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What will happen to foreign intellectual property in Russia?

In response to international sanctions, Russia issued a series of regulations in the area of intellectual property.

During the last two months, there have been alarming signals that the intellectual property of foreign rightsholders could be threatened or lose protection in Russia. However, these conclusions appear premature.

In response to the current developments, the attention of various market players and stakeholders has been drawn to the following issues:

• Can Russian companies use foreign patented inventions, utility models or industrial designs without obtaining consent or without the need to pay the rightsholders?

• Do the same rules apply to other types of intellectual property?

• What does the introduction of parallel importation in Russia mean for foreign companies?

• Is trademark squatting now allowed in Russia?

• Following the so-called “Peppa Pig” case, will the rights of foreign companies be protected before the Russian courts?

Based on existing legislation and case-law, the following answers to these questions confirm that intellectual property will remain protected in Russia.

Use of foreign patented inventions or industrial designs

On 6 March 2022, the Russian Government (the “Government”) issued Decree No. 299*, which amended the method for determining the amount of compensation to a rightsholder for the use of its patent-protected object without consent (“Compulsory Licensing”). For patentholders from foreign states that commit “unfriendly acts” against Russia (“Unfriendly States”), this compensation was reduced to zero.

It is important to note that this procedure only applies when the Government triggers the mechanism of Compulsory Licensing set out in Article 1360 of the Russian Civil Code.

The article allows for the use of an invention, utility model or industrial design without the consent of the patentee, subject to the following limitations:

•  the provisions may only be applied in the limited cases strictly laid down in the article;

•  this decision is taken by a separate Government decree and extends solely to the specific patent held by a particular rightsholder for a limited period of time;

•  such a decision gives this patent use to a specified company, not to any person or entity;

•  the patentee must be provided with the compensation established by Government decree (for companies from “Unfriendly States” – zero, for companies from other countries – a 0.5% royalty, as has been the case since 2021);

•  this decision does not limit the rightsholder’s ability to exercise its rights within the Russian Federation or to license these rights to someone else.

Answering the question of whether Russian companies are obliged to pay compensation to patent owners from “Unfriendly States” when using their patent-protected objects, the answer is yes, they do. The Government can make exceptions for a particular Russian company and a particular patent.

As for exceptions, Article 1360 of the Russian Civil Code has been used only twice for the period of its existence since 2008, and in both cases it was related to vital drugs.

In addition, it should be recalled that Article 1360 of the Russian Civil Code was adopted in accordance with the provisions of Article 31 of the TRIPS Agreement and it is similar to the same legal provisions in other countries.

Can Compulsory Licensing be applied to other types of intellectual property?

Article 1360 of the Russian Civil Code (the rule on Compulsory Licensing) applies only to inventions, utility models or industrial designs and cannot be applied to other intellectual property, including software or trademarks.

Furthermore, there is no other similar regulation for other intellectual property objects in Russia.

Parallel importation in Russia

On 29 March 2022, the Government issued Decree No. 506*, which partly legalised parallel importation, by establishing the international principle of exhaustion of rights to inventions, utility models, industrial designs and trademarks.

This means that if genuine goods have been legally put on the market by the rightsholder in any part of the world, these goods can then be freely sold in the territory of Russia without the additional consent of the rightsholder. This principle will not apply to all goods, but only to those listed in a special list* prepared by the Russian Ministry of Industry and Trade. The Decree is meant for products of companies that declared their exit from the Russian market and do not import their products to Russia.

The Russian Minister of Industry and Trade noted* that the list of goods allowed for parallel imports will be narrowed (goods will be excluded from the list) if foreign companies decide to continue operating in Russia and supply their products to the Russian market.

A similar system with certain specific features also applies in the US.

Is trademark squatting now allowed in Russia?

Over the past few weeks, amid news of foreign companies leaving the country, several dozen trademark applications have been submitted to the Russian Trademark Office, “Rospatent, that were identical or confusingly similar to well-known foreign brands.

However, the procedure for registering a trademark at Rospatent, as in any other patent office around the world, generally consists of the following steps:

•  submission of a trademark application to the patent office for registration;

•  a trademark examination (including checking whether the registration infringes someone else’s rights on their trademarks);

•  a trademark registration.

Anyone is entitled to apply for the registration of a trademark, but this does not mean that any mark will be registered. In fact, Rospatent has consistently denied registering designations even distantly resembling registered trademarks.

Moreover, on 1 April 2022, as the issue became highly publicised, Rospatent released its position* regarding trademarks similar to well-known foreign brands, noting that a previously registered identical or similar trademark known in Russia prevents the registration of the trademark in question.

Will the rights of foreign companies be protected before Russian courts?

The discussion about the inability of foreign companies to defend their rights before Russian courts began with the “Peppa Pig” case*.

On 3 March 2022, the Commercial Court of the Kirov Region dismissed the lawsuit of a UK company for the trademark infringement of the Peppa Pig characters, calling the very fact of going to court an abuse of rights, because the company is registered in a state that has imposed sanctions against Russia.

The case has been strongly criticised by the Russian business community. The decision is not currently in force and is being reviewed by the court of appeal.

In other words, as of today, no judgments in Russia have been finalised that would deny a foreign company protection of its rights on the grounds that it is registered in an “Unfriendly State”.

Moreover, later judgments raising the issue of the “unfriendly” origin of companies have not followed this approach. The courts reasoned that the origin of an entity does not in itself indicate an abuse of rights by that entity. This reasoning has been reflected in the following judgments:

•  Decision* of the Commercial Court of the Chelyabinsk Region dated 29 March 2022 in case No. A76-42835/2021;

•  Decision* of the Commercial Court of Moscow dated 31 March 2022 in case No. A40-162262/2020;

•  Decision* of the Fifth Commercial Court of Appeal dated 1 April 2022 in case No. A51-20464/2021;

•  Decision* of the Commercial Court of the Krasnodar Territory dated 4 April 2022 in case No. A32-4335/2022;

•  Decision* of the Commercial Court of the Republic of Altai dated 4 April 2022 in case No. A02-31/2022;

•  Decision* of the Commercial Court of the Republic of Udmurtia dated 8 April 2022 in case No. A71-16168/2021.

Conclusion

Due to recent events, Russian intellectual property law has undergone changes, but these alterations have not undermined the protection of intellectual property rights for foreign companies. Meanwhile, many features of the new laws have been taken out of context and misrepresented.

In essence, all counter-sanctions taken by the Government are primarily economic in nature, aimed at supporting the economy (e.g. limiting the withdrawal of currency) and delivering proper countermeasures (e.g. restrictions on flights or transport). Measures in the area of intellectual property are pinpointed and aimed at protecting specific interests as is the case with Compulsory Licensing, which was only used in the past in cases of vitally needed drugs.

Thus, intellectual property is still protected by law and legal practices, both for Russian and foreign companies.

* In Russian

Author

Anton Bankovskiy
Anton Bankovskiy
Partner
Head of Intellectual Property
Moscow