Intellectual Property in Russia: Protect Your Rights

For companies that formerly operated in Russia and have ceased operations there indefinitely, the status of intellectual property rights is tenuous at best.

Russia’s invasion of Ukraine has caused chaos throughout the world and heartbreaking death and suffering. In today’s global economy, the war has also resulted in consequences and instability areas beyond what we see on the daily news.

As a result of sanctions from most Western countries and Russia’s own actions, global companies may have a difficult time enforcing their intellectual property rights in Russia and may also be in danger of losing those rights altogether.

For decades, brands from the United States and Europe have been very popular in Russia. Anyone old enough to remember the Cold War will remember the stories of American fashion brands, such as Levi’s jeans, being sold on the black market in the Soviet Union, or an American jeans–wearing visitor to Moscow being approached by a local resident wanting to buy the jeans.

After the fall of the Soviet Union in late 1991, the Russian demand for U.S. and European brands grew quickly, and Western brands found a new and lucrative market for their products and services. It became commonplace for Western businesses to open up their own branded stores or offer their services in Russia and to obtain patent and trademark protection in Russia in order to protect their brands.

Since the start of the Ukraine conflict in February 2022, numerous famous brands have ceased operations in Russia indefinitely. These include Amazon, Apple, Nike, Adidas, Levi Strauss, H&M, Hermes, Chanel, Prada, Louis Vuitton, Gucci, BMW, Ford, McDonalds, Starbucks, Clorox, Estee Lauder, and hundreds—if not thousands—of others.

Recent decrees and court decisions in Russia, along with longstanding Russian intellectual property laws, have now cast doubt on whether those brands will be able to maintain their intellectual property rights in Russia.

In relation to patents, Article 1360 of Part Four of the Civil Code of the Russian Federation allowed the Russian government the right, in case of a national emergency, to use an invention covered by a patent without the consent of the patent owner, provided the patent owner was paid a reasonable compensation under a “compulsory license.” This law is not unusual or unique to Russia; many countries, including the United States, have similar laws.

What has made this Russian law controversial is that on March 6, 2022, the Russian government amended Article 1360 by issuing Decree No. 299. Under this decree, the compulsory license provision in the existing Russian law is amended so that patent owners from certain “unfriendly countries” (including the United States and European countries) would be paid a compulsory license fee of 0 percent for the use of their patents. It is not clear how many 0 percent compulsory licenses will be granted under this decree, but the decree has obviously made it much more difficult for patent owners from “unfriendly countries” to enforce their patent rights in Russia.

Trademark rights are in doubt, as well. Shortly after the issuance of Decree No. 299, a Russian trial court refused to enforce trademark rights in the British-owned Peppa Pig trademarks, allowing a Russian infringer to continue his infringing activities. In its decision, the court referenced the “unfriendly actions of the United States of America and affiliated foreign countries” as rationale for its decision.

Shortly after the Peppa Pig decision, trademark infringers in other infringement cases with U.S. trademark owners made the same arguments. However, those arguments were not successful, and the other courts refused to follow the Peppa Pig court’s reasoning, finding in favor of the U.S. trademark owners.

The Peppa Pig decision was eventually reversed on appeal, with the appellate court reasoning that under the Russian Constitution, the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention, and the Protocol to the Madrid Agreement Concerning the International Registration of Marks, Russia guarantees equal protection to intellectual property of foreign organizations.

The appellate court noted that the “motives” of the lower court’s decision were not based on the correct application of law. It therefore appears, at least for the time being, that Russia may continue to enforce the rights of trademark owners against infringers, regardless of the nationality of the trademark owner.

However, one area in which certain trademark owners will no longer be able to enforce their trademark rights in Russia involves parallel imports. “Parallel imports” occur when legitimate products that are authorized for sale by a brand owner in one country end up being imported into another country in which they are not intended for sale. Often, a product intended for sale in one country may be substantially different from the same product intended for sale in another country. By restricting parallel imports, countries such as Russia (and the United States) protected brand owners by allowing them to control the manner in which their products were sold and presented to the public.

In addition, labeling, packaging, and ingredients of products may differ from country to country, depending on local laws and regulations, so preventing parallel imports is also viewed as a means to protect consumers. Russian government Resolution No. 506, issued on March 29, 2022, authorized Russian companies to import certain goods from outside of Russia without authorization from the brand owner, effectively allowing parallel imports of goods that are no longer being sold in Russia.

Adding to the uncertainty of the protectability of trademarks in Russia, a number of clearly infringing trademark applications were filed in the Russian trademark office by Russian companies and individuals. Among the companies affected are McDonalds, Starbucks, IKEA, Chanel, Givenchy, and many others.

Typically, Rospatent, the Russian office in charge of trademarks and patents, would review such applications, and if the marks were deemed confusingly similar to other registered trademarks, reject the registration of such marks.

To address concerns of trademark owners, Rospatent released a statement confirming that “[t]he presence of a previously registered identical or similar trademark known in Russia is an obstacle to the registration of the claimed designation.” As of this writing, none of these infringing trademark applications appear to have been granted registration.

Yet another potential issue for brands that have ceased operations in Russia is that under existing Russian law, three years of non-use of a trademark in Russia could result in the cancellation of the trademark registration by third parties. This has been the law in Russia (and most other countries) for many years and is not a recent development. Thus, any brand that is not using its mark in Russia for that period of time is at risk of losing its trademark rights and having its trademark registration canceled.

Given the number of companies no longer doing business in Russia, if this withdrawal continues longer than three years, those companies could begin to lose their trademark rights under longstanding Russian laws.

Intellectual property owners based in the United States, European Union (EU), and other countries that levied sanctions against Russia have also had concerns about whether they would be able to prosecute their pending patent or trademark applications or maintain their issued patents or trademark registrations, as sending payments to Russia in order to do so could be seen as a violation of sanctions.

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On May 5, 2022, the U.S. government cleared up this confusion when the Office of Foreign Asset Control (OFAC) issued General License 31, confirming that it would not be a violation of any U.S. Russian sanctions regulation to engage in transactions in connection with the filing and prosecution of any application to obtain a patent, trademark, copyright, or other form of intellectual property protection; renewal or maintenance of a patent, trademark, copyright, or other form of intellectual property protection; or 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.

Intellectual property rights are, for the most part, territorial. While there is an international treaty that protects copyrights from one country to the next, the same cannot be said for patents or trademarks. In general, an issued U.S. patent or a registered U.S. trademark cannot be used to curtail infringements in another country. Patent and trademark rights in Russia arise through registration in Russia. Even before the current conflict, if an intellectual property owner did not have an issued patent or registered trademark in Russia, it was very difficult to enforce such rights there.

The current legal standards are evolving, and there is no certainty as to what will happen in the near or distant future. It would appear that, at this juncture, the best strategy for intellectual property owners would be to continue to seek protection for their intellectual property in Russia and to maintain their Russian patents and trademark registrations.

Without patents or trademark registrations, a party would have virtually no rights over such intellectual property in Russia. By seeking to obtain and maintaining its patents and trademark registrations, a party may at least have a chance to protect its intellectual property rights.

Mary L. Grieco is a partner in the brand management & protection and intellectual property law practices at Olshan Frome Wolosky, based in New York.

From: New York Law Journal

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