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E-library Commercial Contracts Counterfeit goods and seller's implied warranties

Counterfeit goods and seller's implied warranties

18 Feb 2013

French law contains no explicit provision obliging a seller to warrant that the goods sold do not infringe third party intellectual property rights.

According to French case law however, such a warranty may be inferred from article 1626 of the Code Civil (French Civil Code), which obliges a seller to warrant the purchaser against dispossession of the purchased goods.

The seller’s obligation to warrant the purchaser that the goods sold do not infringe third party intellectual property rights is furthermore explicitly provided by the Vienna Convention (United Nations Conventions on Contracts for the International Sale of Goods, ratified by France and in force since 11 April 1980) in relation to contracts for the international sale of goods.

Counterfeit goods and seller's implied warranty on the basis of article 1626 of the Code Civil

According to article 1626 of the Civil Codealthough no stipulation as to warranty has been made at the time of the sale, the seller is obliged as of right to warrant the purchaser against a dispossession of the thing sold which he may suffer in whole or in part, or against encumbrances alleged on that thing, and not declared at the time of the sale”.

According to French case law, the warranty against dispossession provided for by article 1626, also applies when such dispossession is due to the counterfeit character of the goods sold (decision of the Cour de Cassation (French Civil Supreme Court) of 13 March 2008).

The warranty against dispossession set forth in article 1626 does not however apply if the buyer was aware of the risk of dispossession.

To decide that a buyer could not have ignored the counterfeit character of the purchased goods and, consequently, should not be allowed to rely upon the warranty against dispossession provided for by article 1626 of the Code Civil, French courts have relied in the past on the fact that the buyer was “professional” (“acheteur professionnel”), that is, carrying trade in the same field.

The above case law appears however to have been overruled by a decision of the Cour de Cassation dated 13 March 2008. In this decision, the Cour de Cassation ruled that “in the absence of any proof that a buyer had effective knowledge of the counterfeit character of the purchased goods, a Court of Appeal may not rely upon the sole fact that such buyer was a professional purchaser (“acheteur professionnel”) to relieve the seller from its warranty against dispossession”.

It follows from the above decision that a professional purchaser having purchased counterfeit goods should be allowed to rely on the dispossession warranty set forth in article 1626 of the French Civil Code, unless it is demonstrated that such purchaser effectively knew that the goods were counterfeit.

Counterfeit goods and Seller's implied warranty on the basis of article 42 of the Vienna Convention

The Vienna Convention explicitly provides for a seller’s implied warranty that the goods sold in a contract for the international sale of goods do not infringe the intellectual property rights of third parties.

According to Section I ("Sphere of Application") of the Vienna Convention, the provisions of the Convention apply to contracts of sale of goods between parties whose places of business are in different States:

(a) when the States are Contracting States; or

(b) when the rules of private international law lead to the application of the law of a Contracting State.

The seller’s obligations to guarantee that the goods sold do not infringing the intellectual property rights of third parties are detailed in articles 42 of the Vienna Convention. According to this article:

(1) The seller must deliver goods which are free from any right or claim of a third party based on industrial property or other intellectual property, of which at the time of the conclusion of the contract the seller knew or could not have been unaware, provided that the right or claim is based on industrial property or other intellectual property:

(a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or

(b) in any other case, under the law of the State where the buyer has his place of business.

(2) The obligation of the seller under the preceding paragraph does not extend to cases where:

(a) at the time of the conclusion of the contract the buyer knew or could not have been unaware of the right or claim; or

(b) the right or claim results from the seller’s compliance with technical drawings, designs, formulae or other such specifications furnished by the buyer.

It follows from the above provisions that a seller of goods located in France is bound by an implied warranty that the goods sold do not infringe intellectual property rights of third parties in the jurisdiction where the buyer has its place of business and, if the seller knew that the goods were to be resold in other countries, in such other countries.

It also follows from the above provisions that the seller will be relieved from such warranty if the buyer knew or could not have been unaware of, such third parties’ rights or claims.

In a decision dated 19 march 2002, the French Cour de Cassation ruled that a company having purchased counterfeit goods could not have ignored, in its capacity as professional purchaser (“acheteur professionnel”), the fact that such goods were counterfeit and could consequently not rely upon the warranty set forth in article 42.2a) of the Vienna Convention.

It may be argued however that the above decision of 19 March 2002 was overruled by the decision of the French Cour de Cassation of 13 March 2008.

Miscellaneous provisions in a French law contract
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