Alain D, one of 66 people accused of involvement in a paedophile ring, recalled the day a child named Marine V turned six, adding more chilling testimony to the trial.
Most defendants deny any wrongdoing.
Investigators say 45 children - aged six months to 14 years - were abused by their parents or their acquaintances from 1999 to 2002, in some cases in exchange for small amounts of money, food, cigarettes or alcohol.
Marine V is 10 years old now. Victims and suspects cannot be identified by full names because of French laws designed to preserve the anonymity of child victims.
Marine V is the daughter of two top suspects in the case, who were said to have organised the paedophile ring, and hosted adults and lured other children to their home in the western city of Angers.
Their pants were down
On Marine's birthday, her father - Franck V - and her grandfather, Philippe V, were at home with the children, Alain D told the court.
"I went into the bedroom, I saw Franck and Philippe with their pants down. They were touching the children," said Alain.
He faces a maximum of five years if convicted of sexual assault and failing to report criminal acts.
Alain D detailed graphic accounts of sexual acts he witnessed involving Marine and other children, boys and girls alike.
"Why did you watch?" asked the prosecutor, Eric Marechal, visibly stunned.
Alain D responded: "I was paralysed."
Jacqueline, his wife, told the court that, at the time, she said: "We have to intervene."
But they did nothing.
Another accused, Jacky H, testified on Wednesday that he had taken part in group sex at the home of Franck V.
Children were crying
"Franck was caressing the children," said Jacky H, accused of rape and sexual assault. He detailed other graphic sexual acts.
"The children were crying. Some were dressed, others were undressed."
The comment evoked a cry from Franck V: "It's false!"
In all, 39 men and 27 women are accused of taking part in a paedophilia ring in which babies and children were allegedly raped, sexually abused and prostituted by their parents for food or money.
