Kostyantyn Kryvopust talks about judicial practice in IP disputes during the war

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According to the information of the Supreme Court, in 2022-2023, there was a trend of decreasing procedural appeals related to the protection of intellectual property rights. At the same time, if we analyze not the quantitative indicator, but the actual categories of IP disputes considered, it can be stated that over the past two years, the issues related to the protection of intellectual property rights have not changed significantly compared to the pre-war period. The only significant difference is that in some cases, to certain categories of disputes, the courts began to apply the prescriptions of wartime laws, namely, the Law of Ukraine “On the Protection of the Interests of Individuals in the Field of Intellectual Property During Martial Law, Introduced in Connection with Armed Aggression of the Russian Federation against Ukraine”.

Within the scope of this article, we will consider two cases that were reviewed by the Supreme Court in 2023. One of them is directly related to the enforcement of wartime legislation in the IP sphere, and the other concerns an equally important issue that has been waiting for a solution for a long time.

The term of validity of patents for inventions according to the laws of wartime

At the end of 2022 — at the beginning of 2023, the Supreme Court reviewed the decisions of the courts of previous instances in case No. 910/9215/21 in the lawsuit “Merck Sharp and Dome Corp.” to “Teva Ukraine” LLC and the Ministry of Health of Ukraine on termination of infringement of rights to a pharmaceutical patent for an invention. Claims of “Merck Sharp & Dome Corp.” amounted to the termination of any use of the patent of Ukraine No. 55409, in particular the prohibition of the use of the invention in the medicinal product “Caspofungin-Teva” and the refusal of state registration by the Ministry of Health of Ukraine.

Within the scope of this article, we will not dwell in detail on the plot of this case and the arguments of the parties. We only note that the decision made by the Supreme Court following the re-examination of the case in the cassation procedure generally coincides with the stable and consistent position of the court of cassation in similar legal relations. This position can be read in more detail in the decisions of the Supreme Court in cases No. 910/10855/20, No. 910/17860/21, No. 910/17856/21. The stated position is that submitting an application for state registration of a medicinal product and obtaining a state registration certificate are considered actions that are a violation of the rights of patent owners, if such actions are taken before the expiration of the patent.

This case is the subject of our interest in view of the fact that, considering case No. 910/9215/21, the courts of Ukraine applied the prescriptions of par. 3 p. 1 part 1 of the Law until the term of validity of the patent of Ukraine for an invention, the expected expiration date of which fell on the consideration of the case in the court of first instance.

Thus, rejecting the defendant’s arguments about the absence of a subject of dispute in this case, taking into account the expiration of the term of validity of the patent of Ukraine No. 55409 for the invention at the time of the hearing of the case, the courts of the first and appellate instances came to the conclusion that in view of the provisions of the above-mentioned Law, the term of validity of the patent of Ukraine No. 55409 for the invention is extended until the day of termination or cancellation of martial law.

According to para. 3, item 1, part 1 of the mentioned Law “property rights of intellectual property, the term of validity of which expires on the date of introduction of martial law in Ukraine or during the operation of martial law, remain valid until the day following the day of termination or cancellation of martial law. From the day following the day of termination or abolition of martial law, the validity of property rights of intellectual property may be extended in accordance with the established procedure, taking into account the features established by this Law.”

The above approach to the interpretation of the prescriptions of para. 3 p. 1 part 1 of the Law creates prerequisites for the emergence and existence of such a phenomenon as patents with an indefinite term of validity. In this case, patents whose validity period (in particular, additional protection) finally expired starting from February 24, 2022, will be considered as valid until the day of termination or cancellation of martial law in Ukraine. For the pharmaceutical market of Ukraine, this will actually make it impossible to enter the Ukrainian market of generic drugs, where inventions are used, the term of validity of Ukrainian patents for which expired with the beginning of martial law.

LLC “Teva Ukraine” objected to such an approach and noted that the provisions of this Law cannot be applied to those patents whose term of validity, in particular, additional protection, has finally expired, otherwise it would contradict national and international legislation. The defendant even asked, in view of the unique legal problem caused by this, to transfer the case to the consideration of the Grand Chamber of the Supreme Court, noting that there are 13 cases in the proceedings of the judges where the issue of the application of the above-mentioned Law is being resolved.

Expectations that the Supreme Court would put an end to this issue were not fulfilled. The Supreme Court, reviewing the case in the second circuit, although it came to the conclusion that the application of the above-mentioned Law to disputed relations is erroneous, it justified it by the absence of retroactive effect of the law in time. The Supreme Court noted that the disputed relations in case No. 910/9215/21 arose in February 2021, when an application for state registration of the medicinal product “Caspofungin-Teva” was submitted, while the Law entered into force on April 13, 2022, that is, after the disputed relations, and therefore cannot be applied. Taking into account the above rationale, the Supreme Court predictably refused to grant the request to transfer the case to the consideration of the Grand Chamber of the Supreme Court.

Therefore, the question of applying the above-mentioned Law to patents whose validity period has finally expired remains open.

Separately, we note that in July 2023, already after the re-examination of case No. 910/9215/21 by the Supreme Court, the IP office issued an Explanation on this matter. As follows from the Explanation, the IP office does not share the positions of the courts of first instance and appeals in the above-mentioned case and believes that the provisions of the Law can be applied only to those patents whose validity can be “maintained (payment of an annual fee for maintenance of validity) or extended ( additional protection of rights to inventions)”. However, the IP office itself makes a caveat that the Explanation “is informative in nature and does not establish legal norms.”

Therefore, in the current situation, in the absence of changes to the Law (the corresponding draft laws have been developed and two of them have already been registered in the Verkhovna Rada), it remains only to wait for the next case where the issue of the application of the above-mentioned Law to the term of validity of Ukrainian patents on inventions, will be reviewed in the cassation instance, and the Supreme Court will provide a legal position.

Property rights of intellectual property vs joint property of spouses

The question of whether the property rights of intellectual property are the common joint property of the spouses remained debatable and undefined for quite a long time. And finally, there is hope that the Joint Chamber of the Civil Court of Cassation as part of the Supreme Court will put an end to it based on the results of consideration of civil case No. 335/5841/19.

In 2019, a dispute arose between the parties regarding the legality of the alienation of intellectual property rights to trademarks and patents registered in the name of one of the spouses, in the absence of the consent of the other. According to the plot of the case, the plaintiff and the defendant were in a registered marriage. During the marriage, trademarks and industrial designs used by the spouses in joint business were registered for the wife. After the divorce, the plaintiff learned from open sources that the owner of property rights to the specified objects of intellectual property rights had changed from his ex-wife to their daughter. Considering the alienation of property rights to be unlawful, the plaintiff appealed against such actions to the court, justifying his claims by the lack of his consent to the alienation of the joint joint property of the spouses, which, according to the plaintiff, are the property rights of intellectual property.

Courts of the first and appellate instances, partially satisfying the claim in case No. 335/5841/19, based on the fact that the trademarks and industrial designs were registered for the former wife during the marriage, “each of the spouses participated in the acquisition with their joint funds and labor and development of these objects”, and therefore the courts agreed with the position of the plaintiff and attributed the property rights of intellectual property to trademarks and industrial designs to the joint joint property of the spouses.

However, the Supreme Court did not agree with this position. Reviewing case No. 335/5841/19 in the cassation procedure, the Court came to the opposite conclusion that the trademark cannot be the object of joint joint property of the spouses. The panel of judges that reviewed the case assumed that the rights to the trademark belong to the owner/owners of the certificate, therefore “property right to the trademark has only the person who is specified in the certificate issued in execution and on the basis of the Law of Ukraine “On Protection rights to signs for goods and services”. “If one of the spouses is the owner of a trademark certificate, then in the case of concluding a deed regarding the transfer (alienation) of intellectual property rights to a trademark, the provisions of Art. 65 of the Family Code of Ukraine regarding the need to obtain the consent of the other spouse does not apply to such relations, since in such a case it is necessary to be guided by Art. 16 of the Law of Ukraine “On Protection of Rights to Marks for Goods and Services” and take into account that in the absence of an agreement on the use of a trademark, the owner of the certificate can use the trademark at his discretion.

The court also cited the decision of the Supreme Court in case No. 926/1795/18, where the panel of judges reached a similar conclusion, noting that the prescriptions of Art. 16 of the Law of Ukraine “On Protection of Rights to Marks for Goods and Services” “unequivocally establish” the right to use the trademark exclusively for the owner/owners of the certificate of Ukraine, their successors and/or their licensees. Therefore, “the presence of any other relationship between the plaintiff and the defendant, apart from the specified <...>, including their being married, did not mean that the defendant had the right to use the trademark, the certificate for which belonged to the other spouse.”

At the same time, the panel of judges reviewing case No. 335/5841/19 recognized the existence of another approach of the court of cassation to this issue. This approach was outlined in the Supreme Court rulings of November 6, 2019, April 21, 2022 in case No. 161/11764/15-ts, where the panel of judges came to the conclusion that the registration of the defendant’s trademarks “by itself does not exclude their assignment to joint property of the spouses and the possibility of division according to the rules determined by Ch. 8 of the Family Code of Ukraine”.

Therefore, in order to eliminate different approaches in the practice of the cassation instance, on July 5, 2023, the Supreme Court decided to transfer case No. 335/5841/19 to the Joint Chamber of the Civil Court of Cassation as part of the Supreme Court.

Unfortunately, the justification of the above approaches in the Supreme Court’s judgments does not seem sufficiently reasoned and convincing. For example, in case No. 335/5841/19, the Supreme Court without explanation changes the object of research and instead of property rights of intellectual property on trademarks and industrial designs, examines only the trademark as such. The court also does not evaluate the fact established by the courts of previous instances of the former spouses’ use of objects of intellectual property rights in joint economic activity and its influence on the determination of the legal regime of property rights.

It remains to be hoped that the decision of the Joint Chamber of the Civil Court of Cassation as part of the Supreme Court will eliminate the existing gaps and bring the necessary certainty to the issue of the nature of intellectual property rights. Despite the relative paucity of this category of cases, it should be borne in mind that the Ukrainian IT sector constantly deals with intellectual property rights to IT products that are alienated/transferred by natural persons-developers on a daily basis, and therefore the current uncertainty under the absence of contractual regulation creates potential risks for the acquirers of such rights.

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