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A Legal Artifact for a Stalker
Legal representation and defense of the developer of an internationally distributed videogame (S.T.A.L.K.E.R.)
INTELLECT-S began its biggest case related to the IT rights in the internationally recognized S.T.A.L.K.E.R. videogame brand infringed by a publishing group (AST, Astrel Publishers) which published a namesake book series.
S.T.A.L.K.E.R. (www.stalker-game.ru) is the most popular video game series in the post-Soviet countries and one of the world's best known. The Ukrainian developers have marketed three games since 2007. S.T.A.L.K.E.R.: Shadow of Chernobyl, S.T.A.L.K.E.R.: Clear Sky and S.T.A.L.K.E.R.: Call of Pripyat are first-person horror/survival shooters which won two Gameland Awards for the best domestic action and as the best domestic video games and were Editors' Choices in online and printed video game magazines CNews, Mail.Ru, PC Gamer, and Igromania.
S.T.A.L.K.E.R. has become a popular teenager cult brand as it gave rise to a subculture of "s.t.a.l.k.e.r.s" not only populating the virtual game universe, but also sharing a common set of values, a philosophy, and even "traditions." Outside the video game industry, S.T.A.L.K.E.R. spawned fiction, comic strips, movies, clothing, events, contests, a social network, and a multitude of online communities.
The origins of the case date back to 2008 when the Cyprus company Transavision Ltd sublicensed AST Publishing Group the right to publish a series of fiction books based on S.T.A.L.K.E.R. video games under its logo — which the parties recognized as protected — and using Transavision's graphic solutions (such as screenshots and drawings). The books found a wide readership and were produced in large prints. No one could possibly foresee at the time how things would turn out in the future.
The conflict emerged three years later as AST ceased sending the licensor its financial statements as was required by the license agreement, but went on publishing the best-selling S.T.A.L.K.E.R. book series. In July 2011 Transavision Limited terminated the license and sent AST notice requiring to stop publishing S.T.A.L.K.E.R. fiction.
The litigation flared up in September 2011 when AST group's affiliate Astrel Publishers struck back suing Transavision in the Moscow City Commercial Court for the nullity of the sublicense agreement it had published the books under. The plaintiff alleged that the Cyprus company had no right or title whatsoever to the S.T.A.L.K.E.R. logo as sublicensor, whereas no other subject matter in any form, such as screenshots or other graphics, had not been agreed on in either license or sublicense agreements (Case No. А40-92833/11).
The defendant, represented by INTELLECT-S, sued back: in December 2011 it filed three suits (Cases Nos. А40-3837/12-5-34, №А40-9539/12-12-12, №А40-3841/12-12-17) for relief against the infringement on its rights to the video games by AST's unauthorized publication and distribution of the S.T.A.L.K.E.R. fiction series, and later followed up with another action (Case No. А40-141009/12) filed in October 2012 over the breach of fiction rights in the publication of the book Call of Pripyat.
Represented by the firm's ablest attorneys, the Cypriot sublisensor prevailed at the first trial early in 2012 when the court dismissed Astrel's action for the annulment of the sublicense after it ascertained a few decisive facts it had based its important holdings on. The court held, in part, that logos are protectable under copyright law, and that Astrel's publication of fiction did constitute the parties' agreement regarding the graphic solutions. The judgment also granted Transavision protection against the potential future refund of the license fees it had been paid.
Transavision's successful defense hinged on its license agreement with OOO NPP ParaType, a well known font developer. The parties made it legally retroactive under the Civil Code: the plaintiff had built its case on the defect of Transavision's title to the logo S.T.A.L.K.E.R. on Transavision, which used ParaType's typeface without the developer's formal consent. The court accepted Transavision's retroactive agreement with the ParaType made on INTELLECT-S's suggestion to legitimize the prior use of the typeface. Astrel attempted to challenge the impromptu typeface agreement, but Transavision, still represented by INTELLECT-S, successfully rebutted the attempt.
The principal case (No. А40-92833/11) lasted through the entire 2012 and 2013 as higher courts reversed the trial court's judgment on appeal and cassation. The case finally ended in our client's favor in the Higher Commercial Court's Presidium on certiorari: the highest judicial body granted our application for review, reversed the appellate and cassation opinions and upheld the judgment of the Moscow City Commercial court which granted Transavision relief against Astrel Publishers, represented by Uskov & Partners.
Our success was based on several factors. Apart from thorough homework and professional performance before the HCC Presidium, we relied on our flexible trial strategy we used throughout our engagement. Faced with judicial refusals to grant relief against AST after our temporary setbacks, and seeking to avoid creating adverse precedents that would have denied us success in the other, more important actions, we appealed and then abandoned our claims in the court of appeal. As a result, the proceedings (Cases Nos. А40-3837/12 and А40-69584/12) were terminated or dismissed, with the adverse judgments were annulled under Articles 49 (2) and 150(1)(4) of the Commercial Court Procedural Code. We therefore sacrificed smaller claims to keep the key actions (Case Nos. А40-3841/2012 and А40-3841/2012) going. These actions, in which we sought relief for infringement of copyright by the publication of 51 books in the S.T.A.L.K.E.R. series and, respectively, the production of S.T.A.L.K.E.R. school workbooks, were pending until then. The court heard them at the end of 2013 and 2014 and decided them in Transavision's favor.
In May 2014, the Moscow City Commercial Court handed down its judgment on the largest and most complicated of the cases (No. А40-9539/2012) involving the publication of 51 S.T.A.L.K.E.R. books, in which it recognized infringement of copyright and granted the action in part, awarding c. RUB35 million in damages to be paid by AST and Astrel Publishers.
Before that, the court granted our suit for RUB13 million in damages against AST for unlawful publishing of the S.T.A.L.K.E.R.: Call of Pripyat book series in 2013. Although the judgment was reversed on appeal in 2014, the Intellectual Property Court disagreed, reversed the appellate opinion, granted our cassation appeal and remitted the matter for a new trial.
Our other action (Case No. А40-3841/2012) which we filed against AST and Premiera Publishers over the manufacture and sale of S.T.A.L.K.E.R. workbooks, was granted in part.
Significance of the case
The Russian Legal and Court Information Agency (RAPSI) published on December 31, 2013 its "2013 Top Ten Events in Intellectual Property Protection", featuring INTELLECT-S's S.T.A.L.K.E.R. case along such significant events as the adoption of the antipiracy law and the beginning of the Intellectual Property Court's functioning.
Maxim Labzin, INTELLECT-S Partner, explains the importance of the case for the entire legal system:
I am positive that our success in S.T.A.L.K.E.R. is a landmark in intellectual property case law. We built out case on the premise that the parties to a license agreement can identify and agree its subject matter in the very process of its performance — by the fact that licensee uses the copyrightable object. We also demonstrated that the unlicensed use of background copyrightables — a typeface, in this case — to create further copyrightables, does not prevent disposing of the resulting foreground copyright. We are glad that the HCC Presidium upheld our view and took a position of essential importance for jurisprudence.
Finally, speaking of the entire case, if all the decisions and awards in our actions stand and are enforced, our client will get several tens of millions of rubles in compensation. Such an amount of damages for copyright infringement is very large and rare in Russia.
Alexander Latyev, INTELLECT-S Practice Head, explains the importance of the case for the entire legal system:
Our IP and general civil lawyers demonstrated excellent professional interaction in that case. Our defense against the alleged nullity of the license agreement involved, on the one hand, such IP-specific matters as recognition of intellectual products as copyrightables and awarding protection to the authors' rights to use and dispose of them, and, on the other, so inherently civil-law questions as what constitutes grounds for voiding contracts, and if contracts are contestable by customers on any of such grounds, if at all, after the acceptance of delivery. Finally, there was this fundamental question: how far apart IP rights and the general provisions of civil law really stand. The HCC has produced quite a body of guidance on the resolution of disputes arising out of more common contracts (such as building or lease) and held that the parties cannot evade performance under the pretext of the contract's nullity, but yet none on license agreements, which the plaintiff had built its case on. We have reasonable grounds to believe that it will close the loopholes allowing bad-faith dealers to accept delivery and then repudiate the contracts as allegedly non-existing.
The S.T.A.L.K.E.R. litigation is going on as courts are busy hearing copyright actions that Trasvision, represented by INTELLECT-S filed against AST.