Unfair Competition and IP Right: Some Remedies
It should be acknowledged that one of the most common forms of appearance of unfair competition in Ukraine is the use of another person’s business reputation, including intellectual property objects (a trade and service mark, an industrial design, a trade name, etc).
Relations in the field of protection against unfair competition are governed both at national level — by the rules of antitrust laws and laws in the area of protection of rights of the owners of intellectual property objects (hereinafter also IP) — and at transnational level — by the rules of international treaties, as effective and binding for Ukraine. The accession of Ukraine to the World Trade Organization (WTO) facilitated in strengthening legal safeguards for intellectual property.
In connection with the accession of Ukraine to the WTO, the Ukrainian Parliament has amended certain legislative acts to strengthen legal safeguarding of intellectual property in compliance with requirements of the Treaty of Intellectual Property Commercial Aspects. Specifically, there have been amendments to Articles 176, 177, Article 177 and Article 229 (Illegal Use of a Trade and Service Mark, a Brand Name, a Qualified Specification of Commodity Origin) of the Criminal Code of Ukraine, Article 432 of the Civil Code of Ukraine (protection of intellectual property rights). Amendments have also been made to reconcile national laws with the requirements of international treaties in the field of intellectual property protection, including the amendments to procedural laws, specifically to the Economic Procedure Code of Ukraine (in relation to the exceptional jurisdiction of cases regarding disputes over infringement upon proprietary intellectual property rights) and to the Civil Procedure Code of Ukraine (clarification of the procedure for conducting a legal expert examination and determination of a remedy for rights and of the procedure for appealing against infringements of intellectual property at law). Amendments have also been made to the rules of the special laws in the IP realm.
Unfair Competition
In accordance with Article 4 of the On the Protection against Unfair Competition Act of Ukraine (Act), it is unlawful for an entrepreneur to use the name, a trade (brand) name, a trademark (a trade and service mark), a design of a package of goods and periodicals, other designations without the permission (consent) of another entrepreneur, which has resulted or can result in confusion with the latter’s activity.
The legislator has not tied, with good reason, applications of the aforesaid rule exceptionally to registered IP objects, i.e. has not stipulated protection against unfair competition with the registration of appropriate rights to IP objects, as, for instance, in the event with suspension of the customs procedures relating to goods containing IP objects to be imported into Ukraine.
Thus, the Act does not require implementation of any special IP registration formalities for the purposes of application of a sanction towards an unfair competitor or qualification of respective actions as unfair competition. In order to substantiate his requirements, the person must prove his priority in using the appropriate IP object, cause-and-effect relationship between the competitor’s actions, as declared to be unfair competition, and the infringements of the right, protected by antitrust laws. It should be also noted that for qualification of actions as unfair competition no occurrence of adverse effect is required.
One of the methods of protection against unfair competition is for the person concerned to go to the Antimonopoly Committee of Ukraine (AMCU) for protection of the entrepreneur’s rights against unfair competition. Furthermore, the person concerned may take legal action for protection of personal rights and infringed legal interests. Moreover, individual facts of infringements of IP rights may afford grounds for authorized public agencies to initiate administrative proceedings.
Protection of Rights and Interests by Antimonopoly Agencies
Any complaint by the person concerned will be examined under procedure, provided for by AMCU Order of 19 April 1994, No.5. In establishing the fact of perpetration of actions qualifying as unfair competition, the AMCU shall be entitled to apply towards the perpetrator sanctions, as provided by Article 21 of the Act (a fine of up to 5% of the profits (proceeds) from sales of the defendant for the fiscal year preceding the year of imposition of such fine). The AMCU may issue a claim to the court for attachment of the products with an unlawful use of designations or copies of goods of another entrepreneur.
The right to go to the AMCU for protection against unfair competition may be exercised within 6 months as of the date when the person discovered or should have found out that his rights are being violated. In the event of omission of this term, the complaint shall be abandoned, unless the AMCU acknowledges the reason for such term having been omitted to be a valid excuse.
Following the outcome of investigation in the case, the AMCU may adopt a resolution specifically acknowledging the fact of unfair competition, terminating the unfair competition, imposing a fine, etc.
A major benefit of this remedy is its accessibility for the entrepreneurs, while its drawback consists of the terms of examination of a case. It should also be noted that a resolution of the AMCU can be challenged in court (within 2 months).
Judicial Proceedings
Upon choosing the second method of protection of IP rights — by the court, in particular, on the basis of the claim for indemnification of the damage, resulting from unlawful use by a person (the defendant) of the plaintiff’s business reputation — the plaintiff will be, in case of absence of the AMCU’s resolution establishing a fact of unfair competition, to prove that the perpetrator’s actions there can be regarded as actions of unlawful use of his business reputation. In such an event, the claim can be based on the supposition about unlawful use of the plaintiff’s business reputation, but not the establishment of a fact of unlawfulness.
It should be noted that, as practice shows, the charges of a legal expert examination will make up the lion’s share of the plaintiff’s legal costs.
A major benefit of this remedy consists, first and foremost, in the binding nature of an effective court decision and the possibility of application by the court of injunctive relief.
A major drawback of the judicial method of protection is the possibility of abuse by the defendant of its judicial rights for the purpose of delaying the terms of the case’s examination.
Criminal Action
The third method — filing an application in law enforcement agencies — quite rarely yields a rapid result. Upon completion of an investigation, the court will have to carry out an evaluation of the reasons, the grounds and the pieces of evidence, as collected by an investigative agency. The sanction of Article 229 of the Criminal Code of Ukraine provides, apart from a fine, for corrective labor lasting up to 2 years or imprisonment for a term of 3 to 6 years. Furthermore, the sanction for an unlawful use of IP rights, provided that it has caused material damage in a significant amount, may be applied with seizure and destruction of the respective products as well as the equipment and the materials, which have been specially used to manufacture the same.
A criminal investigation should be acknowledged to be the least urgent method of protection. However, depending on the nature of actions of unfair competitor, this method can be more preferable, specifically to preclude further wrong acts of an unfair competitor’s officers.
Administrative Proceedings
Administrative responsibility is also provided for infringements of the rights to IP objects. Here, Article 51 of the Code of Administrative Offences (CAO) provides for a sanction for unlawful use of an IP object or for another intentional infringement of the rights to an intellectual property object, which is safeguarded by law, in the form of a fine of 10 to 200 non-taxable individual minimum income rates with seizure of the illegally manufactured products and of the equipment and the materials, as intended to manufacture the same. An appropriate decision (a report on an administrative offence) may be taken (made) by a state intellectual property inspector based on the findings of an inspection, conducted upon an application of an owner of IP rights for termination of unlawful use, for instance, of a trademark and withdrawal of all of the counterfeit goods with such name, whose goods (based on the findings of an expert examination) are fake, from civil circulation.
A report on an administrative offence will afford grounds for bringing to administrative responsibility. A court resolution (bringing an individual to administrative responsibility) may be appealed against in accordance with the procedure, as provided by the CAO. The absolute advantage of this method of protection is its speed. However, in our opinion, such a method of protection should be acknowledged to be not an independent measure, but a supplementary one, to affect the perpetrator.
The choice of method of protection against a transgressor of IP rights and legal interests depends on a specific situation and the nature of actions of an unfair competitor. Thus, the relative urgency of administrative proceedings or the special powers of the AMCU in the field of investigation of violations of antitrust laws can be both independent and injunctive (with regard to the judicial method of protection of right and interests) measures to affect the perpetrator and to strengthen the evidential base for efficient protection against unfair competition.