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04/17 2019

Proud to be ranked in Legal 500 Tier 3 for IP, designs, copyrights and trademarks

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    “The main name to note is Delphine Brunet-Stoclet, who handled sensitive and high-stakes litigation on behalf of well-known clients and assisted them with issues surrounding the filing of new trade marks. Marie André-Nivet was recently promoted to senior associate and is also notable”

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04/04 2019

French Tax Law | Paris Court of Appeal confirms reclassification of a securities transfer at derisory price as disguised gift

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    After examining a taxpayer’s personal tax situation, the tax administration considered that the transfer of securities at a derisory price, made between members of the same family, constituted a disguised gift.

    For that purpose, the Court implemented proceedings for abuse of process in order for the transfers disguised as gifts to be reclassified and to apply the transfer tax on gifts and the corresponding penalties.

    For the Committee on tax law abuse, called on for the case, the operation revealed, contrary to what the tax administration claimed, an indirect gift and not a disguised gift.

    In a March 18, 2019 decision, the Paris Court of Appeal ended up following the reasoning of the tax administration by qualifying the operation at issue as a disguised gift.

    First of all, the Court indicated that “a disguised gift is one that is done under the guise of a contract in return for payment. Although from a legal point of view, the operation is legitimate, the administration has the right to establish the genuine nature of the deed. Among the circumstances making it possible to characterize a disguised gift is the stipulation of a derisory price.”

    The Court then considered that “evaluating the securities at a symbolic value, unrelated to the real value of the property, which actually corresponds to a sale at an unusually low price, establishes the gratuitous nature of the agreements and the absence of any counterpart to the deed.”

    Although, in this instance, it was an exaggerated case of abuse of process, given the fictional nature of the deed, this legal precedent and the creation of a “mini abuse of tax law” by the most recent Finance law remind taxpayers of the special attention paid by the tax administration to operations of asset restructuring, as well as the necessity for those taxpayers to seek tax advice prior to any restructuring, allowing them to structure their operations as best as possible.

03/22 2019

Intellectual Property Law | Another unexpected legal development for the municipality of Laguiole

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    There’s been a victory for Laguiole, the village in Aveyron famous for its knives bearing a bee insignia on the handle, which since March 5, 2019 has benefited from the Paris Court of Appeal ruling that cancelled twenty brands using the “Laguiole” name.

    The municipality had been fighting for over twenty years against a Val-de-Marne businessman who in 1993 registered the Laguiole name as a trademark in France to designate not only knives, but linen, clothing and fertilizers as well. The range of products sold under that name did not come from the Laguiole municipality at all, and most of them were even imported products. The patent applicants were not citizens from the municipality either.

    As such, the Laguiole village craftsmen were deprived of the possibility of manufacturing or selling products under the “Laguiole” brand without being sued for counterfeiting. “Even with a locally made product, I would’ve been declared a counterfeiter, sometimes even up against Chinese products,” explained Thierry Moysset, manager of La Forge de Laguiole, a company manufacturing the ‘authentic’ Laguiole knife.

    In 2010, the municipality brought the case before the Tribunal de Grande Instance of Paris (district court), in hopes of obtaining the cancellation of the “Laguiole” brands. The case was dismissed and the ruling confirmed on appeal in 2014. However, in late 2016, the Court of Cassation introduced a new episode in the legal proceedings by partially annulling the Court of Appeal ruling; it noted that the Municipality had proven that the brands being sued had been registered maliciously.

    The case was finally judged on March 5, 2019 by the Paris Court of Appeal (Court of referrals), which ruled in favour of the Aveyron village, considering that the contentious brands had been registered “fraudulently” within the framework of a “strategy aimed at depriving the Laguiole municipality and its citizens of using the name”. In addition to the invalidity of the 20 brands registered, the municipality of Laguiole received $50,000 in compensation for the non-pecuniary damage suffered. The Court assessed that the Municipality had been deprived of its name and its reputation harmed.

    It is worth noting that to fight against such practices, the Hamon Law dated March 17, 2014 had already given territorial authorities new means of defence by allowing them to be informed by France’s National Institute of Intellectual Property (INPI) of any application for registering a trademark incorporating the name of the municipality or a similar name and by giving them the right to oppose its registration.

    This legal saga clearly sums up just how hard it is to protect the name of a regional authority in the face of a competing brand. A ruling that could therefore reveal the judges’ determination to protect local and “Made in France” interests.

    Caution: the ruling should nevertheless be taken with a grain of salt. Some Laguiole brands are still on the market and the businessman can still file another appeal.

03/07 2019

Corporate Law | Pacte law – New developments in terms of regulated agreements!

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    To prevent potential conflicts of interest, the regulated agreements procedure currently provided for in the French Commercial Code for public limited companies (sociétés anonymes) subjects agreements entered into between the company and one of its directors or main shareholders to prior authorisation from the Board of Directors, then to approval by the shareholders. The agreements for which one of those parties is indirectly concerned are subject to the same procedure (Article L. 225-38 of the French Commercial Code).

    Article L. 225-40 of the French Commercial Code provides that the “person interested” by the agreement cannot participate in the vote, without however indicating whether that interest can be indirect.

    Whereas the aim of this procedure is to comprehend agreements that do not reveal organic links between the contracting parties but that are nevertheless representatives of a conflict of interest hidden by contractual or company arrangements.

    Article 66 of the PACTE law intends to remove the ambiguity, by explicitly targeting both the person directly concerned and the one indirectly concerned. No definition of indirect interest is provided although the concept remains difficult to grasp.

    The article also proposes that the shares held by the person concerned, directly or indirectly, be taken into account for calculating the quorum when the general assembly’s decision is made dealing with the approval of the agreement in order to, in particular, facilitate making that decision.

    The same article plans to re-establish the right (eliminated in 2011) for any shareholder to request a list of current agreements concluded by the company under normal conditions (Article L. 225-39 of the French Commercial Code).

    Lastly, certain provisions are foreseen solely for listed companies:

    – The company governance report must mention the agreements concluded between the company representatives of the public limited company (SA) or limited partnership with shares (SCA) and any controlled company within the meaning of Article L. 233-3 of the French Commercial Code (modification of Article L. 225-37-4 of the French Commercial Code).

    – The company website must include the publication of certain information (list to be determined by order in French Council of State) concerning the regulated agreements at the latest at the time the said agreements are entered into (creation of Article L. 225-40-2 of the French Commercial Code).

    Although the changes foreseen have commendable objectives aimed at reinforcing control and transparency within companies and meeting the need of transposing Directive 2017/828/EU “Shareholders Rights II”, care should be taken not to overly complicate interactions used in the business world, where legal security and rapidity are essential.

    The Pacte law is currently under examination. We will inform you of the conditions for the effective implementation of these new provisions with a direct impact on the regulated agreements procedure currently provided for in the French Commercial Code.

02/21 2019

Labour Law | Uncertainty before the Labour Court – Could the scale that sets compensation amounts for unfair dismissals be contrary to European Union Law?

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    Decree n°2017-1387 dated September 22, 2017, on the predictability and security of labour relations, introduced a scale for compensations which allows employers and employees to have prior knowledge of the financial stakes for dismissals lacking any real and serious cause brought before the Labour Court (Conseil de Prud’hommes).

    As such, if the employee or employer refuses reinstatement into the company, the judge grants the employee compensation whose minimum and maximum amounts are already determined by the scale, based on the employee’s seniority and the size of the company (Article L.1235-3 of the French Labour Law).
    However, the scale is not applied in the event of dismissal deemed null and void due to the violation of a fundamental freedom, harassment or discrimination (Article L.1235-3-1 of the French Labour Law) .

    When the scale was set, it was the subject of much controversy and led to extensive press coverage.

    In a decision dated December 7, 2017, the Council of State (Conseil d’Etat) rejected the appeal by the French trade union CGT (Confédération Générale du Travail) which raised objections to the conformity of the scale.

    Likewise, in decision n°2018-761 DC dated March 21, 2018, the French Constitutional Council ruled the scale to be in compliance with the French Constitution.

    The scale should therefore be binding on the judge.

    Nevertheless, late 2018 and early 2019 were marked by several decisions by Labour Courts which refused to apply the scale. To our knowledge, five Labour Courts (1) nullified the compensation scale for dismissals lacking any real and serious cause.

    On the contrary, the CAEN Labour Court, in a decision by its settlement (départage) division dated December 18, 2018 (n°17/00193), applied it.

    The judicial battle is essentially about two legal points:

        – The direct applicability of the provisions of the Convention n°158 of the ILO and the European Social Charter by French judges.
        – The conformity of the scale with the principles of adequate compensation for the prejudice suffered within the context of the unfair breach of the work contract provided for in Article 10 of Convention n°158 of the ILO and Article 24 of the European Social Charter dated May 3, 1996.

    According to the Labour Court councillors who refused to apply the scale implemented by the September 22, 2017 decree, the scale is in violation of the European Social Charter and Convention n°158 of the ILO.

    We will now have to wait several months to see how the Court of Appeals and the Court of Cassation rule on the matter.

    Employers and employees are therefore once again in a state of uncertainty: the former can no longer precisely understand their judicial risk and the latter do not know the real financial stakes of legal proceedings they might initiate.

    (1) TROYES Labour Court via a decision on December 13, 2018, “Miscellaneous activities” division
    AMIENS Labour Court via a decision on December 18, 2018, “Trade” division
    LYON Labour Court via a decision on December 21, 2018, “Miscellaneous activities” section
    GRENOBLE Labour Court via a decision on January 18, 2019, “Manufacturing” division
    AGEN Labour Court via a decision on February 5, 2019, “Manufacturing” division

02/07 2019

French Tax Law | Finance Law for 2019: Introduction of the right for partnerships to revoke the option for Corporate Income Tax liability

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    In principle, partnerships such as general partnerships (société en nom collectif), limited partnerships (société en commandite simple), civil partnerships or limited liability companies whose single member is an individual (EURL) are not subject to Corporate Income Tax (CIT).

    Nevertheless, the abovementioned companies may opt for payment of the CIT.

    To be valid, the option must be filed with the tax authorities no later than the end of the 3rd month of the financial year for which the company wishes to be subject to the CIT for the 1st time.

    Such option, once exercised, was, until now, irrevocable.

    For the company financial years ending as of December 31, 2018, the 2019 Finance Law creates an exception to this principle of irrevocability.

    From now on, companies having opted for CIT liability will have the right to revoke that liability at the latest in the 5th financial year following the year during which the option was exercised.

    To be deemed valid, the revocation must be filed with the tax authorities before the end of the month preceding the payment deadline for the first instalment of the corporate tax for the fifth financial year.

    If no revocation is filed within that time period, the option for the CIT shall then become irrevocable.

    The aim sought by lawmakers is to allow companies, which realize in retrospect that the regime is not the one best suited to their needs, not to be penalized by giving them the right to reconsider their decision.

    In terms of taxes, revoking the option for CIT is considered as a cessation of business, which, in principle, leads to the immediate taxation of operating profits and tax-deferred profits made and not taxed, as well as any provisions or capital gains for which taxation had been deferred.

    However, in the absence of a new legal entity being created, the consequences of the cessation of business are expected to be attenuated, if no change has been made to the book values of the assets and if taxation remains possible within the framework of the new tax regime to which the company is subject.

    Make sure to ask us for advice before making such a decision.

01/24 2019

Intellectual Property Law | “Hakuna Matata”: does the trademark have something to worry about?

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    “Hakuna Matata”! Many of us associate that phrase with the American firm, Disney, and its animated feature film The Lion King. Nonetheless, the phrase no longer benefits from the carefreeness of the 1990s.

    This now well-known catchphrase was registered as a trademark back in 1994, when The Lion King was released in movie theatres by the American company DISNEY ENTERPRISES. It was for a French trademark designating restaurant services, and an American trademark for products such as t-shirts. It means “no worries” in Swahili, a language used by a major part of Sub-Saharan Africa.

    The announced release of Disney’s new version of The Lion King scheduled for July 2019 has given rise to many reactions from East African populations. An online petition against the registration of the expression as a trademark has officially requested the American firm to relinquish its right to the trademark.

    Part of the African public opinion does indeed consider that this protection of the expression as a trademark is an “attack against the Swahili people and Africa as a whole”, and a characteristic sign of “theft of African culture” carried out over the years through the use of intellectual property rights.

    Although the cultural and emotional attachment is comprehensible, it is worth noting that the expression “Hakuna Matata” does not appear to fall within the exceptions opposed to the registration of an American and/or French trademark. As such, a trademark based on an everyday or foreign language expression is lawful and valid, provided it is not the common and necessary designation of the product or the service it refers to. The risk for the holder(s), however, is that their rights would be limited in practice. The holder could therefore not oppose the use of the said expression by a third party, insofar as the expression is used with its everyday meaning.

    Among the means that might be used for challenging the validity of the Disney company’s “Hakuna Matata” trademarks, is the prohibition on registering a country’s coat of arms, flags and other insignia as a trademark, provided, nonetheless, that the trademark at issue is not likely to mislead the public as to a connection existing between the trademark holder and the country whose coat of arms, flag or other insignia are appropriated by the said trademark.
    Yet, in this instance, it is doubtful that the French and American public associate the “Hakuna Matata” trademark with East African countries; on the contrary, they will probably associate it with the American firm. Something the petitioners were probably already aware of when they requested Disney to voluntarily relinquish its rights to the trademarks. To the best of our knowledge, no legal proceedings have been initiated so far.

    We’ll be keeping an eye on this case as 2019 gets off to a start…

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