News

Sanctions result in counter-measures by Russia in the IP sector

March 16, 2022

While the EU, UK, and the US have issued sanctions against Russia and Belarus in response to Russia’s invasion of Ukraine, in response thereto Russia has started the evaluation of possible counter-measures in order to ensure the functioning of the internal market. What are those measures and how can they affect Swedish companies’ IP assets in Russia?

In general, at least at present, Russia is uncertain about the approach it should take in order to cope with the sanctions imposed and support the smooth functioning of the internal market. With lots of foreign companies leaving the Russian market, in the near future Russia will face a deficit of imported products (such as misprocessing units and various chemical products) and may not be able to satisfy the consumer demand in other economic sectors as well. 

At present, there are three possible ways in which Russia will regain lost production capacity:

 

  • Compulsory licenses to patents (Article 1360 Russian Civil Code “Use of an Invention, Utility Model, or Industrial Design in the Interests of National Security”).

    The rule has existed in the legislation for a long time but has only been used twice in respect of Covid-19 treatment.

 

  • Non-applicability of Russian IP law (Part IV of the Civil Code of Russia) to certain goods/services.

    The Russian government has already issued the list of countries and territories unfriendly to Russia.[1] Sweden is included in the list as all other member states of the EU.

    The Russian State Duma has amended the IP part of the Russian Civil code (Part 4). The government now has the power to issue a decree defining a list of goods and services to which Part 4 (including the provisions about IPRs protection) shall not be applied.

    It means primarily that Russian companies can have a right to use any foreign IPRs without the owner’s consent. However, to enforce this legislation, the Russian government should issue a special list of the goods and services to which no IP rights can be claimed (no information about the terms of its adoption is provided).

 

  • Enforcing IPRs by a foreign company in a Russian court can be considered an abuse of the rights.

    One of the regional commercial courts of Russia held that a company residing in an “unfriendly country” cannot claim the IPRs protection in Russia (the decision in Russian here) because it is an abuse of rights.

    In this case, the UK-based company brought a claim for the alleged infringement of IPRs. The court stated the following:

    “[I]n view of the restrictive measures imposed on the Russian Federation and the Plaintiff's status (the Plaintiff's place of residence is the United Kingdom), the court considers the actions of the plaintiff as an abuse of right, which is an independent ground for dismissal of the claim. The court finds no grounds to satisfy the claim.”
    There is one more decision in this regard that was made by the commercial court of the Moscow region. The court suspended the execution of a judicial act because the foreign company in question had actively supported the sanctions against Russia (the decision in Russian here):

    “[A]t present, the official position of the group of companies to which the plaintiff belongs is to support economic sanctions against Russia, its citizens, and legal entities, which translates into a de facto repudiation of all contractual obligations with the inevitable risks of bankruptcy. This announcement is available on the official website company's official website. In making this decision, the company does not intend to abide by the decisions of courts requiring compliance with contractual obligations.

    The Court concludes that these arguments are sufficient grounds for suspending the execution of the judicial act in question since it can be difficulties in returning to the defendant the money awarded in the case under consideration in favour of the plaintiff if the judicial act is repealed or in case of reversal of execution.”

    However, it is too early to speak in terms of any established practice, and these cases together with the aforementioned legal mechanisms make it harder for foreign companies to predict the future destiny of their IPRs located in Russia.

 

[1] Order No. 430-r of March 5, 2022 and Decree No 79 of February 28, 2022

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