Technology Disputes

IP overlaps and infringements, cybersecurity issues, data protection and many other intangible matters may be subject to a technology dispute. Tough competition on the tech market and rapidly emerging technologies cause litigation to cope with a wide range of the emerging legal, economic and technical challenges.

Behind any tech lawsuit there normally stands a complicated and often unique technology that is about to be carefully analysed and explained during the dispute. The challenge for the legal counsel of a tech company is to quickly grasp the essence of technology at issue and incorporate it into the legal strategy.

Copyright protection is quite common scenario in technology disputes. The reason is that software, specifically a computer code, is protected by copyright as a literary work in most jurisdictions. Since software is often a core of modern technology, copyright issues arise inevitably.

One of the exemplary cases of successful copyright protection of software in Ukraine is case Finik.Pro LLC vs. JSC Alfa Bank.

Finik.Pro LLC is a Ukrainian FinTech products developer. One of the Finik.Pro’s main products is the internet and mobile banking platform (hereinafter – “Platform”). Finik.Pro granted Alfa Bank a non-exclusive license to use the Platform and entered into an agreement on the individualization of the Platform (creation of new functionality) for the specific needs of the bank.

The subject matter of the dispute was unauthorized use of one of Finik.Pro`s software developments which Alfa bank exploited and made it available for customers in its Internet banking program for desktop computers, as well as in the mobile banking application for smartphones and tablets. Finik.Pro stated that since Alfa bank refused to accept the works re developments of the software and refused to pay therefor it did not acquire the right to use the software code (new functionality) created by Finik.Pro during the respective period.

The stakes were quite high because except for prohibition to use the software, Finik.Pro also claimed a multimillion compensation.

The tech side of the dispute was to prove that the use of particular code resulted into certain functionality of the software that was exploited by the defendant`s computer program and the mobile phone application. Resolving the technical issue was impossible without a specific expert knowledge and skills necessary to opine on complex tech matters, inter alia, on correlation of program functionality and source code, identity of tasks and functionality of computer programs, reproduction of a computer program, etc.

The expert found that the software code created by Finik.Pro fully corresponds to the functionality of the defendant’s commercial software solution, which confirms the illegal use by the bank of the copyright object – a computer program belonging to Finik.Pro.

The litigation ended in a confidential amicable settlement. This case is an excellent example of dependence of a court action on technical findings.

Key legal issues to consider in similar cases for software protection:

1. Strong claim on an owned copyright is a must. It is essential to ensure that the copyright ownership will not be challenged during the proceedings. Therefore, the copyright holder must pay attention to the appropriate acquisition of rights from employees, contractors etc.

2. Evidence of infringement of rights to the program code (in full or in part). Copyright holder should be prepared that the opponent would deny the infringement, and the dispute can turn into a side-by-side battle for literally each line of code.

3. Findings of an expert depend on the questions addressed thereto. Only an excellent understanding of the client’s product allows the attorney to put the most appropriate questions to confirm the infringement.

Software is a “behind the scenes” part of a tech product, and a trademark is normally its “front man”. Investing in a brand name is as important as contributing to research and development. A trademark ensures product distinctiveness and, as a result, the competitiveness of tech company on the market.

One of the fierce battles for trademark is still ongoing in Ukraine. It is a dispute Google vs. PJSC “Real Estate of the Capital”.

The world-famous high-tech company is a manufacturer of a wide range of devices for “smart home” (climate control, security, media systems, etc.) and related software under the “Nest” brand. It faced opposition from the company “Real Estate of the Capital” against the “NEST” trademark application in Ukraine.

Google investigated the use of opposing trademarks by the company “Real Estate of the Capital” on the market and brought the non-use cancellation action against those trademarks.

The question in these types of proceedings is whether a disputed trademark has been used for the goods/services for which it is registered. To answer it, the court has to define what the use of the trademark regarding certain goods/services actually means.

The importance of providing such a definition can be demonstrated by one of the services being disputed in the above matter, namely the software development services.

The defendant owns the software that was developed upon its request by a third party. Does it mean that the defendant provides services for software development? If only the defendant’s title to the software and its order for development of the software by a third party is confirmed, does this mean that the defendant is not a provider, but rather a consumer of such services? According to the law, while purely consuming the services a consumer does not use a trademark for the services it consumes, which apparently means that the defendant could not use the trademark for the software development services.

The above and a number of other issues in defining what shall be considered a “provision of services under a trademark” are crucial and play a decisive role in this category of disputes.

Patent disputes, especially ones over hi-tech, are considered a premiere league in litigation. This is mostly because of high costs and extremely complicated technical matters engaged.

Although patent infringement actions are more common, not less noteworthy are cases for patent invalidation in order to let a new product using the patented technology to enter the market. A bright example in this category is the pharmaceutical case Synthon B.V. vs. Yeda Research and Development Co. Ltd. and Teva Pharmaceutical Industries Ltd.

Synthon B.V. is a science-centered pharmaceutical company specialized in developing and manufacturing high-quality generic and hybrid medicines. It is well-known for delivering medicines at sustainable pricing through innovative science.

It claimed invalidation of the Ukrainian patent to chemical substance used in medicinal products on the ground of non-compliance of the latter with the “inventive step” patentability requirement.

Overall, it took the court three expert reports, cross-examination of the experts, intense debate between the parties, two rounds of consideration by the Supreme Court to grant Synthon’s claim. Given its complexity, the dispute has every reason to be considered a landmark case for the Ukrainian pharmaceutical industry. 

Due to the litigation victory the generic drug received its market authorisation, which significantly increased availability of the disseminated sclerosis treatment to the patients.

It is one of less common issues when a technology faces barriers for its development posed not by a competitor, but by a government agency or a customer. And privacy issues can sometimes be excessively costly.

Among the recent precedents UK Information Commissioner’s Office (ICO) imposed a fine on a well-known face recognition platform Clearview AI in the amount of £ 7,5 million.

Clearview AI used images of people in the UK and all over the world, which were collected from the web and social media, to create a global online database with more than 20 billion images that could be used for face recognition. This fine is another message from data regulators to tech companies: public availability of a personal and/or biometric data does not justify its use. 

Rapid development of technology and emergence of brand-new digital developments stimulate courts to expand their boundaries and consider a variety of unprecedented cases.

England and Wales High Court in case D’Aloia vs. (1) Persons Unknown (2) Binance Holdings Limited and others [2022] had to deal with misappropriation of cryptocurrency and granted a ground-breaking order permitting service of court proceedings via the airdrop of a non-fungible token (NFT) to a digital wallet. Mr. Justice Trower ordered that, given the unknown identity of the alleged fraudsters, the court documents could be served by airdropping an NFT into the wallets to which Mr. D’Aloia had deposited his cryptocurrency. It appears that the NFT contains a link which will direct the recipient to a website with the papers and notify the claimant that they have been accessed.

The Court provided an excellent example how the new technology can be noteworthy development in relation to the service of litigation.

On a separate note, this case is also notable as the Court recognised that there was a good arguable case that the cryptocurrency was being held by the exchanges on constructive trust. Consequently, exchanges such as Binance could be held liable for breach of trust when stolen currencies are found to have passed through their hands.

Generalization of technology disputes as a category is challenging, as such disputes are often based on the unique legal strategy due to the peculiarity of the technology or the company`s business. The only possible common rule seems to be – there is no one-size-fits-all solution.

The technology precedents indicate that if the technology is worth something and becomes successful on the market, the owner will most likely face a dispute. It is eat or be eaten. The sooner company approaches legal matters as a part of broader business strategy the higher chances for asserting its interests in disputes are.

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