On 23 August 2016, the Ukrainian Government (the “Government”) green lighted the winding up procedure of the State Intellectual Property Service of Ukraine (the “Service”), and transformation of State Enterprise “State Intellectual Property Institute of Ukraine” (the “UAPTO”) into governmental organization – duumvirate of regulatory bodies, which were regulating the intellectual property system in Ukraine since 2011.
The Ministry of Economic Development and Trade of Ukraine (the “Ministry”) – a successor of the Service – will also acquire two affiliates of the Service: State Organisation “Ukrainian Agency for Copyright and Related Rights” (responsible for collective management of copyright and related rights) and State Enterprise “INTELZAKHYST” (responsible for maintaining of the register of control marks for marking of certain copyrighted works and, since recently, assistance in combating Internet piracy).
On the wrecks of the existing institutional IP Empire, the Government expects to establish a two-tier system – the National Agency for Intellectual Property (the “National IP Agency”) that will be subordinated to the Ministry. While the full impact of the institutional reform on the intellectual property system is yet unclear and will be assessed mainly by the progress and quality of laws and regulations adopted, IP rights holders should keep the eyes open to avoid any negative legal consequences during or after the transitional period.
The length of transitional period
The road map approved by the Government does not contain an exact date by which the National IP Agency should be finally established. Presumably, searching for the best world practices should be completed in September 2016, and the draft law on improvement of state regulatory measures with respect to intellectual property system should be submitted to the Government in October 2016. Once the Ukrainian Parliament adopts the respective law, the Government will have two months to establish the National IP Agency. In the best-case scenario, the establishment of the National IP Agency will be completed early in 2017. In the worst-case scenario, the transitional period may take the entire year of 2017, or even longer.
In order to avoid a regulatory vacuum, the Service will continue to regulate intellectual property system until its power is assigned to the Ministry.
It is not clear whether the UAPTO will continue to exist up to the creation of the National IP Agency. So far, it is assumed that it will continue to carry out its functions during the transitional period, including accepting and examining the applications with respect to trademarks, inventions, utility models and designs.
Lifehacks for IP rights holders: how respond to the institutional reform?
IP rights holders should consider taking the following steps during the transitional period:
We will continue to closely monitor these developments and provide timely updates.
With effect from 19 August 2016, the National Bank of Ukraine (the “NBU“) abolished the requirement for Ukrainian residents to obtain a price evaluation act – an approval from State Enterprise “State Research and Information Centre for International Commodity Markets Monitoring” (“Derzhzovnishinform”) – for cross-border payments for purchases of IP rights from foreign residents for the value exceeding EUR 50,000.
The reasoning behind price evaluation acts was that they were supposed to prevent non-productive outflows of capital from Ukraine in the form of payments for intangible assets, such as IP rights. Where payments exceeded the regulatory threshold (most recently, EUR 50,000), a Ukrainian payer was required to apply to Derzhzovnishinform for the document (price evaluation act) confirming that the price of IP rights purchased under the contract was consistent with their fair market value. If a price evaluation act was not available, Ukrainian banks were prohibited from arranging the payment (save for a few exceptions).
Abolishment of the price evaluation act requirement is definitely a positive step in terms of simplifying cross-border activities of the Ukrainian business. At the same time, the NBU still maintains control over similar outbound transfers. In particular, the NBU is currently empowered to review the underlying documentation and suspend outbound transfers exceeding USD 50,000.
The NBU also continues its policy of strengthening the financial monitoring procedures and increasing the level of control by Ukrainian banks over capital outflows. In particular, the NBU has instructed Ukrainian banks to carry out a detailed analysis of transactions and obtain additional documentation from clients, where the bank has concerns that the contractual price of goods, services or assets may be inconsistent with their fair market value.
This news was prepared in cooperation with Sayenko Kharenko Banking & Finance practice.