Overview of the plans to restrict IP rights in Russia

Recently, the Russian as well as international media has published articles about plans to restrict the use of Intellectual Property (IP) rights in Russia. The issue relates to a new decree that has caused misunderstandings and confusion among the right holders as well as in the general public. In order to clarify the situation, we have written a summary below on the recent decisions and facts.

Most of the news interpret incorrectly Decree No 299 that was published on 6 March 2022. This decree introduced amendments to point 2 of Government Decision N 1767 of October 18, 2021, where it was defined how the amount of compensation paid to the IP right holder is calculated in the event that an invention, utility model or industrial design is used without the holder’s consent.

The methodology outlined in the decision is used when applying Article 1360 of the Russian Civil Code “Using an Invention, Utility Model or Industrial Design in the Interests of National Security”. Indeed, according to the Civil Code, the Government of the Russian Federation is, in certain rare cases, entitled to make a decision on the use of an invention, utility model or industrial design without the consent of the IP right holder.

However, there are strict grounds given in the Civil Code for such an action, namely an extreme necessity related to ensuring the defense and security of the state, to protect the life and health of citizens. If the decision to use e.g. an invention without consent is made, the IP right holder should be notified as soon as possible and also receive a commensurate compensation.

The amount of the compensation to be paid to the IP right holders (regardless of e.g. their nationality or place of registration) was defined in Decision N 1767 as 0.5 percent of the actual proceeds of a person who has exercised the right to use an invention, utility model or industrial design without the consent of the patent holder, from the production and sale of goods, performance of work and provision of services for the production.

However, recently published Decree No 299 added that, for patent holders associated with foreign states which commit unfriendly actions against Russian legal entities and individuals, the amount of compensation is 0 percent of the actual proceeds.

The list of such states, recently approved by the Government of the Russian Federation, includes the United States, Canada, the EU states, the UK (including Jersey, Anguilla, the British Virgin Islands, Gibraltar), Ukraine, Montenegro, Switzerland, Albania, Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, North Macedonia, and also Japan, South Korea, Australia, Micronesia, New Zealand, Singapore, and Taiwan.

The IP right holders who have citizenship of these states, or whose place of registration, place of primary business activity or place of primary profit from the activity are in these states will therefore not receive any compensation in the event that an invention, utility model or industrial design is used without the IP right holder’s consent.

According to our interpretation of the decree and the current legislation, this would apply in circumstances defined in Article 1360, i.e. in the event of extreme necessity related to ensuring the defense and security of the state, to protect the life and health of citizens. So far, this concerns patents for an anti-Covid medicine which were allowed to be used by two Russian pharmaceutical companies.

However, we notice that a new tool for restriction of IP rights has been adopted recently. The law “On Amendments to Certain Legislative Acts of the Russian Federation” of 8 March 2022 (No 46-FZ) allows the Government to list specific goods in respect of which separate provisions of IP law may be waived. In our understanding this means that with this law and further rules, the Government may in extraordinary situations safeguard the availability of certain critical goods on the Russian market, for example related to drugs, transport or food industry.

It remains to be seen how and for what the Russian Government will possibly utilize the new legislation.

Despite the current uncertain situation we see that protecting and maintaining IP rights is recommendable and we would not advise to do any hasty decisions. We are closely monitoring the situation related to IP rights and will keep our customers promptly informed.

For any questions, please contact Riikka Palmos or Linda Norrgård.