Planned amendments to civil legislation on intellectual property issues
Pepeliaev Group notes that it is intended to amend, in the near future, the Russian Civil Code’s provisions on intellectual property issues.
In implementing the Russian President’s Decree No. 1108 “On the improvement of the Russian Civil Code” dated 18 July 2008, the Council under the Russian President on the codifying and refining civil law has produced a draft law containing amendments to the Russian Civil Code including a series of matters relating to the creation and protection of intellectual property rights.
Creation, use and disposal of intellectual property rights
Under the draft law, it is proposed that rules on creating programs for computers and databases for hire (except relationships involving hiring fr om the author direct) and in performing other work under a contract (articles 1296 – 1297 of the Civil Code) will be extended to all works protected by copyright.
Under the draft law, it is proposed that the regime for using the results of intellectual activity as a part of complex items (cinema films, other audiovisual works, theatrical productions for audiences and multimedia products) be extended to databases and Internet sites (amendment to clause 1, article 1240 of the Civil Code).
The draft law provides that a licensor shall not be entitled, unless the licence provides otherwise, itself to use intellectual property when it grants the right to use such intellectual property under an exclusive licence (amendment to clause 1, article 1236 of the Civil Code). The rule currently in force has the opposite effect: the licensor can use the intellectual property unless the contract provides that it retains no right of use (clause 14 of Resolution No. 5/29 of the Plenums of the Russian Supreme Court and the Russian Supreme Arbitration Court dated 26 March 2009).
The draft law also contains a proposal to extend to any results of intellectual activity or means of identification the right to repudiate a licence agreement in the event of a breach of an obligation to pay remuneration under such agreement (amendments to clause 4, article 1237 of the Civil Code). In contrast, the right currently applies only to works and rights with related rights.
The draft law’s proposals enact a prohibition on disposing of an exclusive right for free and granting for free a right to use intellectual property in relations between commercial organisations (the new clause 4, article 1234 and clause 6i, article 1235 of the Russian Civil Code).
Under the draft law, a right holder may make a public announcement, i.e. may inform general public, that it is granting to any persons the ability to use a result of intellectual activity belonging to such right holder, on such terms and for such time period as the right holder determines (the new clause 6, article 1233 of the Russian Civil Code).
State registration issues in the area of intellectual property
Where there is a failure to comply with state registration requirements for the grant to another person under a licence agreement of a right to use intellectual property, such grant of rights shall be considered void. The same shall be true of a transfer or pledge of an exclusive right without state registration (amendment to clause 6, article 1232 of the Civil Code).
Under the draft law, the right holder in respect of intellectual property which is subject to state registration must notify the registration authority of any changes to data which relates to the state registration. It is the right holder who bears the risk of adverse consequences fr om the failure to make such registration. It is proposed to amend clause 1, article 1232 of the Civil Code accordingly.
Liability for breach of IP rights
If an infringement of intellectual property rights is committed not in course of business activity than certain penalties for such infringement including the recovery of losses or compensation, as well as confiscation of goods and the destruction of equipment at the expense of the infringing party, will be applied under the draft law when the infringing party is at fault, while compensation for mental distress and the winding up of a legal entity or the ceasing of business activity for an individual entrepreneur will apply only where there is fault even if the infringing party is carrying out business activity (amendments to clause 4, article 1250 of the Russian Civil Code). In fact, this is essentially the way in which these issues are currently resolved, in accordance with the general rules of article 401 of the Civil Code and clause 23 of Resolution No. 5/29 of the Plenums of the Russian Supreme Court and the Russian Supreme Arbitration Court dated 26 March 2009.
Under the draft law, there will be no legal protection in the form of an industrial design for solutions capable of misleading a consumer of a product. Moreover, it will not be permitted to dispose of the exclusive right to an industrial design if it can cause a consumer to be misled (amendment to clause 5, article 1352 of the Civil Code and the new clause 2 of article 1365 of the Civil Code). This extends to industrial designs the same rules as apply to means of identification.
It is also proposed to extend to industrial designs those rules which are applied under current legislation relating to various means of identification for determining priority in protection of IP rights (addition to clause 6, article 1252 of the Civil Code).
A new article 12531 is included, and is entitled “Particular features of the liability of a person carrying out activity transferring material to the Internet network or placing material in that network (an Internet provider)”.
Under this article, an Internet provider transferring material to the Internet shall not be liable for an infringement of IP rights occurring as a result of the transfer if the Internet provider:
1) does not change the material after receiving it, save for changes made to secure the processing of the transfer of the material;
2) did not know and should not have known that the use of the intellectual property right by the person initiating the transfer of the material was unlawful.
An Internet provider carrying out services placing materials in the Internet network shall bear no liability for the infringement of intellectual property rights if the infringements occurred as a result of a client placing the material or it being placed on a client’s instructions, as long as the Internet provider:
1) did not know and should not have known that the use of the intellectual property right was unlawful;
2) took, on a timely basis, the steps aimed to mitigate the consequences of the infringement provided in the Federal Law on Internet Providers, should it have received a declaration from a third party of an infringement of IP rights owing to its placing the material on the Internet.
A new article 14061 is included and is entitled “Liability for infringement of an exclusive right to an invention, a utility model or an industrial design”. Under this provision, wh ere there is an infringement of an invention, a utility model or an industrial design, an author or other right holder may, alongside other applicable means of protection and instead of the reimbursement of its losses, choose to require an infringing party to pay compensation:
1) in an amount between RUB 10,000 and RUB 5 million at the court’s discretion depending on the nature of the infringement;
2) in double the amount of the value of the right to use the invention, utility model or industrial design to be determined based on the price which would usually be charged in comparable circumstances for using such invention, utility model or industrial design lawfully, or in double the amount of the cost of the goods in respect of which the invention, utility model or industrial design was used.
Relationships with a foreign element
When the fourth part of the Civil Code was adopted, the necessary amendments were not made to the section of the third part of the Civil Code dealing with international private law (on the regime for determining the law to be applied in relationships with a foreign element) in relation to intellectual property issues.
It is proposed that amendments of this nature be included in the draft law.
Where there is a conflict of laws and an issue arises as to the existence, nature or extent of an exclusive right, the proposal is to apply the law of the country wh ere protection of the right is sought, unless the law provides otherwise (the new article 12071 of the Civil Code). Thus, in the draft law there is no provision for being able to agree to stipulate that a particular law should be applied to specific issues; this approach takes into consideration the need to protect the legal interests of third parties.
It is proposed that the law applicable to a contract to dispose of an exclusive right will be, if there is no agreement on the choice of law, the law of the country in which the right being transferred to the acquiring party has effect. If such right exists in several countries at once, then the applicable law will be that of the right holder’s country of residence or main place of activity. In respect of a licensing agreement, it is proposed that the applicable law be that of the country in which the licensor permits the use of the result of intellectual activity or of a means of identification. However, if such use is permitted in several countries at once, the governing law will be that of the licensor’s country of residence or main place of activity.
Pepeliaev Group’s lawyers will track the ongoing progress of these amendments.
The full Russian text of the amendments can be found on the site: www.arbitr.ru
For further information, please contact:
in Moscow – Denis Bykov, Partner, Head of Dispute resolution and mediation practice, at: (495) 967-0007 or by e-mail; Alexandra Pelikh, Head of IP group, at: (495) 967-0007 or by a.pelikh@pgplaw.ru; Peter Popov, Senior Associate, at: (495) 967-0007 or by e-mail; Roman Serb-Serbin, Associate, at: (495) 967-0007 or by e-mail
in St Petersburg - Sergey Spasennov, Partner, Head of St. Petersburg office, on tel.: (812) 333-07-17 or by e-mail