refers to “the patrimonial value” and “the distinctive value” of the trademarks, without indicating any precise basis. It could be the “negative consequences of counterfeiting” (1st paragraph, 1°) and/or “moral damage” (1st paragraph, 2°), the benefits of infringer (1st paragraph, 3°) being, de facto, excluded from the analysis. The compensation could also be a lump sum which, in this case, cannot be “greater than the amount of the royalties or rights which would have been due if the infringer had requested authorization to use the right which he infringed“, knowing, moreover, that “this sum is not exclusive of compensation for moral damage” Basically, the reasoning seems a little vague. However, this is essential information for victims of counterfeiting. Thorough knowledge of the calculation of pecuniary compensation would allow the injured parties to make legitimate expectations capable of developing litigation strategies approaching judicial reality. In the present case, the sum awarded for compensation for trademark infringement corresponds to only 10% of the sum initially requested.
Regarding the compensation due to parasitic acts (unfair competition), JM Weston had estimated it at 75,000 euros. Unlike the principles governing the law of trademarks, the provisions relating to tort law confer on the judge a discretionary power of appreciation. In this case, the court evaluated the amount at 30,000 euros.
3.3. Publication of the judgment
Article L. 716-4-11 of the French Intellectual Property Code provides that “[t]he court may (…) order any appropriate measure of publicity of the judgment, particularly its display or its publication in full or in extracts in newspapers or on the online communication services that it designates, in the manner it specifies“. When circumstances reveal online counterfeiting, it is strongly recommended to include such a request. In the present case, the court granted the following relief:
“Orders THE FRYE COMPANY, to publish at the top of the home page of its website, accessible in France at <www.thefryecompany.com> in bold, black characters on a white background, of 0, 5 cm high, in a box, under the title “judicial notice” in characters 0.7 cm high, of the following judicial notice:
“By judgment dated March 27, 2020, the Paris Court of Justice condemned THE FRYE COMPANY for counterfeiting and parasitic competition, due to the unauthorized use of the WESTON’ and ‘JM WESTON’ trademarks’, which are owned by JM WESTON “, for a period of 45 days, past the deadline of eight days after the service of this decision, under penalty of 1,000 euros per day of delay, the penalty being enforceable for 6 months”.
The publication, in French, on a site available exclusively in a foreign language, poses an insoluble difficulty. Of course, a translation would alert a broader range of consumers. However, decisions are made on behalf of the French people and such a translation, assuming that the counterfeiter consents, would lack foundation and legitimacy. On the other hand, when the circumstances lend themselves to it, the publication of the decision on the Amazon.fr page controlled by the counterfeiter is possible and desirable.
In principle, the amount of the penalty payment should compel the infringer to post the infamous information ordered by the judge. However, this issue can be settled, and some counterfeiters would prefer to pay an additional sum rather than exposing their reputation to public outcry.