RUSSIA: An Introduction to Intellectual Property

Contributed by Pepeliaev Group

Today's economic environment in Russia is highly unstable. However, rights to intellectual property assets are monopolistic in nature and, moreover, may be protected over an extended period of time. Bearing this in mind, there is continued relevance for various aspects of how intellectual property is enforced, used or protected, even during a time of economic crisis.

Law firms offering IP-related services quite often encounter situations where potential or actual investors discover that their rights to intellectual property assets are unprotected or enjoy weak protection.

Among other things, this may derive from either (1) no trademarks being registered in Russia, which may give rise to court proceedings or reputational risks; or (2) no confidentiality regime (known in Russian as a "commercial secret" regime) having been established, as the Russian legislation requires, to protect know-how (production secrets); or (3) amendments not being made on a timely basis to registration details of intellectual property assets, which entails a risk that certain correspondence from the patent office, courts and similar bodies will not be received; or (4) late payment of annual patent duties to maintain the patents and trademark extension fees.

In October 2014, the Russian Civil Code was extensively amended in terms of the regulation of intellectual property. These amendments fundamentally overhauled the rules of law which had previously been in effect.

For instance, the patent office will conduct a fully fledged expert examination of utility models, rather than a formal examination. Previously, no expert review was conducted with regard to these assets. This resulted in patents coming into existence that formed a basis for so-called patent trolls to assert numerous claims against good-faith manufacturers. They required that manufacturers stop violating rights to these purported intellectual property items.

No longer will licence agreements and contracts assigning exclusive rights require state registration. Instead, it will be rights transferred or granted under a contract that must be registered. This is a significant step in favour of business because, according to the new rules, a contract may take effect as soon as it is signed rather than after it has been registered. This state of affairs means that effective payment mechanisms may be introduced under such contracts and conditions precedent to the transfer of rights may be included in them. This will result in the parties to contracts enjoying a greater degree of security.

A number of other new developments concerning licence agreements are undoubtedly of interest for investors. Examples of these developments include: 

• If a licence is exclusive, it will not be permissible for licences to be granted worldwide for no consideration in relations between commercial entities for the entire term for which the exclusive right is valid. 

• A licensee must provide to the licensor reports detailing how results of intellectual activities or means of identification have been used, unless a licence agreement or the Code establishes otherwise. 

• If the licensee has materially violated an obligation to pay a fee, the licensor may withdraw from the agreement unilaterally and demand that it be reimbursed its losses resulting from such violation. In addition, it is provided that the contract will terminate thirty days after the notice of withdrawal is received, if the licensee fails to perform its obligation to pay the fee. 

• 'Open licences' have been introduced for copyright items. These are a type of licence agreement under which a right holder may allow the public at large to use works on terms set out in the agreement. This is actually an equivalent of free licences. Yet the rules regulating them differ from those regulating creative commons and other public licences.

There has been an extension of the scope of possible solutions which can be applied to prevent trademarks from being registered if they will obviously conflict with trademarks, trade names, copyright or other IP items which have previously been created. The amendments to the Code allow interested parties to apply to the patent office with a warning in respect of the registration of such trademarks. Such application is equivalent to an opposition, as accepted in European countries, which interested parties file at the stage when applications for marks are being examined.

Since 2013 a new court has been operating in Russia. This is the Court for Intellectual Rights. This court, acting as a first instance court, hears disputes in which the Russian Federal Service for Intellectual Property (known in Russia as 'Rospatent') is involved. It also considers, as a cassation-level court, disputes relating to the protection of exclusive rights. It is now possible to make a first assessment of the results of the new court's activities. Firstly, the quality of decisions taken in IP-related disputes has significantly improved. Despite the growing number of 'patent trolls', the court is coping well with its current workload. Secondly, a Research and Advisory Board of the court has been established. This assists and supports the court in issuing analytical information bulletins concerning various aspects of dispute settlement rules, which allows investors to assess how issues will play out. For example, it has become much easier to predict court decisions in domain-related disputes and disputes in which parties seek to have the legal protection of a trademark terminated early. Thirdly, the court is using its new power, i.e. to question experts in a certain area of science and technology, or experts in theoretical legal issues which require a scientific approach. This is helping to improve the quality and predictability of court decisions. It also prevents case law from being formed which could have an adverse impact on further work on a systematic basis.

'Anti-piracy' measures are another crucial new development. From 2014, a law has been in force in this area, though it has received mixed reviews. Despite this fact, this law allows right holders to take special fast-track actions to block any content that has been unlawfully published on the web, thus mitigating the damage incurred as a result of copyright-protected items being illegally distributed over the Internet.

In 2014 and 2015 major amendments are also coming into force in terms of protecting industrial designs. In particular, legislators have switched to a protection approach based on the principle of a consumer's general impression instead of the principle of enumerating the essential features of an industrial design. Moreover, there has been a change to the term for which patents for industrial designs remain valid.

Amendments have been made to the legal regulation of data exclusivity and provisions concerning patents being obtained for medicines: (1) In respect of data exclusivity, a new law on the circulation of medicines has established that a minimum of 4 years should pass after the original medicine has been registered before an application to register a new generic may be filed, and 3 years should pass before it is possible to apply to register a biosimilar medicine. It is still prohibited to use information about pre-clinical and clinical trial results for 6 years. (2) In terms of inventions being patented that are classed as medicines, it has been determined that the patent office has the right to require that additional materials be provided. The period during which such materials are to be provided should in no case be more than 13 months.

Criminal and administrative liability has been made stricter where rights to trademarks are violated in cases that involve counterfeit goods being manufactured. Specifically, tougher punishments have been introduced, including imprisonment, lower thresholds that trigger criminal liability, and fines of five times the cost of the goods for legal entities that produce and sell counterfeit goods. Additional protective measures have been adopted concerning the sale and manufacturing of counterfeit alcoholic beverages and tobacco products.

It should also be noted that both potential and existing investors pay considerable attention to possible changes in the legislation relating to intellectual property, if such changes may affect how attractive they find the prospect of carrying out manufacturing activities in Russia. In particular, there are discussions as to whether the principle of exhausting a right to a trademark should be changed from a regional/national principle to an international one, and how to regulate parallel imports. The platform for discussions has changed. Now the issue is being discussed at the level of the Eurasian Economic Commission. However, the interested parties continue to take the same stances. For instance, foreign investors with local manufacturing facilities in Russia have concerns over the exhaustion of rights doctrine being shifted from a national principle to an international one. One of the reasons behind this concern is that it may create a lack of control over goods imported into Russia that have properties not intended for Russia.