Fondation de la Haute Horlogerie

Unfair competition

Unfair competition

One of the results of the fundamental principle of freedom of commerce and industry is that it gives companies freedom of competition.

From a practical point of view, this means that to commercialize a copy of a product which is not covered by a patent, is not in itself an act of unfair competition. In other words, a product which is not covered by an individual right (patent, design and model, copyright, brand...) can be freely reproduced by virtue of the principle of the freedom of commerce and of industry.

Nevertheless, some limits to this freedom of competition have been set down when its usage is excessive, notably by behaviour contrary to the rules of integrity.

One type of competition can be reprehensible if actions contrary to the usual practice have been committed, such as: bad faith, creating confusion, defamation, an intention to destabilise a rival company.

While the objective of legal action against counterfeiting is to sanction the violation of a private right, (right of trademark, design and model, copyright...), action against unfair competition is often presented as the “sanction of a duty” that a competitor did not respect.

An action against unfair competition can therefore be invoked on its own and in parallel with an action against counterfeiting, but the former is not a substitute for the latter.

These two actions are distinct and independent and consequently, failure to bring the first, if ill-founded, to a successful conclusion, does not constitute an obstacle to proceeding with the second, if its own conditions for implementation are in place. Since the non-counterfeiting exploitation may not in itself be reprehensible, it is necessary to demonstrate a distinct and separate fact in order for the complaint of unfair competition to be retained/upheld.

In Swiss law, the federal law against unfair competition (LCD) of 19th December 1986, sets out the principle of the illegal nature of unfair competition in Article 2, and in Article 3 a non-exhaustive list of all sorts of behaviour judged to be unfair such as: defamation, deceptive advertising, abuse of ownership or inexact professional designations...

In the application of Swiss law, a person who is victim of one of these attacks can undertake one of the following three legal actions:

1. Restraining action if the threat is imminent.
2. Suspensive action if the threat continues.
3. An action establishing the illicit nature, if the problem thus created continues.

Additionally, suing for damages and compensation for moral injury may also be envisaged.

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The case of the servile copy

This field deals with copies that are faithful down to the smallest details of form, made by a third party. Tracing or casting are not legally distinct from the servile copy and only differ from the latter in respect of the way they are produced.

In such cases, the copy is made directly from the material object that constitutes the creation. In other words, the copier does not undertake any personal work and makes no personal contribution. Current jurisprudence and legal doctrine consider a quasi-servile copy as a servile copy, the first differing from the second only by virtue of unimportant details.

Two situations can be distinguished:

1. the servile copy of a creation in an inappropriate form, sanctioned by unfair competition.
2. the servile copy of a creation, which is the object of private ownership rights, sanctioned by unfair competition.

In the first situation, a certain number of legal decisions illustrate the fact that just copying is not enough in itself to be sanctioned by unfair competition. In other words, “the principle of freedom of competition results in the fact that commercializing a servile copy of a product free from rights, is not in itself an act of unfair competition”. The courts seem to insist on there being a distinct fault in the copy.

As an example in the area of watchmaking, the servile copy of a model of a watch not covered by a private right was sanctioned on the grounds of unfair competition, not only because it was identically reproduced, but due to “both the prestige of the brand and that of the model commercialized by the plantiff” and because “the said model had been degraded by the sale of the imitation free of charge”.

In the second situation the question arises as to whether an act of unfair competition and an act of counterfeiting may be combined in the instance of a servile copy covered by a private right.

The two issues, being completely independent and autonomous, can indeed be combined if they are shown to be based on separate circumstances. In the case in point, the case for unfair competition will only be upheld if the plaintiff produces evidence of separate circumstances in relation to those constituting the acts of counterfeiting.

By way of information, Community Regulation 6/2002 of 12 December 2001 on community designs and models has allowed that a non-registered design and model enables its owner to intervene against a usage that leads to the protected design or model being copied. In other words, it is necessary to establish that the third party responsible for the copy had prior knowledge of the non-registered design and model.