Successful Representation Of Client's Interests In The Series Of Disputes On Debt Collection Over 500,000,000 Rubles Under Patent License Agreements

Client SHCHELKOVO BIOCOMBINAT, FSE (Russia)

Description

Federal State Enterprise “SHCHELKOVO BIOCOMBINAT” (SCHBK) is the largest domestic enterprise specializing in the production and supply of biotechnologies and veterinary drugs. SCHBK also carries out scientific research and development activities in the field of veterinary, medicine and biotechnology.

In 2007-2012, SCHBK have entered into several license agreements with the Institute of Biotechnology of Veterinary Medicine, JSC (IBVM) for the use of inventions under patents Nos. 2300562, 2300563, 2332233, which have been issued in the name of the IBVM.

Subsequently, the Russian IP Court (IPC) has found that when entering into license agreements and then extending their term, the former SCHBK General Director acted “contrary to the interests of the enterprise and at his own discretion”. In this regard, SCHBK was forced to pay license fee to the IBVM for a long period of time.

After the dismissal of the former General Director an internal audit was carried out at the enterprise and it was established that many employees of SCHBK had been taking part in the creation of technical solutions forming patented inventions that represented the subject matter of the concluded license agreements. Based on the revealed facts, the new corporate management of SCHBK decided to immediately stop payment of license fees under license agreements to IBVM, by planning their subsequent termination.

At the same time, at the end of 2015 – beginning of 2016, IBVM has filed a number of claims against SCHBK (case refs: A40-222303/2015, A40-18984/2016) for the collection of debts, i.e. non-paid license fees, contractual penalties, as well as default interests, in the total amount of 520,000,000 RUR.

SCHBK approached Gorodissky & Partners as dispute resolution specialists in the field of intellectual property and commercial law for the purpose of representation of interests of state-owned enterprise.

Solution

After examining all factual circumstances and the presented evidence, the lawyers of Gorodissky & Partners have developed a strategy for defending the rights and legitimate interests of SCHBK.

In particular, since the second lawsuit filed by IBVM in Moscow Commercial Court (case ref: A40-18984/2016) was identical in terms of its subject matter and legal grounds, and was aimed at putting additional pressure on the state enterprise, the specialists of Gorodissky & Partners have managed to reduce the amount of claimed amount twice and achieved the dismissal of claim in this case.

The proceedings in the Court of Appeals regarding the first lawsuit (case ref: A40-222303/2015) filed by IBVM on the debt collection in the amount of about 180 mln. RUR and contractual penalty in the amount of about 80 mln. RUR have been suspended by us due to filing and consideration of a series of claims in front of IPC (case refs: IPC-219/2016, IPC-289/2016, IPC-292/2016) for invalidation of patents that were the subject matter of litigious license agreements and establishment of SCHBK as the legal patent owner (co-patent owner).

Our position that was expressed in the relevant claims for invalidation of the subject matter patents which had been filed in IPC under these (parallel) matters consisted in the fact that all patented and subsequently licensed inventions were created by the employees of SCHBK as part of their direct employee duties, at the facilities of SCHBK, and with the use of material and technical resources and equipment of SCHBK, which meant that the patented inventions should have to be considered as employee inventions, and, therefore, patents for inventions had to be initially issued with the indication of SCHBK as the valid patent owner (co-patent owner). Importantly, as factual circumstances later demonstrated, the respective authors-employees did not properly notify the corporate management of SCHBK (employer) about the facts of creation of patentable objects.

Hence, to solve the problems offered by the client, the lawyers of Gorodissky and Partners have participated in a series of counter- as well as parallel-actions, which have ultimately led to a positive outcome.

Result

As a result of the proceedings in three (3) court cases (case refs: IPC-219/2016, IPC-289/2016, IPC-292/2016) aimed at the invalidation of litigious patents, IPC has satisfied the claims of SCHBK in full scope. Subsequently, the IPC Presidium has dismissed the statements of appeals filed by IBVM. This, in turn, allowed us to prevail in the major dispute over the recovery of moneys from our client, as the invalidation of the licensed patents had automatically terminated the litigious license agreements and released the licensee (SCHBK) from obligation to pay license fees to the licensor (IBVM), as was confirmed by the practice of the highest courts.

Therefore, owing to the well-coordinated work of the team of lawyers and the correctly chosen strategy of Gorodissky & Partners, our client has been recognized as the legal owner of the litigious patent rights, and the claims of IBVM raised against SCHBK – for more than 500,000,000 RUR – have been finally rejected.