Compulsory liquidation proceedings: license agreement can be transferred without licensor’s consent

s-business-dreyfus-7The Economic Interest Group (EIG) Prop and the company Groupe Paredes, owners of several trademarks, granted the company Raynaud, also a member of the EIG, the right to use their trademarks.

A compulsory liquidation proceeding had been opened against Raynaud. A judgment of June 28, 2013, resulted in a compulsory liquidation plan ordering the transfer of all commercial agreements and their accessories concluded between Raynaud (initial licensee) and the owners of the trademarks, to company Orapi, then substituted by company Raynaud hygiene (subsequent licensee).

Following the decision on October 24, 2013, which overturned this transfer, the EIG and Groupe Paredes sued Orapi and Raynaud hygiene for trademark infringement, invoking in particular article L713-2 of the French Intellectual Property Code: “the following shall be prohibited, unless authorized by the owner: a) the reproduction, use or affixing of a mark, even with the addition of words such as: “formula, manner, system, imitation, type, method,” or the use of a reproduced mark for goods or services that are identical to those designated in the registration; b) The suppression or modification of a duly affixed mark”.

The issue was whether the transfer of the license agreements and the use of the trademarks between June 28, 2013 and October 24, 2013 by Orapi and Raynaud hygiene, constitutes an infringement under the provisions of article L713-2 of the French Intellectual Property Code.

In a decision dated September 15, 2015, the Commercial Chamber of the Court of Cassation (the French Supreme Court) confirmed the Court of Appeal’s decision to reject the qualification of trademark infringement.

According to the Court of Cassation, the judgment approving the assignment plan should be enforceable by operation of law and should take effect from its pronouncement. The Court specifies that because Orapi and Raynaud hygiene had benefited from the transfer of all commercial agreements and their accessories, the same also benefited from EGI membership. Therefore, the actions resulting from the transfer couldn’t be qualified as counterfeit.

Thus, the law on collective procedures can limit the rights of the trademark owner to choose its licensee. Indeed, in determining the compulsory liquidation plan, the Tribunal may order the transfer of license agreements without the licensor’s consent.

However, even if in this specific case the licensor cannot choose its new licensee, the agreement’s provisions can always be invoked in order to bind the subsequent licensee. Particular attention should therefore be paid to the drafting of such provisions.