Dreyfus

In order to be prepared for any outcomes, including a “no deal” Brexit (a scenario in which the UK leaves the EU without agreement)  the British government published on Thursday, August 16 a set of technical guidelines  outlining the risks of a “no deal” outcome.  The guidelines are intended to help businesses and individuals to get ready for the impact of a “no deal” scenario.

Although the 24 guidelines contain many topics, the government is planning to release 80 guidelines in total. Among other topics, the guidelines cover the issue of tobacco legislation.

 The EU Member States are subject to EU Directive 2014/40 / EU “Tobacco Products” which regulates the manufacturing, distribution and sale of tobacco products in the EU. In the event of a “no deal” Brexit, the “tobacco products” legislation will no longer be applicable in the United Kingdom. It will be replaced by a UK legislation, which would contain minor amendments to the existing UK domestic law introduced in 2016.

However, another related issue remains unclarified, namely the graphic photo warnings that appear on cigarette packets, since the EU owns the copyrights for the photo warnings currently in use.  In order to use copyrighted images, a copyrights owner’s permission is required.  The “Tobacco Products” Directive grants the right to use the images on cigarette packets to the Member States, which makes the image bank of more than 40 photos unavailable to non-Members. In case of a “no deal” scenario, new UK images for cigarette packets will have to be introduced. In its’ notice regarding labelling tobacco products, the UK government states just that – tobacco manufacturers need to ensure that new picture warnings appear on tobacco products after Exit Day.

The tobacco products notice outlines the course of action that will need to be taken in the event of a “no deal” scenario. In September the UK Government will publish more technical details of the new regulation and the picture warnings that will minimize the burden associated with introduction of modifications. New information about the images used in the tobacco picture warnings will therefore be available when the new legislation is passed.

The 2024 Olympic and Paralympic Games represent an exceptionally important date for Paris. The city’s application was accepted by the International Olympic Committee (IOC) on 13 September 2017. This event is a major challenge for both the Olympic trademark  and the partner trademarks which will be protected by intellectual property rights and competition law.

Challenges for the protection of the Olympic trademark and  its notoriety

The Olympic Games are broadcast all over the world and have a global reputation, so the trademark must be protected against the high risks of parasitism and infringement.

This is when intellectual property rights have all their importance. Trademark law protects registered distinctive signs such as the official name of the event, logos, the hymn, etc. Similarly, article L141-5 of the French sports codes already stipulates that the French National Olympic and Sports Committee (CNOSF) is the owner of the national Olympic emblems, currency, hymn, the Olympic symbol and the terms “Olympic games” and “ Olympiad”. Any filing as a trademark, imitation, reproduction, apposition, suppression or modification of these signs constitutes an infringement and is punishable by the sanctions referred to in the French Intellectual Property Code.

Beyond these provisions, the host countries frequently implement ad hoc legislation that may be restrictive and sometimes exempt from common law, to be able to prepare the event in an optimum manner and honour the commitments made during the application phase. For France, this is the purpose of law no. 2018-202 promulgated on 26 March 2018 relative to the organisation of the 2024 Olympic and Paralympic games.

Article 3 of the law specifies and reasserts the rights of protected signs. In this respect, it amends the terms of the French Sports Code and adds certain signs to the protection. The CNOSF is, thereupon, owner of the national Olympic emblems and custodian of the Olympic games flag, currency, emblems, hymn, logo, slogan and posters and of the mascot, the terms “Olympiques”, “Jeux olympiques”, “Olympiade”, “Olympien/Olympienne” “JO” and of the vintage “city+year”. Any commercial or promotional use of these signs or that could lead to a risk of confusion in the minds of the public suggesting a link with the Olympic Games is punishable under the dispositions of the Intellectual Property Code, as constituting infringements. Only the use in normal speech is tolerated.

Lastly, article 6 b of the Paris Convention signed on 20 March 1883 “for the protection of industrial property” states that any person who harms the image of a well-known trademark  will be held liable. In this respect, it is incontrovertible that the Olympic trademark is entitled to this particular protection. In 2006, there was a case in which the CNOSF was up against the procurement group of Leclerc supermarkets which had called its promotional campaign “Olymprix” and filed this trademark for their products. The French courts highlighted the deterioration of the image of the “Olympique” and “Jeux Olympiques” trademark and the acts of parasitism, finding against Leclerc.

Challenges for sponsor trademarks

Behind the euphoria of the global event there are major financial interests at stake. One and a half billion Euros will be used to fund the event. Funding that is provided by the 15 major partner corporations, including LVMH, Suez, BNP Paribas, in consideration of which they will be promoted during the event and allowed to use the protected signs of the games. The increased protection afforded the Olympic emblems by the aforementioned legislation and the ad hoc legislation in particular is therefore at the heart of the smooth running of the games. Only partner undertakings can use the Olympic signs in their marketing strategies during the event, which constitutes major compensation for their funding. Without protection, no investment: without investment, no event. “The strongest guarantees must be given to the CNOSF to protect the terms of which they are the custodian. Their protection is in fact essential for the economic equilibrium of the Games. It is therefore imperative that the partners know their investment is guaranteed and their rights protected” explained Laura Flessel, French minister of sports, at the parliament sitting on 20 December 2017 at 15:00.

This represented a sizeable challenge for non-partner undertakings wishing to take advantage of a global, highly mediatised event in their marketing strategies. Some criticise the measures of the ad hoc law, as it undermines freedom of expression, or restricts the freedom of trade and industry. Severe provisions which, furthermore, go beyond the protection of trademark law by making it deviate from its core function of distinctiveness. While trademark law only protects distinctive signs, this ad hoc law protects terms that have no distinction, but with the aim of protecting the investments of the partner trademarks, in particular to stimulate sales.

Furthermore, the partner trademarks still have to face ambush-marketing. This practice consists in non-certified trademarks making themselves visible during the Olympic Games without having contributed investments in return. The Paris Tribunal de Grande Instance, on 30 May 2008, condemned this type of practice in respect of tortious liability and parasitism in a case opposing the French Tennis Federation and UNIBET. It stated that “UNIBET deliberately places itself in the wake of the Tournament to promote and develop its business inexpensively, which is the definition of parasitic behaviour entailing tortious liability”.

The unfolding of an event which has a global reach therefore poses challenges both for the well-known trademark which the Olympic trademark represents and for the partner trademarks for which protection is critical. France intends to provide effective protection for the Olympic trademark and its recognition, which represent valuable assets.

In case where the European Commission Draft Withdrawal Agreement is signed and ratified by the parties, it will offer advantages in terms of intellectual property rights protection by ensuring continuous protection in the UK.  There are many unaddressed issues concerning trademark rights registered in the European Union. Today, less than eight months before the Great Britain leaves the EU, the chances of reaching an agreement are getting slimmer.

Although the European Commission is still working on an agreement, in July’s press release it called on its’ member statesto be ready for a “no deal”. This was enough to cause unease among the member states who counted on a transition period to be negotiated with respect to intellectual property rights. On August 9, 2018, Jeremy Hunt, British Foreign Secretary, declared at a press conference in Helsinki that: “Everyone needs to prepare for the possibility of a chaotic no-deal Brexit” which, of course, is a worst-case scenario for everyone.

There is still an uncertainty regarding the EU trademarks that were registered before the leave of the United Kingdom. The UKIPO (UK Intellectual Property Office) confirmed that the trademarks registered in the European Union would have a continuous protection in the UK. This position was to be formalized in the Withdrawal Agreement. If the parties fail to negotiate an agreement, it is likely that other ways will be found to ensure continuance of trademark rights in the UK, but it will certainly be more complex.

Given the circumstances, it is critical to take all necessary measures to secure your intellectual property rights.  To that end, we advise our clients to register  national trademarks in the United Kingdom for any new registration of a European Union trademark or an international trademark targeting the European Union.

The GDPR and its implications for WHOIS

The GDPR regulates the processing of personal data with regard to the European Union in a much stricter way than in the past. In this dynamic, the new European regulation now obliges the registries and the registrars to obtain the consent of the registrants to collect their personal data and prohibits its disclosure to the public. The WHOIS then raised a problem for the protection of personal privacy. The public circulation of the identity, or other information relative to the holder of a domain name, as well as the administrative and technical contacts who may be natural persons, opens the door to the commercial exploitation of their data without prior consent. Now, this is precisely one of the problem issues the regulation was intended to handle. Changes relative to access to the personal data on the WHOIS sheets were in this respect essential for effective compliance. The model of WHOIS was called into question by the German EPAG registrar, which purely and simply stopped collecting the administrative and technical contact details for the new registrations, due to a strict interpretation of the regulation. ICANN then initiated legal action before the regional court of Bonn to apply for the continued collection of all the WHOIS data, so that this data remained available to the parties able to establish a legitimate reason for accessing it. ICANN appealed this judgement and the regional court of Bonn decided to hear the file again.

The ICANN’s compliance

ICANN was therefore forced to modify its WHOIS policy. To this end, it amended its contracts with the registries concerning their collection of personal data on 31 July 2017 (point 2.18 of the Registry accreditation agreement ) requiring registries to obtain the consent of any person who is a domain name holder before the publication of their personal data on WHOIS. From this perspective, ICANN retained the provisional model of WHOIS, reduced to the minimum and applied to all the domain name holders, in and outside the European Union on 28 February 2018  called the “Calzone Model”. The aim was to enable short term compliance between the WHOIS directory and the provisions of the GDPR, prior to a full revision of the system to find an optimal balance between the fight against cybercrime and data privacy. The information made available to the public will be the sign of the domain name, the administrative and technical info (dates, status, name of the registry, dns servers), the state and country of the holder, the name of the organisation for companies and a means of contacting the holder (anonymized email or web form). In the “Calzone Model”, the other information will in principle be confidential and only users accredited through an official programme, to be developed in the near future, will have access. For example, specialists in intellectual property law will be able to apply for accreditation from ICANN.

Application of the GDPR by the registries

Following the communications of ICANN, the registrars had to amend their way of processing personal data. In this respect, it is interesting to note a lack of consistency in their new confidentiality policies. For example, some registries now only leave visible the technical information of the domain and the country of the registrant. To communicate with the holder of the registered domain name, it is possible to use an online form to contact the registrant directly (GoDaddy, United States). Other registries have introduced a proxy service enabling the confidentiality of the personal data of the registrants (Namecheap). On the other hand, the Chinese registries continue, for the moment, to disclose the information about European citizens.

Which strategy to adopt?

 The above remarks lead us to believe that there is not yet stability regarding the application of the GDPR which remains disparate.

Faced with a project that is ongoing, the specialist counsels are still giving thought to the strategies to be adopted. In such a situation, it is in fact necessary to see how the dialogue will progress among the different players to find a model of WHOIS that is compliant with the GDPR, which will continue to be a key mechanism for combating cybercrime and more generally any infringement of rights perpetrated online.

At this stage, our team remains at your disposal for any further inquiries.

The auction house Camard used the services of a photographer to produce photographs for the different auction catalogues. They subsequently observed that Artprice.com had digitised these catalogues and published them online in their database, without authorisation.

The photographer and Camard instituted legal proceedings against Artprice.com for infringement, on the grounds that the website breached their copyright on the photographs and catalogues in question. The Court of first instance of Paris rejected the application from Camard and the photographer due to the lack of originality in the sense of creation of copyright. The parties then appealed against this decision.

The Paris Court of Appeal acknowledged that the digitisation of said catalogues on the Artprice.com website constituted an act of infringement, because the catalogues were protectable in respect of copyright.  The appeal judges overturned the decision and ordered Artprice.com to pay 120,000 euros in respect of damages in compensation of acts of infringement of copyright by reproduction of the catalogues.

The Court of Cassation confirmed this judgment following the appeal brought by Artprice.com. To do so, the judges examined in detail the photographs and the catalogues to assess their level of originality with respect to articles L.111-1 and L.112-2 of the Intellectual Property Code.

They noted that the catalogues were presented following a “methodical and ordered presentation of lots, a note on the biography of the authors of the works and a description of the works placing them in their historical, cultural and social context”. The pieces of furniture were also represented by old photographs of the rooms they were displayed in, in a manner “organised by motif, period, school or region…”. All these elements are therefore the expression of “an aesthetic decision imprinted with the personality of the authors of the catalogues”.

The judges also agreed that the photographs presented in the catalogues were the fruit of “personal aesthetic choices” of the authors, with respect to the positioning, framing or the particular take on the items or through the creation of a particular dynamic between the items presented and the adjustment of the colours and contrasts.

This judgement brought to an end an affair that was highly instructive as it enabled a better apprehension of the way the judges assessed the criterion of originality, which is an abstract concept in the field of copyright. In this case, the authors not only designed the catalogues with faithful representation of the items on sale but they also performed authentic work, the fruit of personal choices and aesthetic decisions.

While doubts about the implementation of the GDPR arose even before its occurrence on May, 25^th 2018, first reactions concerning compliance are already emerging.

While companies, on one hand, looked forward to a soft entering into force of the European Authorities Regulation (chapter VI GDPR), consumers’ associations, on the other hand, were, quite unexpectedly, on alert. The associations have rapidly exploited the opportunities given by the articles of the GDPR concerning the right to regain control of their personal data. For instance, Article 77 states that: “every data subject shall have the right to lodge a complaint with a supervisory authority (…) if the data subject considers that the processing of personal data relating to him or her infringes this Regulation.”. It relates to individuals as well as class actions.

Maximilian Schrems, an Austrian lawyer and activist for protection of personal data. Three days later, the French association “La quadrature du Net”, in the name of more than 12 000 plaintiffs, has taken similar actions against Amazon, Google, Facebook, LinkedIn and Apple. The Complaints were based on non-compliance with the terms imposed by the GDPR for acquisition of users consent in personal data collection. According to the plaintiffs, the consent for collection and use of personal data is not authorized. Indeed, they apply an “all-or-nothing” politic: a forced consent, without which users cannot use the services offered by the companies. Thus, large companies are taking advantage of their clients. These complaints could turn out to be costly for the firms since the fines for GDPR infringement can amount up to 4% of the companies’ global turnover.

The way in which these complaints will be treated and the way in which the fines will be applied remain uncertain. Different national authorities in charge of the protection of personal data will be asked to cooperate in order to arrive at a unique solution for all the companies concerned. The decisions will thus be crucial and are highly anticipated.

In France, although it might appear surprising for foreign observers, very specific requirements have to be met when the time comes to ask for the renewal of a French trademark before the French National Institute of Intellectual Property (NIIP). Thus, one of the most primordial requirements is the confirmation that the trademark owner who appears on the national trademarks Register is indeed the same entity as the one filing the French trademark renewal application. If such is not the case, the consequences can be dire.

The company C BECAUSE TV has suffered a bitter experience in that regard and, hadn’t it been for the judgement issued by the Court of Appeal of Paris on November 28, 2017, the economical aftereffects of failing to meet the aforementioned requirement could have been dramatic for this company. In this matter: the company C BECAUSE TV became the owner, following a deed of cession signed on February 22, 2016, of two French trademarks. One of these two trademarks is the trademark ‘CULTURE PUB’ whose protection was expiring on June 10, 2016.

On September 20, 2016, the company C BECAUSE TV filed a fast track application before the NIIP in order to have the deed of assignment appear on the trademark’s status on the French national trademarks Register. A few days later, on September 20, 2016 the company filed a renewal application for the trademark ‘CULTURE PUB’ within the six months’ time frame of the grace period, in its own name as the de facto new owner. Nonetheless, the fast track application filed on September 16, 2016 had not yet resulted in the modification of the status of entries in the National Trademarks Register. Hence, on the day of the filing of the renewal application for the trademark ‘CULTURE PUB’, the company C BECAUSE TV did not appear as the registered trademark owner on the French National Trademarks Register. Consequently, the Director General of the NIIP declared that the renewal application for the trademark ‘CULTURE PUB’ was inadmissible.

However, the NIIP having a tendency to lag behind a bit, this inadmissibility decision was not notified to the company C BECAUSE TV before February 13, 2017. Therefore, the company found itself to be in a very problematic situation since it was unable to submit effectively any observation in reply to the inadmissibility decision insofar as the grace period was expired by then. It is in this context that the decision of the Court of Appeal of Paris issued on November 28, 2017 occurs.

The Court stated in its decision that the inadmissibility of a renewal application could not be pronounced in a case where the applicant had not been able to submit any observation in reply. Accordingly, and taking into consideration the seriousness of the economic consequences that might have arisen from the non-renewal of the trademark ‘CULTURE PUB’, the Court cancelled the NIIP inadmissibility decision.

This case highlights the great importance of the status of entries in the National Trademarks Register when one applies for a French trademark renewal. The extreme severity attached to the status of entries is only counterbalanced in the case at hand by the protection of the rights of the defence, in particular the right for the applicant to be able to effectively submit observations in reply.

Contributor: Nathalie Dreyfus, Trademarks Attorney

The European community’s greatest achievement in terms of intellectual property is surely the regional territoriality of Union rights as emerging from regulations no. 2017/1001 of the European Parliament and Council of 14 June 2017 on the EU trade mark. Extending a territoriality that was originally national to a European Union level, these regulations testify to the gradual but increasingly manifest construction of a fully-fledged “European” intellectual property right. Until then, Union rights holders could, through the unitary effect, claim protection of ownership extended to the twenty-eight Member States. However, Britain’s notification on 29 March 2017, announcing the United Kingdom’s intention to leave the European Union struck a blow to this standard building. For in spite of the potential subsistence of certain European achievements through the local laws transposing the directives, which will continue to apply, the main effect of this withdrawal will be to put an end to the direct application of European regulations inside the United Kingdom. We would add that the continuance of the achievements absorbed by British legislation must be relativised as, henceforward framed and defended on a national scale, they will be more exposed to potential amendments in the name of local interests. It should be specified that European patents shall not be directly affected by the United Kingdom’s withdrawal insofar as the European Patent Convention is not part of the legal order of the European Union.

The European Commission, in a notice published on 1^st December 2017  confirmed that EU trade marks and Community designs registered in accordance with Union law will simply no longer have effect in the United Kingdom as from 30 March 2019, in compliance with article 50(3) of the Treaty on European Union. In the light of this it is regrettable, mainly for questions of legal security, that there is no withdrawal agreement that would permit an organised and efficient transition. The situation changed on Monday 19 March 2018. The European Union and the UK effectively reached a much-awaited agreement on the terms of the transition. Without actually substantially altering the legal consequences of the withdrawal, it provides for the postponement of the effective date till 1^st January 2021. Such a postponement is welcome as it will allow owners of Union rights to anticipate more serenely the restriction of the field of protection pertaining to their rights. In respect of these transitional provisions, article 50 envisaged a “Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community”, published on 19 March 2018 by the British government, a legal mechanism enabling the automatic transformation of Union titles, effective before 31 December 2020, into domestic British rights considered equivalent. Such a system turns out to be opportune as, benefiting rights holders, it will compensate for the restriction of the “origin” unitary field of protection. The implementation of such a mechanism remains, however, still uncertain to date.

Concerning the right of priority, article 55 of the withdrawal agreement allows for the possibility of registering a British design trade mark equivalent to a Union right if the application was submitted in the nine months following the end of the transition period, which means up until 30 September 2021. Also, under the terms of article 52, industrial property rights acquired within the scope of the Madrid and The Hague systems designating the European Union before the end of the transition period, shall retain their protection within the United Kingdom.

In conclusion, it is necessary to keep in mind that Union trade marks and designs being registered beyond 31 December 2020 shall only cover the twenty-seven Member States, therefore excluding the United Kingdom. Also, given the uncertainty surrounding the implementation of the automatic mechanism for the transformation of Union rights into equivalent British rights, owners of Union trade marks or community designs are strongly recommended to anticipate by registering in parallel with EUIPO, with the UK intellectual property office (UKIPO), thereby nonetheless running the risk of having two property rights covering the United Kingdom in 2021.

In tandem with ever stricter legislation, new technologies are increasingly requesting our personal data, often of a sensitive nature.

Facial recognition

Facial recognition is an innovation today widely used by major groups in the tech industry, such as Samsung or Huawei. Apple, however, undeniably remains the company having achieved the greatest impact when it released its new iPhone X in November 2017 by presenting its face ID technology, which allows one to unlock their mobile phone effortlessly. To do so, this innovation is based on extremely precise measurements of the user’s face dimensions. This biometric data then makes it possible to detect the user’s face in any circumstance, whatever its position.

Both practical and fun, this technology nevertheless raises questions about the compatibility of such data processing by Apple with that of current and future legislation and especially the General Data Protection Regulation that will come into effect on 25 May 2018. As the latter tends to be increasingly stricter with respect to companies collecting personal data, it is interesting to analyse whether collecting such biometric data cannot be challenged by the regulation.

Processing of sensitive data

Unlike the previously applicable Personal Data Directive, the General Data Protection Regulation specifies that biometric data falls within the scope of “sensitive data” (Article 9 of the Regulation). Recital No. 51 of the General Data Protection Regulation defines biometric data as data “processed through a specific technical means allowing the unique identification or authentication of a natural person”. Although this definition remains relatively vague, it is a safe bet that the courts will include facial recognition in such a category of personal data. Such a qualification is of great importance, insofar as the General Data Protection Regulation in principle prohibits such a collection, unless this collection fulfils the conditions set out in Article 9-2. It is indeed tolerated if “the data subject has given explicit consent to the processing of those data (…) for one or more specified purposes”. By being careful to rigorously fulfil such conditions, Apple could indeed carry out such data processing, provided that, as authorised under Article 9-3 of the said Regulation, the Member State in which the processing is carried out does not provide for more restrictive provisions.

The company must also endeavour to meet the requirements of Article 35 of the said Regulation. In fact, with regard to the data collected with the use of new technologies that would represent a high risk for the rights and freedoms of individuals, the General Data Protection Regulation requires companies to carry out a detailed analysis concerning the data collected. Through its collection of biometric data via its iPhone X, Apple is in fact faced with such an obligation. The analysis shall include a systematic description of the processing operations envisaged, an assessment of the necessity and proportionality of the processing operations with respect to the purposes, and an assessment of the risks to the rights and freedoms of the persons concerned.

Regarding the potential risks, Apple had already communicated on the degree of increased security that it provided for this type of data: in fact, the company does not keep the user’s biometric data on an external server to the extent that such data is encrypted and locked in the smartphone’s processor via the Secure Enclave (ultra-secure cloud storage). However, such a degree of security had been called into question by a controversy that erupted a few months ago. The American Civil Liberties Union (ACLU), the equivalent of the French data protection authority (CNIL) in the United States, warned that Apple is sharing this biometric data with third-party application developers. Sharing data that concerns facial recognition would allow developers to add new features to their applications. Even though Apple forbade them to use the data for advertisement or marketing purposes, security experts had raised the fact that there was still a risk of fraudulent use of the data by the developers, diverting them from their intended use.

Face ID, consistent with the General Data Protection Regulation?

Apple will have to take the challenges of the General Data Protection Regulation seriously by simultaneously ensuring users give their explicit and informed consent to the processing of their data, guaranteeing a high level of data security and a use strictly proportionate to the purpose for collecting the images. The company’s innovation through its face ID is in fact a typical example of the growing use of increasingly sensitive data through new technologies. This is indeed what the European Union understood during its reflections on the General Data Protection Regulation. Even if, at this stage, simple assumptions about the alignment of high-tech companies with this legislation can be made, it will be necessary to pay close attention to the interpretatio of the courts regarding the processing of this type of data.

The company’s innovation through its face ID is in fact a typical example of the growing use of increasingly sensitive data through new technologies. This is indeed what the European Union understood during its reflections on the General Data Protection Regulation. Even if, at this stage, simple assumptions about the alignment of high-tech companies with this legislation can be made, it will be necessary to pay close attention to the interpretation of the courts regarding the processing of this type of data.

Intrinsically linked to cyberspace, cryptocurrencies have burst into our economy in recent years even though there is still a lack of legislation on them.

The cryptocurrency revolution

Cryptocurrencies are alternative currencies, as they do not have legal tender in any country, are not regulated by any bank and function as a peer-to-peer payment system. Revolutionizing our way of thinking about money, the emergence of these currencies has also shown the public’s growing desire to emancipate themselves from a sometimes excessively regulated financial world. Many cryptocurrencies have been developed, but most work in a similar way and derive from the first full implementation: Bitcoin. Created in 2008 by an individual who goes by the pseudonym Satoshi Nakamoto, Bitcoin represents the archetype of cryptocurrency, so to speak. Its value having experienced an exponential increase by the end of 2017, reaching nearly $20,000 and having subsequently experienced strong fluctuations, is only symptomatic of the craze and fascination that cryptocurrency has aroused. It remains true, however, that the law is struggling to adapt to what is arguably one of the biggest revolutions in recent years.

Bitcoin, a currency?

Not falling under any of the pre-existing legal categories, Bitcoin cannot be recognised as legal tender, or even an electronic currency. It is often substituted for the status of “financial index” or even simply a “valuable intangible asset” that can be the subject of a transaction.  In fact, a currency is conventionally considered as a particular asset issued by the State and whose value is guaranteed by the latter. From the perspective of the law of obligations, a currency is further characterized by its universal discharging effect: the debtor is in fact discharged of his debt once he has turned over to his creditor the amount of money due. The discharging effect is considered to be universal to the extent that the creditor does not need to agree to release the debtor of his debt. This discharging effect is deemed to be automatic, given the power that the law attaches to the currency. However, Bitcoin does not have universal discharging effect insofar as a debtor who would like to pay in Bitcoin must first obtain the agreement of the creditor. Thus, a creditor who refuses such a payment would not be exposed to the sanctions under Article R. 642-3 of the French Penal Code which prohibits the refusal to accept euro banknotes and coins having legal tender.

Bitcoin does no longer fulfils the requirements of an electronic currency. Indeed, Article L.315-1 of the French Monetary and Financial Code, which transposes Article 2.2 of Directive 2009/110/EC, defines electronic money as a monetary value which is stored in an electronic form, representing a receivable from the issuer and which is issued against the remittance of funds for payment transactions. Since Bitcoin is not issued against a remittance of funds, it cannot be classified under this definition.

The Court of Justice of the European Union has nevertheless considered that as Bitcoin “is a means of contractual payment, it cannot, on the one hand, be regarded as a current account, or as a deposit of funds, a payment or a transfer. On the other hand, unlike receivables, claims, cheques and other commercial paper (…), it constitutes a means of direct settlement between the operators who accept it”. In this respect, it had determined that Bitcoin could benefit from the VAT exemptions provided for financial transactions, without giving a more specific definition of the status of cryptocurrencies.

Taxation of Bitcoin

The darkness around the legal status of Bitcoin does not mean that it is exempt from any regulation. The TRAFCIN unit, an agency of the French Ministry of Economy and Finance, in charge of the fight against money laundering and the financing of terrorism, published a report in 2014 on the taxation of Bitcoins. This report specifies that the capital gains on Bitcoins are thus subject to income tax in France as of 11 July 2014, under the category of non-commercial profits if the gains are occasional, or that of industrial and commercial profits if it is a normal activity. This tax is, however, only valid for Bitcoin sales, and does not apply when the cryptocurrency is simply stored in a virtual wallet. Bitcoins are also subject to inheritance and gift tax. As a result, Bitcoins that would be given could be re-qualified as a disguised donation and give rise to the gift tax which could reach up to 60% for non-relatives.

This bit of information given by the TRAFCIN unit, as well as that given by the CJEU provide some clarification of the contours of the legal status of cryptocurrencies, even though they remain unclear. It is therefore important to remain attentive to the understanding of both French and European case law and future legislation on the characterisation of such currencies.

This bit of information given by the TRAFCIN unit, as well as that given by the CJEU provide some clarification of the contours of the legal status of cryptocurrencies, even though they remain unclear. It is therefore important to remain attentive to the understanding of both French and European case law and future legislation on the characterisation of such currencies.