Securing a Claim in IP Cases: from Expectations to Reality

New versions of procedural codes have been in effect in Ukraine since 2017. Compared to the previous versions, the codes regulate the institution of secure claim in significantly more detail. According to the new procedural codes, courts have much broader powers, both in terms of upholding a right to secure a claim and to prevent abuse in using such right.

The legislator lifted the ban on using remedies not directly provided by legislation and introduced the institution of counter security. Claims related to protection of intellectual property can be secured by suspending customs clearance of the goods or objects containing disputed intellectual property based on the direct norm in law. As reflected by court practice, such a norm has been applied and has already contributed to protection of intellectual property rights during the movement of goods across the customs border of Ukraine. However, courts of lower instances predominantly refuse to apply interim measures in other categories of cases related to protection of intellectual property rights. In the absence of a direct norm, there is a lack of unity at the level of courts of first and appellate instances on interim measures.

Essence of Claim Determines the Basis for Security

According to case law, when deciding a motion for securing a claim, a court must assess the applicant’s arguments regarding the need for such security in terms of their reasonableness, validity and adequacy, as well as proportionality of the measures with the stated claim. To analyse the proportionality, the court should compare the negative consequences in case the motion for security is granted with negative consequences, which may occur as a result of failure to secure the claim.

For the last three years, the unified legal position of the Supreme Court of Ukraine has rested on the nature of the claim defining the grounds for securing thereof. In case of a non–pecuniary claim not requiring enforcement if satisfied then, according to the Supreme Court, such grounds for security as “significant complication” or “impossibility” should not be considered or applied.

Instead, the court shall consider and the claimant, accordingly, has to prove a sufficiently reasonable assumption that failure to take such measures may significantly complicate or prevent effective protection or restoration of any violated rights.

In non-pecuniary claims, the court should answer the following question: would the failure to apply security measures violate the requirement of fair and effective protection of violated rights? In particular, would the claimant be able to protect their rights in one such proceeding without the need of a new appeal to a court?

Notwithstanding the above, courts of the first and appellate instances that consider non-pecuniary disputes in the field of intellectual property continue to analyze whether а probable court decision would be impossible to execute. Due to the fact that such courts ignore the actual subject matter of the claim, the claimant bears an unreasonable burden to prove that execution of a probable court decision would be complicated. As a result, granting security for a claim in non-pecuniary intellectual property claims is the exception rather than the rule.

Securing the Claim Factor

Directive 2004/48/EU on the enforcement of intellectual property rights requires Member States to provide for the right to secure a claim in order to prevent infringements of intellectual property rights. In Ukraine, such right is declared in effective procedural codes and is actively exercised by applicants. At the same time, the share of claims secured in a timely manner, including in cases involving infringements of intellectual property rights, remains critically low. One possible reason is the damaged reputation of the institution of secured claims, which was once used as a tool for unlawful interference in the activity of private entities, as well as wide use of their discretionary powers by government authorities.

In addition, the specifics of intellectual property law require deep knowledge not only of procedural law but substantive law as well from the judge considering the security motion. In the absence of a functioning Higher Court for Intellectual Property, an incompetent approach towards resolving cases in this category has been a problem. While the Supreme Court of Ukraine corrects the errors of courts of lower instances, not all court decisions related to securing a claim can be reviewed in cassation.

When Rejection Becomes an Argument

The ambiguous practice of the courts of first, appellate and cassation instances in considering applications for securing claims in IP disputes is due to the cassation filter established by procedural law. For example, a decision by a court of first instance to refuse to secure а claim and the judgment of the appellate court which left such decision without change cannot, according to the Commercial Procedural Code of Ukraine, be appealed in cassation.

Furthermore, an appellate court decision cancelling a decision of the court of first instance to grant an application for securing a claim (and, consequently, refusing the said application), is not subject to cassation review.

The above position on cassation appeal expressed by the Grand Chamber of the Supreme Court on 15 September 2020 has been applied to all commercial disputes. However, legal relations in the field of intellectual property have specific features distinguishing them from other categories of cases. Thus, legislation provides for non-exclusive ways to protect IP rights and establish the peculiarities of regulating such legal relations, reflected at the procedural level by establishing special measures to secure the claim.

If the courts of the first and appellate instances were to unreasonably refuse to satisfy an application to secure a claim by suspending customs clearance of goods or objects containing intellectual property, and if there is no possibility to appeal such refusal, then unimpeded entry of counterfeit goods into Ukrainian markets would be allowed. Apparently aware of such threat, the Commercial Court of Cassation of the Supreme Court stressed in its decision of 15 December 2020 that the existence of this cassation filter complicates access to a court by the plaintiff’s chosen method of protection. The essence of the law is distorted as the claim loses its meaning due to the possibility of distribution, manufacture or entry into civil circulation of goods whose import or export is carried out with a probable infringement of intellectual property rights.

The above circumstances served as the basis for referring the case to the Grand Chamber of the Supreme Court. However, before a case is heard by the Grand Chamber of the Supreme Court, refusal is still the common practice.

Light at the End of the Tunnel

Based on the analysis of the current case law of the Supreme Court, it generally does not support the courts of first and appellate instances in establishing an extraordinary and previously unattainable standard of proof when considering applications for securing claims. In disputes over protection of intellectual property rights, the Supreme Court regards, taking into account specific circumstances, the following remedies to be effective:

•  a ban on the use of a trademark or patent by putting the goods into circulation, offering them for sale on a site and their use in advertizing;
•  A ban on the respondent transferring the right of ownership to the intellectual property object and/or to grant permission (license) for its use;
•  in case of contesting the trademark, establishing a ban on carrying out any actions to transfer rights to other persons before the case’s consideration on merits or a ban for a state body to take action on the state registration of a certificate for a trademark for goods and services;
•  arrest of a trademark for goods and services in a dispute over the invalidation of an agreement on the alienation of intellectual property rights;
•  in a dispute on the termination of the violation of the rights to an invention (medical product), imposing a ban on a state body carrying out state registration of a medical product before a court decision comes into force.

Therefore, it is safe to say that the general direction for the effective protection of intellectual property rights is gradually entering the Ukrainian judicial procedural environment, as evidenced by satisfaction of applications for securing a claim in the above category of cases.