New law gives rights holders better weapons against counterfeiters

Finding the source 
Conserving evidence 
Improved temporary measures 
Better compensation and stronger sanctions

Last week the French Senate adopted a draft law that gives rights holders new and significantly improved legal weapons against counterfeiters. Initially intended to implement the EU IP Rights Enforcement Directive (2004/48/EC), the law actually goes further than the directive in many respects, making uniform and improving the procedures available to holders of trademarks, designs and models, copyrights and patents. 

Finding the source
The law makes it possible for rights holders to obtain more information as to the origin of counterfeit merchandise and distribution networks. Henceforth, not only the person who was in possession of the merchandise, but also any person who provided services used in the counterfeiting activity or who was reported as being involved in the production of the counterfeit merchandise, may be subject to a court order to produce all documents that could help to identify the source of the counterfeit merchandise and any distribution networks. Anyone who refuses to comply with the court in this regard may be subject to penalties. 

Conserving evidence
In order to prevent evidence from disappearing, the law also strengthens probative measures that can be granted by a court. The law unifies the counterfeit seizure (saisie-contrefaçon) procedures; previously these varied depending on the type of IP right at issue. From now on, rights holders may petition a court to order the seizure not only of allegedly counterfeit objects, but also of the equipment used to produce counterfeit goods, as well as any accounting or financial documents and other “relevant information” – regardless of the type of IP right being infringed. In addition, the statute of limitations granted to rights holders to file a claim will no longer be limited to 15 days in certain cases. The specifics of this are expected to be laid out in separate regulations. 

Improved temporary measures
The temporary measures are also harmonised for all IP rights. An IP rights holder may ask for any measure to prevent imminent infringement of its rights or to prevent continuation of the alleged acts of infringement, without being obliged to bring an infringement claim, as was formerly the case for certain types of IP right. In addition, the law provides new measures to guarantee the solvency of the presumed counterfeiter. A court may, when the circumstances include collection of damages, order the attachment of the presumed counterfeiter’s property and assets, which may include freezing any bank accounts. Courts may even grant a monetary provision to the rights holder in emergency interim proceedings when harm is not seriously disputed. 

Better compensation and stronger sanctions
Most importantly, the law improves the compensation available to rights holders. In effect, a company that is a victim of counterfeiting may petition for proportionate compensation. Henceforth, this will take into account the amount of profits made by the counterfeiter, which previously was disregarded by the courts, along with the losses incurred by the victim. The moral prejudice suffered by the rights holder will also be taken into consideration, which so far has been the case only for copyright infringement. Alternatively, the victim may petition a court to order payment of all-inclusive compensation, which may not be less than the amount of royalties that would have been paid to it under a licence.

The law also provides other sanctions against the counterfeiter, up to closing down a company that is guilty of counterfeiting. In addition, a court may order a recall of counterfeit products from commercial channels at the counterfeiter’s expense.

Further, the French law provides for aggravating circumstances, which were not included in the directive. Counterfeits that pose a danger to health or security will result in higher sanctions, up to a fine of €500,000 and a five-year prison sentence. This is particularly important as counterfeiting is no longer limited to luxury goods, but extends to areas such as pharmaceuticals and toys.

Finally, the law provides for the creation of specialised IP courts.

Some commentators have pointed out that the law includes no provisions regarding online infringement at a time when high-profile lawsuits are being brought against hosts of websites with infringing content. However, this law has been drawn up to apply to all counterfeiting and infringement, regardless of whether it takes place on the Internet. Liability of intermediaries will still be governed by specific regulations, which can also be applied to the liability of bodies such as online auction websites.