The Court of Justice of the European Union (CJEU) ruled that the failure to comply with a clause relating to intellectual property rights in a software license agreement must be regarded as an ‘infringement of intellectual property rights’ within the meaning of the Enforcement Directive, and not merely as a contractual breach. Therefore, the holder of the intellectual property rights should be able to benefit from the guarantees provided by the latter Directive, irrespective of which (national) liability regime (contractual or extra-contractual) applies.
The cause for this decision was a French dispute between a software vendor and its customer regarding a software license agreement they entered into. The software vendor sued its customer for infringement of its copyrights and claimed related damages. The software vendor reproached the customer for (substantially) modifying the software and thereby violating a clause of the contract. In first instance proceedings, the claim of the vendor was dismissed because it violated the prohibition of non-cumulation of contractual and extra-contractual liability claims under French civil law. In this case, according to the court, it concerned a contractual liability claim while the vendor was trying to obtain compensation for damages resulting from a tort, i.e. the infringement of its copyrights. The software vendor appealed the first instance judgement and the Court of Appeal of Paris subsequently asked the CJEU for a preliminary ruling on the matter.
The legal background to this dispute is threefold. On the one hand, there is the Software Directive (2009/24), from which the (national) copyright protection for software originates. On the other hand, there is the Enforcement Directive (2004/48), a directive that stipulates various guarantees that EU Member States must provide for holders of intellectual property rights. One of these guarantees is that a rightsholder must be able to obtain adequate compensation for the damage he suffers as a result of an infringement. However, the Directive only defines the parameters to be taken into account in the assessment of damages and does not elaborate on the legal basis for such compensation (contractual or extra-contractual). Other guarantees provided by the Enforcement Directive, include the preservation of evidence (e.g. seizures of counterfeit goods), provisional and precautionary measures and corrective measures. Finally, there is also national law (in this case French law) which, like Belgian law, prohibits, in principle, the cumulation of contractual and tortious liability claims.
The court circumvents the question
The initial reference for a preliminary ruling asked the CJEU to rule on the question whether rightsholders could be required to bring a contractual claim against licensees in the event of a breach of the licence terms, or whether they could also opt for an extra-contractual claim. The CJEU, however, re-formulated and limited the reference as follows: “does the breach of a clause in a software licence agreement relating to the intellectual property rights fall within the concept of ‘infringement of intellectual property rights’, within the meaning of the Enforcement Directive?”
The CJEU firstly considered that the Software Directive does not make the protection of the holder of copyrights in software dependent on the (extra)contractual nature of the infringement. Furthermore, the CJEU considered that the Enforcement Directive applies to ‘any’ infringement of intellectual property rights, also covering infringements resulting from the breach of a contract. Such finding is, according to the CJEU, confirmed by both the purpose of the Enforcement Directive (a high and homogeneous level of protection and the widest possible scope of application) as well as by the context (no limitation as to the origin, contractual or otherwise, of the infringement in order to be able to benefit from the guarantees in the Directive).
The CJEU then decided – not surprisingly – that the infringement of such clause in a software license agreement falls indeed within the concept of ‘infringement of intellectual property rights’ within the meaning of the Enforcement Directive and that, consequently, the rightsholder must be able to benefit from the guarantees provided for in that directive, irrespective of the applicable (national) liability regime. The CJEU also mentioned explicitly that the determination of the liability regime applicable in the event of such infringement falls within the competence of the Member States, whereby such regime should in no way constitute an obstacle to the effective protection imposed by the Enforcement Directive.
By reformulating the question, the CJEU avoided having to rule directly on the problem of cumulation of contractual and tortious liability claims in infringement situations, and passed on the hot potato to the national courts. In view of the differences between the two regimes, it therefore remains interesting to follow up how national courts will interpret them. After all, the differences, e.g. in terms of competent courts and the burden of proof, can be determining factors in legal proceedings. For example, proving non-compliance with a clause in a software license agreement could prove to be easier than proving copyright protection in a computer program and infringement thereof. Software vendors should therefore verify to what extent the national legislator has indeed implemented the guarantees from the Enforcement Directive into its national law. After all, their ‘enforcement’-toolbox may turn out to be fuller than expected. Vice versa, software buyers should be aware that they could be confronted with more far-reaching measures, should there be an alleged infringement of the software license agreement.
CJEU – Case C-666/18, 18 December 2019