Preliminary injunctions in software infringement actions – what is new in court procedures?

Facts
Decision
Comment

Introduction

Preliminary injunction (PI) is an urgent and interim court order aimed at securing plaintiff's claims and interests.

When seeking a preliminary injunction, the plaintiff may ask that the infringer stop committing a certain act. Preliminary injunctions that can be sought in software disputes include:

• temporarily blocking certain pages on the website or mobile application;
• banning the distribution of information or the provision of services; and
• updating software products.

Granting a preliminary injunction in software infringement cases is not common practice unless there is a clear-cut antipiracy case (which would qualify for the simplified procedure by the Moscow City Court). This is because software disputes usually concern technical questions, and the judges cannot easily estimate infringement of computer programs without a special examination of the source code.

However, recently, the Moscow Commercial Court did not follow the common approach and issued a preliminary injunction in a software infringement action.

Facts

The plaintiff was a holder of the copyrighted software platform for trading in stock and crypto markets. The software program was a key e-tool for the plaintiff's clients (traders) and business partners. The plaintiff's income directly depended on the turnover of the plaintiff's clients who used the software.

The plaintiff claimed that the competitor had distributed a software program that due to its functionality, interface and other features might be an unauthorised derivative copy of the plaintiff's software.

The plaintiff purported that the competitor's activity had led to the loss of the plaintiff's clients and had caused substantial harm to the plaintiff. The plaintiff filed a lawsuit and sought a preliminary injunction.

Decision

The Court partly agreed to the plaintiff's motion for a preliminary injunction. Until a final decision on the case is reached, the Court ruled:

• to prohibit the defendant from making the software available to the public in any form, including online;
• to prohibit the defendant and third parties from making and performing any deals that involve the defendant's software;
• to force the defendant to postpone the operation of the defendant's software, which was previously distributed to the users;
• to ban the defendant from cancelling the registration of the domain name to avoid that a third party might snatch it up; and
• to ban the defendant from transferring the domain name to any third parties and other registrars.

The defendant unsuccessfully appealed the order of the first instance court. The Ninth Court of Appeals upheld the court order and specified that the plaintiff showed all the key findings generally required to grant a preliminary injunction. In particular, the plaintiff proved that:

• a "lack of a preliminary injunction may impede or make the enforcement of a judgment impossible". It was found that the defendant had distributed the software to the traders and, therefore, it would now be very difficult to withdraw or terminate the service of the defendant's software if the plaintiff won the case;
• "the plaintiff was likely to suffer substantial harm in the absence of preliminary relief". The plaintiff submitted the calculation to show that the use of the defendant's software led to monthly loses for the plaintiff amounting to approximately $5,5 million;
• "it was likely that defendant's software was an unauthorised copy or modified copy of the plaintiff's software". The plaintiff submitted the expert report showing that there it was highly likely that the plaintiff's source code had been copied;
• "scope of a preliminary injunction corresponded and was adequate to the scope of the claims". The plaintiff asked to stop the defendant from producing and distributing the defendant's software, as well as forcing the defendant to publish the judgement on its official website;
• "a preliminary injunction shall not affect balance of interest of the defendant and plaintiff". The plaintiff would continue bear losses if the distribution of the software was not postponed for the term of the litigation; and
• "a preliminary injunction is in the third party and public interest". There was a risk that the defendant's clients, partners and other interested parties would not know that they were using the infringing software and might be involved in software infringement if the distribution and service of the defendant's software would not be postponed.

Moreover, the Ninth Court of Appeals highlighted that a preliminary injunction is an urgent remedy applied at the preliminary stage of the litigation and thus the proof standards for granting preliminary injunctions should not be the same as the ones for considering the plaintiffs' claims and defendant's objections on the merits.

Comment

It is interesting that the defendant did not give up after these finding and instead appealed the preliminary injunction with the Intellectual Property Court (IP Court). The IP Court upheld the decision of the Ninth Court of Appeals and dismissed the defendant's appeal. The fact that IP Court took the side of the plaintiff gives reason to believe that, in the future, courts will note this new approach and be more loyal to grant preliminary injunctions in the software disputes.

Although the preliminary injunction is not a common rule in software infringement actions, this decision may be helpful when analysing the key findings that the rights holder must show in order to obtain preliminary injunctions in the software disputes.