Ukraine-Russia Crisis - Impact of Russian counter-activities on IP sector

As a reaction to the economic sanctions imposed by the international community on Russia, the Russian government has initiated various counter-actions in order to reduce the effect of these sanctions. In the area of IP protection in the Russian Federation, the following regulations have been set into force in the last few days:

With Order No. 430 of March 5, 2022, the Russian government published a list of “unfriendly countries”. This list includes the following countries:

Albania, Andorra, Australia, Great Britain (including Jersey and the overseas territories of Anguilla, the British Virgin Islands, and Gibraltar), the European Union member states, Iceland, Canada, Liechtenstein, Micronesia, Monaco, New Zealand, Norway, South Korea, San Marino, North Macedonia, Singapore, U.S.A., Taiwan, Ukraine, Montenegro, Switzerland, and Japan.

As the EU comprises 27 member countries, the total number of “unfriendly countries” thus amounts to 48.

By force of Decree No. 299 of March 6, 2022, the Russian government has decided that the compensation (royalties) for a compulsory license which was granted by the Russian Government under the regulations of Art. 1360 of the Russian Civil Code (compulsory licenses in the interests of defense and national security, protection of life and health of the population) amounts to 0% of the revenue for those patentees who are associated with unfriendly countries.

“Patentees associated with unfriendly countries” are defined in this Decree as patentees which are nationals of, or which have their place of registration, place of principal business activity, or principal place of receiving revenues, in a country included in the list of "unfriendly countries".

Up to now, the compensation for such a compulsory license under Art. 1360 of the Civil Code was 0.5% of the revenue.

Until now, the Russian Government has issued only a single Compulsory License based on the “defense / public security” clause. This license was granted to a Russian generics company on a pharmaceutically active ingredient called Remdesivir (patentee: Gilead Sciences, US), which is a drug against Covid-19. The license was limited to one year (from 01-Jan-2021 until 31-Dec-2021), but was renewed last January for one more year.

Conclusions:

While the text of Decree No. 299 of March 6, 2022 sounds indeed alarming, the effect of the Decree as such is rather marginal. In fact, the Decree reduces the royalties in case of a Compulsory License granted by the Government on the basis of the “public security” clause of Art. 1360, from 0.5 down to 0.0% of the revenue.

Moreover, the time of validity of compulsory licenses based on the “public security” clause is usually limited to the extraordinary events on the basis of which this compulsory license was granted.

It cannot be predicted with certainty how many compulsory licenses of this kind might be granted in Russia in the future, and which particular patents will be affected. In any event, however, Decree No. 299 does not represent a free ride for Russian companies to use patented inventions without the consent of the patentee and without the payment of a compensation.

We will keep you updated and will inform you as soon as we become aware of changes in the current situation.