Deep dive: Ukraine's evolving wartime IP laws

Lax IP laws keep Ukrainians setting up corporations outside of Ukraine. The administration has dreams of protecting their inventions and bringing them home — along with a cut of their profits. The latest on IP during a period of martial law:

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Strapping an anti-tank mine to an off-the-shelf DJI Mavic is clever, but not exactly a business model. 

As Ukraine’s independent weapons developers have professionalized, they’ve had to start defending not only the country, but also their innovations.

Intellectual property protections — ranging from trademarks to patents — are, at their core, temporary government-sanctioned monopolies. They allow people or companies that come up with a great idea a window of time to profit off of that idea – all to reward innovation.

It’s both a break from a Soviet past and a move towards the West, with European Union integration wonks playing an outsized role in drafting Ukrainian IP law and regulations. 

From the Ukrainian government’s point of view, it’s hoping to get a cut of what private startups have developed inside the country.

But it’s no easy task: the challenge sits at the nexus of necessity and invention; military secrecy and startup publicity; and indeed the conflict between open source, corporate propriety, and classified innovation.

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IP Recovery

Ukraine is a particularly tricky environment.

“We are a post-Soviet country. In the Soviet Union, everything belonged to the country itself… And therefore IP was not an issue for people,” Ganna Prokhorova, an attorney and partner at Mamunya IP who has worked on these issues for nearly two decades. “So it's a mental thing, right? It takes time.”

Like most Ukrainian IP lawyers these days, Prokhorova’s firm has been finding more work with novel defense companies. She described a recent challenge: patenting the internal operating system of a drone, rather than the physical components.

Having an appropriate system of IP protections will determine the extent to which Ukraine can be a global defense tech leader. 

Then-Deputy Minister of Defense Stanislav Haidar warned in an August op-ed, shortly before he moved to lead the office of the minister, of the “potential leakage of technology created from governmental defense orders” if protections aren’t implemented properly.

In particular, he noted a case in which the Ministry of Defense had been locked out of some armored vehicle manufacturing methods because a private individual beat them to registering a patent in 2018.

Top IP Concerns:

—Theft of ideas. 
—Courts are slow to take up and process cases of IP defense. 
—Ukrainian court system not friendly to outsiders, with judicial corruption a lingering issue. 
—Penalties for “idea theft” within Ukraine have traditionally been small enough to leave it profitable in many cases. 
—Breach of NDAs see almost no enforcement within Ukrainian courts — particularly when it comes to software. 
—Difficult to conduct due diligence on potential business partners within Ukraine due to opaque courtroom and legal databases that are often restricted to Ukrainian nationals.

Problems with local legal practice push Ukrainian companies abroad, costing the government tax revenue. In the case of military products, many of which were funded at some point by government grants, it also costs the government a share of licensing fees.

“Those who really produce something, they cannot enforce their rights because they don't have rights,” said Prokhorova of the problem within Ukraine. “If the whole IP is registered in other countries and not in Ukraine, all the money for using this IP goes to those countries.”

Many miltech firms operate out of corporate structures abroad that, critically, maintain control over IP that is being developed in Ukraine. But why?

“Due to the ability to defend their work. In the event of some kinds of conflict, investors choose a jurisdiction [like] the USA, Britain, Switzerland or Estonia. They trust the legal system. They know that there’s already an established legal practice,” Petro Bilyk, an IP-focused attorney at law firm Justcutum told Counteroffensive.Pro.

Ukrainian techies turned military developers were quick to point out that they would never be able to compete on the international market if they could not protect their IP.

“IP is the most valuable thing. It’s how we operate, what we create, what our products are about,” said Ivan Kaunov, the co-founder of drone software and manufacturing company Buntar. “And some investors ask [us] to establish companies in specific countries that are the most understandable for them.”

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Wartime IP

The desire to see Ukraine become a member of the European Union remains at the center of the government’s goals when it comes to IP reform. The Ministry of the Economy stresses this in no uncertain terms.

Russia’s full-scale invasion changed everything in Ukraine, and in the case of IP acted as a catalyst. While IP would seem like at best a tertiary concern amid a war, it was part of a flurry of legislation signed into law within weeks of the war’s start. 

A key provision upon the establishment of martial law was that patents would last beyond their usual lifespan — a law originally introduced by Mykola Tararin, a Rada member who formerly worked at law firm Helon. Ukrainian transparency organization “Honesty Movement” identifies Helon as having worked on IP law for Volodymyr Zelensky’s “Kvartal 95” studio.

With increased pressure for Ukraine to join the EU and NATO, as well as campaigning from the new generation of miltech firms, IP quickly became a headlining issue.

A new government office, the National Intellectual Property Office (NIPO), opened in September 2022, aiming to speed up the processes behind patents and copyrights, replacing a prior office.

“First of all, a system reset happened,on the basis of transparency, openness to the public, and zero tolerance for corruption,” Olena Orliuk, the founding director of NIPO, on the reason for a new approach.

Core to NIPA’s activities is ‘harmonizing’ Ukrainian IP practices with analogous organizations in the West, especially the European Union. The agency is, as a result, extremely internationally oriented, even as a primary concern is the onshoring of profits.

2023 was a banner year for Ukrainian IP law. A bill passed in March 2023 and signed into law in April mandated new protections for rights holders whose IP had been misappropriated, particularly that they can demand the profits of their misused IP, rather than just penalties. Orliuk says the law been fully adopted in practice. In November, the Ministry of the Economy also ordered the launch of an appeals chamber within NIPA.

Work remains to be done, everyone agrees. New orders and directives come out faster than they are implemented. Ukraine is already party to the bulk of major international treaties and accords binding IP, and unifying patent applications across countries. The most notable exception remains EU membership. 

Actual legal practices within Ukraine — and especially in Ukrainian courts — remains the sticking point for the EU. Can a foreign entity reasonably defend its IP in a Ukrainian courtroom?

Among other recent victories, Prokhorova says, is the end of a five-year freeze on credentialing new IP attorneys. The policy had resulted in legal staffing shortages in both legal practices and in the judicial system.

While recent laws have strengthened protections afforded to IP rights holders, the courts are not hearing many cases in the area, and they’re doing so at a significant delay.

President Zelensky’s predecessor, Petro Poroshenko, established a specialized “IP Court” that officially began operations in 2017 but never truly got off the ground. The project is effectively dead, and without a real successor.

Prokhorova notes that patents are continuing to auto-renew under martial law. On the other hand, martial law has also indefinitely extended the time in which a new patent or copyright can be challenged, which undermines some of the legal stability that a patent is supposed to afford.

“In Ukraine, we are still in the process of judicial reform, and for the time being [in some parts of] society there remains a mistrust for the judicial system,” says Bilyk.

Prokhorova agreed, saying that mistrust extends beyond Ukraine’s borders: “This is one of the big issues for investors, because they don't believe that their money will be safe.“

Foreign entities generally do not want to step into Ukrainian courts. In one of the higher-profile decisions in recent years, SpaceX sued NIPO to end a trademark held by longstanding Ukrainian IT company ‘StarLink’ as the American giant was trying to register its products in Ukraine, particularly its Starlink internet terminals. 

The US company says the IT company’s trademark when it comes to satellite communications has lapsed, as the Ukrainian Starlink isn’t using it within those fields.Multiple courts within Ukraine have rejected SpaceX’s case — rulings complicated by hostility from the Ukrainian military towards Musk over not letting them use Starlink terminals during an assault on Russian-occupied Crimea.

Reforms remaining

Many outside observers still find Ukraine deeply lacking when it comes to IP protections.

The International Property Rights Index ranked Ukraine 95 out of 125 countries for intellectual property protections,

There are still IP thieves out and operational within Ukraine. But the system is changing for the better. Bilyk recounts an ongoing mediation with a client working in drone development, which he declined to name. 

“As soon as this project became public — people started to write about it, all that — two other projects started making the same model we’d just registered.”

They’re in mediation at the moment and still deciding on bringing a proper suit against the copies — a formal mediation procedure that he says is another new development in the field. 

Orliuk says the NIPO will spend the next year developing more proposed changes to Ukraine’s IP law, with the objective of being in front of the Verkhovna Rada in 2026.

The NIPA and Ukrainian Ministry of Defense are, moreover, intent on bringing Ukrainian IP home, one day having it under the possession of Ukrainian entities. That applies especially to developments funded by the ministry, writes Orliuk, “so that Ukraine can receive the same royalties or other payments from the commercialization of IP in which money was invested, especially when state money was invested.”

Prokhorova summarized the situation nicely: "For military tech, we will have other investors who can buy the technology from our people. The thing is that if the technology leaves Ukraine, you know, we will lose it.”

Comments, questions, suggestions or gripes? Reach out to Counteroffensive.Pro editor Tim Mak.

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