The new collateral damage of the war in Ukraine: intellectual property

In a dramatic escalation of the rift between Russia and the West, the Russian Federation has issued an edict allowing its citizens to copy and use Western patents without payment or permission for use. Regulation No. 299, published March 6 and effective March 6, amends the previous Patent Licensing Decree to state that Russians will pay 0% for the use of patents to those residing in what the Russia has defined as a “hostile nation”.

The Russian Federation published a list of 48 “hostile nations”, including the United States and Canada; member states of the European Union (EU); the United Kingdom (including Jersey, Anguilla, the British Virgin Islands and Gibraltar); Ukraine; Montenegro; Swiss; Albania; Andorra; Iceland; Liechtenstein; Monegasque; Norway; San Marino; North Macedonia; Japan; South Korea; Australia; Micronesia; New Zealand; Singapore; and Taiwan.

More specifically, the regulations state:

“With respect to patent holders associated with foreign states who commit hostile actions against Russian legal and natural persons (including whether such patent holders have the citizenship of such states, their place of registration, place of their principal business activity or the place of their principal profit of activities is these states), the amount of compensation is 0% of the actual income of the person who exercised the right to use an invention, utility model or an industrial design without the consent of the patent holder, from the production and sale of goods, the execution of works and the supply of services for the production, execution and supply of which the invention, model of utility or the corresponding industrial design or model has been used”.

This change in law is unprecedented and has broad implications since the potential impact is not limited to companies doing business in Russia. For companies currently doing business in Russia and using patented methods or devices, Russian entities can continue to exploit the patents without royalty obligation or risk of liability. Additionally, since the settlement affects any patent holder residing in one of the “hostile countries,” even companies not currently doing business in Russia may have their patents pirated by Russian competitors.

The impact of this new regulation is somewhat tempered by several factors. Given Russia’s growing isolation and the inability of foreign companies to market goods and services in the country, companies doing business in Russia will likely see significantly reduced or no royalties even without this new edict. . In addition, some Russian entities may look to the future and be reluctant to cut ties with their foreign licensors.

In some cases, it may take time and limited capital for Russian entities to copy patented processes, particularly where such processes have not yet been licensed in Russia. Additionally, if Russian entities attempt to export products that infringe a patent protected abroad, such exports will still be subject to legal action in the foreign jurisdiction.

The assumption that this situation is temporary but continuous for a long period of time leads to these questions:

  • Once the international structure of patent protection has been broken within Russia (and perhaps its ally Belarus, which may well follow suit), can it be rebuilt?
  • If so, how?
  • What will be the impact of permitted breaches, both during this uncertain time and once the commercial world recovers?
  • Will there be any retroactive royalty claims or will these be expressly prohibited by Russian law?

Everything will depend on what will happen in the months to come and if a diplomatic solution will finally be found. Patent holders in “hostile countries” are well advised to seek legal advice. Patent owners with business interests in Russia should determine the intent of their Russian licensees. At the very least, it is important for patent holders to monitor the status and actions of Russian entities within their respective industries.

Things can get worse before they get better. TASS, a Russian news agency, reported on March 5 that the Ministry of Economic Development of the Russian Federation had suggested a similar change to the trademark law. International brand owners should watch developments carefully.

Jorge Espinosa is certified by the Florida Bar Board in Intellectual Property Law and chairs the Intellectual Property Section at GrayRobinson. He has been practicing national and international intellectual property law for over 30 years.

Since: Daily Business Review