Early Termination of the Kaporal Watches License Agreement: Contractual Breaches and Misleading Commercial Practice Sanctioned

– In a judgment dated October 2, 2024 (Paris Court of Appeal, Pole 5, Chamber 4, No. 22/12581), the Court upheld the early termination of the license agreement between the KAPORAL group and Montres Ambre, concerning the design and sale of watches under the “Kaporal Watches” brand. The licensee initiated production without KAPORAL’s express approval of the product names, packaging, or presentation.

– The Court found that express prior approval from KAPORAL, contractually required before any commercialization, had not been obtained. Although the contractual silence period for prototype validation had expired, this did not equate to authorization of all subsequent phases. This procedural breach rendered the product launch unlawful.

– Additionally, the sale of the watches on Showroom Privé using a discounted (strikethrough) price, without any prior sale at the reference price, was deemed a misleading commercial practice under Article L. 121-1 of the Consumer Code. The fictitious discount misled consumers into believing they were receiving a significant deal.

– The Court held that this conduct, directly linked to the use of the Kaporal brand, harmed the licensor’s image and constituted bad faith execution of the agreement. These breaches justified the termination at the licensee’s fault and the enforcement of the contractual penalty clause, set at €70,000.