IP in business transactions: France overview
A guide to intellectual property law in France. The IP in business transactions Q&A gives an overview of maintaining an IP portfolio, exploiting an IP portfolio through assignment and licensing, taking security over IPRs, IP and M&A transactions, and the impact of IP on key areas such as competition law, employees and tax.
To compare answers across multiple jurisdictions, visit the IP in business transactions: Country Q&A tool.
This Q&A is part of the global guide to IP law. For a full list of jurisdictional Q&As visit www.practicallaw.com/ip-guide.
Overview of main IPRs
To be granted patent protection, an invention must comply with the patentability requirements of Article L. 611-10 of the French Intellectual Property Code (IPC), that is, the invention must be:
Capable of industrial application.
Not excluded from patentable subject matter.
Patents are granted for a term of 20 years, from the day the application is filed (Article L. 611-2, IPC). This duration can be extended by obtaining, under certain conditions, a supplementary protection certificate.
A patent is obtained through registration. Applicants can file a patent application with the:
National Industrial Property Office (Institut National de la Propriété Industrielle) (INPI), for French patents.
European Patent Office (EPO), for European patents.
World Intellectual Property Organisation (WIPO) or the INPI, for international patents.
The patent application procedure under French patent law is governed by Articles L. 612-1 et seq. and R. 612-1 et seq. of the IPC. Guidance can be found on the INPI website (www.inpi.fr).
To be registered as a trade mark, a sign must be:
Capable of graphical representation. This requirement will no longer apply to EU trade marks as of 1 October 2017, and national trade marks on implementation of Directive 2015/2436.
Ownership of a mark is acquired through registration, to the exception of well-known trade marks (Article 6 bis, Paris Convention for the Protection of Industrial Property (Paris Convention)).
Applicants may register a trade mark with the:
INPI, for French trade marks.
EU Intellectual Property Office (EUIPO, previously OHIM), for EU trade marks.
WIPO, for international trade marks.
Article R. 712-1 et seq. of the IPC sets out the application procedure for French trade marks.
Trade mark protection starts from the date of filing of the application and lasts for a period of ten years. Trade marks can be indefinitely renewed.
This protection applies in addition to the one conferred by the EU trade mark.
To qualify for protection, a work must be original, that is, bear the imprint of its author. Copyright arises automatically from the mere act of creation, that is, no registration is required.
Whereas moral rights are perpetual, patrimonial rights (that is, exploitation rights) are protected for a term of 70 years after the death of the author, the starting date being:
For works of collaboration: the date of the death of the last surviving co-author.
For pseudonymous, anonymous or collective works: the date of the work's publication.
In addition, posthumous works disclosed after the expiry of the 70 years are protected for 25 years from the date of their publication.
To qualify for protection, a French design must be novel and have individual character. Functional forms and designs contrary to public policy or morality are excluded from protection.
A design right is obtained through registration.
The INPI is the office in charge of designs' registration. Articles L. 512-1 et seq. and R. 511-1 et seq. of the IPC govern the application procedure.
This protection applies in addition to any registered and/or unregistered community design right that may exist.
French law does not protect confidential information, as such, by a specific set of rules.
Disclosure of confidential information is therefore sanctioned through:
Extra-contractual liability (unfair competition/passing-off).
Contractual liability (for example, breach of a non-disclosure agreement/confidentiality clause).
Criminal law. A specific protection against the disclosure (or the attempt of disclosure) of manufacturing secrets by any director or employee is granted by Article L. 1227-1 of the French Labour Code.
Company names, business names or shop signs. A company name is the name under which a company is registered with the Trade and Companies' Register (Registre du Commerce et des Sociétés) (RCS).
A business name is the name under which a company operates its business. A shop sign is the distinctive device placed in a business' premises. Both business names and shop signs can also be registered with the RCS.
Company names, business names and shop signs are protected against other distinctive signs (including trade marks) used to designate identical or similar goods or services. Business names and shop signs must have been used constantly and publicly on French territory.
Domain names. To obtain protection, domain names must be registered with Internet Corporation for Assigned Names and Numbers (ICANN) approved registrars.
They may also constitute prior rights barring use of a latter distinctive sign (identical or similar) used to designate identical or similar goods or services.
Geographical indications/appellations of origin. Specific attention must be paid to geographical indications/appellations of origin which benefit from a protection under French law.
Mask works. The final or intermediate topography of a semiconductor product that is the result of its creator's own intellectual effort can, unless it is commonplace, be filed with the INPI.
The owner of the title can prohibit any third party to reproduce, to commercially exploit or to import the protected topography.
Plant varieties. To qualify for protection, a new plant variety, whether created or discovered, must:
Be different from known varieties.
Be homogenous in its characteristics.
Remain stable, that is, identical with its original definition at the end of each cycle of multiplication.
New plant varieties can be protected through a "new plant variety certificate", which is delivered by the National Office for Plant Breeder's Rights (Instance Nationale des Obtentions Végétales) (INOV).
The new plant variety certificate confers on its owner an exclusive right to produce, introduce into the French territory, sell or offer for sale all or part of the plant or any element for the reproduction or vegetative propagation of the variety (or of varieties derived from it by hybridization) where their reproduction requires the repeated use of the original variety.
For further information about the main IPRs, see Patents, trade marks, copyright and designs in France.
Search and information facilities
Patents searches can be conducted through:
Patent agents and lawyers can conduct searches for applicants and owners.
Trade mark searches can be conducted through:
The TM view database, which allows to conduct searches through national trade marks registered in EU member states, EU and international trade marks and trade mark applications (https://www.tmdn.org/tmview/welcome).
Trade mark agents and lawyers can conduct searches for applicants and owners.
Since copyright is an unregistered intellectual property right there exists no specific website or database that could be used to conduct searches. However, there are registers for specific categories of subject matters/works, such as the register of cinematographic and audiovisual works (Registre Public du Cinéma et de l'Audiovisuel ) (RPCA), or the Register of the National Library of France (Legal Deposit).
Trade mark agents and lawyers can conduct searches for applicants and owners.
Considering that confidential information requires secrecy for its protection, there exists no specific website or database that could be used or consulted to conduct searches.
Company names, business names and shop signs can be searched through the website that provides information held by the RCS (www.infogreffe.fr).
Domain names searches can be conducted through the internet and approved registrars.
Trade mark agents can conduct any such searches.
Maintenance of main IPRs
To maintain protection, the owner must:
Pay patent annuities (Article L. 612-19, IPC).
Exploit its patents, as third parties could obtain a compulsory licence over a non-exploited patent (Article L. 613-11, IPC).
To maintain protection, the following conditions must be met:
The owner must renew the trade mark registration every ten years and pay the related renewal fee.
The trade mark must be put to genuine use in the French territory, in relation to the goods or services designated. (Failure to exploit the trade mark for an uninterrupted period of five years allows third parties to apply for judicial revocation of the trade mark for non-use.)
The owner must prevent the trade mark from becoming either generic or deceptive.
Copyright protection arises automatically and does not require any maintenance.
To maintain protection, the owner must renew the design registration every five years and pay the related renewal fee.
To maintain protection, the owner must ensure that the secrecy of the confidential information is protected against public disclosure, by taking the following steps:
Enter into non-disclosure agreement with the recipient of information.
Mark documents as "confidential".
Implement a confidentiality policy.
Take all necessary steps so as to prevent misappropriation by a third party.
To maintain protection, the owner must renew the domain name with the registrar.
Patents. It is recommended that prior right searches be conducted before the relevant authorities and databases (see Question 2, Patents).
Trade marks. It is recommended that prior right searches be conducted before the relevant authorities and databases (see Question 2, Trade marks) so as to ensure that the intended use is not conflicting with prior rights such as, for example, trade mark, design, company name, business names, surname, protected geographical indication and domain name.
Copyright. It must be ensured that:
The use of software, databases or other copyright materials comply with the terms of the licence granted, if any.
The company actually owns the copyrights over the material it uses.
Prior right searches can also be conducted through the relevant websites and databases (see Question 2, Copyright).
Design rights. Prior rights searches must be conducted before the relevant authorities and databases (see Question 2, Design rights).
Confidential information. An analysis of the conditions under which confidential information was disclosed must be performed.
In relation to all IPRs above, specific warranties should be sought from third parties in light of the contemplated use of elements protected by an IPR.
Rights' owners are advised to subscribe to IPRs monitoring services that monitor applications for registration of industrial property rights. It is also recommended to further monitor competitors' activities. Additional searches can be conducted by watching the new/competing products launched, reviewing catalogues, browsing on the internet, visiting points of sales, and the like.
As a preventive measure as well as a deterrent, the IPRs owner can apply for the withholding of infringing goods by French customs administrations.
In case of infringement, a business should immediately:
Evidence the infringing acts (for example, in a bailiff report).
Send an official summons letter requesting the immediate ceasing of infringing acts and reserving the right to initiate proceedings.
The two main steps in an IP audit are as follows:
Identifying all the IPRs either used or owned by the company that are necessary to conduct its business (identification of domestic, foreign and/or international patents, trade marks, distinctive signs, copyrights, neighbouring rights, designs (whether registered or not), domain names, software, databases, semi conductor chip rights, plant varieties rights, know-how, trade secrets, other intellectual property rights or related, and applications for the same).
Gathering further information, such as:
for each IPR, the details regarding the territory covered, ownership, registration number, registration date and expiry/renewal date (if applicable) and ensuring the payment of periodical fees (maintenance or renewal);
when applicable, the proof of use of the IPRs together with a list of the goods and/or services commercialised by the company that include/use IPRs;
identification of the key employees (for example, people implementing the know-how) with a particular emphasis on their employment relationship with the company;
details of proceedings or claims, actual or threatened, affecting the IPRs owned or used by the company;
details of all assignments, licences or other authorisations, research & development agreements, collaboration agreements including main clauses of these agreements such as, for example, the exclusivity, warranties, scope and term;
details of all security interests relating to the IPRs owned or used by the company;
details of the regulatory authorisations required for marketing products (if applicable).
Scope of assignment
A patent or a patent application can be assigned either in whole or in part (Article L. 613-8, IPC). The parties can decide that a reduced/limited term is to apply to the assignment.
A trade mark or a trade mark application can be assigned either in whole or in part (Article L. 714-1, IPC). However, the trade mark must be assigned for the entire territory and the assignment agreement must not include territorial restrictions. The parties can decide that a reduced/limited term should apply to the assignment.
Patrimonial rights attached to copyright work can be assigned either in whole or in part but any exploitation right must be expressly identified to be validly assigned from an author to a third party. Failure to do so results in the author being deemed to have retained all exploitation rights that have not been expressly assigned. Moral rights, in principle, cannot be transferred, licensed or waived by the author.
A design or a design application can be assigned either in whole or in part. However, a design must be assigned for the entire territory and the assignment agreement must not include territorial restrictions. The parties can decide that a reduced/limited term should apply to the assignment.
Confidential information as such does not constitute a proprietary good and is therefore not assignable per se. Nonetheless, confidential information often relates to know-how that can be transferred together with the assets of a business.
Company names, trade names and shop signs are usually assigned together with the entity to which they relate as part of the transferred goodwill.
Formalities for assignment
Patent assignment must be in writing. Registration of the assignment with the INPI is required for the assignment to be enforceable against third parties (Article L. 613-8, IPC).
Trade mark assignment must be in writing. To be enforceable against third parties, the assignment must be registered with the INPI (Article L. 714-1, IPC).
Only performance, publishing and audiovisual production agreements, and free performance authorisations must be in writing (Article L. 131-2, IPC). However, considering the importance of mandatory clauses in copyright assignment under Article L. 131-3 of the IPC, it is recommended that a written agreement be entered into in all cases, in particular when the agreement is entered into with the individual author.
Design assignment does not need to be in writing. However, a written assignment is strongly advisable. An assignment must be registered with the INPI to be enforceable against third parties.
Main terms for assignments
The main terms to be included in an assignment of IPRs include:
Object and scope of the assignment.
Identification of the rights assigned and the extent of the assignment.
For copyright assignments, a thorough identification of each assigned right, that is, the scope, purpose, means of exploitation, territory and the duration of the assignment. In addition, payment should be provided for by means of royalties, with the up-front payment being the exception.
Warranties and indemnities.
Governing law and the choice of jurisdiction.
Scope of licensing
A patent or a patent application can be licensed either in whole or in part (Article L. 613-8, IPC). The parties can decide that the licence be exclusive or non-exclusive and that a reduced/limited term apply to the agreement.
A trade mark or a trade mark application can be licensed either in whole or in part (Article L. 714-1, IPC). However, the trade mark must be licensed for the entire French territory and the licence agreement must not include territorial restrictions. The parties can decide that the licence be exclusive or non-exclusive and that a reduced/limited term apply to the agreement.
Patrimonial rights attached to copyright work can be licensed either in whole or in part. Moral rights cannot be licensed. The parties can decide that the licence be exclusive, sole or non-exclusive and that a reduced/limited term apply to the agreement. Nonetheless, there is no strict legal distinction between a copyright assignment and an exclusive licence over a copyright.
A design or a design application can be licensed either in whole or in part. However, a design must be licensed for the entire French territory and the agreement must not include territorial restrictions. The parties can decide that the licence be exclusive or non-exclusive and that a reduced/limited term apply to the agreement.
Formalities for licensing
A patent licence must be in writing. Registration with the INPI is required for the licence to be enforceable against third parties (Article L. 613-8, IPC).
It is not required that a trade mark licence be in writing. However, registration with the INPI is required for the licence to be enforceable against third parties, notably to validly assert one's right in the course of trade mark infringement actions.
It is advisable that any copyright licence be in writing, considering the importance of mandatory terms which must be included in copyright licence agreements.
A design licence need not to be in writing. However, a written agreement is advisable. To be enforceable against third parties, a licence must be registered with the INPI.
Main terms for licences
The following are the main terms to be included in an IP licence:
The scope of the licence, that is:
identification of the rights licensed;
Terms of exploitation.
Termination and rights on termination.
Warranties and indemnities.
Proceedings against third parties for infringement.
Ability to assign the licence to a third party.
Governing law and the choice of jurisdiction.
For copyright licences, a thorough identification of each right is required. Therefore, the agreement must specify, for each licensed right:
The means of exploitation.
The territory and duration of the licence.
In addition, payment should be provided for through royalties, up-front payment being the exception.
Registered IPRs can be secured and the IPC provides for specific rules for the pledge of the main registered IPRs (that is, patent, trade mark and design). Pledges and other securities are less common over copyrighted works. However, cinematographic and audiovisual works are often secured. These securities are registered with the RPCA.
Securities over IPRs are not commonly taken because of the following issues:
Since IPRs are intangible rights, their valuation may be difficult.
IPRs are temporary rights, precarious by nature.
Their efficiency may be affected by insolvency procedures.
In relation to all IPRs below, the main security interest taken is a pledge.
A pledge must be in writing (Article L. 613-8, IPC) and, to be enforceable against third parties, it must be registered (Article R. 613-55, IPC). A patent can be seized and sold by the patent owner's creditors (Article L. 613-21, IPC).
A pledge must be in writing (Article L. 714-1, IPC). Registration is required for a pledge to be enforceable against third parties (Articles L. 714-7 and R. 714-4, IPC).
A pledge must be in writing and, for audiovisual and cinematographic works, registered with the RPCA. Copyright royalties can be seized by the author's creditors (Article L. 333-1 et seq., IPC).
A pledge must be in writing. Registration is required for a pledge to be enforceable against third parties (Article R. 512-15, IPC).
In share and asset sales, the steps taken during IP-related due diligence are the same as in relation to IP audit (see Question 5). Specific attention is paid in share sales to the additional remuneration/fair price owed to employees who have created inventions.
See above, Share sale.
In share and asset sales, the following warranties should be given by the seller, among others:
Ownership of the IPRs.
Payment of all registration, renewal, maintenance and other fees.
Payment of all royalties and licence fees by the seller.
Absence of opposition, revocation or invalidity proceedings in relation to the IPRs.
Absence of any proceedings, claims or other disputes involving the seller in relation to the IPRs.
Absence of any right, title or interest in and to any IPRs of any employee (including additional remuneration/fair price) or consultant.
Validity and enforceability of the IPRs and agreements in relation to the IPRs.
Absence of any infringement by third parties of the IPRs and absence of any infringement by the seller of IPRs of third parties.
That the seller has done its best efforts to maintain the confidentiality of trade secrets and other valuable confidential information.
That the key employees will not leave the company after completion of the sale or that they have signed binding non-competition, confidentiality and IPRs assignments' provisions.
This is the same as for a share sale (see above).
Transfer of IPRs
A share sale does not affect the ownership of the IPRs held by the target company. However, change of control clauses in existing agreements involving the target may require the written consent of the other party to the agreement prior to the share sale.
By contrast to a share sale, an asset sale impacts on the ownership of IPRs. The buyer must ensure that:
No assignment clause or intuitu personae clause (that is, a clause specifying that the particular individual cannot be replaced under a contract) could prevent the sale.
The asset purchase agreement includes a complete and accurate list of the IPRs transferred.
In addition, the buyer must register the assignment with the INPI to ensure enforceability against third parties (see Question 7).
In France, joint ventures are often created in the context of a tender that involves complex technologies. Two companies, specialist in complimentary fields, would set up a joint venture to develop a new product that would integrate both of their technologies, mainly to offer the most competitive and advanced bid.
Joint venture agreements may also be entered into by a company that holds certain IPRs but lacks capital and/or manufacturing capacity to develop the IPRs.
When entering into a joint venture, the parties must include the following IP-related provisions, among others:
Licence to the joint venture of the existing IPRs necessary for the project and related warranties.
Terms of ownership of the IPRs developed by the joint venture and related registration and maintenance duties.
Commercialisation and exploitation of the new IPRs and products.
Terms of revenue sharing.
Scope and duration of the joint venture.
Termination (and post-termination) provisions.
Governing law and jurisdiction.
General provisions relating to the incorporation and operation of the company.
Main provisions and common issues
The main relevant provisions under national competition law are Articles L. 420-1 and L. 420-2 of the French Commercial Code (FCC). These provisions are equivalent in substance to Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and are applied jointly with Articles 101 and 102 of the TFEU where the disputed practice substantially affects trade between EU member states.
Article L. 420-1 of the FCC prohibits any concerted practice, convention, tacit or express agreement or coalition, that has the object or effect of restraining or distorting competition on a given market, in particular by:
Limiting access to the market or hindering competition by other undertakings.
Preventing prices from being freely determined by the market, by artificially encouraging price increases or reductions.
Limiting or controlling production, markets, investment or technical development.
Sharing markets or sources of supply.
This list is not exhaustive.
Certain practices (for example, price-fixing, output limitation) are considered as anti-competitive per se, that is, they are prohibited regardless of their effect on the market. Other practices are considered as anti-competitive only if they have a substantial impact on competition, which partly depends on the parties' market shares.
Article L. 420-2 of the FCC prohibits the abuse by one or more undertakings of a dominant position on the French domestic market or a substantial part of it. A dominant position mainly depends on the undertaking's market shares on the relevant market(s) but other criteria may be taken into account, such as:
The range of products.
Belonging to a large group of companies.
Abuse may be characterised, in particular, by:
Refusing to deal with an undertaking.
Applying discriminatory conditions of sale.
Commitments, agreements or contractual clauses implementing a practice prohibited under Articles L. 420-1 or L. 420-2 of the FCC are deemed invalid.
Under Article L. 420-4 of the FCC, an exemption is available for certain practices, such as:
Practices adopted as a result of the implementation of an act or a regulation.
Practices that have the effect of ensuring economic progress, reserving users a fair share in the resulting profit, without giving the undertakings involved the opportunity to eliminate competition for a substantial part of the products in question.
Agreements that are intended to improve the management of small or medium-sized undertakings (SMEs), if they fulfil the conditions detailed in the previous bullet point and provided that:
the French Competition Authority gives its approval; and
the Minister of Economy adopts a decree specifically exempting the relevant agreements.
Breach of the above provisions can be penalised by fines of up to 10% of the group's worldwide turnover. Furthermore, damages may be sought by competitors, suppliers or clients before the national courts, subject to French rules on tort liability.
Articles L. 430-1 to L. 430-10 of the FCC regarding merger control can also be relevant, as IPRs can be relevant in the assessment of the impact of a transaction on the market.
The following issues may arise in the exploitation of IPRs. The list is not exhaustive.
IPR licensing agreements
Where the IPR holder grants a licence to a competitor, it must refrain from, among other things, requiring the licensee to delay or abort the marketing of its products using the licensed IPR.
A mutual licensing agreement between competitors must not give rise to price-fixing or market-sharing practices.
Technology transfer agreements
A technology transfer agreement is a licensing agreement relating to technologies, whereby the licensor authorises the licensee to exploit the licensed technology for the production of goods or services. Under Regulation (EC) 316/2014 on the application of Article 101(3) of the TFEU (formerly Article 81(3) of the EC Treaty), to categories of technology transfer agreements (Technology Transfer Block Exemption Regulation), technology transfer agreements that may restrain competition on the market, are exempted depending on the parties' market shares. However, no exemption will be granted if the agreement contains any of the following restrictions:
Restrictions on the licensee's capacity to freely set prices.
Limitation of production.
Market sharing (under certain circumstances).
Companies can group into a technology pool but specific competition risks may arise under Article L. 420-1 of the FCC and Article 101 of the TFEU:
The European Commission considers that a technology pool necessarily implies the joint selling of the pooled technologies and that, where the pool essentially consists of substitute technologies (as opposed to complementary ones), there is a high risk of price-fixing.
Certain technology pools support de jure or de facto industry standards, which may imply that competing technologies be foreclosed from the market. In that case, the owner of the patent may be required to grant licences at fair, reasonable and non-discriminatory (FRAND) rates.
Refusal to license an IPR
In principle, the mere refusal to license an IPR is not prohibited. However, such refusal may amount to an abuse of a dominant position if all of the following conditions are met:
The IPR owner is dominant on the market on which it uses such right.
Access to the infrastructure covered by the IPRs is indispensable for the competitor to undertake a competing activity on an upstream, downstream or neighbouring market.
The infrastructure cannot be duplicated by competitors under reasonable economic conditions.
The refusal to license is not objectively justified.
The refusal prevents the entry on the market of a new product for which there is consumer demand.
Competition is excluded on the market.
Block exemptions of agreements
Article L. 420-1 of the FCC and Article 101 of the TFEU do not apply to restrictions of competition that are exempted under:
Technology Transfer Block Exemption Regulation.
Regulation (EU) No 1217/2010 on the application of Article 101(3) of the TFEU to certain categories of research and development agreements (Research and Development Block Exemption).
Regulation (EU) No 1218/2010 on the application of Article 101(3) of the TFEU to certain categories of specialisation agreements (Specialisation Block Exemption).
Regulation (EU) 330/2010 on the application of Article 101(3) of the TFEU to categories of vertical agreements and concerted practices (Vertical Restraints Block Exemption).
Individual exemption of agreements and abuses of a dominant position
See Question 18.
Due to dramatic differences among European countries regarding advertising laws and uses of third parties' trade marks, the EU issued a specific directive aimed at authorising comparative advertising and harmonising national laws on the matter (Directive 2006/114/EC concerning misleading and comparative advertising (Misleading and Comparative Advertising Directive)).
Article 4 of the Misleading and Comparative Advertising Directive is implemented into French law through Articles L. 122-1 (previously L.121-8) and L.122-2 (previously L. 121-9) of the French Consumer Code. As a result, use of a third party trade mark in comparative advertising is lawful only if the following conditions are met:
It is not false or likely to mislead.
It compares goods or services fulfilling the same needs or intended for the same purpose.
It objectively compares one or more material, pertinent, verifiable and representative characteristics of these goods or services, one of which may be the price.
Comparative advertising cannot:
Take unfair advantage of the reputation attached to a trade mark, manufacturer's brand or service trade mark, to a trade name, to other distinctive marks of a competitor or to the designation of origin as well as the protected geographical indication of a competing product.
Discredit trade marks, trade names, other distinctive signs, goods, services, activities or circumstances of a competitor.
Provoke confusion between the advertiser and a competitor or between the advertiser's trade marks, trade names, other distinctive signs, goods or services and those of a competitor.
Present goods or services as an imitation or replica of goods or services bearing a protected trade mark or trade name.
Notably, strict provisions of the Law 91-32 of 10 January 1991 relating to the struggle against tobacco consumption and alcoholism (Evin Law), which regulates advertising for tobacco and alcoholic beverages affect the use by economic operators of trade marks in relation to these products.
In addition, the Law 94-665 of 4 August 1994 relating to usage of the French language in France (Toubon Law) may also impact on the IPRs owner's ability to use its trade marks registered in a foreign language.
Employees and consultants
Where the inventor is an employee, ownership of the invention is automatically granted to the employer if the invention was made in the course of the employment, where the employment agreement or the scope of the employee's duties officially entrusted to him comprises an inventive mission. The inventor must receive an additional remuneration which can be fixed in compliance with the criteria set out in the IPC either in a collective agreement, the company's policy, or in an individual employment contract.
Where the inventor is an employee, the employer may ask to be granted the ownership of the inventions made during his employment (despite the absence of any specific inventive mission in the employment agreement), in the field of activity of the company, by reason of knowledge, use of technologies or specific means of the company or of data acquired by the company. In such a case, the employee must receive a fair compensation for the transfer of the invention to the benefit of the company.
Ownership of all other inventions belongs to the employee.
Under French law, copyright belongs to the author of a protected work even if it is created within the framework of an employment contract (Article L. 111.1, IPC). For the employer to secure ownership of the rights over the works created by its employees, a specific assignment of such rights is required, either in an employment contract or in a separate agreement. The assignment must fulfil the legal requirements (see Questions 7 and 8).
Notably, there are some exceptions to this principle; in case of journalistic works, software or works created by public officials, ownership of the patrimonial rights over works created by an employee are granted to his employer.
The principles are the same as in relation to copyright (see above, Copyright).
In the absence of any contractual provision to the contrary, an external consultant owns the main IPRs he creates under a consultancy agreement. To secure ownership of the IPRs created by a consultant, the commissioning party must provide for a specific assignment of such rights, either in the consultancy agreement or in a separate agreement. The assignment must fulfil the legal requirements (see Questions 7 and 8).
Income tax on royalties
The statements below are a summary provided for general information purposes only and should not be considered as a comprehensive analysis of all tax consequences that may apply.
Royalties paid to French corporations. A French corporation licensing IPRs is subject to corporate income tax (CIT) on the received royalties at 33.33% (plus 3.3% additional social charges on CIT leading to a 34.43% effective tax rate).
A temporary 10.7% surcharge of corporate income tax liability for large taxpayers (that is, whose turnover exceeds EUR250 million) applies to tax years closed from 31 December 2011 to 30 December 2016 (it is due to be repealed for tax years closed as from 31 December 2016).
French corporations subject to CIT can benefit from a 15% reduced rate (plus 3.3% additional social charges on CIT leading to a 15.5% effective tax rate and, if applicable, the 10.7% surcharge) on the royalties received provided that all of the following conditions are met:
The IPR licensed must qualify as a patent (patentable inventions and technical proceeds related to the patent are also eligible to the favourable regime). Foreign patents can also qualify for the favourable regime under certain circumstances.
The IPR must be booked as a fixed asset in the licensor's accounts.
If the licensor acquired the IPR for consideration, it must have held the IPR for two years at least. This condition is disapplied if the IPR has been created or received for no consideration by the licensor.
Corporations whose business is to acquire and resell patents cannot benefit from the reduced rate.
Royalties paid are fully deductible from the taxable income of the licensee. Nonetheless, when the licensor and the licensee are related companies (part of the same group) within the meaning of Article 39-12 of the French Tax Code (Tax Code), royalties paid by the licensee are deductible from its taxable result up to (approximately) 15/33 of the royalties (subject to the increased rates). The deduction limit is not applicable if the licensee can prove that the use of the patent:
Will create added value over the licensing period.
Cannot be viewed as an artificial scheme whose aim is to avoid French tax law.
French pass-through entities are in principle subject to the same regime as French resident individuals (see below).
Royalties paid to French resident individuals. Royalties received by a French resident individual are subject to income tax at progressive rates. Payment of royalties to the inventor is subject to a 30% rebate on the amount of the royalties received.
A French resident individual can benefit from a 16% reduced rate on the received royalties (plus 15.5% social contributions) if certain conditions are met, in which case the 30% rebate does not apply.
Royalties paid are in principle fully deductible from the taxable income of the licensee.
Royalties paid to non-French corporations. Corporations that are not French tax resident are subject to a 33.33% withholding tax on the royalties. The tax rate may be increased to 75% if the royalties are paid to a licensor that is established or domiciled in a jurisdiction listed as a non-co-operative state or territory (état ou territoire non coopératif) within the meaning of Article 238-0 A of the Tax Code.
Royalties paid or due by an individual or a corporation domiciled or established in France to an individual or corporation domiciled or established in a tax haven jurisdiction (that is, the tax paid in such jurisdiction is 50% lower than the tax the entity would have paid in France, had it been established in France) are only tax deductible to the extent that the paying entity can prove that there is a genuine licensing transaction and the remuneration (royalties) is normal (that is, in line with market practice) (Article 238 A, Tax Code).
Double tax treaties entered into by France generally provide for a favourable regime for royalties (withholding tax exemption or reduced rates). In addition, where the licensor and the licensee are related companies both located in the EU, the royalties can, under certain conditions, be exempted in France from withholding tax.
Several so-called "IP specific" or "patent box" tax regimes are currently being reviewed by the European Commission, among others under the EU state aid and harmful tax competition principles. Some of the principles discussed above fall within the French regime that is currently being reviewed as such. The conclusions reached by the European Commission could consequently trigger certain modifications in respect of such tax regimes, possibly with a retroactive effect. Similarly, the OECD's Base Erosion and Profit Shifting reports have suggested several modifications to such IP specific or patent box tax regimes to move toward an agreement on a so-called nexus approach, to better link tax benefits to the underlying economic activity. If this approach is adopted by France, the principles discussed above could be further modified.
Value Added Tax (VAT)
Licensing of IPRs qualifies as an immaterial service for VAT purposes.
Licence between two French residents which carry out an activity subject to VAT is subject to 20% VAT in France, payable by the licensor.
The licensee pays royalties inclusive of VAT and is entitled to deduct VAT paid from VAT collected or claim a refund of the VAT.
If the licensee that carries out an activity subject to VAT is not a French resident, or its French permanent establishment is not the lessee of the services, as part of the VAT territoriality rules, no French VAT is payable.
Income tax on disposal of IPRs
A transfer of IPRs by a French corporation may trigger capital gains subject to CIT. A French corporation can benefit from the long-term regime and the reduced rate of CIT under the same conditions as apply to royalties (see Question 24, Income tax on royalties: Royalties paid to French corporations).
A transfer of IPRs by a French pass-through entity or individual may trigger capital gains which can benefit from the long-term regime and the 16% CIT reduced rate (plus 15.5% social contributions) (see Question 24, Income tax on royalties: Royalties paid to French resident individuals).
However, the reduced rate never applies when the seller and the buyer are related companies (part of the same group) within the meaning of Article 39-12 of the Tax Code.
Capital gains on the disposal of IPRs by non-resident corporations are in principle not normally taxable in France except if the IPRs are allocated to a French permanent establishment. Certain double tax treaties entered into by France may further contain specific provision in this respect.
The disposal of IPRs qualifies as an immaterial service for VAT purposes and as such is subject to the same VAT regime as that for licensing (see Question 24, Value Added Tax (VAT)).
However, when the disposal of IPRs is included in the transfer of a French business as a going concern, the change of ownership can be VAT exempted under certain conditions (including a business continuity test).
A single disposal of used IPRs (patents only) is subject to a EUR125 fixed transfer duty. If the IPRs are unused, no transfer duty is generally due.
If the IPRs disposal may be qualified as a transfer of French clientele or a transfer of French going concern, such disposal may be subject to transfer duty at the following rates:
0% below EUR23,000.
3% between EUR23,000 and EUR200,000.
5% above EUR200,000.
Depending on the nature of the IPRs transferred, the value of the IPRs can be excluded from the tax base for transfer duty purposes (for example, patents will be excluded from the tax base of the business and only trigger a EUR125 fixed transfer duty).
IPRs transferred by means of a merger or assimilated operation can benefit from a favourable transfer tax regime where only a nominal tax is payable.
France is party to most major IP treaties, including:
WIPO Paris Convention for the Protection of Industrial Property 1883.
WTO Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS).
Patent Cooperation Treaty 1970 (Patent Cooperation Treaty).
European Patent Convention 1973/2000.
Strasbourg Agreement Concerning the International Patent Classification 1971.
Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure 1977.
Patent Law Treaty Geneva 2000.
Madrid Agreement Concerning the International Registration of Marks 1891 (Madrid Agreement).
Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks.
Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks.
Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks 1989.
Trademark Law Treaty 1994.
Singapore Treaty on the Law of Trademarks 2006.
Berne Convention for the Protection of Literary and Artistic Works 1886 (Berne Convention).
Universal Copyright Convention 1952.
Rome Convention for the Protection of Performers, Phonograms and Broadcasting Organisations 1961 (Rome Convention).
WIPO Copyright Treaty 1996.
WIPO Performances and Phonograms Treaty 1996.
Hague Agreement Concerning the International Registration of Industrial Designs 1925.
Locarno Agreement Establishing an international Classification for Industrial Designs 1968.
Agreement on a Unified Patent Court 2014.
A detailed list of treaties can be found at www.wipo.int/wipolex/en/national.jsp.
Due to the territoriality principle, foreign IPRs cannot, in principle, be enforced in France. However, France is a signatory country of all the major treaties and conventions providing for a system of international application and registration (see Question 26).
Under the Patent Cooperation Treaty, international registration of a patent can be acquired through the International Bureau of WIPO, either directly or through the industrial property official authority of the contracting party. An international registration has the same effect as a domestic application in each of the contracting parties designated by the applicant.
According to the Madrid Agreement and the Protocol Relating to the Madrid Agreement, international registration of a trade mark can be acquired through the International Bureau of WIPO, either directly or the industrial property official authority of the contracting party. An international registration has the same effect as a domestic application, in each of the contracting parties designated by the applicant.
Following the principle of national treatment as stated by the Berne Convention, works originating in one of the contracting states are given the same protection in France as the works of French nationals. In addition, under the principle of automatic protection, copyright protection is granted without any formalities.
Considering that a great majority of states are signatories to the Berne Convention, most foreign authors enjoy copyright protection in France by the mere fact of creation.
However, pursuant to the reciprocity principle, Article L. 111-4 of the IPC provides only for a limited protection (restricted to the moral rights of integrity and paternity) for works originating from a state which, according to the French law standards, does not provide adequate protection for works disclosed for the first time in France.
Under the Hague Agreement Concerning the International Registration of Industrial Designs, international registration of an industrial design can be acquired through the International Bureau of WIPO, either directly or through the industrial property official authority of the contracting party. An international registration has the same effect as a domestic application for each of the contracting parties designated by the applicant.
In addition, following the French principle of the unity of art, which provides for equal protection for works of art as for works of applied arts, rules relating to copyright apply to design rights.
In 2012, the European Parliament and member states agreed on the "unitary patent package", a legislative initiative consisting of two regulations and an international agreement establishing a unitary patent protection in the EU. The unitary patent package provides for enhanced co-operation between 25 member states (all member states except Italy and Spain).
The two regulations entered into force on 20 January 2013. However, they will only apply from the date of entry into force of the Agreement on a Unified Patent Court. Currently, only 11 states have ratified the Agreement (including France on 14 March 2014). To enter into force, it must be ratified by a further two member states (including Germany and the UK. The new system was expected to start at the beginning of 2017. However, with the result of the UK's referendum on its EU membership being in favour of a withdrawal, the whole future of the UPC and unitary patent project is now very much in the balance.
On 27 March 2013, the European Commission presented a proposal of a trade mark system reform. The European Parliament voted on 25 February 2014 on the "trade mark reform package". On 15 December 2015, the European Parliament approved the trade mark package. The reform consists of two texts:
Regulation (EU) 2015/2424, amending Regulation (EC) No. 207/2009 on the Community trade mark and Regulation (EC) No. 2868/95 of 13 December 1995 implementing Regulation (EC) No. 40/94 on the Community trade mark, and repealing Regulation (EC) No. 2869/95 on the fees payable to the OHIM (Trade Marks and Designs),which entered into force on 23 March 2016.
Directive (EU) 2015/2436 amending Directive 2008/95/EC relating to trade marks, which must be implemented by 14 January 2019, at the latest.
The reform package contains numerous innovations, including changes to the fee structure, criteria concerning the registrability of trade marks and procedural issues, as well as certain changes applicable to infringement proceedings and customs seizures. Listed below are some of the most noteworthy points and changes to be aware of:
All references to the Community are replaced with the EU. The Office for Harmonization in the Internal Market (OHIM) is renamed the European Union Intellectual Property Office (EUIPO) and Community trade marks are renamed EU trade marks.
From 1 October 2017, the requirement to represent a trade mark "graphically" will no longer apply to EU trade marks, making it easier to register non-traditional signs such as sounds or smells (provided that they can be registered in a manner which enables the competent authorities and the public to determine the clear and precise subject matter of the protection afforded to its proprietor).
Implementation of a new one-fee-per-class-system for trade mark applications and renewal of EU trade marks.
The Court of Justice of the European Union's decision in the IP Translator case (Case C-307/10) is incorporated. Therefore, only goods and services that fall within their literal meaning will be covered. The owners of EU trade marks filed before 22 June 2012 and designating the entire heading of a class had until 24 September 2016 to notify the Office of the European Union of their intention to seek protection in respect of goods and services beyond those covered by the literal meaning of the this heading.
Owners of EU trade marks can prevent third parties from bringing goods in the course of trade into the EU, even though those goods are not intended for the EU market, so the mere transporting or storing of goods through or in the EU could be an infringement. However, the entitlement to prevent goods in transit will lapse if the owner of the goods can show that the trade mark owner is not entitled to prevent the goods being placed on the market in the country of the goods' final destination.
The own name defence will only be available for natural persons.
On 8 June 2016, the European Parliament and the Council adopted Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. This harmonises the definition of trade secrets in accordance with existing internationally binding standards. It also defines the relevant forms of misappropriation and clarifies that reverse engineering and parallel innovation must be guaranteed, given that trade secrets are not a form of exclusive intellectual property right. It also provides that persons acting in good faith that reveal trade secrets for the purpose of protecting the general public interest (whistleblowers) will enjoy adequate protection. Therefore member states must dismiss applications for measures, procedures and remedies under the Directive where the alleged misuse or disclosure of a trade secret is carried out:
For exercising the right to freedom of expression and information, as set out in 11 of the Charter of Fundamental Rights of the EU, including respect for the freedom and pluralism of the media.
For revealing misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest.
Disclosure by workers to their representatives as part of the legitimate exercise by those representatives of their functions in accordance with EU or national law, provided that such disclosure was necessary for that exercise.
For the purpose of protecting a legitimate interest recognised by EU or national law.
Without establishing criminal sanctions, the proposal harmonises the civil means through which victims of trade secret misappropriation can seek protection, such as:
Stopping the unlawful use and further disclosure of misappropriated trade secrets.
The removal from the market of goods that have been manufactured on the basis of a trade secret that has been illegally acquired.
The right to compensation for damages caused by the unlawful use or disclosure of the misappropriated trade secret.
EU countries must implement the Directive by 9 June 2018.
On 14 September 2016 the Commission proposed two texts to adapt the EU copyright rules to the realities of the Digital Single Market:
Proposal for a Directive on copyright in the Digital Single Market.
Proposal for a Regulation laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions.
These proposals aim at:
Ensuring better choice and access to content online and across borders.
Improving copyright rules on research, education and inclusion of disabled people.
A fairer and sustainable marketplace for creators, the creative industries and the press.
These proposals include in particular:
A cross-border clearance mechanism for digital broadcasting by broadcasters and retransmission of broadcasts online.
An exception allowing educational establishments to use materials to illustrate teaching, extended to the use of digital tools and to online courses across borders.
A specific exception allowing research organisations to conduct text and data mining for scientific research purposes.
A new mandatory exception allowing cultural heritage institutions to make copies of works in their collections to preserve them digitally.
An obligation for online services providers that store and give access to a large amount of works uploaded by their users to conclude agreements with right holders for the use of their works and to take measures such as the use of effective content recognition technologies to avoid unlawful content.
A transparency obligation on the contractual counterparty of creators on the exploitation of their works and performances from those to whom they have licensed or transferred their rights, coupled with a contractual adjustment mechanism.
A new related right for media organisations to cover digital uses of press publications.
These texts will now follow the ordinary procedure involving the European Parliament and the Council of the member states. This process will take at least 18 to 24 months. Therefore, it is unlikely that these proposals will become binding on member states before 2020.
*The authors express their special thanks to Nicolas André, Claire Lavin and Pauline Desjours for their valuable input into the writing of this article.
Professional qualifications. Paris, 1992
Areas of practice. IP (contentious and non-contentious); advertising; licensing and technology transactions.
- Frequently assists companies with their initial public offering on Euronext.
- Represents international clients in a pan-European IP right infringement litigations (patent, trade mark, design, copyright and geographical indications).
- Advising multinational clients on strategic IP matters and the implementation of programmes aimed at securing and enforcing their IPRs.
- Regularly assists clients in drafting and negotiating IP-related contracts (assignment, licensing, franchise and co-existence).
- Broad experience in the field of protected geographical indications and appellations of origin (AOC).
- Former president of the Association des Praticiens du Droit des Marques et des Modèles (APRAM).
- Member of the International Trademark Association (INTA).
- Member of the Association Internationale des Juristes pour le Droit de la Vigne et du Vin (AIDV).
Professional qualifications. Paris, 2010
Areas of practice. IP (contentious and non-contentious).
- Frequently assists companies with their initial public offering on Euronext.
- Advises multinational clients on strategic IP matters and the implementation of programmes aimed at securing/enforcing their IPRs.
- Handles complex IP litigation matters for French and international clients before national and European courts and institutions.
- Regularly assists clients in drafting and negotiating IP related contracts.
- Member of the Association des Praticiens du Droit des Marques et des Modèles (APRAM).
- Member of the International Trademark Association (INTA).
- Member of the Association Internationale des Juristes pour le Droit de la Vigne et du Vin (AIDV).