From Russia with love: The ‘other’ Russian conflict targeting intellectual property owners

Russia’s war with Ukraine has rightly not been far from the public’s mind over the past couple of months. The war is having, and will continue to have, tragic consequences for the people of Ukraine. However, it is another of Russia’s tactical measures associated with the conflict which could have serious and long-lasting consequences for both the country of Russia and intellectual property owners across the world.

In an effort to bring pressure on Russia numerous countries have imposed significant economic sanctions on Russia. And numerous global businesses, including Apple, McDonald’s, Coca-Cola, Mercedes Benz, Ikea and Starbucks are rapidly downsizing or ceasing operations in Russia. This mass corporate exodus has caused significant logistical and supply chain disruptions in the technology and retail sectors, with many Russian businesses quickly looking to fill the growing gaps in consumer demand.

Russia’s ‘war’ with international patent and design owners

Part of the Russian government’s response to the international sanctions was to launch a second (or third if you include the cyber-attacks) attack of the year against international intellectual property owners. It issued a decree on 6 March 2022 effectively allowing Russian entities to use patents, utility models or industrial designs without paying licence fees, or being at risk of damages for infringement, where the owner is from a country which imposed economic sanctions and/or has carried out “unfriendly activities” towards Russia.

So far, those countries include the United Kingdom, European Union, the USA, Canada, Japan, South Korea, Singapore, and of course Australia and New Zealand.

The decree is broad, and affects owners who are citizens or residents, headquartered in or even receiving significant revenue from those ‘unfriendly’ countries.

The Russian government has, in one fell swoop, effectively gone further than the large-scale nationalisation efforts developing countries undertook in the 1960’s and 70’s, by expropriating intangible property and intellectual property rights from foreign owners.

What’s the likely impact?

The decree expropriating patent and design rights means that Russian entities can now exploit patents and registered designs without consent, and the owners cannot enforce their rights, receive damages for infringement or licence fees for use of those rights.

The economic impacts and sanctions will last long after the shelling finally stops, with the US and EU discussing Russia effectively being a global pariah for the foreseeable future.

In those circumstances, it is unlikely that even if Russian patents and designs could be enforced during their term, owners will have sufficient interests in Russia to justify doing so. Intellectual property owners are now in an invidious position. Even if they can renew their registrations - the sanctions mean it will be difficult or impossible to pay renewal fees - owners may simply decide to abandon their registrations in Russia.

While Russia’s actions may have a short-term gain for Russian entities, foreign investment will be significantly curtailed. Similarly, innovative entities are unlikely to risk transferring or commercialising sensitive technology or data into Russia for a considerable period. This will ultimately stifle the flow of technology and innovation to Russia and reduce its productivity and growth in the long run.

But what about other intellectual property rights?

Despite the decree only explicitly covering patents, utility models and industrial designs, it has the potential to affect other intellectual property rights in Russia, including copyright and trade mark rights. In fact, Russia’s Ministry of Economic Development has hinted that further decrees could be on the way, including (temporarily) removing trade mark and copyright protections for owners based in ‘unfriendly’ countries.

Rospatent, Russia’s Federal intellectual property office has recently received an influx of trade mark applications for famous and luxury brands like Givenchy, Christian Dior, Chanel, Nike, BMW and Audi from applicants that aren’t the marks’ owners. There is a good chance some of these applications will be registered, as even pre-decree, Rospatent was not able to refuse trade mark applications on the express basis that they were filed in bad faith.

One high-profile example is a trade mark application for ‘Uncle Vanya’ for restaurant services, along with the following logo:

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If the logo looks familiar, it won’t be a surprise that the trade mark application was filed shortly after senior Russian officials declared all McDonald’s restaurants in Russia should be replaced by a new burger chain called Uncle Vanya, presumably coming to Russian towns everywhere soon.

If Russia issues another decree removing trade mark rights for owners based in ‘unfriendly’ countries, the decree will likely mean that applications such as this would be registered as Rospatent examiners would be prevented from considering existing trade marks owned by ‘unfriendly’ foreign owners.

Additionally, the Russian courts appear to have already declared open season on other forms of intellectual property rights.

One relatively high-profile recent case involves Peppa Pig. Peppa Pig’s UK based owners (Entertainment One UK) was bought by Hasbro Inc, a US entity – both are based in ‘unfriendly’ countries. They brought trade mark and copyright infringement proceedings against a Russian national. The Russian District Court dismissed infringement proceedings. In its judgment, the court specifically referred to Britain’s and the United States’ sanctions against Russia as justification for its decision to allow the Peppa Pig trade marks to be used without consent