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    A new episode of protecting the famous red sole in China prompted us to consider this subject.

    In China and for the first time in this country, it could be conceded that a color affixed to a specific area could constitute a trademark.

    On February 3, 2010, the luxury shoe brand Christian Louboutin filed an international trademark application to protect, particularly in China, “the red color (Pantone No. 18.1663TP) applicable to the sole of the shoe”.

    After several rejections of Louboutin’s application by the Chinese courts, on the grounds that the trademark in question was devoid of any distinctive character, the case was brought before the Second Instance. It was then recognized that such a sign could constitute a trademark. However, this decision, which demonstrates a certain flexibility on the part of the Chinese trademark courts, remains provisional. The case must again be brought before the Chinese Trademark Review and Arbitration Committee, and the validity of Louboutin’s design trademark could still be called into question.

    But what does French law provide in this regard? While in theory it is not excluded to file a color as a trademark, cases of granting registration are rare.

    Article L711-1 of the Intellectual Property Code defines “a trademark or service mark” as “a sign capable of being represented graphically to distinguish the goods or services of a natural or legal person. Such signs […] can be established through the layout, combinations or shades of color“.

    Like any trademark, such a sign must be distinctive, i.e., allow a consumer to identify the commercial origin of the designated products/services in relation to their competitors’ products/services. However, a color is rarely perceived as a distinctive element, and it generally acquires its distinctiveness through use. In other words, because of its widespread use, a consumer will immediately associate the color with the entity behind the trademark. This is the case for Milka‘s lilac color, Hermes‘ orange or Tiffany‘s aqua blue, which are now registered, known and recognized trademarks.

    In addition, such a sign should be identifiable through a clear and precise graphic design. This condition cannot be met by simply reproducing the color on paper; the color shade must be clearly identified and specific using an internationally recognized color code, such as Pantone.

    Recent case law points out that trademarks consisting of a color do not easily meet these two conditions. However, this does not mean that they will be totally unprotected.

    Some colors are part of the visual identity of companies but do not benefit from brand status. However, in the event that a competitor adopts the same colors in order to mislead the public, the company may benefit from protection claimed on the basis of unfair competition.

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    On April 11, 2019, the Law “for the growth and transformation of enterprises” (PACTE Law) was adopted by the French Parliament.

    With regard to commercial companies’ requirement to appoint a statutory auditor, three major considerations deserve attention:

    1/ The thresholds that trigger the requirement for commercial companies to appoint a statutory auditor have changed

    The PACTE Law specifies and standardizes the thresholds beyond which the appointment of a tatutory uditor is mandatory for all commercial companies.

    Article 20 of the PACTE Law provides that commercial companies (which include SA, SCA, SAS, SAS, SARL, SNC, SCS) are required to appoint a statutory auditor if they exceed two out of three thresholds which will be defined in a forthcoming French decree and are expected to be modelled on the European thresholds for statutory audits, i.e.:

        4 million Euro in gross assets (at the close of the financial year)

        8 million Euro in turnover (at the close of the financial year)

        50 employees (average number of employees during the financial year)

    2/ The adoption of thresholds that trigger the requirement to appoint a statutory auditor for commercial companies that control or are controlled by other companies

    For any parent company, within the meaning of Article L. 233-3 of the French Commercial Code, the obligation to appoint a statutory auditor is stipulated when the group it forms with the company or companies it controls exceeds the thresholds set forth in the reform applicable to all commercial companies (see 1, above).

    For subsidiaries held directly or indirectly by one of the companies mentioned above, the obligation to appoint a statutory auditor is required for any “significant” subsidiary, i.e., one that exceeds thresholds that will be set by decree on the basis of three criteria: gross assets, turnover excluding tax or average number of employees employed during the financial year.

    3/ The reform comes into effect beginning in 2019

    The National Assembly rejected the three-year transitional period put forward by the Senate and stipulated that the measure would become effective as from the first financial year following the publication of the forthcoming decree on increased audit thresholds and by September 1, 2019 at the latest.

    With regard to the statutory auditors’ terms of office which expire after the Annual Shareholders’ Meeting or the relevant body approving the financial statements for the sixth financial year, for financial years ending on or after 31 December 2018, companies will be exempt from the obligation to appoint a statutory auditor provided that:

    – the sixth financial year closed no more than six months before the decree on thresholds became effective;
    – at the time of the current financial year-end, the company has not exceeded two of the three future thresholds;
    – the Shareholder Meeting and appointment of a statutory auditor will not have taken place before Article 20 comes into effect (on or before 1 September 2019).

    An exception has been granted to overseas departments where the effective date of the reform has been postponed until 2021.

    If the current terms of office of the statutory auditors are not immediately affected by the reform and continue until they expire – with the exception of early resignations – companies that approve the term of office of their statutory auditors after the entry into force of Article 20 of the PACTE Law and the decree on thresholds may apply the new thresholds in order to determine whether or not they should renew or appoint a statutory auditor.

© Schmidt Brunet Litzler