Ukraine crisis: possible Russian countermeasures could affect foreign companies’ IP rights

The economic implications of the conflict in Ukraine are likely to impact IP owners. Already, European IP offices (EUIPO, EPO) have ended their respective cooperation with their Russian counterpart, Rospatent. More importantly, possible countermeasures against Western sanctions may affect intangible assets.

In response to the current wave of economic sanctions, the Russian Ministry of Economic Development has announced it is considering temporarily lifting restrictions on the use of IP rights, including temporarily suspending the IP rights of foreign owners who have decided to exit the Russian market (ie ‘freezing’ them). Additionally, the Russian government has issued a resolution whereby the current Russian compulsory licensing system in place for patent rights will be changed so that patent holders associated with countries that have imposed sanctions on Russia will no longer receive licence fees. Much about the detail and extent of these measures remains unclear, but IP owners should monitor the situation closely and consider the potential implications.

Potential risks

• A temporary suspension of IP rights would de facto legalise infringements of IP owners’ exclusive rights. This would open the door for Russian companies (and companies from other countries not covered by such measures) to copy brands, designs or technology otherwise protected under applicable IP laws. The Russian market could be flooded with copies and IP owners would have no effective remedy against plagiarism, software piracy, reverse engineering, and legally approved misappropriation of know-how.
• Russia is considering excluding liability for parallel import of certain products. This would de facto legalise importing counterfeit products from other countries without the consent of IP owners, who would have no effective remedy against trademark infringements. As a result, their brand reputation and trademark portfolios would be devalued.
• The amendment to Russia’s compulsory licensing rules would enable local companies to use patents, inventions, utility models and industrial designs held by owners originating from countries that have imposed sanctions on Russia without having the right to reasonable compensation. This means a royalty-free license for the use of such IP rights.

The impact on IP rights will depend on the nature and scope of any Russian countermeasures. The devil is in the detail, and, so far, much is up in the air. For instance, there is currently no clarity as to whether such measures would apply only to certain types of IP rights (eg trademarks) or to certain categories of goods. It also remains to be seen which businesses would be affected, and whether any regime would apply only temporarily (and if so, for how long) – or would lead to a permanent invalidation of IP rights owned by affected businesses.

What steps can be taken in light of potential countersanctions?

Given this current lack of clarity, businesses should closely monitor the situation. Potential steps to mitigate IP-related risks may include:

• reviewing current IP portfolio and licensing landscape relevant to the Russian market;
• reviewing whether there is current exposure to compulsory ‘free’ licensing recently issued;
• aside from publicly available (registered) IP, considering whether access to sensitive know-how (trade secrets) can be restricted in order to prevent unauthorised use and/or disclosure;
• documenting current use of IP (especially trademarks) in Russia for purposes of potential future legal proceedings;
• considering licensing options as an alternative to an operational presence (however, this may not be feasible due to local law restrictions or reputational implications); and
• to the extent possible, considering technical measures to prevent reverse engineering and/or piracy of software and hardware.

Depending on how the conflict develops, further remedies may be available.

• From an international law perspective, the protection of foreign IP rights is backed by several international treaties, notably including the TRIPS Agreement within the framework of the WTO. Russia’s purported ‘freezing’ measures would likely be considered a breach of such rules and we may see actions being brought forward under TRIPS’s dispute settlement mechanism.
• IP rights are typically also covered by investment protection treaties (for example the BIT between Russia and Germany) which may offer protections.

This is a developing situation and we will update our analysis as things change. If you have any specific IP-related questions please reach out or get in touch with your usual Freshfields contact.