Protection of IPR and limits of contractual relationships: AG Opinion in Case C-103/11 P

Last 15 Movember 2012, Advocate General Cruz Villalon delivered his Opinion in case in Case C-103/11 P Commission v Systran SA and Systran Luxembourg SA, where he endorsed the position of the European Commission whereby intellectual property related disputes that arise in the broader context of a contractual relationship between rights-holder and infringer are a matter of contractual liability--and, consequently, remain outside the jurisdiction of the EU Courts.

The dispute derived from the disclosure of proprietary Systran know how and other IPR protected data by the European Commission to a third party in the context of the maintenance and linguistic enhancement of a machine translation system initially developed by Systran. Systran brought the case to the General Court and, in 2010 (T-19/07), it held that the dispute could not be considered to be contractual in nature and that it did not therefore lack jurisdiction to adjudicate upon it. It imposed a lump sum payment of €12mn to compensate Systran for the loss of value of its IPR. The Commission appealed.

According to AG Cruz Villalon,  the dispute in question must primarily be examined by the competent national courts, in accordance with the agreements in question and the laws applicable to them.  According to the AG, the General Court made an error in law in its examination of the relationships which were established, in a very marked contractual context, between the Commission and the various companies in the Systran group which have developed or contributed  to the development of the various versions of the Systran software. Therefore, the General Court wrongly declared itself as having jurisdiction to hear and determine the action for compensation for the damage allegedly caused to Systran by the Commission’s conduct. 

The final decision by the CJEU in this case will be of major relevance, since it will deal with the complicated issue (which does not seem to receive homogeneous treatment across the EU) of the vis attractiva of contracts when the parties engage in subsequent tortious behavior. Therefore, the final Judgment in case C-103/11 may have large consequences for the Contract Law of Member States, which leaves me with the question whether the adjudication of this case may not in itself run against the allocation of competences in private law matters that seem to have a weak connection with the internal market (mainly, concerning art 114 TFEU). Definitely, a case to follow with interest and area where some well-meditated research seems required.

Public buyers will self-protect against bid rigging

Another of the interesting developments included in the compromise text that reflects the current status of negotiations for the modernisation of  EU public procurement rules (http://tinyurl.com/modernisationcompromise) is the inclusion of a new Article 54(3) that clarifies that tenderers affected by any grounds for exclusion can be disqualified by contracting authorities at any time:

Contracting authorities may at any moment during the procedure exclude an economic operator where it turns out that the economic operator in question is, in view of acts committed either before or during procedure, in one of the situations referred to in Article 55(1) to (3).

This is a relevant clarification that prevents a rigid interpretation that would have limited the possibility to exclude tenderers at the beginning of the procurement process (ie only at selection stage).

Notwithstanding the above, and maybe most interestingly, this provision is coupled with a new Article 55(3)(d) in virtue of which a tenderer can be excluded

where the contracting authority can demonstrate that the economic operator has entered into agreements with other economic operators aimed at distorting competition.

This is an important development in terms of reducing the impact of bid rigging on procurement, which stresses the need for contracting authorities to cooperate closely with competition watchdogs (both at regional and national levels, and with the European Commission's Directorate General for Competition) and that opens the door to potential difficulties in terms of due process (eg what is the burden of proof to be discharged by contracting authorities?) and an eventual conflict of enforcement competences (both by administrative bodies and in terms of judicial review, particularly where competition matters are assigned to specialised courts).

Therefore, when the time to transpose Articles 54 and 55 of the new Directive (if adopted in the terms of the compromise text) comes, it will be interesting to revisit the institutional architecture of procurement authorities to ensure the appropriate collaboration channels with antitrust authorities (on this, see A Sanchez Graells, Public Procurement and the EU Competition Rules [2011] Hart Publishing 381-389).