Technology Disputes

Setting the stage: The fast-paced world of tech litigation

The relentless march of technology constantly throws curveballs at lawmakers around the world, forcing them to scramble and adapt regulations. This frantic game of catch-up has spurred a wave of fresh legislation across numerous countries, particularly targeting concerns like artificial intelligence (AI), data privacy, and the complex ecosystems surrounding cryptocurrencies, autonomous vehicles, and robotics. These legislative changes are not mere bureaucratic exercises; they have a profound impact on the operations of tech firms, reshape societal dynamics, and influence the trajectory of technological trends.

The very nature of uncertainty surrounding new regulations often sparks technological disputes, playing a pivotal role in shaping the legal framework for future advancements. In recent years, we’ve witnessed a surge in conflicts related to these emerging technologies. These range from accusations of cryptocurrency theft and fraudulent token offerings to bitter disputes between companies offering crypto-related services. Another battleground involves software disputes arising from employee or consultant movement between competing firms, leading to disagreements over code ownership and potential data infringement.

The escalating use of cutting-edge technologies has also heightened cybersecurity concerns. The frequency of cyberattacks and unauthorized data breaches is on the rise, demanding heightened vigilance and robust security measures. Additionally, a growing number of legal disputes are tied to the use of AI across diverse industries, necessitating the formulation of new legal standards and regulations to navigate this uncharted territory.

In essence, the widespread adoption of these emerging technologies has unleashed a wave of legal conflicts and disputes, underlining the crucial need for regulatory attention and intervention. The rapid advancement of digital technology has also significantly reshaped dispute resolution practices. Just a decade ago, the notion of legal battles erupting over AI technology seemed like science fiction. However, technology-related disputes are a harsh reality for organizations today, impacting both suppliers and customers alike.

The battleground of technology-related disputes has dramatically expanded beyond the traditional realm of IT or software implementation issues. Today’s legal clashes encompass novel areas such as cryptocurrency, AI, autonomous vehicles, and the intricate web of regulations surrounding them. These areas raise unique questions regarding ownership, data security, privacy concerns, and intellectual property (IP) rights. As legal battles over these issues unfold, they continue to shape the approach lawyers take towards them. High-tech patent disputes are, for instance, on the rise and show no signs of slowing down.

Plaintiffs are increasingly exploring legal avenues in their lawsuits against companies developing AI models. A common theme centers on allegations of copyright infringement, with accusations that AI models are trained using copyrighted materials. In response, defendants have presented counterarguments, challenging the validity of such claims and contesting the very notion that AI models constitute infringement of copies of the copyrighted works they were trained on.

A multitude of technology-related legal cases have emerged in the United States, reflecting a surge in recent filings. These cases involve allegations of copyright infringement, particularly in the context of training language models using copyrighted works. The lawsuits highlight disputes between book authors and tech companies like Nvidia and Databricks Inc., with claims ranging from direct copyright infringement to vicarious infringement. Additionally, news media organizations have taken legal action against OpenAI, citing violations of the Digital Millennium Copyright Act (DMCA) regarding the training of language models without appropriate content management information. Furthermore, a class action complaint filed by journalists and authors targets Microsoft and OpenAI, alleging unauthorized reproduction of copyrighted materials for training purposes. These legal disputes underscore the complex intersection of technology, intellectual property, and regulatory frameworks, shaping the evolving landscape of tech law and litigation.

In ongoing legal battles, The New York Times newspaper is facing off against OpenAI and Microsoft over contributory copyright liability claims, while GitHub is embroiled in litigation regarding copyright management information. Simultaneously, Google is under fire for alleged violations including web scraping and direct copyright infringement. In a consolidated effort, several claims, including vicarious infringement and DMCA violations, are being pursued against OpenAI in N.D. Cal Litigation. Additionally, representatives of George Carlin’s estate have filed a lawsuit regarding the unauthorized use of Carlin’s likeness and copyrighted materials in AI-generated content.

These diverse cases illuminate the intricate and ever-evolving legal landscape surrounding technology and intellectual property rights. The array of technology-related legal battles in the United States paints a vivid picture of the dynamic and intricate nature of modern legal challenges. From copyright infringement disputes involving language models to contributory liability claims against tech giants, and even cases involving the unauthorized use of likeness in AI-generated content, these legal clashes underscore the urgent need for clear guidelines and robust legal frameworks in the digital age.

Bridging Continents: Tech Litigation Challenges in Ukraine

Ukraine has a strong IT industry with innovative companies and a large base of highly-skilled IT professionals who create world-renowned startups. Our country garners the interest of foreign investors and partners due to its proficiency in software development and its high level of technological expertise, as indicated by numerous rankings. According to the IT Ukraine Association’s data Ukraine’s exports of goods and services IT services have grown significantly in recent years and are now a vital export segment, accounting for 13.2% of total exports[1]. Hundreds of government services have been digitized. Technologies play a role both on the battlefield and in Ukraine’s cybersecurity, as well as in the rear. The IT industry remains a driving force of our country’s economy – despite the challenges of war, this sector contributes about 5% of Ukraine’s GDP. In 2023, 64% of Ukrainians used state electronic services. Around 20 million Ukrainians use the Diia app. The Ukrainian IT industry consists of two parts: service and product companies. Additionally, there is a separate sector comprising R&D centers—companies owned by foreign product companies that conduct development exclusively in their interests.

The most common types of disputes in this industry include Non-compete agreement (NCA) disputes, software development disputes, intellectual property rights protection disputes, and tax incentive disputes. Copyright protection is a common issue in technology disputes because software, especially computer code, is usually safeguarded by copyright as a literary work in most jurisdictions. This is because software plays a crucial role in modern technology, and copyright issues inevitably arise.

It is important to note that the legal regulation of contracts in the IT sector in Ukraine is not relevant to the current state of rapid technological advancement. Scholars have highlighted that there is currently no single legal nature of a contract that regulates legal relations in the IT sphere. This is because neither the Commercial nor the Civil Codes of Ukraine define the specifics of essential terms of contractual relations specifically in the IT sector. Courts attempt to differentiate between various types of contracts. For instance, in case No. 910/2683/19[2], the Supreme Court of Ukraine considered a dispute regarding a contract in which one party agreed to provide creative services for marketing, promotional organization, website design and functional content development, software supply, as well as other services related to brand promotion, products, and services specified in the contract. The other party agreed to accept the services/work/software and make payment immediately. The court found the contract to have a mixed nature since it contains elements of a service agreement, subcontracting, manufacturing, and transfer of intellectual property rights. Therefore, if the parties choose the wrong form of contract to regulate legal relations, the court will qualify the contract in accordance with the law when resolving the dispute. This should be taken into account when concluding contracts in the IT sphere. Ambiguity in the form and terms of the contract will have negative consequences on the outcome in the event of any dispute.

It is worth noting that the disputes related to emerging technologies are not limited to only a certain jurisdiction. One of the main reasons for this is the lack of a clear regulatory framework in this field and the absence of uniform judicial practices in resolving such disputes.

Despite the underdevelopment of judicial practice in resolving IT disputes, Ukraine is one of the few countries in the world actively implementing electronic justice. The services are used by 50,000 court employees and judicial organizations, as well as by more than 6.7 million citizens, lawyers, notaries, law-enforcement agencies, and business representatives. The number of court decisions considered during 2021–2023 was 16,904,405[3].

The Ukrainian Parliament approved the Law of Ukraine on Stimulating the Development of the Digital Economy in Ukraine on July 15, 2021 to promote effective intellectual property management in the digital space. Under the special legal regime of Diia.City, IT companies are granted various tax benefits. This may lead to entrepreneurs requiring tax consultations and periodic inquiries from the tax authorities.

The Diia.City legal regime supports various activities, including computer programming, consultancy on informatization issues, computer equipment management, publication of computer games and other software, provision of software products online, provision of web services for software application delivery, educational activities in the field of information technology and data processing, related design (construction), research, testing (evaluation) of technologies, devices, and robotics systems using computerized control systems, and more.

The implementation of this regime will improve the regulatory framework and contribute to overall digitization of Ukrainian society. It is crucial for Ukraine to review and reassess its strategic priorities to create significant breakthroughs in the competitiveness of the products and services being developed both in the country and globally.

The Diia City regime has made non-disclosure agreements a legal requirement. IT specialists must not compete with their companies during their employment and for one year after termination. A review of court decisions reveals that tax disputes involving Diia.City residents are the most common cases. However, few disputes have arisen regarding compensation for revealing confidential information or engaging in competitive actions.

The court’s standard of proof in cases involving disclosure of information is noteworthy. In case 922/4148/19[4], a dispute arose between parties to a software development contract. The plaintiff claimed that after fulfilling its contractual obligations, the respondent became a co-founder of another company that created a website remarkably similar to the plaintiff’s website, including references to the plaintiff’s clients and projects. The plaintiff failed to convince the court of the connection between the website and the respondent and to prove that the respondent received confidential information from the plaintiff. So as to avoid state intervention in contractual relationships, the new law on digital technologies provides compensation for the disclosure of confidential information that is not regulated by the Civil Code or the Commercial Code of Ukraine. The court can only reasonably reduce the amount of compensation if it exceeds the damages caused to the other party to the contract, and standard provisions on fines, penalties, or forfeits do not apply to compensation.

Beyond the core legal issues, Ukraine’s IT industry is grappling with additional challenges in the courtroom. Data privacy and cybersecurity concerns are heightened by the ever-growing volume of personal data collection and increasingly sophisticated cyberattacks. Companies must navigate strict data protection regulations and implement robust security measures to safeguard sensitive information. Cybercrime, including intellectual property theft, is another growing threat, necessitating vigilance in protecting intellectual property and implementing effective cybersecurity measures to prevent unauthorized access and data breaches. Finally, the rise of e-commerce has brought an increase in disputes related to online transactions, requiring companies to ensure their online platforms comply with consumer protection laws and provide clear and transparent terms and conditions.

With the ever rising number of users on digital platforms and networks, businesses and industry players in the digital assets ecosystem will likely face more claims. This includes developers, creators and operators of digital asset platforms and networks. Even when the technology behind such platforms and networks works as intended, disputes can occur. These disputes will continue to arise when these platforms and networks are breached by third parties or negatively affected by IT incidents. Technological advancements and the disruptive use of AI will persist, leading to opportunities and challenges for those seeking to monetize and leverage them.

Ukraine’s IT industry has emerged as a beacon of innovation and resilience, contributing significantly to its economic growth and global standing. However, to ensure its continued success in the dynamic and ever-evolving digital landscape, a comprehensive and adaptable legal framework is essential. Ukraine can foster a thriving IT ecosystem that promotes responsible innovation, protects intellectual property, and safeguards the rights of individuals and businesses by increasing the level of professionalism of law-enforcement agencies and the specialization of judges. Embracing collaboration, innovation, and ethical practices will position Ukraine as one of the leaders in the digital age, shaping a future where technology empowers individuals, drives economic growth, and contributes to a more just and equitable world. The government, industry leaders, academia, and the public must work together to create an environment that nurtures innovation, protects intellectual property, and ensures a fair and equitable legal system.

[1] Digital Tiger: the Power of Ukrainian IT – 2023//https://itukraine.org.ua/digital-tiger-the-power-of-ukrainian-it-2023

[2] https://reyestr.court.gov.ua/Review/90115694

[3] Digitalization of the judiciary: working on an updated concept of e-Court// https://www.kmu.gov.ua/news/tsyfrovizatsiia-sudovoi-sfery-pratsiuiemo-nad-onovlenoiu-kontseptsiiu-e-sudu

[4] https://reyestr.court.gov.ua/Review/89652008

  • Yaroslav Ognevyuk

    Managing Partner, AMBASSADORS

  • Tetiana Ohneviuk

    PhD, Partner, AMBASSADORS

AMBASSADORS Attorney’s Office

Address:

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Kyiv, 01032, Ukraine

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E-mail: info@ambassadors.in.ua

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