Defending the interests of the Southern Kuzbass Coal Company

One of the priority objectives of Russian Federation state policy is to stimulate research and development and use the results of intellectual labor and innovation in advanced industries. This was confirmed by Russian President Vladimir Putin, who delivered the Address to the Federal Assembly of the Russian Federation: “To solve complex technological problems, we shall continue to develop the research infrastructure, including the targets of the mega science class. I am sure that the opportunity to work on unique equipment and to undertake the most ambitious tasks is an incentive for talented young people to go into science”.

According to Rospatent, 35,511 applications for the registration of inventions were filed in 2019 and 34,008 patents were obtained as a result. More than 6,900 applications were registered in the field of industrial designs, and 5,395 subject matters were patented. This data indicates that inventors are aware of the need for patenting. After all, for the effective use of intangible resources, it is necessary to provide an appropriate legal protection regime for them.

Russian civil legislation corresponds largely to the provisions of international treaties in the field of intellectual property. This is also true of patent law, to which Chapter 72, Part 4 of the Civil Code of the Russian Federation is devoted.

In accordance with Article 1345 of the Civil Code, patent rights shall be applicable to such subject matters of intellectual property as inventions, industrial designs, and utility models.

The right of authorship and the exclusive rights to the registered subject matter shall come into force from the moment of the certification of the patent holder’s rights by issuing a patent. The patent holder shall be entitled to grant the right to use the patent, and in the case of its illegal use, has powers to defend his rights and interests. Article 1252 of the Civil Code outlines the ways the patent holder can lodge claims, namely:

• On the recognition of the right.
• On the suppression of the actions that violate the right or create a threat of violating it.
• On damages.
• On withdrawal of the tangible medium according to Paragraph 4 of Article 1252 of the Civil Code.
• On the publication of the court’s decision on the violation committed with an indication of the actual right holder.

Under Article 1406.1 of the Civil Code, instead of a claim for damages, the patent holder shall have powers to lodge a claim for compensation: “1) in the amount from ten thousand roubles to five million roubles determined at the discretion of the court on the basis of a nature of the violation; 2) in double the amount of the value of the right of the use of the invention, the utility model or the industrial design determined on the basis of the price, which in the comparable circumstances is usually charged for the legal use of the correspondent invention, utility model or industrial design in the way used by the violator.”

Thus, in the case of violation, the legislator gives powers to the patent holder to choose the methods of defense and restoration depending on the degree and nature of the violation, and to demand their implementation and damages.

The problem is that the person holding the patent, perhaps due to insufficient competence, firstly assumes that there is illegal use of the subject matter belonging to him, in respect of which it has been necessary to obtain his consent and to conclude a license agreement, and he applies for the restoration of the violated rights. And, secondly, he lodges claims that are disproportionate to the nature of the alleged violation. In turn, the lawyers, who specialize in intellectual property, have specific knowledge and are sure that there is no violation. In such situations, the insistence and self-initiated activity of the patent holder ends in lengthy judicial proceedings.

This leads to significant financial costs for both parties and to the occurrence of huge damages in the event of a suspension of manufacture, in which the disputed subject matter of intellectual property is used.

Here is an interesting case in the practice of the lawyers of Zuykov and partners that has similar features to the above problem.

The individual (Krivoshapko A.V.) received a patent for the invention “A Method for Heating the Mine Ventilation Air”. Subsequently, Krivoshapko considered that his exclusive rights to the patent had been violated by the Southern Kuzbass Coal Company. As a prejudicial settlement of the dispute, Krivoshapko appealed to the company with a claim for damages, however, Southern Kuzbass refused due to the absence of the fact of violation.

• Krivoshapko filed a statement of claim, requesting that the court:
• oblige Southern Kuzbass to publish the court’s decision on the violation, and indicate the actual right holder (Krivoshapko);
• prohibit the operation of the air heating unit using the patented invention;
• recover damages in the amount of 451,877,920 roubles.

On 29 May 2018, the Patent Office declared Krivoshapko’s patent invalid. Justifying the decision, Rospatent stated that the invention in the form in which it had been described in the independent claims did not meet the patentability criterion “inventive step”. Krivoshapko appealed to the Intellectual Property Court to declare the decision of the Federal Service for Intellectual Property invalid.

Thus, the cases for one patent were considered simultaneously in two different judicial instances. At the same time, the decision of one of the courts (the Intellectual Property Court) was of direct importance for the objectivity of the resolution of the dispute considered by another court. In this regard, the proceedings to resolve the conflict between Krivoshapko and Southern Kuzbass were suspended until the Intellectual Property Court determined the legality of the Patent Office’s decision. As a result, according to the decision of the Intellectual Property Court, the decision of Rospatent remained valid, and the case proceedings were resumed.

Considering the dispute on the merits, the first-instance court noted the following circumstances:

• The patent for the invention was previously declared invalid by Rospatent.
• By its decision of 10 April 2019 in case No. SIP-359/2018, the Intellectual Property Court upheld the decision of Rospatent.
• According to Paragraph 54 of Resolution of the Plenum of the Supreme Court and the Plenum of the Supreme Arbitration Court of 26 March 2009 No. 5/29 “On Some Issues Arising in Connection with the Entry into Force of Part Four of the Civil Code The Russian Federation”, which was in force at the moment of adopting the disputed judicial act, Rospatent’s decision to declare the patent invalid came into force on the date of adoption. Such a decision shall entail canceling the patent and the corresponding exclusive right at the moment of filing the application with Rospatent. Therefore, a persons’ actions for the use of the utility model, the patent for which is subsequently declared invalid, cannot be recognized as the violation of the rights of the person for whom the patent was registered.

On 23 April 2019, the Mezhdurechensk City Court of the Kemerovo Region dismissed Krivoshapko’s claims in full. Krivoshapko appealed. Thus, the decision of the Intellectual Property Court was appealed pursuant to the cassation proceedings, and the decision of the Mezhdurechensk City Court was appealed by Krivoshapko. The lawyers of Zuykov and partners, who represented the interests of Southern Kuzbass, considered the appeal to be unreasonable. In support of their point of view, the representatives of Southern Kuzbass pointed out that:

• The arguments of the appeal were based on an incorrect interpretation of the norms of the substantive and procedural law; they were aimed at misleading the court, and therefore, the appeal ought not to be upheld.
• As proof of the legality of the claims lodged, Krivoshapko referred to the availability of exclusive rights to the invention in accordance with the patent; but this patent was declared invalid by Rospatent on 29 May 2018.
• The absence of proof of one of these circumstances meant dismissing the claims. The cancellation of the patent refuted the claims lodged by the plaintiff.

The Kemerovo Regional Court found: “As the Russian Federation patent No. for the group of inventions “XXX” is declared invalid in full and, accordingly, the exclusive right of Krivoshapko A.V. to the indicated invention is absent, the court’s opinion on the absence of the grounds for upholding the claims of Krivoshapko A.V. to PJSC “Southern Kuzbass” regarding the defense of the exclusive right to the invention “XXX” certified by patent No., recovering damages for the illegal use of the invention, prohibiting its use and compelling to publish the court’s decision on the committed violation is correct."

Thus, the Court of Appeal agreed with the point of view of the first-instance court and the lawyers of Zuykov and partners, and it ordered that the decision of the Mezhdurechensk City Court of 23 April 2019 in case No. 2-3/2019 (2- 137/2018) be upheld, and Krivoshapko’s appeal dismissed.

The above example of the judicial practice allows us to conclude the following:

• The data reflects a constant growth in application subject matters.
• The increase in the number of patents leads to an increase in the number of disputes in this field.
• The international legislation and the legal norms of some states contain the provisions describing the signs and kinds of violations, as well as the ways of restoring and defending the violated rights. However, in order to apply such provisions correctly and justifiably, it is necessary to have a certain level of skills and qualifications.
• One of the most important points for the holder of the registered subject matter of the patent law is the validity of the patent granted to him. The protection document may be disputed and canceled at any time during its validity period. One of the grounds for which the patent can be declared invalid is the fact that the subject matter of patenting does not comply with the criteria of patentability.
• Canceling the patent shall entail the termination of the exclusive rights from the moment of filing with Rospatent and granting the patent. In this regard, the use of the subject matter, the patent for which was subsequently declared invalid, cannot be recognized to be a law violation.

Originally published in The Patent Lawyer Magazine, March/April issue