The Supreme Court of Estonia made an important decision on consumer games in April this year. The Estonian Ministry of Finance initiated a misdemeanor procedure against a local newspaper that organized a consumer game for its clients, with prizes drawn including a car. The Ministry of Finance argued that this was a lottery so that the newspaper should have applied for relevant lottery license to carry out the campaign.

      A lottery defines as a game where;

      - participation enables the chance to win money or other assets;

      - the prize of a person who has acquired the right to participate depends on figures, symbols or a picture;

      - the outcome is determined by a draw or another activity entirely based on randomness;

      - participants risk losing their contribution in return for the right to participate.

      In the given case the Supreme Court took the position that the first characteristic of a lottery, i.e. randomness, is present in consumer games. The court also found that the second essential characteristic of a lottery, i.e. the contribution, is not present in consumer games. The Court reasoned that contribution is considered to mean only such financial outlay which, if made, involves the risk that the assets of the contributor decrease as a consequence of the activity based on randomness used to determine the prize. In a situation where a person pays a certain amount of money with the aim of acquiring certain goods or services as well as the right to participate in a draw of a material value (prize), such payment can be considered to be a contribution only if the amount of money paid exceeds the market value of the goods or services acquired in addition to the right to participate in the draw. In the case of consumer games, where no additional money is payable for participation, no risk arises that the assets of the participant would diminish in consequence of the draw compared to the situation before acquiring the right to participate. If no contribution is required for participation in the campaign, then the lottery does not require any operating permit.

      Additional information:

      Evelin Parn-Lee

      e-mail: evelin.parn-lee@sorainen.ee

      Attorneys Triin Toomemets and Carri Ginter successfully represented Gulf International Lubricants Ltd. before the Supreme Court in a claim against an unofficial reseller of “Gulf” goods in Estonia.

      In a landmark judgment of 30 March 2006 the Supreme Court ruled that the lower courts should have interpreted Estonian law in harmony with European legislation.

      According to correct interpretation of Estonian law it is illegal to use another's trademark in a manner that creates false impression of a special connection between a reseller and the trademark proprietor.

      The court also stated that unauthorized use of a trademark in another person’s business name can infringe the rights of the trademark proprietor. If the business name is misleading, then it is possible to prohibit its use regardless of the areas of activity of the respondent undertaking. The court can thus prohibit use of the business name and impose penalties on a respondent violating the prohibition.

      For the first time in local legal practice, the court recognized that a trademark proprietor is entitled to prohibit the use of its trademark in a domain name of a third person. The court pointed out that mere registration of the domain name provides sufficient grounds for turning to the court because of the trademark owner’s inability to use the same website address. In conclusion, the case stands as a landmark as it demonstrates that, on top of resolving a number of unclear legal issues, the shortcomings of domestic law and practice can be overcome by using principles set forth in relevant EU legal acts and recognized by the ECJ.

      Additional information:

      Triin Toomemets

      e-mail: triin.toomemets@sorainen.ee

      The act amending the Investment Funds Act (investeerimisfondide seadus) and related acts will soon be introduced to the proceedings of the Estonian Parliament.

      One of the main aims of the act is to create a legal environment enabling establishment of venture capital funds (including venture capital funds based on private initiative and private capital) considering the peculiarities arising from the nature of venture capital funds. This has hitherto been unregulated in Estonia. In order to promote the establishment of venture capital funds, certain requirements on management companies have been relieved, ensuring that their administrative burden is lower.

      Another important change introduced by the act is the establishment of different regulation for real estate funds and, in particular, their management companies. For example, compared to other funds, real estate funds no longer need to have a depositary. The aim of these amendments is to facilitate the establishment of real estate funds and make the foundation of risk capital funds and real estate funds more attractive.

      Additional information: Kaido Loor e-mail: kaido.loor@sorainen.ee

      Amendments adopted to the Aliens Act (välismaalaste seadus) and other related acts introduce a new concept of a longterm resident and make the conditions for getting a residence permit stricter. The amendments to the act enter into force on 1 June 2006 and do not apply to EU citizens.

      According to the amended act, two types of residence permit will be available in Estonia: temporary residence permits, and residence permits for long-term residents. According to the act, permanent residence permits will no longer be issued and all aliens holding a permanent residence permit will automatically become longterm residents - they need only replace the document proving their residence permit. Aliens holding a long-term residence permit in Estonia will need no work permit for employment or engaging in business in Estonia. For the purposes of the act, the term “alien” includes both citizens of third (i.e., non-EU) countries and stateless people.

      An alien who applies for a long-term residence permit must have lived in Estonia on the basis of a residence permit continually for at least five years before applying for a long-term residence permit; the person must have a valid temporary residence permit, permanent legal income, health insurance, and at least a basic level of language proficiency in Estonian.

      Taking the basic level language exam is not required of residents under the age of 15 and over the age of 65; people who have acquired basic, secondary, or higher education in Estonian, adults with restricted active legal capacity, and people who for health reasons are permanently unable to take the language exam.

      We advise all others to apply for longterm residence permit before 1 June 2007, because this avoids the need to take the basic level Estonian exam.

      The language proficiency requirement for issuing permanent residence permit is already effective in Latvia. Similar amendments to the aliens act are currently under way in the Lithuanian parliament.

      Additional information:

      Kristiina Harms

      e-mail: kristiina.harms@sorainen.ee

      The European Court of Justice (‘ECJ’) started court hearings in the case of Microsoft Corporation (‘Microsoft’) versus the European Commission (‘the Commission’) on 24 April 2006.

      After a five-year investigation, the Commission fined Microsoft EUR 497 million in March 2004 for abusing its market power in the EU. This is the largest fine in EU history.

      The Commission found that Microsoft had abused its market power by deliberately restricting interoperability between Windows PCs and non-Microsoft work group servers, and by tying its Windows Media Player, a product where it faced competition, with its Windows operating system. This alleged illegal conduct had enabled Microsoft to acquire a dominant position in the market for work group server operating systems, which are at the heart of corporate IT networks, and risked eliminating competition altogether in that market. In addition, in the Commission’s opinion Microsoft's conduct had significantly weakened competition on the media player market.

      The Commission had ordered Microsoft to disclose to competitors the interfaces required for their products to be able to 'talk' with the ubiquitous Windows Operating Systems. Microsoft was also required to offer a version of its Windows Operating Systems without Windows Media Player to PC manufacturers (or when selling directly to end users), as well as the version with it.

      Microsoft appealed against this decision to the ECJ and asked for the decision to be suspended until the proceeding come to a final decision in possibly four years. The ECJ refused this request December last year.

      In the Commission’s view, Microsoft has not fulfilled its obligations correctly so far. The Commission has repeatedly demanded the software maker to comply with protocol-sharing requirements. Daily fines have been also issued against Microsoft in the amount of EUR 2 million daily.

      According to Microsoft, the network protocols it has been ordered to share are "valuable trade secrets” and its intellectual property, while its ability to innovate is also at stake.

      The ECJ proceedings could last for several years and the outcome is unpredictable. This is without doubt a landmark case and will pave the way for future competition cases. In case the Commission’s position prevails, the companies holding market power within the EU may be obliged to share their intellectual property. However, in case the position of the Commission is not supported by the ECJ, the Commission may lose a lot of its credibility in fulfilling its tasks. The outcome of the case will determine the framework for the future competition policy within the EU and shall also set guidelines to the amount of possible fines.

      

      Additional information: Carri Ginter

      e-mail: carri.ginter@sorainen.ee

      The Parliament adopted amendments to the Commercial Law. The amendments to the Commercial Law are in force since 10 April 2006:

      - The rules regarding mandatory appointment of an auditor for all companies are withdrawn.

      - An auditor no longer need be registered with the Commercial Register.

      - Appointment of a sworn auditor is necessary if two of the three following criteria can be applied:

       * the sum of the balance sheet exceeds LVL 100 000 (ca. 143 000 euros);

       * annual turnover exceeds LVL 200 000 (ca. 286 000 euros);

       * the average number of employees within the financial year exceeds 25.

      Of course, a company may appoint an auditor even these legal criteria are not reached.

      We suggest that companies resolving that an auditor is not necessary should ensure withdrawal of the clause in the articles of association on the need for an auditor.

      In addition, the amendments provide that the Companies Register of Latvia may approve sample signatures (i.e., signatures of an individual trader and founder on applying for registration) if an individual trader or a company with sole founder is being established, as well as signatures of management board members, liquidators and procurists. Therefore, in these cases it will not be necessary to visit a notary.

      In particular cases, data already kept on file at the Companies Register need not be submitted - for example, approved individual sample signatures. Further, a management board member who signs an application for registration as a management board member need not submit specific consent, or specific notice on legal address. These amendments to the Commercial Law will enter into force on 1 July 2006.

      

      Additional information:

      Janis Taukacs

      e-mail: janis.taukacs@sorainen.lv