Important changes to IP and IT law

1) Federal Law No. 46-FZ of 8 March 2022, entitled On Introducing Amendments to Certain Legislative Acts of the Russian Federation (cl. 13 of part 1 of art. 18).

The law has been passed, published and took effect on the date of its publication (8 March 2022);

As was clarified by the Ministry of Economic Development of Russia,¹ this measure was designed to authorise so called parallel imports in relation to certain categories of goods.

Traditionally parallel imports were understood to mean the import of goods containing IP (such as trademarks) without the permission of the rightholder in circumvention of official supply channels. To date, such activity was viewed as a violation of the rightholder's exclusive right despite the shrinking ability of the rightholders to prosecute parallel importers.

It is evident from the clarifications of the Russian Ministry of Economic Development that the new law must allow the Russian Government to determine goods or groups of goods in relation to which the rightholders will be entirely deprived of the opportunity to prosecute parallel importers and hold them accountable.

The wording of the law we are referring to is quite broad, which allows one to apply it in the future not only in relation to parallel imports, but also in relation to other IP infringements.

2) Resolution of the Russian Government No. 506 of 29 March 2022, entitled On Goods (Groups of Goods) in relation to Which Certain Provisions of the Russian Civil Code on the Protection of Exclusive Rights in Intellectual Property Incorporated in such Goods and the Means of Individualisation such Goods are Marked with shall not Apply.

The subordinate act has been passed, published and took effect on the date of its publication (29 March 2022).

Pursuant to the abovementioned law, on 29 March 2022 the Government of the Russian Federation instructed the Ministry of Industry and Trade of Russia to approve lists of goods in relation to which the provisions on the exhaustion of rights in trademarks (art. 1487 of the Russian Civil Code) and patent rights (cl. 6 of art. 1359 of the Russian Civil Code) will not apply.²

From a literal interpretation of the partial abolition of the exhaustion provisions one can conclude that each resale of goods lawfully imported into Russia will require the consent of the relevant rightholders. However, despite the apparent controversies found in the text of the resolution, we expect that the law enforcers and courts will continue to abide by the principle of rights exhaustion: the sale of goods lawfully imported into Russia will not be treated as an infringement of the rightholder's exclusive rights. On the contrary, they will interpret the principle of exhaustion in relation to such goods broadly, thereby allowing importers not to obtain the consent of the rightholders to the import of goods lawfully purchased abroad into Russia.

The newly adopted approach of the Russian Government to the principle of rights exhaustion leaves questions as to how these provisions will co-exist with the rules of the Eurasian Economic Union on the regional exhaustion of rights.³ For example, whether the purchaser of such "grey" goods will be able to freely sell on such goods to Belarus, Armenia and other union member states without the consent of the respective rightholder.

Resolution of the Russian Government No. 299 of 6 March 2022, entitled On Amending Point 2 of the Methodology for Determining the Amount of Remuneration Payable to the Rightholder when a Decision is Taken to Use the Invention, Utility Model or Industrial Design without Consent, and the Procedure for Paying such Remuneration.

The subordinate act has been passed, published and has taken effect since the date of its publication (6 March 2022).

This measure relates to the mechanism of granting the right to use patented items in the interests of national security. This mechanism is stipulated by Russian law. According to art. 1360 of the Russian Civil Code, the Russian Government may decide on the use of inventions, utility models or industrial designs without the rightholder's consent for the purposes of ensuring national defence and state security and protecting the lives and health of people.

As a rule, if the Russian Government takes such decision, the patent holder is entitled to remuneration. The amount of such remuneration is set by the methodology approved by the Russian Government and amounts to 0.5% of revenues actually received by the person who exercised the right to use the invention, utility model or industrial design without the rightholder's consent from the production and sale of goods, performance of work or supply of services with the use of the relevant IP.⁴

The recently introduced measure alters this methodology and brings the amount of remuneration down to 0% for patent holders connected with states and territories taking hostile actions against the Russian Federation, Russian legal entities or individuals.⁵

The list of instances when a connection of the rightholder to such states and territories is considered to exist is non-exhaustive and, among other things, includes instances when the patent holders have citizenship of such states as well as when these states are the place of their registration, their principal place of business or their main profit centre.

This mechanism is, however, quite rarely used in practice by the Russian Government. As of today, orders on granting the right to use patented items in the interests of national security have only been given in relation to inventions relating to Remdisivir medicine with an unpatented international name.⁶

The draft law was developed by the State Construction and Legislation Committee of the State Duma of the Russian Federation.

Draft Federal Law No. 92282-8 On Amending Certain Legislative Acts of the Russian Federation was introduced to the State Duma on 22 March 2022

The draft law provides for restricting the rightholders in their right under law or contract to unilaterally amend or terminate a contract (or the performance thereof) associated with the exercise and protection of their IP rights.

The restrictions are proposed to be extended to cases of the amendment or termination of contracts, where such amendment or termination is caused by hostile actions taken by foreign states and international organisations in connection with the restrictive measures against Russian citizens or Russian legal entities. Cases where the rightholders' counterparties themselves materially breach their obligations under contracts will be exempt from these restrictions.

As a general rule, the term of such contracts made with Russian individuals or legal entities will be renewed for the duration of the hostile actions. Only a Russian individual or legal entity granted the right to use IP under the contract may waive such renewal.

The foregoing measures are proposed to be applied retrospectively from 24 February 2022 (in respect of those obligations that matured after 23 February), rather than from the effective date of the law.

The foregoing measures will, apparently, in the first place affect licence and sublicence and franchise agreements as well as commercial concession contracts.

The draft law does not require that there has to be a link between the rightholder and a foreign state or an international organisation taking hostile actions. Technically, the prohibition on termination may apply to a Russian rightholder as well if, for example, it is determined that the rightholder's refusal to renew a licence agreement is caused by sanctions imposed by a foreign state against the licensee.

The Ministry of Economic Development of Russia, Rospatent.

The draft law should have been submitted to the State Duma for consideration by 28 March 2022. No information on the consideration of this draft law is currently available.

The contemplated measure implies that in addition to inventions, utility models, industrial designs (art. 1362 of the Russian Civil Code) and successful breeds (art. 1423 of the Russian Civil Code), the mandatory licensing mechanism may be extended onto other IP. In particular, the mass media discussed this measure in the context of software.⁸  The current version of the plan features the term "technology-related IP", which leaves room for interpretation.

We assume that in addition to computer programs such IP may include databases, IC layout designs and know-how.

We believe that, by analogy with how this mechanism works in respect of patented items, the contemplated measure may allow any interested parties – if the rightholder refuses to enter into a licence agreement with them – to bring a lawsuit seeking an ordinary (non-exclusive) licence to use software and other "technology-related" IP in the Russian Federation.

Specifically, a suite of measures may be targeted at the continuous use of software of those foreign IT companies that ceased providing their services and granting licences to the use of their software in Russia.

The question, however, remains when and in respect of what "technology-related" IP the mechanism can be applied.

The draft was developed by the State Construction and Legislation Committee of the State Duma of the Russian Federation.

Draft Federal Law No. 84631-8 On Amending the Administrative Offences Code of the Russian Federation (to the Extent Related to Clarifying Administrative Liability for Specific Violations in the Sphere of Telecommunications and Information) was introduced to the State Duma on 10 March 2022.

New administrative offences relating to the failure of foreign persons operating in the Internet in Russia to observe requirements provided by the earlier adopted law on "grounding".¹⁰

As a reminder, from 1 January 2022 the law obliges foreign IT companies meeting the stipulated criteria to formalise, inter alia, its legal presence in the Russian Federation through establishing an authorised legal entity, a branch or a representative office, as well as to register a personal account on Roskomnadzor's website and to post a feedback form for users on their websites.

A breach of these legal requirements triggers administrative liability, inter alia, in the form of a turnover-based fine of up to 1/5 of the aggregate annual revenue.