Disputes in the IT sphere are governed by domestic laws and international agreements. For technology companies, it is crucial to understand the specifics of the particular laws and regulations that apply in this industry. This knowledge helps ensure data protection, intellectual property rights, and labor legislation compliance. The ability to stay updated on legislative changes and court rulings related to the tech sector is vital for protecting against potential legal pitfalls.

 

In the rapidly evolving technology industry, the emergence of a legal dispute can be not only a financial burden but also a significant cause of delays in your business’s growth. Therefore, IT companies should employ effective strategies to mitigate the risk of litigation and remain informed about even the smallest legislative changes.

 

Today, more than ever, there is a sharp increase in the number of companies seeking legal support due to issues with IT contracts, copyright protection, etc. This affects both providers and consumers on both sides of the dispute. Collaborating with lawyers from the AA Lawrange, who specialize in IT law, will provide valuable insights and recommendations for navigating this complex environment. Our experts are ready to assist not only in identifying potential legal risks but also in protecting your interests even at the stage when conflicts escalate into IT disputes, saving time and resources for companies.

 

In our work, we consider the impact of international laws and regulations on the technology business, especially if you operate or plan to operate on a global scale. For example, compliance with the General Data Protection Regulation (GDPR) in the European Union is mandatory for IT companies processing data of EU residents, regardless of the jurisdiction of the entity. Understanding these cross-border legal requirements is key to reducing the risk of litigation and facilitating seamless international operations.

 

The Concept of IT Disputes and Their Relevance

The rapid and continuous development of the digital age has opened unexplored areas of law, leading to the emergence of new legal issues and complexities that require a professional legal approach. Against this backdrop, IT disputes have recently come to the forefront.

 

IT disputes (or technological conflicts) refer to conflict situations related to the creation and implementation of IT systems, as well as rights to intellectual property and licensing, personal data protection, and other similar aspects.

 

Being linked to complex legal aspects of the digital world, they can concern a wide range of areas, such as computer games, esports, artificial intelligence (AI), blockchain technology, media, software as a service (SaaS), etc.

 

Different types of technological disputes involve various parties. In disputes related to large-scale IT projects, large commercial organizations or government agencies are typically involved. Conflicts over cryptocurrencies often include individuals, sometimes companies, and in cases of fraud — unknown individuals. High-tech patent disputes can involve multiple parties.

 

At the same time, lawmakers in all countries strive to quickly adapt the legal landscape to emerging changes in the IT field, which leads to the regular introduction of new laws aimed at regulating complex digital ecosystems and relationships in the IT sphere. Concurrently, there is a certain degree of uncertainty surrounding new and constantly changing regulations, which often results in the emergence of technological disputes. In the last decade, Ukraine has experienced a significant surge in disputes surrounding new technologies. This further underscores the acute need for regulatory intervention in this sector.

 

Importantly! Technological disputes currently encompass a broader range of issues than we are accustomed to associating with the traditional IT sphere. Legal clashes arise against the backdrop of conflicting interests concerning cryptocurrencies, AI, autonomous vehicles, and more.

 

The increased frequency of IT disputes is also linked to the active emergence of new enterprises and the expansion of existing technology companies, which inevitably intensifies competition amid stricter governmental oversight. For this reason, legal services for IT companies in Ukraine are in high demand. Meanwhile, economic, regulatory, and political factors can significantly influence the nature of technological disputes.

 

Main Types of Disputes in the IT Sphere

There are numerous issues that lead to disputes in the IT field. These can include, for example:

 

  • Insufficient attention to the formation of commercial (or non-legal) conditions when drafting contracts.
  • Misunderstanding of the specifics of the legal environment in IT by the parties and difficulties in defining their requirements.
  • Complex wording in IT contracts, which often leads to ambiguity and dilution of legal rights.
  • Low quality or performance of software — issues with functionality and performance are often difficult to determine until the system is presented to users, etc.

 

For these and other reasons, several types of disputes frequently arise, which will be discussed further.

 

Intellectual Property Violation

Intellectual property (IP) is a vital source for the technology industry, making its protection paramount for businesses. Resolving disputes in the IT sphere related to copyright is a common scenario. Pure intellectual property disputes (as opposed to contractual disputes) can arise between parties that previously had no relationships. They may occur, for example, due to a deliberate attempt to use someone else’s inventions or ideas. Such conflicts are often a consequence of competition, including that based on the use of “dirty” methods.

 

The problem is further complicated by the fact that intellectual property rights are generally national in nature; however, as most major companies trade and operate internationally, the dispute typically becomes international. The scope of rights of the parties can be interpreted differently in various countries, even if it concerns the same wording in a patent or the same programming code. An intellectual property lawyer becomes essential for protecting business interests, as they are well-versed in these and other nuances.

 

Conflicts Arising from Breach of Contracts or Technical Errors

In the technology sector, contracts govern a wide range of relationships, including those with clients, suppliers, partners, and employees. Effective contract management implies not only careful drafting of agreements to ensure clarity and equity but also constant monitoring and enforcement of these agreements. This can prevent misunderstandings and conflicts in the future.

 

Disputes arise when a party attempts to deviate from what they promised/agreed to do. For example, it is quite common for alternative software to be proposed, for team members to change frequently, for excessive delays to occur, for poor or nonexistent communication and data exchange to arise, for charges to be imposed for additional work that was part of the original scope, or for failure to take steps to rectify technical errors. The latter often leads to disputes over which party should be responsible for paying for the work to correct the errors and to what extent.

 

Disputes Over Personal Data and Breaches of Confidentiality

Data leakage can occur if a cybersecurity service provider offers a solution that does not meet the company’s purpose. In this case, compensation can be sought, provided that the supplier’s fault in the data breach can be proven.

 

Disputes Regarding Software Licenses

The situation in the software licensing sphere is constantly changing; therefore, resolving disputes in the IT sphere is often related to licensing issues that arise, for example, due to:

 

  • Alleged violations of contract terms;
  • Unauthorized uses of software licenses, databases, or other IP;
  • Non-compliance with terms, royalties, and payment schedules, etc.

 

Disputes Between Publishers and Developers

The topic of mutual claims between publishers and developers deserves special attention. The main issue, which usually provokes conflicts, is the use of terms and concepts that each party interprets differently. For example, the publisher may understand the term “promotion” to mean one thing, while the developer interprets it entirely differently. The main problem here lies in the lack of clear and unambiguous wording when concluding agreements, as well as insufficient disclosure of necessary information.

 

Resolving disputes in the IT industry is often accompanied by defining:

 

  • Payment procedures;
  • Calculation of payment amounts;
  • Consideration of expenses and revenues when distributing profits;
  • Conditions for the transfer of rights to the game;
  • Timelines and procedures for software development;
  • Terms of mutual information exchange, etc.

 

The clause concerning applicable law also plays a significant role, as it determines the manner of contract execution, the rights and obligations of each party, and the legality and validity of the contract or individual provisions. Consequently, the project’s economics and potential consequences of breach of contract can significantly depend on the applicable law.

 

Disputes Over Domain Names

Having a domain name that matches the company’s name or one of its products is an extremely valuable part of establishing an online presence. If you wish to acquire a domain name, it is important to conduct a search to see if the desired domain is already occupied. If a domain name corresponding to a company’s name or a product’s trademark is already owned by someone else, a dispute may arise with the aim of returning the domain name to its original owner.

 

Important! It often happens that domain names are copied by scammers to create a false image of a real company and conduct activities supposedly on its behalf. Some individuals may even run campaigns against the original website, engaging in employment fraud. Another common reason for domain appropriation is the distribution of malware and viruses.

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When a dispute arises over a domain name, the parties can always go to court. Although the courts make determinations regarding who exactly will hold ownership rights to the domain name (following the same principle as resolving conflicts related to any other property), the actual judicial process tends to be lengthy. Companies filing lawsuits must present legally justified arguments as to why the domain name, registered to someone else, should be canceled or transferred to the organization that failed to register it first.

 

Disputes Regarding NCAs

Disputes over non-compete agreements (NCAs) are a common area of business litigation in any jurisdiction. The purpose of such contracts is to limit an employee’s ability to work for a competitor or start a competing business after leaving the company. Understanding the legal requirements for non-compete agreements, the factors that courts consider when evaluating their enforceability, and the process for resolving these conflicts is crucial for both employers and employees.

 

Important! Ukrainian legislation does not contain any regulations regarding NCAs, so these norms are often not followed, leading to various complexity levels of disputes. Moreover, judicial positions on resolving these conflicts are ambiguous and often unpredictable.

 

Disputes Regarding Taxation

Tax disputes typically arise from different interpretations of tax legislation when a taxpayer and a tax authority disagree. Judicial practices form a uniform application of legal provisions. In Ukraine, the Tax Code specifies benefits under which companies engaged in supplying software and performing operations with software, whose payments are not classified as royalties, are exempt from VAT. However, there has long been a lack of understanding regarding the precise application of such a benefit, leading to disputes. For instance, opinions often differ on whether VAT exemptions apply to the supply of components for software to the client. The Ministry of Finance asserts that transactions for the supply of software are exempt from VAT, provided that the type of product is a separate element of the supply to which ownership has been transferred.

 

Methods for Resolving IT Disputes

The best way to avoid an IT dispute is to take measures to ensure that it does not arise. This means ensuring proper documentation is in place and that the project continues in accordance with what is outlined in it.

 

If a dispute arises during a company’s operations, it is important to address it at the early stages. IT projects are often complex, stressful, and require hours of work. Their success generally depends on good and harmonious working relationships. To resolve disputes in the IT industry with minimal effort, it is important to timely adjust project checkpoints, change its scope, switch team members, and/or address payment issues. Legal consultations and support may be necessary (often in the background).

 

Important! Judicial resolution of an IT conflict often incurs significant costs and time (it can take months or even years). Typically, upon completion, all expenses are borne by the losing party. To achieve a favorable outcome in court, it is essential to rely on the assistance of professional lawyers.

 

If a dispute arises, there are several courses of action that may serve as good ways to resolve issues. Sometimes, the terms of the contract specify a particular course of action in the event of a conflict. Below are some methods for resolving IT disputes:

 

  • Mediation (pre-trial settlement) – this method involves bringing in a neutral party as a mediator to assist in resolving the dispute amicably. The goal of mediation is to provide the parties with opportunities and authority to engage in negotiations, which should ultimately allow for any dispute to be resolved quickly, cost-effectively, and confidentially, without resorting to court.
  • Negotiation – the simplest method for resolving a dispute in IT. The parties agree to exhaust the conflict by themselves. This approach not only saves time and money but also helps maintain business relationships.
  • Litigation (court trial) – if the parties cannot resolve the issue amicably, the need arises for court assistance. The objective of judicial consideration is to establish all circumstances that led to the dispute and the arguments of each party. In court, a decision is made in favor of one party, which takes effect from the date it is issued or from another specified later date.

 

Features of Judicial Practice in IT

Judicial disputes in the field of IT are characterized by complexity and multifacetedness. Depending on the country, cases are handled in specialized courts for intellectual property, as well as in general jurisdiction courts and arbitration courts. The specifics of decision-making by Ukrainian judicial instances can be described as ambiguous. Judicial practice in Ukraine regarding the resolution of conflicts in the IT sphere is still in the process of formation. This, in turn, provokes the emergence of various approaches to handling such cases.

 

In comparison to other areas of economic activity, the IT industry is regarded as the least regulated. On one hand, this means that technology business owners have extensive legal freedom. On the other hand, due to the lack of established judicial practice in this field, there is no possibility to even approximately predict the outcome of an IT dispute in court.

 

Another important circumstance that significantly complicates judicial cases regarding IP, software, domain names, and trademarks is the difficulty of proving the respondent’s guilt. Despite the vast number of decisions in the Unified State Register on this subject, judicial disputes in the Ukrainian IT sector are still conducted without a generally accepted scheme for presenting various types of evidence.

 

Practical Recommendations for Avoiding IT Disputes

Information technology has become a huge part of everyday life, and the success of businesses and organizations operating in this sphere depends on the comfort of relationships among all participants in the working process: business owners, partners, and clients. Several key pieces of advice can help avoid disputes and the related problems.

 

Draft the Contract Properly

A contract should be tailored to the specifics of the situation, avoiding the use of standard provisions and terms (these are better applied only to small projects with low costs). Clearly describe what you want and need — one of the main conditions for the smooth operation of the project. Accuracy and realism should be observed. Avoid vague or ambiguous descriptions or statements. If assumptions are made, clarify what they are and why they are made.

 

Important! If it is not clearly specified what you want and need, you risk leaving room for interpretation. This can lead to disputes later on due to different interpretations by the parties involved in the contract. Thus, the dispute will depend on the specific wording used, so it should be clarified.

 

Properly Handle Changes to the Contract and Document Everything

If changes are needed in the contract, it is important to ensure that all requirements outlined in the contract are followed. Failing to do so may turn any changes against you later. Keep records and/or minutes of all phone calls, meetings, or conversations. If a dispute arises later, these documents can confirm or refute any statements.

 

Don’t Let Problems Linger

When any problem arises, it is crucial to address it promptly. It is best to seek legal advice immediately. Timely legal assistance will make it much easier to notify the other party or terminate the contract.

 

Effective Communication

Another important factor in preventing disputes is to organize:

 

  • The presence of managers from both the suppliers and clients to manage their roles and responsibilities within the project.
  • Regular reporting on work progress, deliveries, etc.
  • A system of written communication for making amendments and changes to the project.

 

Implementing all of the measures mentioned above will undoubtedly help minimize the risk of disputes or, if they do arise, provide valuable guidance on how best to resolve the issue from the perspective of the relevant procedures.

 

How Lawrange Can Be Useful to You

In the dynamic, innovation-driven IT environment, a wide range of disputes often arises, typically related to the provision of goods and services. Our team has experience in resolving IT conflicts, from complex situations involving software licensing and multimillion-dollar development projects to minor contractual disputes between small and medium-sized enterprises. In any case, AA Lawrange is focused on finding solutions that are advantageous for our clients. We assist in preventing disputes, resolving issues through negotiation, and participating in litigation.

 

It is clear that after resolving an issue between the parties, permanent relationships often remain; thus, our goal is to achieve a mutually acceptable commercial resolution of the dispute quickly and cost-effectively. We support our clients in identifying and managing risks at early stages, forecasting changes, and maximizing the use of their contractual positions.

 

FAQ

What’s better: to go to court immediately, or to try alternative dispute resolution?

This can only be understood after an IT lawyer analyzes the strengths and weaknesses of your legal position. Only then can you determine what legal strategy should be undertaken.

 

What should be done in the event of a data breach?

The first step is to identify and close the breach channel. Next, a working team should be created to address the issue. Along with IT specialists, a lawyer should be included to assess the potential risks. The subsequent course of action depends on the specifics of the situation.

 

Can court be avoided in IT conflicts?

It is possible to avoid court by using alternative dispute resolution methods. The key is to choose the most appropriate method; otherwise, valuable time for resolving the dispute amicably may be wasted.

 

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