The Legal 500

(1) No pre-dismissal actions are possible during maternity leave (2) Putting a protected employee back into his previous position after an unsuccessful attempt to a promotion requires the employee’s agreement (3) Means of measuring the electoral base of sector-based trade unions validated by the French Constitutional Council

(1) The general contractor is not liable vis-à-vis third parties for damages caused by his subcontractor (2) Termination by right of a commercial lease by application of a cancellation clause implies a breach of the express obligations contained in that lease (3) A provision in a lease transferring to the lessee the cost of major repairs and of walls and roofs, must be narrowly interpreted

(1) Patent law: the patentability of computer programs examined by the Enlarged Board of Appeal of the European Patent Office (2) Trademark law: Israel joins the International Trademark System (3) Trademark law: clarifications to the doctrine of exhaustion of rights

(1) Report on assessing sanctions for anticompetitive practices (2) The European Court of Justice maintains that in-house lawyers are not covered by legal professional privilege

(1) Clarification of “fault separable from the performance of duties” incurring a director’s personal liability vis-à-vis third parties (2) Clarification on the extension of the time limit for arbitration under §1456 of the French Code of Civil Procedure (3) The Jérôme Kerviel vs Société Générale case

(1) Invalidity of service agreements entered into between a company and its Chief Executive (2) Clarifications concerning L. 225-96 of the French Commercial Code (3) Transfer of an administrative authorization in case of merger by takeover (4) A seller’s warranty that liabilities are as stated does not cover a liability arising out of an event subsequent to the sale (5) Impact of the breach of a covenant on the right to receive payment when transferring shares (6) Validity of delegations of firing authority within SAS companies

Can a disciplinary file be used to assess the professional qualities of an employee when determining the order of redundancies?

The liability of a deputy project owner

Domain names: limiting the jurisdiction of French courts in cases of infringement by foreign websites

Clarification on the anti-competitive exchange of information between companies

Draft reform of the Safeguard Law: creating a “fast-track financial safeguard procedure”

The Faurecia decision: an end to the case law “saga” on limitation of liability clauses?

Sanction against communicating inaccurate market information: applies even in the absence of intent

Can a disciplinary file be used to assessthe professional qualities of anemployee when determining the orderof redundancies? 

A deputy project owner who has been instructed bythe project owner acts in the latter’s name and on hisbehalf. Therefore, any contractual obligations arisingfrom contracts signed between a deputy projectowner - acting in the name of his principal - andcontractors are the responsibility of the project owneralone. 

Domain names: limiting the jurisdictionof French courts in cases ofinfringement by foreign websites 

Clarification on the anti-competitive exchange of information between companies 

Draft reform of the Safeguard Law:creating a “fast-track financialsafeguard procedure” 

The Faurecia decision: an end to thecase law “saga” on limitation ofliability clauses? 

Sanction against communicatinginaccurate market information: applieseven in the absence of intent 

Acknowledgement of de facto termination and breaches by the employer

A lessor cannot assert provisions of leases departing from the status of commercial leases so as to defeat the lessee’s commercial property rights

Host or publisher? The January 14, 2010 ruling by the French Supreme Court in the Tiscali case

New European Commission regulation on vertical agreements and concerted practices adopted on April 20, 2010

Debtor protection or “safeguard” procedure: eligibility of the procedure

An act by an SAS company in violation of its by-laws will not necessarily be invalidated

Several recent Court of Appeal rulings (in particular, CA Versailles, 14th div., June 25, 2008, CA Versailles 5th div., Sept. 24, 2009 and CA Paris, 2nd div., Dec. 3, 2009 and Dec. 10, 2009) dealing with the validity of delegations of authority within a simplified joint stock company (société par actions simplifiée or “SAS”) have held that a delegation of authority within an SAS, to the benefit of a General Manager (Directeur Général), Assistant General Manager (Directeur Général Délégué), or any other person – whether a third party or not – is only enforceable against third parties to the SAS if and when (i) the by-laws expressly provide for such a delegation of authority and are on file with the competent registry, and (ii) such delegation of authority is mentioned on the company’s short-form certificate of incorporation (K-bis form).

1) Scope of a commitment to support a subsidiary contained in a letter of intent . 2) Insider Trading – Privileged Information . 3) Director’s liability to shareholders: distinct personal harm . 4) Right-of-first-refusal arrangements: contribution of securities . 5) Dispute in case of disposal of corporate rights: price setting or arbitration provision . 6) SAS: invalidity of a share put option . 7) An employee dismissed for serious misconduct cannot be deprived of the benefit of his or her stock options

Collective negotiations.

Are there any restrictions on the establishment of a business entity by a foreign licensor or a joint venture involving a foreign licensor, and are there any restrictions against a foreign licensor entering into a licence agreement without establishing a subsidiary or branch office?

Nous avons le plaisir de vous remettre une nouvelle édition de notre lettre d’information juridique.

Emploi des séniors : comment éviter la pénalité ?

Comme nos précédentes Newsletters, nous y aborderons des questions juridiques d’actualité ou liées à des problématiques que vous pourriez être amenés à rencontrer.

Getting the Deal Through Q & A

The Paris Court of First Instance has found Dailymotion liable for infringement of copyright and related rights ...

Up until now, discretionary bonuses escaped the application of the principle of “equal salary for equal work”. However, after the judgement of the Employment division of the Court of Cassation dated April 30, 2009, a bonus which is at the employer’s discretion no longer escapes the judge’s control.

Lafe performance penalties in work contracts. The parties to works contracts can insert clauses to penalise delays in paying for works as well as the late delivery of the work.

Control of concentrations: a transferor company was considered to have acquired joint control of the transferred company because of specific rights and close commercial agreements ...

Civil Procedure: the requirement of filing a cross appeal in writing in oral proceedings ...

The reform of the conditions for compensation for senior corporate executives of companies receiving State aid or support because of the economic downturn ...

What forms of business entities exist that would be relevant to the typical franchisor?

Business entities that are most commonly adopted by franchisors are those that allow them to limit their liability and thus to control the risk they are ready to assume when launching a franchise. (...)

Any promise of sale (“promesse de vente”) granted by a natural person, having as its object the sale of a building or of an interest in land, whose term of validity exceeds eighteen months, or any extension of such promise bringing its term to eighteen months, shall henceforth be memorialized in an official deed (“acte authentique”).

The “IIEESS” case offers a rare case of application by the courts of the provisions of law no. 98-536 dated July 1st, 1998, integrated in Art. L. 341-1 through L. 343-7 of the Intellectual Property Code (“IPC”)

Law no. 2008-1258 dated December 3rd, 2008 in favor of earned income was published in the Journal Officiel on December 4th, 2008 (the “Law”).

Executive Order no. 2008/1345 dated December 18th, 2008, entered pursuant to the authorization given by the law on the modernization of the economy dated August 4th, 2008 (LME), completes the reform of the law on distressed companies initiated by the “rescue” law (loi de sauvegarde) of July 26th, 2005. Virtually all of the provisions of the order (with some three exceptions, simplifying the arrangements for replacement of the juge-commissaire in case of impediment or if that judge is no longer in office by amending Art. L. 621-9 in fine) entered into force on February 15th, 2009 and apply to proceedings opened as of that date.

On November 13th, 2008, the government adopted Executive Order no. 2008-1161 modernizing the regulation of competition. This executive order has made a few key changes to the procedure in competition cases:

Much ink will continue to be spilled on the biggest fraud ever to hit financial markets. US$50 billion reported to have gone up in smoke, investors cheated throughout the entire world, and one man, Bernard Madoff, placed in house arrest in his New York apartment by the US courts, while awaiting trial.

So as to make the French financial marketplace more attractive, Art. 152 of law no. 2008-776 dated August 4th, 2008 on the modernization of the economy (“LME”), authorized the government to take the measures necessary to modernize the legal framework of the financial marketplace by executive order.

Are there any restrictions on the establishment of a business entity by a foreign licensor or a joint venture involving a foreign licensor and are there any restrictions against a foreign licensor entering into a licence agreement without establishing a subsidiary or branch office?

(French Supreme Court, 1st Civil Division, November 27th, 2008)

In France, the sale or purchase of blank recording media (CD or DVD) is subject to a payment called “private copy levy”, which is due to authors, performing artists and producers of phonograms or videograms under Article L. 311-1 IPC.

(Paris Court of Appeal, January 23rd, 2009)

The “IIEESS” case offers a rare case of application by the courts of the provisions of law no. 98-536 dated July 1st, 1998, integrated in Art. L. 341-1 through L. 343-7 of the Intellectual Property Code (“IPC”).

Law no. 2008-1258 dated December 3rd, 2008 in favor of earned income was published in the Journal Officiel on December 4th, 2008 (the “Law”).

Executive Order no. 2008/1345 dated December 18th, 2008, entered pursuant to the authorization given by the law on the modernization of the economy dated August 4th, 2008 (LME), completes the reform of the law on distressed companies initiated by the “rescue” law (loi de sauvegarde) of July 26th, 2005.

On November 13th, 2008, the government adopted Executive Order no. 2008-1161 modernizing the regulation of competition. This executive order has made a few key changes to the procedure in competition cases:

Much ink will continue to be spilled on the biggest fraud ever to hit financial markets. US$50 billion reported to have gone up in smoke, investors cheated throughout the entire world, and one man, Bernard Madoff, placed in house arrest in his New York apartment by the US courts, while awaiting trial.

So as to make the French financial marketplace more attractive, Art. 152 of law no. 2008-776 dated August 4th, 2008 on the modernization of the economy (“LME”), authorized the government to take the measures necessary to modernize the legal framework of the financial marketplace by executive order.

Business entities that are most commonly adopted by franchisors are those that allow them to limit their liability and thus to control the risk they are ready to assume when launching a franchise.

This issue features topical legal issues which you may encounter: (1) COMPANY LAW / SECURITIES LAW (2) COMPETITION / DISTRIBUTION (3) BANKRUPTCY (4) LABOUR & EMPLOYMENT LAW (5) INTELLECTUAL PROPERTY (6) NEW TECHNOLOGIES 

This issue features topical legal news as well as a focus on legal issues which you may encounter.

French Act no. 2008-3 dated 3 January 2008  on the development of competition to benefit consumers (the Chatel Act), provides for new measures to benefit consumers.

The new provisions are notably with regard to electronic communications contracts entered into with a consumer (a physical person), whether or not that person is acting for professional ends. They will enter into effect on 1 June 2008 and will be applicable to contracts already in force.

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After the file-sharing websites “DailyMotion” and “MySpace”, it was the turn of the famous online, free and collectively-compiled encyclopaedia “Wikipedia” to be hauled before French courts.

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The anti-infringement Act, which transposes European Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights into French law, establishes provisions regarding the simplification of proceedings (1), regarding the right of victims of infringement to obtain information on the perpetrators of the infringement relating to the strengthening of penalties (3).

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The French Act no. 2008-3 dated 3 January 2008  on the development of competition for the benefit of consumers, called the Chatel Act, provides for a certain number of important measures regarding relations between producers and distributors (retailers). These measures consist notably of modifying the method used to calculate below-cost selling thresholds (1), of requiring the execution of a single agreement setting out the terms and conditions which arise out of sales negotiations between suppliers and distributors/retailers (2), and of providing that failure to communicate the general terms and conditions of sales is no longer a criminal law offence (3).

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In a decision dated 15 May 2007, the French Court of Cassation ruled that
“when an employee requests the termination of this or her employment contract due to acts which he or she accuses his or her employer of having carried out, while continuing to work for the employer, and the latter then dismisses him or her, a judge must determine whether the request was justified; if so, the judge shall deem that the termination date was the date on which the dismissal letter was sent”
(French Court of Cassation (Labour and Employment Law Chamber) ruling, 15 May 2007, no. 04-43.663).

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The three major changes brought in by the Decree

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A shareholders’ agreement entered into for a term during which the parties shall remain shareholders in the company is an open-term agreement

(French Court of Cassation (Commercial Chamber) ruling on
6 November 2007, Société Compagnie Générale de Tourisme et d’Hôtellerie v. Société Compagnie Méridionale de Participation)

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AMF (the French Financial Markets Authority) clarifies the terms governing increases in share capital through the free allocation of share subscription warrants.

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- Clarification on the implementation of a termination clause
- Recipient of the lessee’s notice of termination upon expiry of the lessee’s three-year period

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Decree no. 2007-181 of the 9 February 2007 (the “Decree”) creates a commission under the aegis of the Agence Nationale pour la Cohésion Sociale et l’Egalité des Chances (“ACSE” or National Agency for Social Cohesion and Equal Opportunities) and the Centre National de la Cinématographie (“CNC” or National Motion Picture Centre) called the
“Commission images de la diversité” (Commission on images of diversity).

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Formalism of assignment of copyright: the Cour de cassation in favour of increasing the flexibility of the protection enjoyed by authors

French lawmakers have always been highly protective of author’s interests. For example, Article L. 131-3 of the Intellectual Property Code requires that rights assigned by an author must be restrictively listed and that their field of exploitation must be determined in terms of the scope, intended use, place and term.

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After many years, a case law position has developed concerning the application in trademark law of the parody exception existing in copyright law.

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The EC Court of First Instance has recently held that an agreement that aims at limiting parallel trade does not necessarily have for its object to restrict competition.

With the benefit of ten years’ experience in implementing its leniency program, introduced in 1996, the European Commission adopted, on 8 December 2006, a new leniency notice, aiming at increasing the efficiency and attractiveness of this policy which, according to the Commission, is “a powerful tool to detect, destabilise and terminate cartels.”

The leniency program, which also exists under French law, allows the Commission to offer complete immunity or a reduction of fines for undertakings involved in an anticompetitive practice, in exchange for disclosure of information concerning that practice and cooperation in the investigation conducted.

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Initiated with the Loi Evin and upheld by the Employment Division of the Cour de cassation in a ruling of 29 June 1995, smoking prevention efforts are stepped up with the Decree of
15 November 2006 amending Articles R.3511-1 et seq. of the Public Health Code (“PHC”) and are completed by several circular memos, specifically that of 24 November 2006 on the
fight against smoking, in particular in the workplace.

In application of these provisions, since 1 February 2007 smoking is, in principle, prohibited in all workplaces, subject to criminal prosecution.

As with any rule, this ban has certain exceptions that will be outlined below, before examining the tools made available to the employer, who becomes the main enforcer. Lastly,
failure to comply with the ban on smoking exposes both the employer and the employee to sanctions.

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In the presence of several categories of shares, Article 11 of the Decree now requires a description in the bylaws of any special rights attached to preferential shares.

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The AMF has recently broadened the scope of scenarios requiring mandatory recourse to an independent expert

Previously limited to squeeze-outs, the expert’s services are now required in the other cases cited by the AMF’s General Rules. These General Rules specify the rules for the appointment as well as the duties of the expert.

Only some of the new provisions of the AMF’s General Rules shall be mentioned below, since this article does not purport to be exhaustive.

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Takeover bid on Compagnie Européenne de Casinos: a hostile takeover bid can be
sidestepped by selling securities on the market

For the first time, a takeover bid facing off two potential purchasers was resolved not by a transfer (apport) of the target’s securities to one of the protagonists but by their sale on the market.

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The latest report1 issued by the Union des Fabricants (antiinfringment association) reports, figures in hand, a significant increase in infringment.

While infringment accounted for 5% of international trade in 2000, this figure is claimed to have stood at about 10% in 2005. The profits generated by infringment internationally is
estimated at EUR 400 billion a year.

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The law on copyright and related rights in the information society, adopted on 30 June 2006 by Parliament, was finally promulgated on 1 August 2006 (after consultation of the
Conseil Constitutionnel which had been referred to in respect of certain of its provisions).

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A complaint against two national cartels in the door manufacturing sector provided the French Competition Authority, the Conseil de la concurrence1 with the first opportunity
to apply, since its introduction by the law of 15 May 2001 on New Economic Regulations, the leniency procedure (some twenty cases are currently being reviewed).

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Based on eight years’ experience in the implementation of the 1998 guidelines on the method of setting fines, the European Commission adopted, on 26 June 2006, a new method for calculating fines levied on undertakings violating the antitrust
provisions of the Treaty (Article 81) and abuses of a dominant position (Article 82). This has taken the form of new guidelines, with the announced purpose of making the fines
levied more dissusasive so as to increase compliance with competition rules.

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Upon the renewal of a commercial lease, the rent can be increased from the initial rent.

When the term of the lease is less than 9 years, pursuant to Article L. 145-34 of the Commercial Code, the rent under the renewed lease should be capped absent any significant change in any of the factors in assessing rental value (inter alia features
of the premises, local marketability factors or prices habitually practiced in the neighbourhood).

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This summer court session resulted in some surprising rulings in dismissal cases that should lead employers to review certain practices.

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Law no. 2006-387 of 31 March 2006 transposes the European Directive of 21 April 2004 on takeover bids.
Only certain provisions of the law will be addressed below, since this presentation is not intended to be exhaustive.

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In a decision of 27 June 2006, the Cour de cassation (French
Supreme Court) found a bank liable for having exercised de
facto control through an intermediary, and sentenced it to pay
for the liabilities of a company in insolvency proceedings.

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