Russia’s IP appropriation adds to impact of sanctions
Russia is waging a traditional war in Ukraine. At the same time, an economic war has been waged on Russia. In the hope of dissuading Vladimir Putin from his current course of action, nations on both hemispheres have imposed on the country unprecedented economic sanctions. Many Western businesses are also temporary or permanently closing their activity on Russian soil.
The situation has elicited a strong response from Russia as far as IP is concerned. On March 7, 2021, an amendment to the methodology for patent infringement was published by the Government of the Russian Federation.
The legislation removes a patent holder’s compensation for patent infringement if such the holders are associated with foreign states who commit “unfriendly” actions against Russian legal entities and individuals (including if such patent holders have citizenship of these states, their place of registration, the place of their primary business activity or the place of their primary profit from the activity are these states).
The term “unfriendly” is not defined, however, a list of unfriendly countries is included in the Decree of the Government of the Russian Federation no. 430 of March 5, 2022. At the time of writing, the list includes all the member states of the European Union, the states of the European Economic Area, as well as the US.
Russian leadership is considering taking further measures with respect to “unfriendly” countries nationals who are rightsholders of some trademarks, such as lifting the restriction on importing counterfeit goods.
What this effectively means is that anyone doing business in Russia will be able to appropriate IP rights of lawful patent holders.
This may potentially have far-reaching effects, bearing in mind that in 2020, the Russian Federation intellectual property office, Rospatent, had 22,839 patents in force originating from the US, and a total of 40,237 patents originating from EU member states, according to WIPO.
This is also unlawful from an international law perspective. By allowing IP rights of nationals of more than forty countries to be infringed, Russia is breaching its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Article 45 of TRIPS obliges signatory states to enable judicial authorities to award damages adequate to compensate for the injury the right holder has suffered because of an IP infringement by an infringer who knowingly, or with reasonable grounds to know, engaged in infringing activity.
However, IP rights protection in Russia was problematic even before the start of the war. Russia was among the nine countries on the priority watch list of the Office of the US Trade Representative for its record of poor IP rights enforcement.
Major concerns included copyright infringement, trademark counterfeiting, a lack of transparency in the operation of collective management organisations and poor enforcement of IP rights due to lack of political will to fight infringement.
The measures imposed by Russia may represent, aside from a power-play move in the war against the West, an attempt to deter the Western firms’ exodus or reduce the impact thereof on the local economy. Whether local firms have the capacity to fill the space left by Western companies whose activities in Russia have currently ceased, remains to be seen.
Patents alone may not be sufficient for launching products to market. Know-how plays an important role in the production process, and it is likely that only licensees of the Western companies have access to (most probably) part of these companies’ know-how.
And the question arises whether such licensees are well-prepared enough to stand on their own and launch competitive products. It is also a matter of them taking the risk of jeopardising future relationships with their former licensors by becoming (IP rights infringing) competitors.
It is also worth noting that, with the sanctions imposed on the Russian banking system, it becomes difficult for patent applicants to pay for the renewal of their patents (as well as for patent applicants to file their applications) anyway.
This by itself would have likely led to Western companies losing patent protection in Russia, bearing in mind that patent fees are paid annually and that, according to the Civil Code of the Russian Federation, lack of payment triggers the expiry of the patent.
There is, however, a three-year grace period in which patents may be re-instated. One can only hope that the tensions between Russia and Western countries will be resolved before the respective term lapses.
Alina Popescu is founding partner at MPR Partners. She can be contacted at: alina.popescu@mprpartners.uk
Flavia Ștefura is a senior associate at MPR Partners. She can be contacted at: flavia.stefura@mprpartners.com
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