Russia’s war on Ukraine’s effects on intellectual property law
The Russian war on Ukraine resulted in a series of US sanctions and Russian countermeasures that disrupted the coordination of patent and trademark rights between the United States and Russia.
Payment of fees to Rospatent. Financially, the question has arisen whether it is legal to pay royalties to Rospatent, the Russian equivalent of the US Patent and Trademark Office. Rospatent fees are deposited in the Central Bank of the Russian Federation (the “FCRC”).
On February 28, 2022, the Office of Foreign Asset Control (“OFAC”) of the United States Department of the Treasury published Guideline 4 Under Executive Order 14024 (Prohibitions on Transactions Involving the Central Bank of the Russian Federation…). In that directive, OFAC said that U.S. citizens may not, without a license, engage in “any transaction involving the Central Bank of the Russian Federation…including any transfer of assets to such entity.”[y] or any foreign exchange transaction for or on behalf of such entity[y].”
However, on March 3, 2022, OFAC released “General License No. 13“, which authorizes U.S. persons to pay taxes, fees, or import duties, and to purchase or receive permits, licenses, registrations, or certifications [that are otherwise prohibited by Directive 4]provided that such transactions are habitually incidental and necessary for the day-to-day operations of such persons in the Russian Federation, until 12:01 a.m. Eastern Daylight Time on June 24, 2022.”
It appears that US companies that are in the process of filing for a patent or trademark in Russia, or for which a maintenance fee is due on a patent or trademark issued in Russia, can legally pay fees to Rospatent up to at 12:01 a.m. EST on June 24, 2022. After this time, no payments may be made by U.S. Persons to Rospatent. However, it may be difficult to find a bank or money transfer service that will facilitate this payment due to the vague language of General License no. 13. Previous regulations and general licenses published under the sanctions specifically mentioned fees for maintaining IP registrations, but this one does not.
Receive payments from Russian licensees and franchisees. Russia has decreed that amounts owed to residents of “unfriendly” countries (described in more detail below) can be paid in rubles.
Preservation of intellectual property assets in Russia. On March 6, 2022, the Russian government issued a decree stating that citizens of foreign countries who commit hostile actions against Russians are subject to compulsory licensing of their inventions, patents, utility models and industrial designs under conditions providing a 0% royalty for the owner of the intellectual property. On March 7, 2022, the Russian government released a list of “hostile” countries. The list included the United States, EU countries, South Korea, Japan, and several others. As a result, US owners of Russian patents will receive no compensation for infringement in Russia, at least as long as the US imposes sanctions on Russian individuals and companies.
These measures, which amount to confiscation of intellectual property rights without compensation, violate the TRIPS Agreement to which Russia is a party. However, the Russian constitution was amended in 2020 to give the Russian constitution priority over treaty obligations. It is difficult to predict whether the March 6 decree reducing certain patent royalty rates to zero will be considered entrenched in the Constitution. But due to the politically charged atmosphere surrounding the war in Ukraine, it seems safe to assume that no Russian court will overturn Russia’s March 6 decree based on the TRIPS Agreement.
The attack on intellectual property assets held by citizens of “hostile” countries is not limited to patent rights. Reports in the Russian press indicate that Russia may soon eliminate legal liability for the use of pirated software and movies from hostile countries. Russian politician Dmitry Ionin even suggested that the country could unblock the RuTracker torrent suite to help Russians hack Hollywood movies.
Although the same result may soon apply to the trademarks of American companies, it is too early to be sure. Reportedly, a number of trademarks similar or identical to famous Western brands – such as McDonalds, Starbucks, Chanel, IKEA and Instagram – have been filed in Russia, but Rospatent has not yet acted on the applications. Given Russia’s new hostile country policy, it would be surprising if Rospatent rejected these trademark applications based on pre-existing Western trademarks.
USPTO actions. On March 4, 2022, like the European Patent Office, the United States Patent and Trademark Office announcement a severance of relations with Rospatent. In particular, the USPTO will no longer participate in the Global Patent Lawsuit Highway (GPPH) if the patent application is based on work carried out by Rospatent as an earlier examination office under the GPPH.
The USPTO also warned patent applicants filing under the Patent Cooperation Treaty (PCT) should exercise caution before selecting Rospatent as the International Searching Authority or International Preliminary Examining Authority. The USPTO has warned that this could prevent the successful processing of international applications under the PCT, including the transmission of required fees through financial institutions.
While many companies pull out of Russia, some don’t, either because it’s too difficult to do, or for humanitarian or other reasons. For companies whose cases are pending before Rospatent, it would be wise to pay the upcoming fees before June 24, 2022 if possible. Other companies may legitimately wonder if it’s worth it, as Western corporate intellectual property protection is rapidly disappearing.
US and European companies that do not plan to continue doing business in Russia can expect to see their intellectual property used in Russia without compensation. More worrying is the possibility of Russia becoming a massive exporter of counterfeit goods. Companies that once saw China as the most likely source of counterfeits may now find they’re coming from Russia.
In anticipation of such activity, it may be wise to seek intellectual property protection in countries that may be customers of Russian sellers of infringing goods. This protection may include the registration of patents and trademarks and, where applicable, the registration of copyrights. Countries to consider include China, India, and countries in the Middle East.
This guest post was written by Thomas C. Carey, President of the Business Practice Group at Sunstein LLP.
© 2022 Schwegman, Lundberg & Woessner, PA All rights reserved.National Law Review, Volume XII, Number 90