Since Russia's military attack against Ukraine began in February, its government has made clear that IP is a weapon in its economic warfare, such as by threatening that IP could be used without the owner's permission or compensation. Attorneys noted that Russia's threat may be bigger than the actions following it, but they've still decided to err on the side of caution.
"We're really at the beginning chapter of this book, and hopefully they won't go down the road that everyone is afraid of," said Sunstein LLP partner Thomas Carey, referring to the fear that Russia will broadly permit IP to be used without payment to the owners.
Russia is on the precipice of either showing its threats are empty, or permanently altering its place in the world IP sphere, and that has made it hard for attorneys to provide clients advice with the certainty they want.
On the one hand, pursuing patents in Russia right now may just be a huge waste of money if they're never enforceable, but not doing so could lead to losing rights if Russia does remain a viable market. Trademarks are less risky, but still in question.
"Russia is on stage right now," said Kilpatrick Townsend & Stockton LLP partner Mark Mathison. "They're just one of several countries where it's risky in general to file [IP applications], and it's becoming riskier based on factors like how long the war goes and how much they disregard rights."
An Ominous, but Questionable Threat
Over the last few weeks, there has been a clear "degrading of IP rights in Russia," as its invasion turns into an economic war, said Josh Gerben of Gerben Law Firm.
In March, Russia made a decree that opens the possibility of allowing IP from a broad list of "unfriendly countries" to be used without compensation to the owner, and the Russian prime minister has allowed branded products to be imported without the brand owner's permission or any payment offered.
There have been several trademark applications from individual citizens and companies copying major Western brands like McDonald's and Starbucks. In addition, the equivalent to a trial-court-level judge in Kirov in March refused to enforce trademarks for the British children's show "Peppa Pig" specifically because of the "restrictive" political and economic sanctions placed on Russia.
But St. Petersburg-based attorney Victor Lisovenko said examples like "Peppa Pig" have been outliers, not the new norm. He pointed to a trio of examples from March in St. Petersburg and Saratov where courts did require compensation to the U.K. trademark owner from Russians who infringed the same "Peppa Pig" marks. It is also unknown whether the Kirov decision will hold up on appeal.
Many attorneys suspect that the Russian government is using such IP threats as propaganda or individual acts of frustration with the West, rather than as standard operating procedure.
"The opportunity for rulings that are based on emotion rather than what's the text of various laws and statutes is always there," Carey said of Russian courts. "Those kinds of oddball results are increasingly possible as public opinion in Russia is becoming more polarized in favor of [Russian President Vladimir] Putin, and the notion that the world doesn't understand Russia."
Likewise, there has yet to be evidence of Russia approving trademark applications where individuals or companies have filed to own well-known companies' logos — although it's not strange for application decisions to take time.
However, a particularly high-profile application incorporating the McDonald's logo was withdrawn by the applicant after two weeks, Lisovenko said.
That withdrawal is "indicative of the fact that despite the existing obvious concerns, the trademark and patent prosecution process will be based on the same principles and regulations as it used to be," said Lisovenko — who works for the intellectual property firm Patentica but commented in a personal capacity.
Maksym Popov of Ukraine's Mentors Law Firm said Russian lawyers are presuming these applications are being filed by "trolls that exist in every country," but are still cautious that the Russian government could prove them wrong.
For now, Gerben said, these applications appear to be "social media fodder" based on "opportunistic individuals."
"You're still seeing that IP rights have a pulse in Russia," he added. "I'm not saying they're great, but they have a pulse."
During the Soviet Union, the government famously held so-called show trials, where defendants it had already decided were guilty were given public trials for propaganda purposes. Gerben said the current IP landscape could head that way, with large companies like McDonald's facing the most public threats. He also suggested Russia could start operating McDonald's with local owners as a way to grab headlines.
"This is a government that relies on propaganda," he said.
Uncertainty Over Whether to File
Whether companies should continue filing applications to protect their IP in Russia depends on whether they're looking at patents or trademarks, and what industries are at stake.
Trademark prosecution is relatively inexpensive, Gerben said, so there's a sense of "why not?" If anything, he said the increase in gray-market goods cleared by the prime minister strengthens the need for trademark protection in the long term. Delays may also lead to Russian entities getting trademark registrations for company names or logos in the hopes of getting paid to hand them over, he said.
Trademark registrations can also be canceled in Russia if there are no products sold or services provided involving them for three years, Lisovenko said as a caution for companies that have pulled out of Russia, noting that similar laws apply across a range of countries.
"Those well-known Western companies that decided to leave the country should take this fact into account and clearly realize that even if they are not present in the Russian market, their products should be imported to Russia to secure the possibility of maintaining exclusive rights," he said.
Patents, however, are more complicated and expensive, Kilpatrick's Mathison said. While an outcome where U.S. IP rights are permanently disregarded in Russia could make patent prosecution a huge waste of money now, if the war ends in a regime change, those patents are extremely important, he said.
Starting June 24, U.S. companies may not have a choice regarding patents. As part of the U.S.'s sanctions, payments will no longer be allowed to the bank that the Russian patent office uses for fee deposits, Sunstein's Carey said.
Such a change is particularly troubling for the pharmaceutical industry, given the large amount of money tied to its patents, he added.
"If I were an American pharmaceutical company with a patent portfolio that has a lot of registrations in Russia, I would certainly do anything I could to keep them in effect," Carey said.
Rearranging the World's IP Map
No matter how the war ends, Russia's place in the IP landscape has been altered. For example, as companies pull out of Russia, many have instead been building up their business in Ukraine.
Kyiv-based Popov said that since the war began, large companies have been reaching out to Ukrainian law firms, either because they no longer have counsel in Russia or because they don't want to work with them.
Lisovenko said that over the last five years, Rospatent — as Russia's patent and trademark office is known — has reported that 30% of its patent applications have come from foreign companies, and 20% to 25% of those have been from the U.S. He said the U.S. is the most active foreign user of Russia's IP system.
For trademarks, he said there have been about 4,000 to 4,500 applications filed per year by U.S. companies, making up about 15% of applications for foreign companies.
U.S. patent filings in Russia were already on the decline, Mathison said. Between 2015 — after Russia annexed Ukraine's Crimean Peninsula — and 2020, international filings dropped by half.
"Clients were already starting to not file in Russia," he said. "It's become more and more disfavored."
The European Patent Office and U.S. Patent and Trademark Office have both cut their ties to Rospatent and the Russia-based Eurasian Patent Organization following the invasion of Ukraine. It remains to be seen whether Russia will do what it can to get back on the good side of these agencies, or if it will instead find partners in other parts of the world.
"You could see Russia decide it doesn't need to interact with the Western world and seek to strengthen ties with Asia and other parts of the world where it can derive products and services and trade from," Gerben said. "To think they need a relationship with the United States to exist would be incorrect."
But he added that if Russia chose to close off from the West and nationalize global brands like McDonald's, it runs the risk of being "the next North Korea."
"There's a large incentive for Russia to eventually come back around and respect the registrations that already exist and have a legitimate process going forward," Gerben said.
The World Intellectual Property Organization, of which Russia is a member, has been notably silent. Attorneys said it's unlikely something as big as WIPO kicking out a member would happen, but there are likely conversations happening about Russia's threats.
"The idea of kicking a major power out of a global treaty organization is something that would only be undertaken after a long period of reflection and debate," Carey said. "In all likelihood, the war in Ukraine will be wound down and over before anyone gets down to thinking about something like that."
In addition to WIPO, Russia is still part of a wide range of IP agreements, Lisovenko noted, including the Paris Convention, the Patent Cooperation Treaty, the Agreement on Trade-Related Aspects of Intellectual Property Rights and the Hague Agreement, and it remains a member of the World Trade Organization and international professional organizations. He said there's no sign that Russia plans to remove itself from any organizations.
Popov said no matter what, Russia's reputation has been permanently harmed, pointing to other areas of law where the Russian government has acted out of line.
"I don't think Russia is trustworthy," Popov said. "Suppose Russia can violate international agreements, refuse to comply with judicial decisions of other countries, and nationalize the property of foreign companies. How can we be sure that Russia will not do the same with IP? In my opinion, this will only change when the government changes and Russia takes international rights into account."
--Editing by Robert Rudinger.
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