Protecting your IP in Russia: Best practices, action steps

Intellectual property rights such as patents, trademarks and copyrights are often a company’s – or even a country’s – most precious and valuable assets. By seizing those assets, making it impossible to control the activities of local licensees or undermining enforcement against infringers, a belligerent can cause real commercial injury. It is no wonder that the fight for control over IP has become a new battlefield in modern warfare.

Despite US sanctions, US companies can obtain, maintain and enforce IP rights in Russia.

Recent events in Russia evidence this. Press reports that Russia has completely suspended IP protection or has seized patents and trademarks appear to be exaggerated, but prudent companies will remain aware of these developments and take action now where feasible.

In light of a General License issued on May 5, 2022 by the US Office of Foreign Asset Control, US companies may take action in Russia to protect IP rights notwithstanding the US economic and trade sanctions relating to Russia.

Compulsory license of patents in cases of “extreme need”

A longstanding rule in the Civil Code of Russia allows the government to use inventions, utility models and industrial designs without the consent of the patent holder when this is justified by extreme needs of national defense and security or protection of life or public health. In these cases, the patent holder must be notified and paid compensation. (Civil Code art. 1360.)

A new rule sets the compensation rate for holders from most countries at 0.5 percent; however, it nullifies any compensation for patentees connected to “unfriendly states.” (Resolution of the Government of the Russian Federation, No. 299 of March 6, 2022).

Limitation of enforcement of trademarks, copyrights and patents

Under a new law passed on March 8, 2022, Russia can “exempt” enforcement of IP rights including patents, trademarks and copyright of certain goods. It is presumed that this law is intended to deal with shortages of goods, but there is no indication as to how broadly the rule will be applied and whether it will be used to address issues other than shortages. The rule appears to be limited to 2022, and there is no guidance indicating which goods may be designated for “exemption” of IP enforcement.

Parallel imports permitted?

Russian IP law generally provides that an IP rights holder may prohibit unauthorized importation of branded products (ie, parallel imports) even if those products were legitimately purchased outside of Russia.

In response to recent sanctions, Russia changed the law to allow it to override an IP owner’s wishes and permit such importation of certain designated categories of goods.

This would allow the government to mitigate supply shortages of certain branded goods. On April 19, 2022, the Ministry of Industry and Trade adopted Order No. 1532 specifying a broad list of goods for which the protection against parallel importation would be suspended and for which IP rights would be deemed “exhausted.” The products range from raw materials to finished goods and technological hardware. It is advisable for any foreign manufacturer or distributor to check to see if their products or brands fall under this list.

Despite US sanctions, US companies can obtain, maintain and enforce IP rights in Russia

Not only do changes to Russian law and practice impair IP rights of US and other “unfriendly” countries, but, until recently, there was doubt whether US companies could obtain, maintain and enforce IP rights in Russia without violating US trade and economic sanctions. The good news is that, on May 5, 2022, the US Department of the Treasury Office of Foreign Asset Control (OFAC) issued a General License permitting the procurement, maintenance and enforcement of IP rights notwithstanding the sanctions.

General License 31 expressly authorizes:

1. The filing and prosecution of any application to obtain a patent, trademark, copyright or other form of intellectual property protection
2. The receipt of a patent, trademark, copyright or other form of intellectual property protection
3. The renewal or maintenance of a patent, trademark, copyright or other form of intellectual property protection and
4. The filing and prosecution of any opposition or infringement proceeding with respect to a patent, trademark, copyright or other form of intellectual property protection, or the entrance of a defense to any such proceeding.

General License 31 does not authorize: (1) payments through accounts for entities subject to Directive 2 of Executive Order 14024; (2) debits on the books of US financial institutions of the Central Bank of Russia, National Wealth Fund of Russia or the Ministry of Finance of Russia; and (3) transactions prohibited by Executive Orders (EO) 14066 (March 8, 2022) and 14068 (March 11, 2022).

Are your marks registered in Russia?

It is imperative that brand owners register their most important marks in Russia. Russia is a “first to register” country. If a pirate registers a mark first, it may be very difficult to expunge that registration and get back the misappropriated rights.

Best practice is to register all important marks you use or may plan to use in Russia now to avoid pirates beating you, the rightful owner, to filing in the trademark office. Before filing any new applications in Russia, it is essential to check whether applicable sanctions permit such filings. Fortunately, newly issued General License 31 permits US companies to file trademark, copyright and patent applications.

Piracy

Many internationally famous brands have strong reputations in Russia. Recent days have seen a flood of new third-party-owned trademark applications filed in Russia for these brands and for confusingly similar versions thereof. In one case, an international quick service restaurant chain saw its world-famous logo refiled in the exact same shape and color scheme but rotated at a 45-degree angle. In another case, a famous brand was refiled with a slightly different spelling that looked and sounded almost the same. In both these cases, pirates have created highly confusing versions of well-known trademarks.

Brand holders should carefully monitor the marketplace and commercial watch notices to see if any identical or confusingly similar marks are being filed. Even if the political situation may make successful enforcement challenging, trademark owners should consider taking swift action to prevent loss of rights, provided such action is permitted under the applicable sanctions regimes that may pertain. Fortunately, newly issued General License 31 permits enforcement by US companies.

Maintain and do not abandon rights

As in most countries, a trademark registered in Russia must be used and maintained. If a mark is due for renewal, it must be renewed before its expiration date. If a registered mark is not used on all the goods and services covered by it for any three-year period, it can be cancelled by an interested third party in whole or part.

If you own any registrations more than three years old, be sure the marks are in use on all the goods and services covered thereby. If not, confer with counsel proactively to determine what steps can be taken to preserve these rights.

It is very difficult, if not impossible, to cure non-use once a cancellation action is initiated. Again, the new General License clears a path for US companies to file replacement applications and take other actions.

A final word

Technology, brands and other IP are valuable assets that have become a new front in global political disputes. It is now more important than ever to be vigilant.

Learn more about the implications of this topic by contacting the author or your usual DLA Piper relationship partner.