Breach of software license agreement: Clarifications from the French Supreme Court on the applicable liability regime

In its recent decision dated 5 October 2022, the French Supreme Court (“Cour de Cassation”) brought awaited clarifications on the French civil liability core principle of non-cumulation of contractual and tortious liability as interpreted by the Court of Justice of the European Union (“CJEU”).

The French company Entr’Ouvert is specialized in software development. In 2003, it developed a software program named “Lasso”, allowing the implementation of a Single Sign-On (SSO) system, i.e. an authentication method enabling users to access several websites while using a single set of credentials. Lasso was distributed under the GNU GPL free software license, or under a commercial license when the intended use was inconsistent with the GNU license, typically when incorporated into a proprietary program.

In 2005, the French central administration launched a call for tenders regarding the development of “Mon Service Public”, an Internet portal allowing its users to perform all their administrative formalities and procedures online. Orange, the French telecommunications operator, was selected to supply an IT solution on identity and interface management. Orange’s solution incorporated the Lasso software code.

Entr’Ouvert filed a claim against Orange for copyright infringement. In particular, it was arguing that Orange infringed the GNU GPL free software license (version No. 2) applicable to Lasso because of the incorporation and the distribution of Lasso software code within Orange’s proprietary software without a commercial license.

The Paris first instance and appeal courts rejected Entr’Ouvert’s claims based on copyright infringement. They considered that Entr’Ouvert was actually seeking compensation for the contractual breach of the license and could therefore only ground its claim on contractual liability. Under the principle of non-cumulation of contractual and tortious liability, one cannot hold another person liable in contract and tort for the same acts, and tortious liability is excluded in favor of contractual liability where the parties at stake are bound by contract.

In the debate, the parties put forward the CJEU decision rendered on 18 December 2019 where it has been ruled that “the breach of a clause in a license agreement for a computer program relating to the intellectual property rights of the owner of the copyright of that program falls within the concept of ‘infringement of intellectual property rights’, within the meaning of Directive 2004/48 [on the enforcement of intellectual property rights], and that, therefore, that owner must be able to benefit from the guarantees provided for by that directive, regardless of the liability regime applicable under national law.” (§30, 50).

In the light of the above decision, the Paris Appeal court considered that where the infringement of intellectual property rights results from acts of infringement of a tortious nature, the action shall be grounded on tortious liability. To the contrary, where the infringement of intellectual property rights results from a contractual breach, the action shall be based on contractual liability.

The Cour de Cassation held that the appeal decision dated 19 March 2021 misinterpreted and misapplied the above principle. It considered that if the principle of non-cumulation of contractual and tortious liability prevents someone from being compensated for the same wrongful act on a contractual ground and on a tortious ground simultaneously, favoring contract over tort does not apply to infringement actions.

The rationale behind this decision is that should the copyright owner be restricted to claim under contract, it would not benefit from the copyright legal framework and related guarantees. In particular, it is deprived from the right to initiate seizure proceeding. In addition, it cannot benefit from the provisions regarding damages assessment according to which courts take into consideration distinctively the negative economic consequences of the infringement (including the loss of profit and loss suffered), the moral prejudice suffered by the rightsholder and the profits made by the infringer, or as an alternative a lump sum that shall not exceed the amount of royalties that would have been due. The directive also provides for specific guarantees regarding software that cannot be set aside.

The clarifications provided by the Cour de Cassation shed light on the options available to copyright owners in case of a breach of a software license agreement. As soon as the rightsholder cannot beneficiate from the guaranties provided by the directive, the latter can file an infringement action grounded on tort notwithstanding any contract is place.