Software License Remedy: Copyright Infringement vs. Breach of Contract
During the performance of a license agreement, when the beneficiary does not comply with the licensing terms, she might breach the contract and infringe the copyright.[1] Indeed, while not complying with contractual terms, the beneficiary might also infringe the copyright holder’s rights to the licensed work.[2] That would be the case, for example, with a software license, while exceeding the number of authorized users, exploiting the software in territories not covered by the contract, or keeping the software and using it after the end of the license duration.[3]
What should be the preferred remedy then? Breach of contract, as provided by the parties? Or damages for copyright infringement, as provided by the law? The copyright holder, who conceded the license to the client, could ask for damages for one, the other, or both.[4] For example, in the recent Oracle v. NEC case, the claim was based on both grounds, and damages were claimed for both the breach of contract and the copyright infringement.[5] Because the case was settled, we can only assume that both types of damages were part of the negotiations to reach the settlement agreement.[6]
Infringement to Protect Authors
The European Union took a moral approach, favoring copyright law over contract law.[7] Copyright law is deemed more specific, tailor-made for authors and copyright holders, in general.[8]
Therefore, it should be the privileged path for remedy in the European Union territory.[9] Indeed, the European Directive on the enforcement of IP rights incentivizes the EU Member States to apply copyright law and infringement in all cases, regardless of the contract provisions.[10] The Court of Justice of the European Union considers it to be of the highest importance that authors are not barred from enforcing their rights in any part of the E.U. territory.[11] That includes those jurisdictions that would apply contract law and not copyright law.[12]
Pacta Sunt Servanda Should Not Withdraw Authors’ Rights
In France, the cultural importance of contract theory led some courts to consider that, because the contract is the law of the parties, and because of the principle of non-accumulation of liabilities, contractual liability should prevail.[13] This civil law principle of non-accumulation of liabilities prevents a plaintiff from acting on both torts and contractual liability for the same prejudice.[14] In essence, the plaintiff may not seek recovery for the same injury twice, through two sets of liability.[15] Applied to copyright, this means that the author must choose between breach of license and copyright infringement.[16] Because of this, several courts held that authors should only sue for breach of contract.[17] In other words, because the contract is the law between the parties, pacta sunt servanda, that would mean that other laws are to be ignored.[18] Hence, the decision from the Paris Court of Appeals on March 19, 2022, dismissing the author’s claims made on the ground of copyright because a contract existed between the copyright holder and the allegedly infringing party.[19]
The Long-Awaited Confirmation
Finally, on October 5, 2022, the Cour de Cassation (the French supreme court for civil cases) ruled that a copyright holder can claim remedy on the ground of copyright infringement.[20] This interpretation related to the civil law countries’ views on liquidated damages clauses: most of the time, because the parties reached an agreement on liquidated damages, that necessarily means that they waived their standard common law remedy, such as damages to compensate for the entire loss.[21] The parties to a contract would need to expressly stipulate that they meant not to waive other possible damages apart from those concerned by the liquidated damages clause.[22] This narrow interpretation is necessary to distinguish those damages that are included in the clause, foreseen and determined by the parties, from the common damages not included in the liquidated damages clause.[23] However, this rationale does not work in the software infringement case, where surely, parties contracted to allow the beneficiary to use the software, but they never intended to waive the software owner’s legal copyright infringement remedy.[24]
As much as contract law is fundamental in a Rule of Law country, it cannot be that it essentially withdraws rights from authors and renders copyrights ineffective.[25] Moreover, authors are further protected by copyright law because they have a specific procedural claim, the preliminary injunction (and its French equivalents, the saisie-contrefaçon and référé).[26] This injunction allows the judge to stop a copyright infringement at an early stage of the lawsuit.[27]
The majority of legal commenters were relieved after reading that latest decision from the French supreme court; indeed, the Rule of Law principles require that human rights, including property rights, be fully enforced.[28]
Footnotes
