LM: What is the most critical issue for brand owners doing business in Russia?
PA: In Russia, rights stem from registration, not use. For brand owners, it’s critical to register.
MM: No amount of use will grant a brand owner trademark rights, except in cases of exceptionally famous “household name” brands. You can use a mark for 100 years, and not obtain rights. Because Russia is “first to file” pirates can file for your own brand. A doctrine of good faith registration is developing, to allow legitimate brand owners to oppose these applications, but this doesn’t confer trademark rights; it’s only defensive.
PA: Rospatent (Federal Service for Intellectual Property of Russia) may itself discover a bad faith application when internet searches reveal a true brand owner, but the brand owners should be vigilant. The number one takeaway is to register your marks.
LM: Let’s talk about licensing trademarks in Russia. Are there any notable or unique issues under Russian law that parties to a trademark license should be aware of?
MM: In Russia you cannot license a mark that’s not registered.
PA: And you have to register the license itself with Rospatent, which is different from most jurisdictions.
MM: The two biggest “tripwire” scenarios we see are: a brand owner has no trademark registration in Russia, or the brand owner has registrations in Russia but tries to license indirectly, through an affiliate. In Russia, there must be a direct chain of title for an effective license. In the first instance (no registration), it takes about 18 months to obtain trademark registration. In the second, a direct chain of title must be created with “middleman” licenses, and registering these takes about two months. Both scenarios may affect deal timing.
LM: How does the “customs Union” between Russia, Belarus and Kazakhstan affect licensing?
MM: There are no customs barriers between these countries, so there is free flow of product even though a Russian-territory license won’t extend to the other two countries.
PA: Contractually, you can have the licensee undertake to use best efforts not to commercialize the product in the other common market countries. If they distribute outside of the territory, it would breach the agreement.
MM: In practice, most distributors don’t contravene their agreements. The biggest risk to brand owners is from counterfeits or parallel imports entering Russia through Belarus or Kazakhstan.
LM: What remedies are available to IP owners when it comes to enforcing IP rights in Russia? Do you find that the Russian legal system offers sufficient remedies and means for enforcement of IP rights against infringers and counterfeiters?
PA: The law provides for a variety of potential remedies, including stopping the infringement, destroying infringing products and the equipment and facilities used to create such products (usually counterfeits), stopping suspicious shipments at customs, and damages.
MM: We have worked with clients to obtain complete victories – not only stopping the infringement but also collecting damages and seeing the infringers off to prison. But in most cases, the best a rights holder can usually hope for is to simply stop the infringing activities.
PA: In Russia, of all of the intellectual property rights, trademark rights tend to be the easiest to enforce. Russian courts have proven willing to enforce trademark rights.
MM: The difference is that Russian courts are extremely formalistic. Evidence must be documented in a manner that is not typically required in other jurisdictions. Documentary evidence is considered much more probative than witness testimony.
LM: My recent experience working with clients on Russia-focused IP transactions is that now, a significant part of the deal is providing assistance with U.S. Office of Foreign Asset control (OFAc) compliance, as well as compliance with similar sanctions lists issued by the EU and UK. Have you had similar experiences?
PA: Yes, we regularly assist clients with complying with OFAC, HM Treasury and European Union sanctions lists, in coordination with our regulatory and compliance colleagues in the US, UK and other countries.
MM: As previously mentioned, “who you’re doing business with” is not always readily apparent. A big part of such compliance reviews is conducting a proper investigation to identify all the parties that may have an interest in the transaction.