The effect of Russia-Ukraine war on Intellectual Property Rights of the Countries
Background
On 24th February, 2022 Russia invaded Ukraine. With the invasion both the countries have suffered losses of finance, military and diplomatic relations with countries. The said war has divided the world into two fragments one with Russia and the other against it. However, the number of countries in favour of Russia is very low with India having a neutral stance upon the event. Russia has released a list of unfriendly countries which include Western countries such as the U.S, Canada, South Korea, Switzerland, Japan, Singapore, U.K etc. Many brands/companies of these unfriendly countries have abandoned Russia since the war began such as McDonald’s, PepsiCo, Shell, Unilever, Deutsche Bank, Apple etc.
Sanctions on Russia
Russia has been hit by sanctions from countries and international organizations all over the world. With many companies halting their services in Russia, countries like America and international organizations like the United Nations, Bretton Woods, NATO etc. have imposed harsh sanctions on Russia. These sanctions have a long lasting effect on civilians and the national economy. Attempts have been made to break down the Russian economy by deploying huge sanctions which cover banking, energy, Shipping industry, businessmen, government officials and even the president and his family members have been targeted. Recently several Russian banks were banned from SWIFT international payments network which include Sovcombank and VEB (Russia’s development bank), VTB bank (Russia’s second largest lender) and five others. Western countries have also frozen assets of Russia’s central Bank, consequences may be observed on forex reserves within a few months.
Russia’s move against the companies leaving its territory
The Russian government issued Decree no. 299 which legalizes within its territory, the unauthorized use of patents and other related Intellectual Property Rights of companies based in unfriendly countries. This step was taken in response to the United States Patent and Trademark Office and European Union Intellectual Property office, after they halted work with Russian counterpart, Rospatent Russia IP Office. As per the above decree, no compensation shall be payable to the patent owner on making use of inventions, utility model or design without consent. This means a company based in an unfriendly country will not be able to enforce its intellectual property right in Russia. By this move government is intending to nationalize the assets of enemy companies and mitigate the effect of unemployment and keep producing their products locally.
However, this step by Moscow is not first of its kind, earlier in 2020 the government issued a Compulsory License to cope with the health crisis caused by the Covid-19 pandemic awarding to a Russian pharmaceutical company ‘Pharmasyntez’ to make ‘Remdesivir’. The step was justified under Article 1360 of Russian Civil Code, which allows the government to use IP rights in cases of public health emergencies as an exception. Decree 299 seems to be an extended form of older decree.
Effects of Russia -Ukraine war on Intellectual Property rights
The normalization of foreign assets may harm Russia in the long run, it is already evident from a report published by consultancy Brand Finance that the public opinion in most of the countries considers Russia guilty for the war. Russia has failed to take companies into confidence and avoid their migration. Government is trying to stop this migration by issuing threats and warnings to seize their assets and trademarks. By allowing individuals and local bodies to acquire trademarks of western companies Russia may lose its potential investors and it will take decades to restore trust in the government.
According to a CNN Business report dozens of companies have halted their services in the country some of them are:-
Autos – Companies like Ford, General Motors, Toyota, Volkswagen and Nissan have suspended their production and sales in the country.
Aviation – Companies like Airbus and Boeing have suspended their operations and supply of spare parts to the country.
Big tech – This list includes Airbnb, Amazon’s, Apple, Meta, Hitachi, IBM, Intel, Microsoft and others. All these companies have suspended their services in the country.
Energy and metals – Companies like BP, Equinor, Exxon, Rio Tinto, Shell and Total Energies all these companies have declared not to continue their services in Russia till the situation gets normal.
Finance – Several companies like Norway’s, MasterCard, Visa, American Express, Moody’s, Goldman Sachs, JP Morgan Chase, Western Union, Citi group, PayPal etc. have decided to suspend their services in the country.
Other services have also been affected by the war such as retail, media and entertainment, hospitality, food and beverages, shipping and transportation. In order to fulfill the demand of all these services it is desirable to lift protection of IP rights of these services.
In short, the war has created a negative impression of Russia in the global market which will result in an economic crisis in the coming days.
Instances of IP rights violation by countries
Perhaps the first instance goes back to World War I when America introduced the Trading with Enemy Act allowing the seizure of private property and corporations of enemy countries through its Alien Property Custodian (APC), an agency controlling foreign property. In 1918, when the war came to an end, ‘Bayer’ a German Pharmaceutical company lost its IP rights and assets including trademarks to APC and later auctioned to Sterling. However, this didn’t work for Sterling and it had to sign an agreement with Bayer for production of Aspirin.
In recent times Entertainment One UK Ltd. has sued Russian business for infringement of its copyright over Peppa Pig. Russian court dismissed Entertainment One’s claim. On 12th March 2022 a trademark application for the brand name “Uncle Vanya’s” was filed which had a logo similar to McDonald’s Golden Arches with the same colour combination rotated 90 degrees to the right. This is likely to impact the brand value of MacDonald’s, especially when it has committed to keep paying its workers their wages.
Is Russia justified in lifting protection of IP rights?
Lifting of protection to IP rights may be a violation of international treaties which protect companies all over the world. It is the duty of all signatories to abide by the norms of the treaty. In case of violation foreign companies can enforce intellectual property rights against the perpetrators. Russia can justify itself with security exceptions mentioned in Article 73 of TRIPS, which allows countries to take any necessary step in exigency to protect their security interests in times of war.
Remarks
Russia has taken a bold step by allowing individuals and local bodies to acquire Trademarks of unfriendly countries. Being hit by sanctions from western countries and international organizations it was left with no other option than to lift the protection of IP rights of foreign companies. This exodus affects every corner of the economy be it energy, auto, finance, retail, entertainment and fast food. Sudden removal of goods and services from Russia has caused havoc among the citizens. To fulfill their demand, it has become mandatory to allow nationalization of foreign goods and services. Even article 73 of TRIPS gives liberty to take such steps in exigency situations.
– Saurav Kumar Singh (Intern), BHU, Varanasi
Disclaimer: This article is intended to provide general guidance to the subject matter. It does not contain legal advice. For any specific advice/corrections, write to [email protected]
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