Unfair competition

Freedom of trade and industry is a fundamental principle of our law.

This principle includes the freedom of competition, according to which the entrepreneur has the right to compete freely with others.

However, this principle is not an absolute one and is limited by the need to respect the elementary loyalty that must govern relations between competitors.

It is thus sanctioned, on the basis of article 1240 of the french Civil Code (tort liability) any unfair behavior by which an economic operator (such as: individual, company or group of companies) seeks to take undue advantage of the efforts of a competing company and/or to create a risk of confusion with its activities.

In order to justify an action for unfair competition, it is necessary to prove the existence of a fault attributable to its author, of a prejudice resulting from this fault and of a causal link between the two, which is regularly recalled by the Courts.

In matters of unfair competition, case law assesses fault in the following manner:

“The assessment of the fault with regard to the risk of confusion must result from a concrete and detailed approach of the facts of the case taking into account in particular the more or less slavish, systematic or repetitive character of the reproduction or the imitation, the age of use, the originality and the notoriety of the copied service ” (“cour d’appel” of Paris, November 18, 2015, No. 13-14.017)

Finally, with regard to the relevant public in matters of unfair competition, the Court of Cassation considers that ” the risk of confusion is assessed for a consumer of average attention who does not have the litigious products at his disposal at the same time. (Cass. com., July 3, 2001, n°99-19.632).

As for free-riding, it is consistently defined as :

” The set of behaviors by which an economic agent interferes in the wake of another in order to benefit from his efforts and know-how, without spending anything or by incurring much lower costs than those he would normally have had to face in order to achieve the same result if he had not benefited from the other’s efforts. ” (Paris Court of Appeal, January 24, 2018, No. 17-10.971).

Parasitism corresponds to all the actions by which an economic agent interferes in the wake of another in order to take advantage, without spending anything, of his efforts (financial investments, work carried out etc…) and of his know-how.

Unfair and/or parasitic competition is increasingly used in the context of indirect protection of intellectual property assets.

Thus, unfair competition and/or parasite claims are regularly made in the absence of private rights.

However, an action for infringement and an action for unfair competition and/or parasitism have very different causes and grounds.

The infringement action sanctions the infringement of a private right, whereas the unfair competition action sanctions a fault.

Thus, in addition to an infringement action, the unfair competition action will require the demonstration of distinct facts (Cass. com., Sept. 18, 2019, n°17-23.253).

However, the Court of Cassation considers that an action for unfair competition can validly be brought, in the alternative, by a person who does not have a private right, even if the said action for unfair competition is based on the same facts as those alleged under the counterfeit (Cass. civ.^1ère, Oct. 7, 2003). 2020, n°19-11.258).

In any case, it is strongly recommended to be accompanied by lawyers specialized in the field of intellectual property in order to benefit from their complete expertise and advice, in particular on compensation for damages (proof and calculation of damages) and on the possible methods of resolution in the context of a dispute.

Update on the statute of limitations

The action for unfair competition is subject to the common law statute of limitations set forth in Article 2224 of the french Civil Code:

“Personal or movable actions shall be barred after five years from the day on which the owner of a right knew or should have known the facts enabling him to exercise it.”

Thus, in a decision dated February 26, 2020, the “Cour de cassation” overturned a court of appeal which had considered that unfair competition would constitute “a continuing quasi-crime so that the statute of limitations does not begin to run until the day on which the offending acts cease. ” (Cass. com., February 26, 2020, n°18-19.153).

“Update on restrictive competition clauses

Article L.341-2-I of the french Commercial Code, resulting from the Macron Act of August 6, 2015, provides that. “any clause having the effect, after the expiry or termination of one of the contracts mentioned in article L. 341-1to restrict the freedom to carry on the commercial activity of the operator who has previously entered into such a contract shall be deemed unwritten.

In a case between a franchisor and its operator, the latter invoked article L.341-2-I of the french Commercial Code in order to challenge the validity of a clause in a franchise agreement concluded in 2005, which prohibited the operator from using the white and blue colors of the franchisor and required it to have its premises repainted within 6 months of the termination of the franchise agreement.

While the judges of appeal considered that the disputed clause should be deemed unwritten (Paris Court of Appeal, July 1, 2020, n°17-21.498), the “Cour de cassation”, in a decision dated July 16, 2020, considered that the clause should be deemed unwritten.
The Court of Appeal, in its judgment of February 2022, censured the appeal decision, pointing out that in the absence of retroactivity expressly provided for by the legislator, the new law cannot call into question the validity of a clause
contract governed by the provisions in force on the day the contract was concluded (Cass. com., February 16, 2022, n°20-20.429).

The disputed clause was also assessed under the general law of contracts. While the Court of Appeal had considered that the clause constituted “a restriction on the freedom of the operator to carry out his commercial activity”, the “Cour de Cassation” censured the appeal decision for having declared the clause null and void without having examined whether or not this infringement was disproportionate. The Court therefore confirms that the validity of a restrictive competition clause must be assessed in light of the principle of proportionality.

The Bouchara firm assists you in particular in :

• Detection of unfair competition (Internet monitoring, trademark monitoring, etc.);
• Protecting and defending your intellectual property assets in business life;
• Negotiations with a competitor;
• Initiation of unfair competition proceedings as a principal or subsidiary action before the civil courts;
• The establishment of the proof of the acts reproduced by statements of facts and procedures of request 145 according to the type of infringement.