Since the beginning of Russia’s invasion of Ukraine on February 24, the Russian government has taken many steps to limit the breadth of rights provided to international intellectual property owners.
Compulsory licensing, parallel imports, barring foreign owners from unilaterally canceling foreign licenses, and other measures were among them. In reaction to Russia’s hostility, hundreds of worldwide firms withdrew or ceased producing in and exporting to the nation, prompting the government to take steps to rebuild the economy. Apart from worldwide businesses, some legal firms have ceased operations in Russia, and significant IP agencies such as the UKIPO, EUIPO, and USPTO have severed links with Rospatent, Russia’s patent office.
As a result, despite the fact that no such law exists, a few Russian courts have sided with the Kremlin and refused to enforce IP owned by foreign owners in the nation. Other legal and quasi-judicial institutions, on the other hand, have adjudicated cases exclusively on the merits, disregarding other nations’ sanctions against Russia.
Compulsory licensing of patents and copyright
The first blow to IP owners came on March 6, when the Russian government issued a decree saying that if their IP was used without their authorization, they were entitled to 0% of the earnings from the manufacture and sale of goods, execution of labor, and provision of services. In a statement on March 7, Russia’s Prime Minister Mikhail Mishustin confirmed the news. Inventions, utility models, and industrial designs were all included in the order.
Australia, EU member nations, Iceland, Japan, New Zealand, Norway, Korea, Singapore, Switzerland, Taiwan, Ukraine, the United Kingdom, and the United States were among the 24 foreign unfriendly states and territories approved by the government. The term “unfriendly” was used to describe countries that have sanctioned Russia or backed sanctions against it.
According to Russian IP attorneys, the directive essentially permitted the Russian government to utilize Article 1360 of the Russian Federation’s Civil Code, which allows the government to impose compulsory licensing in the interest of national security. However, the government has lately announced plans to expand the scope of Article 1360 through legislation.
On April 20, the Russian news outlet Vedomosti reported that the government was drafting legislation to expand the scope of the compulsory licensing clause to include copyright. It appears to be a response to international studios leaving or stopping operations in Russia, which has resulted in significant losses in the country’s film and video industry. If a firm from a hostile nation canceled a licensing agreement unilaterally, a Russian licensee might petition to a court for a forced licence under the proposed legislation.
Pirated film screenings have already begun in Russia, with an unofficial premiere of ‘The Batman’ held at a Moscow theater around a week ago, after Warner Bros. postponed the official release in Russia.
Exempting goods from IP protection
On March 9, Russian President Vladimir Putin approved a measure allowing the government to exclude some items from IP protection, dealing another blow to international IP owners.
“The Russian Federation has the right to make decisions providing for a list of goods (group of goods) in respect of which certain provisions of the Civil Code of the Russian Federation on the protection of exclusive rights to the intellectual activity expressed in such goods, and the means of individualization with which such goods are marked, cannot be applied,” according to an English translation of Article 18.13 of the legislation. The law was significantly larger in scope than the compulsory licensing law, since it included all sorts of IP rights, including trademarks, copyright, and patents. When the legislation was enacted, the government, on the other hand, did not disclose the list of commodities that were to be exempted.
IP attorneys in Russia expected the new law to apply to pharmaceuticals and software, but observed that the wide phrasing permitted the government to interpret it as it saw fit. The rule might be understood to enable parallel imports, according to Irina Shurmina, IP counsel and head of digital law at CMS Russia, who told Managing IP that the regulation could be interpreted to support acquiring branded products from other territories and reselling them in the domestic market.
Allowing parallel imports and piracy
On March 29, Russia’s Prime Minister Mishustin signed another directive allowing the parallel import of some copyrighted and branded items in Russia, confirming Shurmina’s forecast. The directive attempted to alleviate the country’s import shortfall by enabling Russian enterprises to import items from other nations without first obtaining permission from the rights holders. Parallel imports into Russia were only permitted under the decree for commodities that had previously been introduced into circulation outside of Russia with the approval of the rights owners.
The measure “will develop competition between brands by increasing the number of businesses that import goods to Russia, which will lead to a decrease in retail prices for these goods,” according to Russia’s competition authority, the Federal Anti-Monopoly Service (FAS), which drafted the parallel import decree. Following this, on April 19, the Russian government produced a list of over 50 kinds of items, together with their customs tariff numbers, that may be lawfully imported into the nation via the parallel import method. The goods include mineral fuel, pharmaceuticals, cosmetics, soaps, chemical products, paper and cardboard merchandise, wool, textiles, medical devices, electrical machines and equipment, and toys.
The list was not just limited to products – it also named several brand owners whose goods that fall under these categories could be brought into Russia under the parallel import route. These include major international companies, such as Apple, Bosch, Samsung, Siemens, Volvo, ABB, Electrolux, Philips, IBM, Lenovo, Schneider, 3M, Nintendo, Hitachi, and Western Digital, from so-called “unfriendly” countries. China’s Huawei was also included in the list, even though the Chinese government has avoided taking a stand against Russia. The list of goods has been sent to the Ministry of Justice for approval.
Ending arbitrary licence termination
The Russian government has also taken efforts to prevent international owners of intellectual property from cancelling their responsibilities in the country. At least two measures prepared by the government represent the government’s attitude on IP licensing.
One of the laws presently before the State Duma would empower the government to take the intellectual property and other assets of select international corporations that have opted to quit or scale down their activities in Russia. The proposed rule would apply to international enterprises with more than 100 workers or a market capitalization of 1 billion rubles ($9.1 million) in which “unfriendly country” citizens had at least a 25% share. The proposed legislation would allow the external administration to take control of and use IP belonging to the foreign company, as well as IP licensed to it.
Furthermore, the government has the authority to reinstate any IP licenses that were suspended or cancelled on or after February 24, when Russia launched its invasion of Ukraine. On March 22, the government introduced a new measure in parliament to prevent foreign firms from unilaterally ending IP arrangements, such as licensing agreements.
Due to “unfriendly activities of foreign nations and international organizations linked with the adoption of restrictive measures against individuals of the Russian Federation and Russian legal entities,” the bill recommended altering various Russian laws. It made it illegal to terminate or change IP agreements unilaterally while Western sanctions on Russia were in effect, unless the non-terminating party had seriously broken the agreement.
Even if a right to terminate or alter the terms of an arrangement was provided statutorily or contractually agreed between the parties, a party would not be able to exercise such a right once the new law enters into force.
On top of that, all IP agreements would be extended for as long as sanctions against Russia remain in force. The government also proposed that the new law should take effect retroactively from February 24.
Conflicting court decisions
Some Russian courts have backed the Russian government’s efforts to limit or impair IP owners’ rights. The earliest and most well-known was arguably Judge A P Slavinsky’s ruling at the Kirov Region’s Arbitration Court on March 3. The court rejected the plaintiff’s allegations of infringement of the ‘Peppa Pig’ and ‘Daddy Pig’ trademarks without considering the merits of the plaintiff’s arguments.
Sanctions imposed by Western countries have “prejudicial relevance” in the case, according to the court. According to the judgment, the plaintiff’s activities – the UK branch of Canada-based entertainment corporation eOne – constituted an abuse of rights as a result of Western nations’ sanctions against Russia, including the United Kingdom.
However, on March 18, eOne was successful in a separate IP battle with a Russian person, assuaging international rights owners’ fears about the prior ruling.
In this case, eOne had filed an opposition to a trademark application for a logo that included an aspect that was similar to eOne’s ‘Gaston the Ladybird’ mascot from the hit children’s show Ben & Holly’s Little Kingdom. In August 2021, Rospatent sided with eOne and declined registration, causing the Russian trademark applicant to submit an appeal with the IP court. The court focused entirely on the merits of the case, rather than eOne’s home country, holding that eOne’s petition to protect its violated IP rights could not be an abuse of rights and dismissing the appeal.
In the last several months, courts and Rospatent have made a few more judgements in IP lawsuits and domain name disputes that have upheld foreign rights owners’ IP claims. Other Russian courts, on the other hand, continue to make politically motivated verdicts.
For the same rationale as the Kirov Court, the Commercial (Arbitrazh) Court of the City of Sevastopol, Crimea, recently dismissed a trademark infringement complaint filed by a US corporation. “Taking into account the restrictive measures against Russia and the plaintiff’s location (the United States), the court finds that plaintiff’s actions aimed at obtaining financial compensation while Russian residents in the United States do not have the same opportunities constitute abuse of rights,” it said. While there is nothing to support the “abuse of rights” proposition adopted by the Kirov and Sevastopol courts, Russian lawyers believe some decisions will continue to be affected by geopolitics while others will be decided fairly.
Future troubles
As the war continues, the measures taken by the Russian government and the uncertain IP enforcement environment might help local players and the Russian economy in the short run but will likely affect the return of global brands to Russia in the longer term.
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