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21 August 2018

Brands & Trends 2018, Issue II

IP LITIGATION: NO MORE QUESTIONS ABOUT THE VENUE FOR BUSINESS VS BUSINESS ONLINE IP INFRINGEMENT CASES. NOW ALL ROADS LEAD TO…

The Supreme Court of Ukraine has clarified the venue for commercial disputes regarding online IP infringement cases. However, this does not change the venue landscape dramatically. Prior to the judgment addressed below, a similar practice of defining the venue for examination of business vs business online IP infringement cases has been in place since at least late 2012. In particular, where an infringement covered two or more administrative-territorial units (virtually all Internet-related cases) any commercial court to which a claimant filed a lawsuit was as an appropriate venue. However, this was not an ‘exclusive’ venue, and other options and opinions existed (e.g. establishing the venue by the place of intellectual property infringement, or a manufacturer’s location, or an agent’s residence, etc.).

The Supreme Court has now had the chance to pass judgement on the venue issue in relation to intellectual property infringements on the Internet. It now remains applicable only to a limited number of business vs business intellectual property infringement actions filed with the courts before 26 April 2017.

Background

A Rivne-based NGO and a Kyiv-based consulting company (the “Claimants”) entered into a copyright assignment agreement with a team of authors who earlier had created an audio-visual work (the “Video“). Later on, the Claimants found the Video posted on Facebook pages by a third party. The Claimants engaged an expert who further discovered that the page is used and administered by Ecologic Investments LLC (the “Defendant“). Other proofs collected also confirmed that the Video was posted by the Defendant. On this basis, the Claimants filed a copyright infringement action with the Commercial Court of Rivne Region seeking statutory damages (one-time compensation).

The court of the first instance granted the claim and the court of appeal upheld the decision. The Defendant challenged the decisions of the lower courts in the court of cassation – the Supreme Court of Ukraine. The defendant argued, inter alia, that the Claimants brought the case in an inappropriate forum.

Having reviewed the case, the Supreme Court pointed out that if a copyright infringement covers two or more administrative-territorial units (e.g. regions of Ukraine), a dispute should be resolved by the court to which the claimant decided to recourse. The Supreme Court further explained that the venue should be determined taking into account all circumstances of the dispute. In particular, since the Video was publicly displayed on the Internet, the Claimants determined the Rivne region of Ukraine as a place of infringement, taking into consideration the specifics of Internet use as well as the fact of capturing the infringement in the city of Rivne. Since Facebook is available within the entire territory of Ukraine, the Claimants’ decision to bring the action to the court at their discretion (in this case, where the infringement was detected by them) is in line with procedural legislation requirements.

Current venue

The position expressed by the Supreme Court can equally apply to any other intellectual property infringement cases (not only copyright infringements). It derives mainly from Resolution No. 12 of the High Commercial Court of Ukraine of October 2012, where it concerns intellectual property infringement actions in general. However, this position is now relevant only for a limited number of intellectual property infringement actions filed with the courts before 26 April 2017 (i.e. before the effective date of the Law of Ukraine “On State Support of Cinematography in Ukraine”).

Transitional provisions of the restated Procedural Commercial Code of Ukraine stipulate that business vs business online IP infringement cases should be resolved by the court at the location of the Ukrainian IP Office (i.e. by the Kyiv Commercial Court). The Kyiv Commercial Court will consider disputes relating to online IP infringements until the Superior Court on Intellectual Property is established. Once created, the IP Court will consider all intellectual property disputes at its seat, i.e. in Kyiv. The venue issue will no longer be relevant for business vs business intellectual property infringement litigation. Now all roads for commercial IP disputes will lead to Kyiv.

Online IP infringement actions against individuals will need to be brought to the general courts where they or one of the defendants (e.g. Kyiv-based IP Office) resides.

UNFAIR COMPETITION: NO MORE WHAT, WHERE, WHO, HOW…

It has become an established practice, including court practice, that the Antimonopoly Committee of Ukraine (“AMC“) has boundless discretionary power in terms of running investigations on the violation of competition laws. This is especially true when it comes to the investigation period, evidence to be collected, experts to be engaged, and the actions to be taken to cease the violation. A recent decision by the Supreme Court of Ukraine that we address below limits to some extent this discretionary power of the AMC and its territorial offices with regard to ordering defendants to follow the AMC’s specific instructions on how to cease violations of competition laws.

Background

Late in 2016, one of the AMC’s territorial offices (the “Defendant“) decided that a regional gas distribution, transportation and supply company – Kryvorizhgas (the “Claimant“) – violated Ukrainian competition law. Specifically, in the Defendant’s opinion, the Claimant unreasonably demanded that three customers introduce certain changes to the Claimant’s technical documentation in order to resume gas supply. The Defendant imposed a fine on the Claimant and obliged him to cease the violation by amending his technical documentation himself and resuming gas supplies.

The Claimant challenged the Defendant’s decision in court. Both the court of the first instance and the court of appeal accepted the Defendant’s position and dismissed the claim. The Claimant further challenged the decision of the lower courts to the Supreme Court of Ukraine (cassation court). The Supreme Court mostly upheld the decisions of the lower courts, but did not support the Defendant’s demand to cease the violation by instructing the Claimant to amend its technical documentation and resume gas supplies.

The Supreme Court of Ukraine referred to Article 48 of the Law of Ukraine “On Protection of Economic Competition”, which stipulates that it is a competence of the AMC’s bodies to make a decision based on the results of the investigation, including to cease violation of the competition laws. Neither said Article 48, nor other laws of Ukraine stipulate that the Defendant has the authority to demand the Claimant to cease the violation by amending the technical documentation and resuming gas supplies. Instead, the Claimant should independently decide on how to cease the violation (e.g. to choose the way and proper measures to cease the violation).

What does this mean in practice?

The position of the Supreme Court of Ukraine may change the current practice overall and the approach of the AMC’s bodies to demanding the defendant cease a violation of competition law in some specific way. Specific demands from the AMC’s bodies on how to cease a violation always give a certain comfort and clarity to defendants and, as a result, help avoid any further disputes. In some cases, specific demands are also desirable for claimants (for example, when it comes to removing a trademark from some domain name – see Brands & Trends 2017. Issue II).

However, we believe that the position of the Supreme Court of Ukraine suggests a more balanced and impartial solution. In particular, it does not limit in any manner the way the AMC’s bodies recognise a certain activity (mechanics, action, etc.) as a violation of competition laws, including unfair competition law. It only limits the AMC’s discretion to decide in what specific way(s) to cease the violation.

For more information, please contact Oleksandr Padalka or Oleg Klymchuk. This newsletter was prepared with the assistance of associate Pavlo Kovalchuk.

Information contained in this newsletter is for general information purposes only, does not constitute legal or other professional advice, and should not serve as a substitute for specific professional advice tailored to particular circumstances.

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