UKRAINE Trends and Developments Contributed by: lllya Tkachuk, Igor Krasovskiy and Inna Kostrytska, INTEGRITES
Another common issue to be checked during the due diligence is the absence of the holding com- pany. It happens quite often that an IT business encompasses several companies, sometimes in different jurisdictions, but does not have proper relations established between them. IP rights IP rights are a classic key asset of product IT companies. Considering this, it is crucial to ensure their transfer to the company. A common case observed during due diligence is when the transfer of IP rights from develop- ers to the company is not properly formalised. Indeed, the IP objects can be created either by the employees, or by an IT specialist under a service agreement, or by the founders without any written agreements (which would still con- stitute a verbal service agreement). Despite the differences in the regulation for employees and contractors, the absence of the clear provision in the agreement on the transfer of IP rights cre- ates a risk of challenging the company’s title to IP by the author. It is important to note that the Ukrainian legisla- tion which regulates the transfer of IP rights has undergone several significant changes over the past ten years. One of the points to pay atten- tion to is the basic principle as to whom the IP created by the employees/contractors belongs. In August 2021, the specific rule was introduced for software which was created by employees of the company. Before these changes, the basic rule stated that the proprietary right to such objects belongs to the employee unless other- wise prescribed by the employment agreement, whereas after the changes – on the contrary – the right belongs to the employer.
Therefore, it is important to consider the differ- ent regulations in transferring the title to IP rights under the employment agreement and the ser- vices agreement, as well as to consider differ- ences in regulation of these relations at different points in time. Also, considering this, the post-validation of the transfer of IP rights is a common clause for transaction documents. It is important to note that in Ukraine the intan- gible IP rights are not transferable and belong to the IP authors. Considering this, the transaction documents should include a special statement from the authors regarding the use of the intan- It happens rather often that an IT company col- lects, uses or discloses personal data. In this regard it is important to note that Ukraine has not taken any obligation to apply the General Data Protection Regulation (GDPR) and, therefore, the local regulation should apply. In most cases, the Ukrainian Data Protection Regulation is less rig- orous and formalistic than the GDPR. This may create difficulties in cases when a Ukrainian IT company deals with the personal data of for- eigners. Since the GDPR follows the owner of the per- sonal data, in cases when a Ukrainian IT com- pany, for example, deals with the personal data of EU citizens, it should comply not only with the Ukrainian Personal Data Regulation, but also with the GDPR. Employees’ retention bonuses Following the international trend, the Ukrainian M&A market developed the practice of special bonuses to key employees aimed at protecting gible IP rights. Personal data
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