Russia has taken its first steps in seizing assets from Western companies that suspend operations in Russia because of imposed sanctions. Russia has retaliated by "suspending" their intellectual property, as they are parties affiliated with "unfriendly countries". The measure will have further implications for Western companies and their IP rights in Russia. A lower court ruling in Russia illustrates how Russia will probably allow the ongoing infringement of intellectual property rights.

Russia's response to sanctions

To enable the seizure of assets, the parliamentary committee has approved the nationalisation of factories, offices and other Russian property of companies from "unfriendly states". The Russian Federation has also issued a decree allowing patent infringement, without risk of liability for damages, by all Russian companies if those patents were filed by any entity affiliated with countries "unfriendly" to Russia. There have been reports that the Russian Federation will also abolish "criminal and administrative liability for the use of pirated software "from countries that support sanctions", including legalising distribution of copyright-protected works, such as games and films. These are a few examples of Russia's retaliation on Western sanctions imposed in response to the Russian invasion of Ukraine, and the war it continues in that country.

In addition to these steps, on 5 March, the Russian Ministry of Economic Development announced that the Russian Federation is considering suspending intellectual property rights that protect goods that cannot currently be imported because of the sanctions. This measure would affect many products, including patented products, computer software and branded goods. They would not affect companies which sell and produce their goods and provide services in Russia, but rather impact IP owned by companies that have suspended their operations in Russia. The Ministry suggested in its announcement that the measure will be temporary, "for the period that the restrictions of the supply are in place"; and that the measure is aimed at "organising the production and use of technologies used in the goods that the Russian citizens are now deprived of by Western companies and on the other hand it legalises the import of such goods from third countries". The Ministry stated that the measures would "mitigate the impact on the market of supply chain breaks, as well as shortages of goods and services that have arisen due to the new sanctions of Western countries". The suspension will take place by means of amendments to current legislation. This is expected to include the suspension of IP rights, and the abolishment of national exhaustion rules (making it impossible to stop parallel trade). A bill is likely to be presented to the lower chamber of parliament, which body will then pass the bill, amending the legislation.

This measure could contribute to the seizure of assets from Western companies, making it possible for Russia to nationalise the companies in question and to continue their operation in violation of IP rights. It will also allow the importation of infringing and parallel-traded goods.

Allowing IP infringements

Meanwhile, a judgment has been issued by a Russian court of first instance where an infringement claim brought by a UK owner of IP rights was denied, solely on the basis that the plaintiff was domiciled in the UK, a country that had imposed sanctions on the Russian Federation. According to the court, invoking an IP right by a UK company would automatically constitute “an abuse of right”. This is an example of how the Russian Federation, through its courts, could allow intellectual property right infringements against anyone from countries that are deemed "unfriendly" towards the Russian Federation, de facto expropriating IP rights.

Sources:

• Russian decree

• Russian media announcement

• Ruling of Russian lower court

• Het Financieele Dagblad article

• Wall Street Journal article

• Washington Post article

• Euractiv article

• IP Watchdog news