Recovery of Statutory Damages for Copyright Infringement in Ukraine under New Rules: Dark Times or Improved Opportunities?

Recovery of Statutory Damages for Copyright Infringement in Ukraine under New Rules: Dark Times or Improved Opportunities?

Amended regulations on the calculation of the amount of statutory damages for copyright infringement in Ukraine are effective as of 22 July 2018, so today (22 July 2020) is the second anniversary. While the amendments to the Law of Ukraine “On Copyright and Related Rights” (Copyright Law) concerning statutory damages are perceived as one of Ukraine’s obligations under the EU-Ukraine Association Agreement, these amendments were highly debatable and negatively perceived by IP practitioners. Here we discuss what has changed about two years ago and assess the effect of the controversial changed approach to the recovery of statutory damages on the protection of the rights holders’ rights.

Seeking statutory damages for copyright infringement before

Over a decade, seeking statutory damages for copyright infringement has proven to be the most popular legal remedy among the rights holders with which in the armory, they had more opportunities to ensure that infringers pay a heavy price. The amount of statutory damages ranged from 10 to 50,000 minimum statutory salaries (statutory minimum salary in 2020 is UAH 4,723 that is about EUR 160). Like other jurisdictions, recovery of statutory damages was an optimal alternative to the recovery of actual damages and lost profit, which amounts are usually challenging to determine and justify. For the court to award a certain amount of statutory damages for being recovered, it was sufficient to prove the fact of infringement and justify other relevant factors which would impact on the amount of the statutory damages to be recovered (for example, the scope of copyright infringement, the intention of a defendant). At a minimum, an aggrieved rights holder that proved the fact of infringement could expect to recover at least the minimum amount of statutory damages that is Ukrainian Hryvnia equivalent of about EUR 1,600.

Seeking statutory damages for copyright infringement now

On 15 May 2018, the Ukrainian Parliament adopted the Law of Ukraine “On Effective Management of Rights Holders’ Proprietary Rights in the Field of Copyright and(or) Related Rights” (Copyright Management Law).

Final and transitional provisions of the Copyright Management Law also introduced amendments to Article 52 of Copyright Law concerning statutory damages for copyright infringement. Under the amended approach, the amount of statutory damages shall be determined as a lump sum of double (or triple – if an infringement is willful) amount of remuneration or commission fees, which would have been due if the infringer had requested authorization to use the copyrighted or related rights work.

The amendments are usually regarded to be a result of the implementation of Article 240 of the EU-Ukraine Association Agreement into national IP laws (…, they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorization to use the intellectual property right in question). It also well correlates with Article 13 of Directive 2004/8/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights.

However, discrepancies between official texts of the EU-Ukraine Association Agreement in English and Ukrainian, as well as a further creative approach to revision of Article 52 of Copyright Law for recovery of statutory damages, have led to regulation like no other. Lack of definition of ‘commission fees’ in both, Copyright Law and Copyright Management Law also makes it more difficult to efficiently utilize the recovery of statutory damages remedy by rights holders.

It is an established opinion that the revised approach to recovery of statutory damages for copyright infringement is best suited to collective rights organizations whose principal purpose is licensing of copyright and related rights. Implementing the revised approach within the new legal framework for collective rights organizations well follows this logic. In fact, the revised approach to recovery of statutory damages virtually narrows the applicability of this remedy not only to those rights holders who actively commercialize its copyrighted and related rights works but to those who are able (or ready) to disclose their license fees (that may be (and usually) regarded as commercially sensitive information). Utilizing the recovery of the statutory damages remedy in connection with uncommercialized copyrighted products (e.g., a copyrightable product developed for internal purposes or not yet released copyrightable products) is today somewhat questionable or difficult to implement.

When the discussed amendments had entered into force, they were negatively perceived by IP practitioners. After almost two years of the regulations being in effect, we see that the enforcement practice remains limited:

  • collective rights organizations and some rights holders who actively commercialize their portfolio of copyrighted works remain, to some extent, active in enforcement of their IP rights seeking also recovery of statutory damages. However, this activeness appears to be lower than before the introduced amendments. In practice, a warning to claim recovery of statutory damages is widely used in pre-litigation settlements to persuade the infringer to cease the infringement and/or buy a license.
  • in many court cases, the rights holders usually claimed recovery of the basic amount of statutory damages (i.e., amount of remuneration or commission fees which would have been due if the infringer had requested authorization to use the copyrighted or related rights work) without multiplying it by two or three. Multiplying the basic amount usually results in a significant amount that the court would unlikely to accept as reasonable and fair, ultimately decreasing the chances for the rights holder to obtain the recovery.
  • Depending on the circumstances of the case, the courts can discretionally award the amount of statutory damages lower than the basic amount of statutory damages. In this regard, interestingly that, as a sort of fair indicator, the courts usually rely on previous regulation of statutory damages and award ten minimum statutory salaries or compatible / replacing social payments.

A way forward 

The best way to form a basis for statutory damages claim is to have documents that prove licensing the copyrighted product in Ukraine. Where it is not in place, for the rights holders be prepared to seeking the recovery of statutory damages, they may consider taking the following steps:

  • audit portfolio of copyrighted works and determine which of them have already been and can be commercialized.
  • develop and implement an internal document (policy) with rates of compensation (royalties, fees) for the use of the copyrighted works by third persons and maybe post them on the company’s web-site (though the latter posting option may not work for all the rights holders). For this purpose, the rights holder may rely on different options or combine them, e.g.:

    (i) rely on minimum rates under Regulation No.72 On Approval of the Minimum Rate of Remuneration (Royalty) for the use of Copyrighted and Related Rights works dated 18 January 2003; and/or

    (ii) engage a local expert to define the commercial value of the copyrighted work; and/or

    (iii) Refer to publicly available rates/tariffs provided by collective rights organizations or professional business associations.

      For further information, please contact Oleg Klymchuk (oklymchuk@brandsfield.legal).

      Information contained in this overview is for general information purposes only, does not constitute legal or other professional advice, and should not be relied upon as a substitute for specific professional advice tailored to particular circumstances.