Brussels Court of Appeal invalidates software editors’ settlement agreement because of wilful misrepresentation

The Belgian Judicial Code allows an intellectual property rightholder to seek, ex parte, a “descriptive seizure order” from the court if this rightholder suspects that his or her intellectual property rights have been infringed.

In this case, several software editors made use of this right. They organized a “counterfeit” seizure, alleging that illegal software was found on the premises of suspected infringers who are reputable printing companies. Even though these printing companies contested the infringement of any copyright, they were coerced to sign a settlement agreement
on the day of the descriptive seizure.

Soon after signing the settlement agreements, the suspected infringers provided the editors with documentary evidence showing that they were duly licensed for most of the software in question. However, the editors refused to refund the money they had charged to the suspected infringers. The latter then sued the software editors, but the case was dismissed at first

On 3 June 2013, the Brussels Court of Appeal quashed the court of first instance’s decision. It held that the signed settlement agreement was null because certain facts and circumstances which were shown to have been used have led the Court to conclude that fraudulent acts had indeed been used.

First, the software editors launched a counterfeit seizure as a “fishing expedition”. They committed this act based on erroneous and unsupported assumptions of copyright infringements on a large scale.

Second, contrary to what was written in the agreement, there was no need to settle because software from most of the editors who launched the counterfeit seizure had not been found. Also, the suspected infringers and the remaining editors whose software was found (i.e., used) were not in dispute yet.

Third, such dispute was created artificially by the editor’s threat to seal and seize the alleged infringing programs and their hosting hardware. If the seizure had indeed been carried out, it would have been detrimental to the suspected infringers’ activities. Also, the Court stated that one editor in particular is to be blamed for having knowingly withheld relevant information during the counterfeit seizure about the licenses which had been actually granted to the suspected infringers.

Fourth, contrary to what the editors alleged, the Court found that it was they who urged for a settlement agreement to be signed and not the suspected infringers. The Court took into account the template settlement agreement that was drawn up by the editors and discovered that the agreement included names of editors whose software was not even found during the descriptive seizure.

To sum up, the suspected infringers would not have entered into the settlement agreement or would have done so on different terms had there not been any misrepresentation on the software editors’ part. As a result thereof, the editors were ordered to reimburse the settlement fee plus interest.