IT Development v. Free Mobile (Case C-666/18) is a preliminary ruling of the Court of Justice of the European Union (CJEU) of 18 December 2019. A French software publisher, IT Development, sued its licensee, the mobile operator Free Mobile, for copyright infringement after Free Mobile modified the licensed software in breach of the licence. The French courts asked whether a licensee’s breach of its licence is an infringement of intellectual property rights or only a breach of contract. The CJEU held that breach of a licence clause relating to the copyright in a computer program is an “infringement of intellectual property rights” within the Enforcement Directive (2004/48/EC), so the rightholder must be able to use that directive’s guarantees regardless of the liability regime under national law.[1]
Background
By a contract of 25 August 2010, amended on 1 April 2012, IT Development granted Free Mobile a licence and maintenance agreement for “ClickOnSite”, centralised project management software that Free Mobile used to organise and monitor in real time the deployment of its radio antennas by its teams and external service providers.[1]
Article 6 of the licence, headed “Scope of the licence”, stated in essence that the customer undertook not to reproduce the software, not to decompile or reverse engineer it, and not to “modify, correct, adapt, create second works and add” to it, directly or indirectly.[1]
The dispute
On 18 June 2015 IT Development sued Free Mobile before the Paris Regional Court (tribunal de grande instance) for infringement of the copyright in ClickOnSite, alleging that Free Mobile had modified the software, in particular by creating new forms. Free Mobile counterclaimed for abuse of process.[1]
On 6 January 2017 the Regional Court declared IT Development’s claims, which were based on tort, inadmissible. French civil liability law follows a principle of non-cumulation: a party bound by a valid contract cannot sue in tort for damage caused by non-performance of that contract. The court held that there were two separate regimes, tortious liability for infringement of the author’s statutory exploitation rights and contractual liability for breach of rights reserved by contract, and that this case concerned the latter.[1]
IT Development appealed to the Paris Court of Appeal, asking it to declare the modifications to be infringements and to award EUR 1,440,000 in damages or, alternatively, EUR 840,000 in contract, and to prohibit Free Mobile and its subcontractor Coraso from using the software and from extracting and reusing its data. Free Mobile sought EUR 50,000 for abuse of process.[1]
The Court of Appeal referred a question to the CJEU. It asked whether a licensee’s non-compliance with a software licence, “by expiry of a trial period, by exceeding the number of authorised users or some other limit, such as the number of processors which may be used to execute the software instructions, or by modifying the source code of the software where the licence reserves that right to the initial rightholder”, is an infringement under Directive 2004/48 of a right reserved to the author by Article 4 of the Software Directive (2009/24/EC), or may instead fall under a separate regime such as ordinary contractual liability.[1]
Decision or outcome
The CJEU noted that only the last of the listed situations, modification of the source code, was at issue, and answered only for that case.[1]
- Modification is a reserved act. Under Article 4 of the Software Directive the rightholder’s exclusive rights include the right to authorise any alteration of a program, so a prohibition on modifying the source code falls within the program’s copyright. The directive does not make protection depend on whether the infringement is also a breach of a licence agreement.[1]
- “Any infringement” includes contractual breaches. Article 2(1) of the Enforcement Directive applies to “any infringement of intellectual property rights”. The court read the word “any” as covering infringements resulting from breach of a contractual clause on the exploitation of an intellectual property right, including that of the author of a program. This was confirmed by the directive’s aim of a high, equivalent and homogeneous level of protection and by Article 4, which entitles rightholders to seek its remedies without limitation as to the contractual or other origin of the infringement.[1]
- National law chooses the regime. The Enforcement Directive does not prescribe a specific liability regime. Member States remain free to decide whether the action against a licensee is contractual or tortious, but the regime chosen must satisfy the directive: remedies must be fair, equitable, effective, proportionate and dissuasive, and must not be an obstacle to effective protection.[1]
- Consistent interpretation. The referring court had noted that no French provision limited infringement actions to parties not bound by a contract. The CJEU said that an interpretation of French law consistent with the directives appeared possible, subject to the national court’s verification.[1]
The operative ruling was that breach of a clause in a licence agreement for a computer program relating to the intellectual property rights of the copyright owner falls within “infringement of intellectual property rights” in Directive 2004/48, so the owner “must be able to benefit from the guarantees provided for by that directive, regardless of the liability regime applicable under national law”.[1]
As reported by the French digital industry association Numeum, IT Development then withdrew its appeal, recorded by the Paris Court of Appeal on 18 February 2020 (RG no. 17/02679), so the dispute ended without a ruling on the merits.[2]
Significance for software licensing and SAM practice
The ruling matters for licence compliance in the EU because the measures, procedures and remedies of the Enforcement Directive, which must be effective, proportionate and dissuasive, can be available against a customer that breaches a licence clause protecting the program’s copyright. A licensee cannot assume that overstepping its licence is only a contract dispute.[1]
The ruling also has limits. It decided only the case of unauthorised modification. The referring court’s other examples, use after a trial period, more users than licensed and more processors than licensed, were set aside as not at issue, so the ruling does not say whether each such breach relates to a reserved act under the Software Directive.[1] The French courts later applied the question in the open-source context in Entr’ouvert v. Orange. The related question of when a lawful user may decompile or correct a program without consent was decided in Top System v. Belgian State.
Lessons learned
- In the EU, a licensee that uses software outside a licence clause protecting the copyright can face the Enforcement Directive’s remedies. The CJEU held that such a breach is an “infringement of intellectual property rights” whatever the national liability regime.[1]
- The ruling decided only unauthorised modification. The court expressly limited its answer to modification of the source code, leaving the referring court’s examples of user and processor limits and expired trials undecided.[1]
- Licence clauses reserving modification rights to the vendor are enforceable restrictions on the licensee. The court treated the prohibition on modifying the source code as falling within the program’s copyright under Article 4 of the Software Directive.[1]
- Whether the claim is framed in contract or tort remains a matter of national law. Member States may choose, provided the directive’s guarantees are respected.[1]