In Re (#4 April 2020)

Intellectual Property Reform

by Dmytro Nikulesko

Ukraine keeps on fulfilling its commitments to carry out intellectual property reform in accordance with the Association Agreement between Ukraine on the one part, and the European Union, the European Atomic Energy Community and their member states on the other part (hereinafter the Association Agreement).

To this end, three extremely important Draft Laws were adopted in the first reading by the Verkhovna Rada of Ukraine on 5 February 2020, including changes which are part of the reform in the field of intellectual property, which has already been going for more than five years, in particular:

No. 2255 On Amendments to Certain Legislative Acts of Ukraine Regarding the Establishment of the National Intellectual Property Authority;

No. 2258 On Amendments to Certain Legislative Acts of Ukraine Regarding Strengthening the Protection and Defense of Rights to Trademarks/Industrial Designs and Fighting Patent Trolling;

No. 2259 On Amendments to Certain Legislative Acts of Ukraine (Regarding Reform of Patent Legislation).

According to the authors, Draft Law No. 2255 is aimed at creating an optimal, high-quality and effective state system of legal protection of intellectual property capable of developing and implementing a transparent public model to overcome existing challenges and risks, suggesting effective tools for the intellectual property field as incentives for development of related economic and social factors.

There is no doubt that Ukraine has long been expected to create an effective state system of legal protection of intellectual property, and this Draft Law meets key standards. For instance, there is finally a proposal to establish a two-tier structure for the state system of intellectual property protection in Ukraine, with all main functions belonging to the Ministry of Economic Development and the National Intellectual Property Authority (hereinafter the NIPA). The Ministry of Economic Development will ensure both state policy formation and implementation in the intellectual property field, and the NIPA will perform separate public functions (authorities) to implement state policy (issuing protection documents (patents, certificates) for intellectual property).

Such a state system model of intellectual property protection stands a good chance of becoming effective, which is corroborated, inter alia, by international practice. A system of this kind has long been in use by most world-leading economies, particularly by Germany, Japan, Singapore, South Korea, France and others.

However, many IP experts claim that the aforementioned Draft Law needs to be supplemented with rules minimizing further stagnation in formation of an effective system. Thus, it is indicated in the explanatory report to the Draft Law that the NIPAs functions will be performed by a state organization established on the basis of the State Enterprise Ukrainian Institute of Intellectual Property (expert institute), and will be assigned to the Ministry of Economic Development Administration. Yet, the Draft Law does not clarifiy this information, which can lead to a fight between existing enterprises which are part of the Ministry of Economic Development in the intellectual property field for NIPAs status.

It would be appropriate to amend the Draft Law prior to the second reading so that both final and transitional provisions are supplemented with a provision obliging the Cabinet of Ministers of Ukraine to promptly determine the organization performing NIPAs functions, a state organization formed by reorganizing the State Enterprise Ukrainian Institute of Intellectual Property (Ukrpatent), as advised by the central executive authority, ensuring both formation and implementation of policy on state intellectual property.

Such a position is quite reasonable and tenable since it is Ukrpatent that has held both International Searching Authority and the International Preliminary Examining Authority statuses for many years. Depriving Ukrpatent of this status and transferring it to another entity, established in any way other than by its reorganization, may lead to reform delay sine die.

Moreover, NIPAs legal status requires more precision in accordance with Draft Law No.2255, provided that all the powers inherent in state bodies are granted to it, particularly the power to issue protection documents. It is more expedient to define the NIPAs legal status as the central executive authority carrying out state policy in the intellectual property field.

According to the authors, Draft Law No.2258 will ensure the achievement of a European level of protection of intellectual property rights for both trademarks and industrial designs, ensuring transparency in the procedures for the acquisition and disposal of intellectual property rights, improving the quality of protection of documents, ensuring an effective implementation mechanism for protecting intellectual property rights, including the fight against patent trolls.

The most important changes introduced by the Draft Law are as follows:

the procedure is established for filing registration applications for marks for goods/services and industrial designs in electronic form;

a single term for trademarks is granted, since the sign for goods and services concept is replaced by trademark, which is provided in the Civil Code of Ukraine;

a one-time penalty is envisaged for unfair trademark use, the amount of which is determined by a court in the sum of 10 to 50,000 minimum wages;

the grounds for registration refusal and invalidation of trademarks are expanded;

extra eligibility criterion an individual character is granted to industrial designs;

the maximum term of property rights of up to 25 years is established for industrial designs;

a certificate will be issued instead of a patent to certify title to an industrial design;

the possibility to recognize an industrial design certificate out of court by filing an appropriate application with the Appeals Chamber is envisaged;

compensation for losses or a one-time monetary penalty is provided, the amount of which is determined by a court in the amount from 10 to 50,000 minimum wages for dishonest registration of an industrial design.

The aforementioned innovations suggested by Draft Law No. 2258 are able to provide telling rejoinders in the fight against so-called patent trolling. Thus, the possibility of recognizing industrial design certificates in an administrative post-grant opposition by contacting the Appeals Chamber can significantly shorten the procedure for invalidating these objects.

It is also important that the decisions of the Appeals Chamber come into force from the date of their approval by the order of the Institution being subjected to full disclosure on the Institutions official website, based on the consideration results of such an application, according to the proposed draft rules. Thus, even when appealing against such a decision to a court, an unscrupulous owner will no longer have rights to the corresponding object, which greatly improves the chances of minimizing unscrupulous registrations.

It should be pointed out that the application of monetary penalties by the court with respect to such infringers significantly reduces the economic effect compared to what they are receiving now, except for the simplified procedure for recognizing unfairly registered patents and certificates.

At the same time, according to the explanatory report to the Draft Law, its purpose is to implement Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to bring the laws of Member States relating to trademarks and the Council Regulation (EC) No. 207/2009 of 26 February 2009 on the Community trade mark into national law.

However, as fairly noted by the Main Scientific and Expert Directorate, the proposed laws provisions do not take into account the provisions of the new EU Directive No. 2015/2436 and Regulation (EU) 2015/2424, on amendments to the Council Regulation (EC) No. 207/2009 on:

signs of which a trademark may consist and in what form it may be represented (Article 3 of Directive No. 2015/2436 and Article 4 of Regulation (EU) 2015/2424);

some grounds for refusing to register a trademark, such as the impossibility of registering trademarks pursuant to Union legislation or international agreements to which the Union is party, providing for protection of traditional specialties guaranteed (Article 4(1)(k) of Directive No. 2015/2436 and of Article 7(1)(l) of Regulation (EU) 2015/2424);

trademarks which consist of, or reproduce in their essential elements, an earlier plant variety denomination registered in accordance with Union legislation or the national law, providing protection for plant variety rights, and which are in respect of plant varieties of the same or closely related species (Article 4(1)(l) of Directive No. 2015/2436 and Article 7(1)(m) of Regulation (EU) 2015/2424);

some grounds for refusal to register a trademark, such as the presence of a previous trademark which has a reputation in a Member State in respect of which the registration is applied for or in which the trademark is registered, and if the usage of a later trademark without good excuse may receive an unfair advantage, or damage the distinctive character/reputation of the previous trademark (Article 4(3) of Directive No. 2015/2436 and Article 8(5) of Regulation (EU) 2015/2424), etc.

Given the above, Draft Law No. 2258 is in general terms forward-looking, despite the aforementioned shortcomings, and meets all the commitments assumed by Ukraine under the Association Agreement.

Draft Law No. 2259 will ensure the achievement of a European level of intellectual property rights protection for both inventions and utility models, fulfillment of commitments undertaken by Ukraine under the Association Agreement, implementation of the provisions of the EU acquis in the field of intellectual property into national legislation, ensuring transparency in the acquisition and disposal of intellectual property rights, improving the quality of protection documents, providing the introduction of an effective mechanism for protection of intellectual property rights. Its authors claim it will also create the prerequisites for enhancing inventive activity, leading to an improvement in the investment climate in Ukraine.

The most important changes introduced by the Draft Law are as follows:

the list of technology objects not covered by legal protection for inventions and/or utility models is expanded;

a procedure for filing registration applications for inventions and utility models in electronic form is established;

any person is granted a right to submit a grounded objection to an inventions registration within six months after the information about the relevant application was published;

the procedure for providing extra protection to inventions is being determined;

the possibility of recognizing patents for utility models and inventions out of court, by filing an appropriate application with the Appeals Chamber, is established;

the concept of a declarative patent is completely removed;

the requirement is envisaged of granting permission before the product intended to protect health and plants is released onto the market;

an additional period for the protection of medicinal products, plant protection products and medicinal products that underwent pediatric studies was established.

Taking into account all the forward-looking provisions, unfortunately, Draft Law No. 2259 does not contain any provision envisaging a one-time penalty for dishonest registration of a utility model, as provided for industrial designs. The presence of such a provision in the Draft Law is required to combat patent trolls as this type of dishonest registration is widely popular not only in relation to industrial designs but utility models as well.

Moreover, regretfully, none of the draft laws mentioned above, although aimed at intellectual property development in Ukraine and are part of reform, contains any provisions to actually stimulate innovation in Ukraine, while Article 157 of the Association Agreement, opening the Intellectual Property Chapter, notes that the objectives of this chapter are to:

a) facilitate the production and commercialization of innovative and creative products in the Parties; and

b) attain an adequate and effective level of protection and enforcement of intellectual property rights.

By turning draft laws Nos. 2258, 2259 and 2255 into adopted laws, Ukraine is approaching completion of reforms in terms of the goals defined in Article 157(b) of the Association Agreement, on an appropriate and effective level of protection and enforcement of intellectual property rights.

However, this is only half the reform in the field of intellectual property. We expect that these draft laws will be presented as soon as possible, via which Ukraine will begin to implement Article 157(a) of the Association Agreement to facilitate both the creation and commercial use of innovative and creative products.

Dmytro Nikulesko is an attorney at law at Ilyashev & Partners

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