Cover Story (#4 April 2020)

Lively Discussion

The protection of intellectual property rights has always been one of the pillars of credible and reliable jurisdiction. The ongoing reform of subsequent institutions in Ukraine and delays in establishing a special IP court are accompanied by the so-called turbo regime in selective lawmaking. Victoria Sopilnyak, partner of Doubinsky & Osharova, explains why recent initiatives provoked such a lively discussion among stakeholders, and what the threats to proper patent protection in Ukraine are.

UJBL.: What are the main changes to be introduced to the state system of legal protection of intellectual property? What are they based upon, and how would you assess them?

Victoria Sopilnyak: You see, if we talk about the intellectual property (IP) field in general, it can be said that one reform there merely leads to another. And it somehow happened that everything is not just being reformed but is being reformed all at once. We currently face institutional reform, judicial reform and, on top of that, legislative reform. All reform processes are quite slow, and there are both objective and subjective reasons for that.

In terms of the state system of legal protection of intellectual property, we have already seen a lot, including an authority with special status, and a unit within the structure of some ministry/agency, changes in subordination and more. I have always asked myself: why cant we have a properly functioning Ukrainian patent office created under the best practices present in developed countries? Arent we such a rich country that we can afford to liquidate, re-purpose, re-subordinate, or establish an intellectual property authority anew once every few years?

My position is that institutional reform must be finally completed. It just so happens that we constantly discuss and talk about it, but the relevant authority has never been established. Finally, the National Intellectual Property Agency should be established as the only professional body that will cover all the states functions in the IP field. The said authority should be provided with powers and competence that will ensure the most effective process of IP rights acquisition for the applicant, starting with the application submission, its examination in relation to a certain item, registration processes and followed by keeping in force and terminating intellectual property rights. We should also keep in mind the need for a strong and professional Appeals Chamber that will acquire new functions and powers under amended legislation or new legislation on specific intellectual property items.

UJBL.: What are the main areas of concern in IP legislation? To what extent should the regulations governing the IP field be changed?

V.S.: A common problem for all aspects of intellectual property rights protection is the inconsistency of legislative instruments regulating legal relations regarding the items of intellectual property rights with the standards of the Association Agreement signed with the EU, the desuetude of certain provisions of these instruments. The lengthy implementation process of European approaches in this field, which has not yet been completed, hinders the establishment of an effective mechanism for protecting intellectual property rights in Ukraine.

UJBL.: Given Ukraines European integration course, how is the harmonization of IP legislation being implemented?

V.S.: The harmonization of IP legislation is extremely slow. The Association Agreement came into force on 1 September 2017, almost three years ago. With only a few exceptions, its provisions cannot be seen as directly applicable ones, and even if it were so, there are no relevant implementation mechanisms. In recent years, we have been constantly discussing certain legislative initiatives, participating in working groups, organizing professional discussions, but the dun is in the mire. How often have we been told about post-grant opposition as a counteraction to patent trolling? How long have we been improving the movement of products with IP items across the customs border of Ukraine? It is said that recent changes have slightly improved the Customs Code of Ukraine, though I have reasonable doubts. Time will tell. In any case, there is no point in being content with the legislative provision of IP rights, but to adopt at least those draft laws that are not the reason for tough professional discussions and not divide those involved in the IP field into opposing teams.

UJBL.: How would you assess the legislative initiatives in the IP field presented in the last few months? In particular, Draft Law No.1230 (the so-called Law on parallel import)?

V.S.: As in all other fields, legislative changes in the IP field are adopted in turbo regime. More initiatives and steps for adoption thereof have been introduced in the last six months than in 2017, the year when the implementation of the Association Agreement standards into Ukrainian national legislation was to begin. I would not claim that the legislative initiatives we are proposed are always high quality ones. Moreover, most of them provoke lively discussions between stakeholders. And Draft Law No. 1230, which you mentioned, is no exception. Are parallel imports good or bad? And to be precise, what exhaustion principle should be applied in Ukraine? Everyone has different interests. We constantly argue, debate, but there is no consolidated position, and we cannot agree. This leads to a situation when to set a clear definition of the exhaustion principle to apply in Ukraine (and, therefore, whether we allow parallel imports of original goods) at legislative level seems to be problematic, despite all attempts to push any principle into legislation where it doesnt fit in, to put it mildly. The question has already become a rhetorical one. There is no clear-cut answer.

I would like to expressly indicate that I totally oppose the parallel import of medicines (Draft Law No.2089). Moreover, I do not like the manipulative message put into our minds that parallel import of medicines is intended to increase the amount of affordable quality and cheap (do such things exist?) medicines for Ukrainian citizens. What do legislators propose in the pursuit of quality and cheap medicine? It is simple to replace the most effective original medicines, which are properly registered in Ukraine, containing items of intellectual property rights with their cheap analogues, whose quality and effectiveness is declared by the supplier. The consequences are not difficult to predict: the originator companies are unlikely to register their original medicines in Ukraine, where patent rights are neglected, to put it mildly, followed by a high risk that the number of unauthorized copies of the original medicinal products manufacture will rise; sharp increase in the volumes of counterfeit medicines; this will open up vast opportunities for the activities of grey distributors, not to mention strike a blow to the investment attractiveness of Ukraine and its business climate in general.

UJBL.: The provisions of Draft Law No.2259 on the pharmaceutical industry are quite controversial as of today. What are they exactly? What could be consequences for the pharmaceutical market?

V.S.: Currently, the toughest discussions revolve around Article 6 of this draft law, which establishes significant restrictions on items that may be subject to patent protection. There are proposals to exclude from patent protection, in particular, new forms (including salts, esters, ethers, compositions, combinations and other derivatives, polymorphs, metabolites, isomers) of a known medicine, new dosage or new use of a known medicine, irrespective of their compliance with patentability standards. Yet again, the motivation behind this legislative initiative is the everlasting accusation that large pharma companies abuse patent protection, that their patents are ever green and that they are trying to cash in on the backs of poor Ukrainian citizens. As if by narrowing the patent protection of medicines we will get cheap medical products. This idea is being deliberately pushed today and, unfortunately, the relevant legislative initiative has every chance of being adopted by the Ukrainian Parliament. In my opinion, the adoption of Draft Law No. 2259 with Article 6 will at least lead to a breach of Ukraines international patent protection obligations. And the real consequences of such lawmaking are even sad to think about. I hope that through good intentions to make medicines more affordable, we will not destroy proper patent protection in Ukraine and will not make the Ukrainian market unattractive to innovative pharma, thereby making it impossible for Ukrainian patients to get treatment using the latest original innovative medicines.

UJBL.: What inquiries do you receive at present from your clients in the pharmaceutical industry?

V.S.: I must stress at once that the vast majority of our pharmaceutical clients are representatives of so-called original pharmacy. And what is the basis of the originators IP portfolio? Thats right patents for active substances of medicinal products, combinations of substances, methods for their preparation and more. Therefore, any inquiries from such clients are focused on ensuring that their patent rights are respected to the fullest extent. We deal with a significant share of preliminary claim settlement activities trying to prevent illegal medicine registrations and to prevent medicines that infringe patent rights from entering the market. Besides, we are known as one of the most effective patent litigation teams in Ukraine.

It should be noted that in the current circumstances, when humanity is facing the respiratory syndrome caused by the SARS-CoV-2 virus, a large number of inquiries are related to licensing, patent waivers, granting various permits, charitable aspects and more, as it is already known that in some countries certain original medicines have been recognized as being effective in the fight against COVID-19 and are included in the relevant local treatment protocols.

UJBL.: What are the main pros and cons in relation to the creation of a specialized IP court? Where do you stand? What results do you expect?

V.S.: I have always said, and still insist, that I am an adept, if you like, of the idea of creating a specialized IP court. I believe that specialization is the key to improving the effectiveness of judicial protection of intellectual property rights. What is the current situation? The low efficiency of right holders protection actually leads to the counterfeit nature of the Ukrainian market, its pirated content, which ultimately has a negative impact on Ukraines economy, undermines the countrys image on the international arena, causes a reduction in foreign investment, and actually nullifies the plans our state has for European integration.

Nowadays, Ukraine is listed in the Special 301 Report compiled by the International Intellectual Property Alliance as a country that cannot ensure proper protection of intellectual property rights.

And what does the right holder expect? Firstly, that in the event of violation of rights, he/she will have the opportunity to appeal to a court for protection, and, secondly, he/she expects the predictability of a potential court decision given the relevant case law and the stability of the judicial system. But what do we actually see today? IP cases are scattered between all jurisdictions, there is lack of enforcement uniformity and also we see unrealistic terms for the hearing of a case, which does not contribute at all to that efficiency of judicial protection everyone is talking about. The said entails the arguments in favor of an IP court: the need to deepen the specialization of courts and judges, to ensure case-law unity and the predictability of decisions adopted by courts. Obviously, focusing all IP disputes in a single court on a substantive basis will allow for a much higher efficiency rate of judicial protection of IP rights than the existing one. We will have judges dealing exclusively with the specified category of cases (currently the possibility of an additional load for the IP court with competition litigation matters is being discussed, but no agreement has been reached yet), so we can speak boldly about improving the quality of court decisions. The very specialization of judges and, to put it bluntly, their awareness of the subject matter, will certainly lead to a reduction in the time spent on hearing cases, as it seems to me that unnecessary procedural actions such as unreasonable commissioning of expert evidence, the obligation to provide the results of opinion polls and more, which is the case today, will be excluded.

As for the arguments against, the following is usually mentioned: (1) a small number of IP disputes that do not require a separate court I would like to oppose this at once: there are enough disputes, they are quite complex and given the number of judges expected to be involved in IP court activities following the competition, the workload will be quite large, to put it mildly; (2) limiting access to justice, since there will be only one court in Kyiv and the opportunity for non-resident parties to participate in the proceedings will be limited and will require additional costs I believe this is a rather artificial disadvantage, as a specialized IP court cannot and should not be established in every settlement. And the opportunity to take part in proceedings without arriving directly in court has long been provided by the applicable procedural codes. I have in mind hearings held in video conference mode.

I have to point out that specialized IP courts are quite successful in the UK, France, Germany, Spain, Portugal, the United States of America, China and other countries. I do hope that all the competition procedures related to such a court in Ukraine will finally be completed, and we will have our own IP court. At least I really wish to be heard there.

UJBL.: How does digitalization affect intellectual property practices?

V.S.: I will be right to claim that digitalization is affecting everything right now. Digitization followed digitalization and caused the rather fast transfer of information, goods, services. Today, everything is possible on the Internet. Moreover, everything is constantly changing and developing quite rapidly. The things that were seen as new and wow yesterday are already outdated today. It is clear that the law cannot catch such rapid development of the results of digital transformation. Existing IP right tools do not always enable to deal in an effective and timely manner with new types of IP infringements that are emerging. Not to mention the relevant litigation practice. We are currently faced with the digital product category an e-format product that can be transferred/alienated. For example, via email or downloaded via a link. How should we resolve a dispute if, for example, the product is downloaded in one country for 3D printing purposes but is actually printed in Ukraine? The USA and Europe have already developed some law-enforcement guidelines for protecting digital goods. Ukraine has not done this yet. However, in the face of globalization, endless cyberspace capabilities, incredible digital transactions, as well as the cross-border nature of our clients, we must be ready for new challenges.

UJBL.: What is the current situation on the IP protection services market? How serious is the competition and what industries experience it most?

V.S.: Competition in the IP services market is quite tough. As before, we have a number of boutique law firms that in the main provide services exclusively in the IP field, as well as biglaws with IP practices. International professional directories and ratings also divide us into leagues: gold, silver and the like. We can talk about specific specialization within IP firms or IP practices: some deal only with trademarks/designs, some never visit courts, some focus on patents and pharma, some pursue counterfeiting, and some deal with IT law. Ukrainian top five IP firms deal with everything. Therefore, they compete in almost every industry. Everyone needs clients today and each of us is trying to create/invent that particular product to ensure a competitive advantage. The positions of clients when choosing IP counsels are completely different and all have the right to exist. As a matter of fact, someone buys chocolate in a supermarket. But someone is looking for his/her own chocolatier in a small chocolate maker. I personally love boutiques.

Doubinsky & Osharova

Year of establishment: 2000

Location: Kyiv, Ukraine

Number of partners/lawyers: 6/20

Core practice areas:

  • Trademarks
  • Patents and Utility Models
  • Designs
  • Copyright
  • Domain Names

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