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News-Archiv

30.03.2011
News-Archive, Ukraine

Short overview of the court system in Ukraine in IP related disputes

(as of the beginning of 2010)


 

Ukraine has a relatively developed legal system ensuring protection of intellectual property rights for both Ukrainian citizens (Art. 55 of the Constitution of Ukraine) and foreign individuals whose rights are equal to the rights of residents. The protection of rights and legitimate interests of intellectual property owners is ensured through measures foreseen by the current legislation, which are applied to infringers and involve acknowledgment and restitution of these rights and cessation of violations. Art.432 of the Civil Code (hereinafter referred to as CC) allocates the right of everybody to file a suit in order to protect his/her intellectual property rights pursuant to Art.16 of the CC. Such judicial protection provides protection of those IP rights which are governed by the law (Art. 432 and 424 of the CC: personal, non-property and property IP rights).

The protection of the legitimate interests of copyright owners and owners of other IP rights is ensured through the protection mechanism which represents a system of forms, processes and means of activity of corresponding jurisdictional authorities and interested parties. The aim of this activity is to acknowledge and restitute the violated rights, stop the violation of rights and legitimate interests of copyright owners, owners of other IP rights, and use state enforcement measure against infringers.

In the IP-related area two main forms for protection of rights may be used: jurisdictional and non-jurisdictional. However, the jurisdictional form plays a more significant role and is fulfilled through court actions, administrative responsibility, and criminal prosecution of IP rights.

Currently, the legislation of Ukraine and organisational activities of juridical authorities, first of all of the Supreme Economic Court of Ukraine, provide a possibility to owners of intellectual property rights to seek protection of their rights and legitimate interests. Such protection is ensured by the current legislation of Ukraine and international treaties to which Ukraine is a party for both non-residents as well as physical persons and legal entities of Ukraine which have equal rights.

The practice shows that in IP related disputes, collecting evidence of violation of IP rights, (expert opinions, preparation for the hearing, the hearing as such) and issuing a decision, are technically rather complex. This is also due to the complexity of the objects of intellectual property, as well as the structure, hierarchy and the volume of legislative norms including the provisions stipulated by international treaties to which Ukraine is a party.

Moreover, the IP related issues are not only complex, but are also very specific. In order to appropriately resolve IP related cases specific legal and technical knowledge is required. Furthermore, the IP objects as such represent exclusive rights; in the opinion of many Ukrainian lawyers they are sui generis rights which are beyond the boundaries of classical separation of rights into property rights, obligation rights and personal rights. This explains the necessity of specific education for judges which goes beyond the field “jurisprudence”.

Most IP related disputes are handled by economic courts. These courts investigate each year a significant number of IP related cases. The statistical evaluation of the court practice in the recent years demonstrates an upward trend in the number of IP related judicial cases. During the period 2002-2007 the number of copyright related cases handled by courts of general jurisdiction increased from 99 cases (2002) to 123 cases (2007), the number of IP related cases (inventions, utility models, industrial designs, and trademarks) raised from 58 to 76, respectively.

Moreover, there is a clear upward trend in the number of filed suits relating to IP infringements according to Art.512 of the Code of Ukraine for Administrative Infringements: there was a rise from 199 cases (175 cases were examined and resolved) in 2002 to 1033 (848 respectively) in 2007; the increase of the number of suits as to illegal distribution of audiovisual data carriers and computer programs, data bases pursuant to Art.1649 of the Code of Ukraine for Administrative Infringements was from 1259 cases (1146) in 2002 to 7246 (6401) in 2007. During 2007 about 9 cases relating to infringement of legislation which regulates production, export, import of laser discs, and export or import of materials for their production (Art. 16413 of the Code of Ukraine for Administrative Infringements) were filed.

In 2009 before courts 229 IP related cases were pending in which one party was the Ukrainian Patent Office, including 40 cases in administrative courts, 98 in economic courts and 91 in the courts of general jurisdiction. From 2003 to 2009 in the courts of the first instance, courts of appeal and cassation courts 515 cases were handled (6 cases in 2003, 4 in 2004, 20 in 2005, 27 in 2006, 66 in 2007, 163 in 2008, 229 in 2009). Disputes related to the protection of rights for objects of industrial property were handled in the courts of general jurisdiction (178 cases), economic courts (208 cases) and administrative courts (115 cases). In 2009 about 1206 hearings took place. An analysis of the legal cases shows that the majority of these cases relates to trademarks. Subjects of disputes were: invalidation of trademark certificates, validity of the international registration of trademarks, and annulments of decisions of the Patent Office as well as premature termination of national and international trademark registrations.

Due to the increase of IP related disputes the Supreme Economic Court of Ukraine (hereinafter referred to as SECU) decided to introduce effective organisational measures in order to improve judicial protection: special education of judges, providing courts with the required methodological aid in order to ensure an appropriate and uniform court practice.

An important step on the way of improving intellectual property protection in Ukraine was the formation of a separate court chamber for IP related disputes in 2001. Similar chambers were formed in the economic courts of appeal; in local economic court boards of judges were set up or certain judges were appointed to handle IP related issues.

A significant problem concerning cases of protection of intellectual property rights is that so many different courts have jurisdiction over disputes related to the violation of these rights and legitimate interests. Pursuant to Art.124 of the Constitution of Ukraine the jurisdiction of courts covers all legal relationships which occur in the state. The current procedural legislation of Ukraine stipulates specific rules for the jurisdiction of a court in certain issues.

The judicial system in Ukraine includes courts of general jurisdiction and specialised courts. The judicial system includes three levels: local court, court of appeal, cassation court.

For courts of general jurisdiction, courts of the first instance are district (in cities) and inter-district courts (in the rural area). Courts of appeal (second instance) are located in regional centres. For the city of Kiev the court of appeal is the court of the city of Kiev. For courts of appeal the cassation courts (third instance) are other courts of appeal (The law “On the organisation of courts” defines which court is the cassation court for a particular appeal court). For instance, the court of the city of Donetsk is the cassation court for the court of appeal of the city of Kiev.

For economic courts, courts of the first instance are district economic courts, court of the city of Kiev, Sevastopol, and Autonomous Republic of Crimea. Courts of appeal (courts of second instance) are located in several regional centres. For economic court of Kiev such court is the Court of Appeal of the city of Kiev. For all economic courts of appeal cassation court is the Supreme Economic Court of Ukraine.

For administrative courts, first instance courts are district courts that are responsible for territorial districts. Administrative courts of appeal are courts of second instance. For all administrative courts the cassation court (third instance) is the Supreme Administrative Court.

Formally, all branches of juridical authority are subordinated to the Supreme Court of Ukraine (except for the Constitutional Court which has a specific jurisdiction). However, in fact, supreme specialised juridical authorities (Supreme Economic Court and Supreme Administrative Court) have the status of a cassation instance and their decision cannot be appealed.

Thus, the courts of general jurisdiction handle:

  1. intellectual property related civil disputes (Art.15-17 of the Civil Procedural Code of Ukraine);
  2. cases of administrative infringements in the IP related issued (Art.221 of the Code of Ukraine for Administrative Infringements);
  3. criminal cases related to IP-related crimes (art.15 of the Criminal Procedural Code).


Economic courts handle IP related disputes between companies, institutions, organisations and other legal persons (including foreign citizens), citizens which are involved in entrepreneurial activity but are not a legal entity and obtained the status of an individual entrepreneur in the stipulated order (art.1, 12 of the Economic Procedural Code).

Administrative courts examine IP related cases wherein one party is a subject of state body and its decisions are contested (normative legal acts or legal acts of individual action), activity or non-activity are contested (art. 2, 17 Administrative Legal Procedure Code).

However, in the practice, rather often situations occur in which the owner of IP rights must turn to two courts of different jurisdictions (both the economic and administrative one) in order to protect his rights by restituting the violated rights or annulment of IP rights of a person infringing these rights. This makes the protection procedure more complex, increases the duration of disputes and raises the protection costs, since court experts and persons skilled in the art are involved in IP related litigations.

The principle of determining jurisdiction is based on two main criteria: the subjective (parties involved) and an objective one (subject of the dispute). Thus, the criteria determining the jurisdiction of cases for the economic court are: the parties involved and the character of subject of dispute (economic activity, including entrepreneurial activity). In the course of the civil legal procedure cases of public, administrative and economic legal relations do not fall under the jurisdiction of these courts.

The aim of administrative courts in Ukraine was to solve a range of problems related to determine specific features of cases which can belong to the jurisdiction of said institutions. One of the crucial factors for determining the competence of administrative court is the fact that a public legal dispute between physical and juridical persons on the one side and official state authorities on the other is related to problems of management and infringement of rights of a non-governmental subject in the process of realisation of management or governmental decisions. Due to these factors the main part of the legal disputes falling within the jurisdiction of administrative courts has a clear administrative character.

Administrative courts handle claims of citizens and legal entities against authoritative actions of subjects of public authority as to the lawfulness and well-foundedness of the authoritative activity (inactivity). The basic component of such dispute is an infringement of rights and freedom of citizens. This means, the dispute has an administrative character. The legal protection which is ensured by administrative courts is directed not as much to punishment of the unlawful conduct, but rather reinstatement of legitimate rights. This allows stating that administrative legal procedure is aimed at public legal disputes.

An example for such a dispute can be a dispute between the Patent Office and an applicant relating to a Decision to invalidate a patent or a trademark certificate; this means the dispute between the participants of the public legal relations, most of all arising at the stage of obtaining rights for an object of intellectual property.

Disputes as to the infringement of intellectual property rights fall under the private law. Therefore, they are handled in both courts of general jurisdiction and economic courts. The difference consists in the persons involved; if at least one person is not an entrepreneur the case unavoidably falls within the competence of the court of general jurisdiction.

Such courts are in charge of disputes relating to the grant of patents of Ukraine for an invention. Pursuant to art.24 of the Law of Ukraine “On protection of rights for inventions and utility models” the following disputes can be solved in the court: conditions and amount of compensation for an employee’s invention (utility models); defining the amount and way of paying reimbursement for court decisions in disputes foreseen by the legislation; authorship of the invention (utility model); establishing the fact of actual use of an invention (utility model); establishing the owner of the patent; infringement of rights of the patent owner; conclusion of license agreements;  rights of prior use; compensation and other disputes related to the protection of rights which are described by the Law of Ukraine “On protection of rights to inventions and utility models” (art.35).

Pursuant to the Law of Ukraine “On protection of rights for industrial designs” disputes relating to the application of the regulations of the Law fall within the jurisdiction of courts, especially the authorship of the industrial design; establishing the fact of actual use of an industrial design; establishing the owner of the patent; infringement of rights of the patent owner; conclusion of license agreements;  rights of prior use; compensation and other disputes related to the protection of rights (art. 27).

In the field of protection of rights for the means of individualisation the following issues can be mentioned which belong to the jurisdiction of courts and are related to the use of regulations of the Law of Ukraine “On protection of rights for trademarks for goods and services”: establishing the owner of the trademark; infringement of rights of the trademark owner; conclusion of license agreements; other disputes related to protection of rights.

Thus, the majority of disputes as to violation of intellectual property rights are related to the nature of objects of intellectual property as such.

It must be noted that when resolving IP related disputes a dualism of the court system can be observed. The handling of IP related issues falls within the competence of both courts of general jurisdiction and specialised courts. In the latter situation additional dualism can be observed, since these cases are usually assigned to economic and administrative courts. However, both courts have deficiencies in the unified approach to the intellectual property legislation. There are also problems in determining the jurisdiction for certain cases, especially in cases where the third party belongs to different jurisdictions. The competence of judges in courts of general jurisdiction and in administrative courts is not sufficient for handling such specific issues.

Actually, since the professional qualification of judges at economic courts is based not only on the knowledge about intellectual property legislation, but also on a specific technical education, based on long-term practice of handling IP related issues in the system of economic courts and on the long experience of judges it is suggested that it would be more appropriate to subordinate all cases relating to infringements of intellectual property rights to the jurisdiction of economic courts. This issue was repeatedly discussed and suggested for examination by state authorities.
 
However, the attempt to solve this problem did not find any support at the normative level. Even at the level of judicial authorities a dualistic approach to the problem of jurisdiction can be observed. In 2008, the Supreme Court of Ukraine which reviewed the draft of the Law “On introducing amendments to certain legislative acts of Ukraine (relating to cases which belong to the jurisdiction of economic and administrative courts of Ukraine)” commented on this problem as follows: subordinating public legal disputes as well as issues falling within the competence of the jurisdiction of the Constitutional Court of Ukraine to the competence area of economic courts because such disputes relate to the activity of economic subjects contradicts Art. 147, 150 of the Constitution of Ukraine, it does not comply with the principle of specialisation of courts and violates the rules of jurisdiction. Moreover, the implementation of the suggested amendments would lead to the revision of the main principles of administrative legal procedures.

A problem with respect to court proceedings is their duration due to different levels of instances. Often it takes up to 3-4 years until the case is resolved, since a lot of time is spent on juridical and specialised research.

Apart from long-lasting proceedings another problem is substantial increase of costs for litigation issues at each new stage of the process. For subjects of economic activity such legal proceedings lead to significant financial losses and lack of motivation for creating new objects of IP.

Taking into account the above-referenced, it is again necessary to speak about the implementation of the system of specialised patent justice in Ukraine. Especially since the attempt to set up a Patent Court in Ukraine was made several times; however, a small number of legal cases related to intellectual property protection was the main obstacle on the way of establishing the new institution. Nowadays however, a significant increase in the number of such cases can be observed. There is a well-educated body of judges within the system of economic courts of Ukraine which can handle IP related issues without delay and relatively cost-efficient.

Only the Economic Procedural Code provides for developed legal norms with regard to preliminary measures (Art. 66-68 Economic Procedural Code) and preliminary injunctions (art. 43-1- 43-10 EPC). We would like to show an example for the implementation of such measures in the system of the economic courts. 
 
A German pharmaceutical company producing an original preparation “A” went to the Economic court of the city of Kiev with a suit against a state company “State Pharmacological Centre” belonging to the Ministry of Health Protection of Ukraine (a state authority which registers medicaments for market authorisation in Ukraine) and an Indian pharmaceutical company producing generics “B”, “C”, “D” and “E” with the following request:

  • oblige the company “State Pharmacological Centre” to reject the application to register preparations “C”, “D” and “E” (generics of the Indian company);
  • oblige the state company “State Pharmacological Centre” to reject applications for state registration of generic medicaments which will be filed by said Indian company before a certain date (suggested termination of the legal proceeding) and contain an active ingredient patented for the preparation “A” which active ingredient was used without consent of the patentee of the preparation “A” to use the registration information concerning the effectiveness and safety of the medicament “A”;
  • prohibit the afore-mentioned Indian company to import or distribute (sell, exchange, perform other actions related to sales) on the territory of Ukraine of the medicament “B” which contains patented substance “A”.


Pursuant to the norms of Art.9 of the Law of Ukraine “On medicaments”, the registration of generic preparations on the basis of “exclusive data” available in the registration file of the original preparation is not possible within 5 years calculated from the registration date of the latter medicament.

On the basis of the norms of Art.66 of the EPC the German pharmaceutical company filed a request with the Economic court of the city of Kiev to

  • prohibit the state company “State pharmacological centre” to perform actions relating to the examination of registration materials for medicaments “C”, “D” and “E” and issue a conclusion as to the possibility of their state registration;
  • prohibit the Ministry of Health Protection of Ukraine to perform the state registration of medicaments “C”, “D”, and “E”;
  • prohibit the Ministry of Health of Ukraine and the state company for medical supply “Ukrmedpostach” of the Ministry of Health of Ukraine and/or other persons who are authorised to purchase or accept for distribution or pay for medicaments “B”, “C”, “D”, and “E”.


The court satisfied the above request and issued a Decision which was based on the following facts:

  • when filing applications for the state registration of medicaments “B”, “C”, “D” and “E”, the applicants, in particular the above-indicated Indian company, did not obtain a consent of the plaintiff (German company) for the use of the registration information for medicament “A” which is an intellectual property of the plaintiff;
  • the state company “State Pharmacological Centre” accepted medicament “B” produced by the Indian company for state registration, the Ministry of Health registered said medicament without the consent of the plaintiff to use reference information from his registration file for registered medicament “A”. The registration took place within a 5-year period during which the use of the exclusive file information in order to register a generic is prohibited. As a result, medicament “B” received market authorisation. Medicament “B” having an active ingredient of the same type as medicament “A” won a tender for purchase by the Ministry of Health of Ukraine and was introduced into the Ukrainian market;
  • Since applications for the state registration for generic medicaments, in particular for medicament “B”, were filed a year ago, it is clear that at the moment of court decision in the present case said medicaments can either be applied for state registration, or even already registered; therefore, the enforcement of the court decision to withdraw said medicaments from registration will be difficult.


Although this case has not been resolved yet the defendants have already appealed the court’s Decision in the court of second instance (i.e. Economic Court of Appeal of the city of Kiev). The court of the second instance supported the defendants and set the Decision of the court of the first instance aside. The Decision of the second instance explains that the fact of illegal use of information available in the registration file (“exclusive data”) by the defendants must be proven only during the legal proceeding.

The plaintiff, a German company, went to the Supreme Economic Court of Ukraine with a cassation appeal and explanations, in which it requests to set the decision of the economic court of appeal aside and confirmed again the decision of the economic court of the first instance due to the incorrect application of the norms of material and procedural legislation. The plaintiff set forth that after the registration of medicaments “B”, “C”, “D” and “E” the defendant (Indian company) will have the right to use these medicaments on the basis of Art.9 of the Law of Ukraine “On medicaments” whereby the rights of the plaintiff will be infringed.

Having examined whether the norms of procedural law were correctly used by the court instances the Supreme Economic Court of Ukraine came to the conclusion that it was necessary to introduce amendments into the resolution part of the Decision of the economic court of appeal.

Pursuant to Art.66 of the Economic Code of Ukraine, the Economic Court of Ukraine can take preliminary measures on his own initiative or on the basis of a request of a party, prosecutor or deputy prosecutor who filed the suit. Preliminary measures are available at any stage of the proceeding if the enforcement of the decision taken by the economic court can be impeded without such measures.

Preliminary measures can be taken if there is substantiated assumption that the non-use of such measures can impede or complicate the enforcement of the decision with respect to the claims.

According to Art.67 of the Economic Code of Ukraine preliminary measures can be taken in particular by prohibiting the defendant to perform specific actions.

In item 1.1 of the Information letter of the Supreme Economic Court of Ukraine of 12.12.2006 no.01-8/2776 “On several questions of the practice of preliminary measures” is it stated that the court’s assessment as to the necessity of the corresponding preliminary measures suggested by the plaintiff must be based on the following principles: the plaintiff’s request as to preliminary measures is reasonable, substantiated, and adequate; the interests of both parties as well as other parties involved in the proceeding are equally considered; there is a link between a specific preliminary action and the subject of suit, in particular a corresponding action can ensure a practical enforcement of the court’s decision to sustain a claim; the practical enforcement of a decision of the economic court can be impeded in case of sustaining a claim if preliminary measures have not been performed;  the infringement of rights and interests of other parties which are not involved in the legal proceeding can be prevented.

Whether the preliminary measures taken by the economic court are adequate depends on the fact whether it corresponds to the request in relation to which these measures are taken. The evaluation of such fact is carried out under consideration of the relation between the right (interest) of the plaintiff which should be protected and interest of other parties involved in the legal case.

When applying the norms for preliminary measures the economic court assumed that when the Indian company filed the application for registration of medicaments “B”, “C”, “D” and “E”, plaintiff’s consent for the use of registration information (“exclusive data”) for medicament “A” which represents plaintiff’s intellectual property was not received. The court also assumed that at the moment of issuing a decision in the present legal case said medicaments can be applied for state registration or even already registered; therefore, the enforcement of the court decision to dismiss the indicated medicaments from the registration list will be very difficult.

Moreover, the local economic court has not taken into account the following:

  • The fact of inappropriate use by defendants of registration materials belonging to the plaintiff is a part of evidence in the case that can only be subject matter in the main proceeding of the dispute; any evaluation of evidence relating to the essence of the dispute by the economic court is not admissible at this stage of legal proceeding and means that use of preliminary measures was not substantiated;
  • The letter of the Ministry of Health of Ukraine and the supply contracts for medicaments “A” and “B” signed by limited company “N”, the Ministry of Health and state company “Ukrmedpostach” are evidence of state purchase of the aforementioned medicaments within the budget program “Centralised measures for transplantation of organs and tissues”. I.e. having prohibited the purchase of medicaments “B”, “C”, “D” and “E”, the economic court of the 1st instance intervened the activity of the Ministry of Health of Ukraine and the state company “Ukrmedpostach” what might impede the implementation of the budget program, activity of the Health Ministry and economic activity of its supply partner.


The Supreme Economic Court assumed that the elimination of these mistakes by the economic court of appeal is justified and that the preliminary measures are not adequate in relation to the suit filed by the German company; these measures do not correspond to the subject of the present suit. Therefore, the Supreme Economic Court set the decision of the economic court of the first instance in this matter aside.

Guided by Articles 66, 1117, 1119-11111, 11113 of the Civil Procedural Code, the Supreme Economic Court of Ukraine changed the decision of the economic court of appeal of the city of Kiev having supplemented the resolution part by a new paragraph 3: “The claim of the German company as to the preliminary measures must be dismissed”.

The remaining part of the Decision of the economic court of appeal of the city of Kiev in this legal case was retained without any changes. Thus, the cassation claim of the German company before the Supreme Economic Court of Ukraine was dismissed.

Although the prosecution in this case has not been finished yet, we can draw certain conclusions as to the practice of Ukrainian courts.

  1. When requesting preliminary action it is not allowed to motivate them by circumstances which have not been considered yet or accepted by court and which relate to the subject of the dispute.
  2. The preliminary measures must not interfere interests of any other parties which are not involved into the dispute.
  3. The requested preliminary measures must be adequate and relate directly to the subject of the dispute.


Apparently the representative of the German company did not take into account these aspects and could not present any arguments which would not contradict the current legislative norms. Thus, when requesting preliminary measures prejudical facts must be used. Only then the defendant cannot substantiate his appeal.
 
The difference between preliminary measures (art. 66-68 of the Economic Code) and preliminary injunctions (Art. 43-1-43-10 of the Economic Code) is that the preliminary injunctions are used on the basis of the interested person’s request before the suit is filed.

In order to request preliminary injunctions, the future plaintiff should file a request with the court of first instance (defendant’s residence) indicating against whom and which preliminary measures should be taken, as well as circumstances by which preliminary measures are motivated. The application should enclose documents and other proofs for the afore-mentioned circumstances as well as a document confirming the payment of a corresponding fee. Within 10 days after the request is filed the applicant should file a suit.

Another peculiarity of the procedure for the use of preliminary injunctions (in contrast to preliminary measures) is the possibility to consider the issue without the presence of the persons against whom such measures are directed (if the plaintiff can correspondingly substantiate his request and the court agrees with him). Moreover, the economic court handling the request as to the application of preliminary injunctions has the right to request additional proofs substantiating the infringement or potential infringement as well as security deposit necessary to avoid the misuse of such measures.

Having examined the request as to the application of preliminary injunctions the court issues a Decision which is immediately enforced. This Decision can be appealed before the Court of Appeal; however, filing an appeal does not stop the measures. If the plaintiff does not file a suit within a 10-day term, the Decision of the court becomes invalid.