Ukraine-Russia Crisis - NEWS UPDATE - Impact of sanctions on patenting in Russian Federation

In consequence of the armed conflict between Russia and Ukraine, the EU and US, among others, have imposed a range of economic sanctions on Moscow. There is presently an ongoing debate among IP specialists whether these sanctions should be considered to have a prohibiting effect on patenting in Russia.

The Russian Patent Office is not a sanctioned entity under the raft of penalties levied by the international community on Russia. Also, there is no per se prohibition on filing for patents through the Russian Patent Office.

However, the Russian Patent Office accepts payments of official fees from applicants and patentees through the Central Bank of the Russian Federation only, independently of the currency in which they are paid (RUB, USD, EUR). This bank is specifically targeted with sanctions by the US and the EU. While the sanctions imposed by the EU prohibit transactions related to the management of reserves and assets of the Central Bank, which seemingly does not ban the payment of official fees to the Patent Office, the US sanctions (Directive 4 under Executive Order 14024 of the Treasury Department of 28-Feb-2022) are more comprehensive and prohibit “any transactions involving the Central Bank of the Russian Federation, the National Wealth Fund  …, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities.” This could be construed to encompass payments of official fees for IP rights to the Patent Office through the Central Bank.

General License No. 13 of March 2, 2022, provides a transition period until June 24, 2022 12:01 a.m. EDT, to wind down certain activities which have been sanctioned. This wind down period authorizes U.S. persons to pay taxes, fees  …. to the Russian Central Bank provided that such transactions are ordinarily incident and necessary to such persons’ day-to-day operations in the Russian Federation. This exception thus includes the payment of official fees for IP rights.

The sanction text stipulates that one cannot circumvent the given sanctions. In particular, Directive No. 4 separately recites that “(1) any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions of this Directive; and (2) any conspiracy formed to violate any of the prohibitions of this Directive” are also prohibited. This includes the use of a third party, such as a law firm in a neutral country, to pay the sanctioned fees on the patentee’s behalf.

While the above-mentioned sanction of Directive 4 pertains to “United States persons” and thus does not apply directly to German- or EU-based companies, it is possible that the US will also impose secondary sanctions. As a result, from the US perspective, the US sanctions in question could be considered to apply to companies worldwide, regardless of whether there is a potential US connection or not. European companies are therefore well advised to carry out a risk assessment with regard to the US sanctions.

If an IP right holder is of the opinion that, after said date of June 23, 2022, the payment of official fees to the Russian Patent Office could indeed be deemed to represent a violation of sanctions, the following should be noted.

Patenting in Russia would not be banned if the US Department of the Treasury were to issue a further license, similar to General License No. 13, which represents a permission for the payment of official fees to the Russian patent Office beyond said date.

If any IP right in Russia is considered withdrawn due to a missed deadline, in many cases the Russian patent legislation allows for a reinstatement of such an IP right within a 12 months period. In case of a granted patent for which the annuities have not been paid, the patent could even be reinstated within a 3 years term. If this is the case, however, it should be borne in mind that third party rights to continue use of an IP right could potentially arise in the interim period during which said IP right is not in force.

Also, to avoid payments after June 23, 2022, IP right holders may consider paying any official fees to the Russian Patent Office well in advance before said date, as far as this is possible.

Finally, it seems to be worth to note that, while the cooperation between the Eurasian Patent Office and many other Patent Offices worldwide, such as the US PTO, is mostly suspended due to the conflict between Russia and Ukraine, the prosecution of applications as well as the maintenance of granted patents before the Eurasian Patent Office is so far not affected by the sanctions imposed by the US, EU or other countries.