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Snapshot: technology dispute remedies in France | #cybersecurity | #cyberattack | #hacking | #aihp


Remedies and enforcement

Interim remedies

What interim remedies are available and commonly sought in technology disputes in your jurisdiction?

There are no particular interim remedies pertaining to technology disputes. There are, however, interim remedies available for intellectual property rights infringement. It follows from article L716-4-6 of the intellectual property code that the plaintiff in infringement proceedings may be granted, as part of summary proceedings (ex parte proceedings or adversarial proceedings), provisional measures, that is, measures intended to prevent an imminent infringement of the rights conferred by the title or to prevent the continuation of alleged acts of infringement, if necessary under penalty. An action before the court on the merit must however be brought after such interim remedies have been sought.

Another option would be to use the summary proceedings under article 834 and article 872 of the French Code of Civil Procedure in cases of urgency. It is then possible to ask the judge to order all measures that are not subject to serious challenge; and, even if there is any serious challenge, the judge could still order precautionary measures to prevent an imminent damage or to cease an obviously unlawful disorder (articles 835 and 873 of the French Code of Civil Procedure). 

Substantive remedies

What substantive remedies are available and commonly sought in technology disputes in your jurisdiction? How are damages usually calculated?

Substantive remedies related to technology disputes are usually based upon ordinary civil remedies. The principle of article 1240 of the French Civil Code is that every damage or harm caused by a person must be remedied by said person. However, in some cases, specific remedies tend to fix infringements of intellectual property rights. For instance, in patent infringement litigations, the patent holder usually seeks to prevent the infringing product (which contains some or all the parts of the patent’s subject) from being distributed and advertised on the territory in which he or she owns intellectual property rights. Remedies will also regularly take the form of financial compensation for the loss of opportunity or clientele, the loss of investment, the restitution of the price and the diminution in value of the licenced technology due to a non-compliance with the technology’s scope of exploitation.

Damages will generally be based upon the technology licensor gains or losses. To assess such a loss, several economic and judicial aspects are taken into account such as the influence of the intellectual property right on the market, the capacity of production of the technology holder, competition on the specific market. The unitary selling price of the intellectual property rights holder is also taken into account. Another important aspect when assessing the damage and the relevant remedy is the investment engaged for the exploitation of the licenced technology especially when the intellectual property right holder can show evidence of the sums of money he or she invested. Claims for reimbursement of irrecoverable costs based on article 700 of the Code of Civil Procedure (ie, attorney costs) are also systematic.

A recent case illustrates damages calculation relating to data loss and the principle of full reparation. The court pointed out that compensation for damage consists of compensating the injured party for the harmful consequences directly suffered as a result of the other party’s breach of contract (Nanterre Commercial Court, 23 April 2019, No. 2018F00579). Damages awarded must be calculated, not only according to the total cost of reconstituting the files, but only in consideration of the reconstitution of the files necessary for the customer to continue its activity. In other words, the loss suffered and compensable is limited to the cost of reconstructing only the data useful to the customer’s activity and not all the lost data.

Limitation of liability

How can liability be limited in your jurisdiction?

The parties may enter into restrictive or exclusive liability contractual clauses. Such clauses shall not apply in the event of gross negligence or fraudulent misconduct and are not valid in case of physical damages (eg, death or bodily injury). According to a recent case, gross negligence cannot result solely from a breach of a contractual obligation, even an essential one, and it must be deduced from the debtor’s conduct (TC Nanterre, 23 April 2019, No. 2018F00579). In addition, these clauses are valid as long as they do not deprive the contract of its substance or undermine public policy or a mandatory provision. 

A recent case gives an illustration of the derisory nature of a limited liability clause. The liquidator of a company sued a software publisher for damages following significant anomalies due to a software defect. The publisher opposed its limited liability clause that limits the compensation to €2,700. The Court of Cassation considered that this sum constituted a manifestly derisory cap. The clause, therefore, contradicts the scope of the publisher’s essential obligation to deliver functional software (CA Montpellier, 26 May 2021, No. 18/05776). 

Furthermore, clauses that excessively limit a party’s liability in such a way as to create a significant imbalance could result in that party being held liable under article 442–1, I, 2º, of the French Commercial Code.

Parties can also define largely force majeure to limit their liability. In most IT contracts, parties refer to the definition provided in the French Civil Code but in some cases, they expressly include specific events that may not be considered a force majeure event by French courts, such as strikes or cyber-attacks.

However, the parties must ensure limitation of liability clauses does not amount to a total exemption of liability beyond the traditional scope of force majeure, which could deprive a contract of its substance or create a significant imbalance in the conditions mentioned above.

Absent any contractual provision with respect to liability, French law provides that indirect damages are excluded and that only the harm suffered can be repaired. It means that parties must be in the same situation as before the damage occurred. 

Limitation of liability clauses will no longer apply if the contract is terminated (CA Montpellier, 22 May 2020, No. 17/03561).

The judge will try to determine what is the appropriate amount to repair the damage. 

French law prohibits personal enrichment in a liability action; accordingly, under French law, punitive damages are prohibited. However, case law accepts the exequatur of foreign arbitral awards or court decisions that have pronounced punitive damages if they are not disproportionate with regards to the damage suffered.

Liquidated damages

Are liquidated damages permitted? If so, what rules and restrictions apply?

In order to be valid, liquidated damages clauses must be expressly stipulated in the contract and known by the parties. The application of the clause is automatic as soon as a breach is established. The creditor must give the debtor formal notice to perform before invoking this clause unless the non-performance is final.

A judge may, however, review the amount provided in the liquidated damages clause if he or she considers that the amount is manifestly excessive or derisory. The parties may not derogate from this intervention by the judge. Moreover, in the event of partial non-performance of the obligation, the judge may moderate the compensation provided in proportion to the obligation actually performed.

Enforcement

What means of enforcement are available and commonly used by successful litigants in technology disputes in your jurisdiction?

The means of enforcement available and commonly used by successful litigants in technology disputes are the same as in standard disputes and are ruled by the French Civil Procedure Code. According to article 500 of the Code, a decision obtains res judicata when it is no longer subject to an appeal. The decision then becomes enforceable if accompanied by a formula of enforcement (article 502). Finally, the decisions can be enforced against those to whom they are opposed only if they are notified to them (article 503). It must be noted that with a recent reform of French civil procedure (December 2019), first instance decisions can be in principle temporarily enforced, unless otherwise provided by the law (article 514).

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