The Russo-Ukrainian War’s Implication on Intellectual Property Rights

Following the 2014 so-called “Ukrainian Revolution of Dignity” and the Russian Federation’s annexation of Crimea, a major escalation of the ongoing Russo-Ukrainian War occurred in 2022, culminating in the Russian invasion of Ukraine on February 24. The invasion triggered Europe’s largest refugee and humanitarian crisis since World War II, causing an unprecedented amount of human suffering and countless civilian casualties.

At the same time, escalating international tensions brought about U.S. sanctions and Russian countermeasures, damaging the legal framework coordinating patent and trademark rights between the United States and Russia.

A discussion of such measures and their impact for U.S. companies and individuals follows.

Impact of Financial Measures on Patent and Trademark Matters

An issue of immediate concern is whether it is currently lawful for a U.S. party to pay fees to Russia’s Federal Service for Intellectual Property (Rospatent), which are in turn deposited in the Central Bank of the Russian Federation (“Bank of Russia”). Rospatent is the Russian counterpart of the United States Patent and Trademark Office (USPTO).

On February 28, 2022, by Executive Order No.: 14024, the Office of Foreign Assets Control of the United States Department of the Treasury issued Directive No.: 4, titled “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.” Under such directive, the Treasury Department explained that U.S. citizens cannot engage – without a license – in “any transaction involving the Central Bank of the Russian Federation…including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities.”

Clarifying the scope of its intervention, on March 3, 2022, the Department of Treasury issued General License No. 13, authorizing U.S. persons to pay taxes, fees, or import duties, and to purchase or receive permits, licenses, registrations, or certifications (which would otherwise be forbidden under by Directive 4), “provided such transactions are ordinarily incident and necessary to such persons’ day-to-day operations in the Russian Federation, through 12:01 a.m. eastern daylight time, June 24, 2022.”

Accordingly, and barring further developments, it is reasonable to infer that U.S. companies applying for patent or trademark protection in the Russian federation, or seeking to submit maintenance fees in connection with existing patents or registered trademarks in the Russian federation, may lawfully make payments to Rospatent until 12:01 a.m. EDT on June 24, 2022.

Regardless, U.S. persons may still encounter significant obstacles in making payments to Rospatent because many financial institutions (and money transfer services in general) could refuse to serve U.S. persons in this context, due to the vague language of General License No. 13. Furthermore, regulations and general licenses issued in connection with past economic sanctions expressly authorized the payment of fees for the maintenance of intellectual property registrations, but General License No. 13 is silent on the subject.

Impact of Russian Countermeasures

Suspension of Compensation for Patent Infringement and Royalty Payment by Russian Government

On March 6, 2022, the Russian Federation issued Decree No. 299, which sets forth, inter alia, that:

  1. Owners of industrial designs, utility models, and patents, related to foreign states committing hostile acts against Russian companies and individuals, cannot receive compensation for infringement of those rights. The list of “unfriendly states” includes the United States, Canada, and many others.
  2. The Russian government may use foreign patents without the consent of the patent holders and without the payment of royalties. The scope of the exemption benefits the Russian government for activities aimed at providing defense and security of the state and protecting the lives and health of Russian citizens.

Russian Law Allowing Government to Disregard Additional IP Rights for Certain Products

On March 9, 2022, the Russian legislative assembly (“Duma”) promulgated a new law, under Bill No.: 80712-8, which temporarily suspends many of the rules on protection of intellectual property rights as they would apply to a large group of goods specified therein.

Specific measures by the USPTO and Western IPO equivalents

On March 22, 2022, the USPTO issued a statement on “engagement with Russia, the Eurasian Patent Organization, and Belarus.”

The USPTO received the guidance of the U.S. Department of State and terminated engagement with officials from the Rospatent and the Eurasian Patent Organization. The USPTO also terminated engagement with officials from the national intellectual property office of Belarus.

Furthermore, effective March 11, 2022, the USPTO will no longer grant requests to participate in the Global Patent Prosecution Highway (GPPH) at the USPTO when such requests are based on work performed by Rospatent as an Office of Earlier Examination under the GPPH.

Similarly, on March 1, 2022, the European Patent Office (EPO) already suspended cooperation with Rospatent, the national IP office of Belarus, and the Moscow-based Eurasian Patent Organization (EAPO).

Additional Proposed Russian Counter-Sanctions Potentially Affecting Brand Owners

The Russian Federation is contemplating additional countersanctions potentially affecting brand owners.

Additional measures have been announced, albeit not yet implemented. For example, video released by the Russian government’s press office in the last days of March 2022 showed Prime Minister Mikhail Mishustin virtually addressing members of the Government Commission on the Sustainable Development of the Russian Economy Amid the Sanctions. In that video Mr. Mishustin announced that the Russian government is preparing additional packages of legislative initiatives aimed at supporting vitally important Russian companies.

Among such proposed laws, a draft bill is rumored to contain measures largely viewed as retaliatory against famous consumer marks like McDonald’s, Nike, H&M, and others, who announced their suspension of sales in Russia in response to the country’s invasion of Ukraine.

Numerous accounts have already surfaced of new trademark applications filed for brands ranging from IKEA to Starbucks and Peppa Pig.

It is well known that the Russian trademark office, like its Western IPO counterparts, will need months to examine these trademark applications. However, suspicion abounds that Rospatent may accelerate the process to meet the political expectations of the Russian government.

Practical Tips

U.S. entities or individuals who own pending applications before Rospatent or intend to file new ones should try to meet their payment obligations (including filing fees and maintenance fees) prior to June 24, 2022, because it is unclear whether the U.S. government will renew or extend the current license.

At the same time, for companies that have no immediate or foreseeable need to operate in Russia, it may be appropriate to evaluate whether the cost and efforts of seeking IP protection in Russia are justified in the face of a rapidly-deteriorating intellectual property framework. The current state of affairs also betrays additional concerns that Russian actors may “midwife” the birth of a massive market for knock-offs and counterfeits of Russian origin.

International brand owners may also want to shore up their IP protection in countries that are excluded from the Russian list of unfriendly states but whose companies may trade with Russian producers of infringing products. IP protection activities should extend to patents, trademarks, and copyrights as appropriate.

Gibbons will continue to monitor and report developments on the impact of the war in Ukraine on intellectual property rights in Russia.

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