LawFlash

Russian Decree Undermines Value of Certain Patents; USPTO Cuts All Ties with Russian Patent Office

April 07, 2022

The Russian government has issued a decree to deny compensation to patentees from “unfriendly states” when their patents are used for Russia’s national security purposes. Additionally, the US Patent and Trademark Office has fully ended its engagement with Russia’s patent office, Rospatent. 

With numerous nations, including the United States, bringing economic sanctions against Russia, Russia has opted to end its compensatory scheme for the unauthorized use of certain patented inventions, utility models, and industrial designs for patentees that hail from foreign states deemed “unfriendly” to Russia—including US holders of Russian patents.

Additionally, as part of the United States’ multipronged strategy to put economic pressure on Russia, the US Patent and Trademark Office (USPTO) announced that it has formally ceased all cooperation with Rospatent, Russia’s patent office.

Amid the changing landscape of sanctions and counter-responses related to Russia’s operations in Ukraine, those who hail from the United States and other countries that Russia labels as “unfriendly states” who have Russian patents or who are considering prosecuting patent applications in Russia should evaluate their patent prosecution strategy and options for enforcement of patents protected in Russia.

Compensation to Be Denied for Unauthorized Use of Certain ‘National Security’ Related Patents

Article 1360 of the Russia Civil Code provides for the use of inventions, utility models, and industrial designs by Russian entities or individuals without the consent of the owner “in the event of extreme necessity linked to the interests of national security, [or] protection of citizens’ life and health,” provided that the owner is notified and given commensurate compensation for the use.[1]

On October 18, 2021, Russia set forth a decree including methodology for determining compensation to owners affected under Article 1360; the procedure essentially provides for issuing compensation equaling “0.5 percent of the actual revenue” yielded from the unauthorized use.[2]

Such use includes “the production and sale of goods, the performance of works and the provision of services.”[3] Russia has reportedly exercised its use of Article 1360 in only two instances to date, both involving the unauthorized use of pharmaceutical products for the health of Russian citizens during the COVID-19 pandemic.[4]

However, on March 6, 2022, Russia modified its remuneration methodology by issuing new Decree No. 299. The new language provides that “patent holders associated with foreign states who commit unfriendly actions against Russian legal entities and individuals” are entitled to “0 percent of the actual proceeds” yielded from the unsanctioned use of their inventions, utility models, and industrial designs.[5]

Notably, the types of patent holders referenced in Decree No. 299 considered to be associated with “unfriendly states”[6] are broad and include the following:

  • Citizens of the “unfriendly states”
  • Business entities having their place of registration in “unfriendly states”
  • Individuals and entities having the place of their “predominant business activity” in “unfriendly states”
  • Individuals and entities having the place of their “predominant profit from the activity” in “unfriendly states”[7]

It remains to be seen how Russia will apply Decree No. 299 across industries and to multinational organizations to determine which patent holders are subject to the decree, or how Russia will define “predominant business activity” and “predominant profit from the activity.”

The patents that Decree No. 299 affects purport to relate to the defense and safety of Russia, or for the protection of Russian citizens’ life and health. While on its face this appears to limit the types of patents to which Decree No. 299 is applied, Article 1360 provides no specific restrictions on the types of patents and inventive goods that may be considered pertinent to “national security” interests or “citizens’ life and health.”. We therefore cannot rule out the possibility that Russia may take a more expansive approach to interpreting this provision as the economic sanctions placed upon it continue to mount.

It should be noted that not every patent protected in Russia that is arguably related to “national security” interests or “citizens’ life and health” will be subject to the provisions of Decree No. 299 automatically. That is, in order to apply Decree No. 299, the government must designate the patents that will be subject to Decree No. 299 by issuing separate orders targeting such patents and stating the purpose of their use.

Russia’s new decree therefore effectively suspends (and potentially terminates) the ability for patent holders from “unfriendly states” to rely on monetary compensation as a remedy for the unauthorized use in Russia of their inventions, utility models, and industrial designs that may be found to serve Russia’s “national security” interests or “citizens’ life and health.”

Considerations for Entities Affected by Russia’s Decree

Those potentially affected by Russia’s new decree should consider assessing their options in an environment of sanctions and counter-measures that could significantly impair patent value within Russia—for at least the short term.

Those already holding patents protected in Russia pertinent to “national security” interests or “citizens’ life and health” and deemed to be associated with “unfriendly states” should critically evaluate their enforcement options in the event that Russia permits unauthorized and uncompensated use of their patented inventions pursuant to Decree No. 299.

It is also worth noting that many jurisdictions proscribe unauthorized importation of infringing products or products made from infringing methods. Thus, in situations where affected patentees hold corresponding patent rights in other nations, patent holders may have the option to prevent importation of infringing goods, including those imported from Russia.

Potential barriers exist for those considering deferment of patent filings in Russia by instead submitting patent applications via the Eurasian Patent Office.[8] Various patent offices and authorities, including the USPTO and the European Patent Office, have opted to limit or sever relations with the Eurasian Patent Office[9] given its strong ties to Russia.[10] The Eurasian Patent Organization is headquartered in Moscow, and all filings with the Eurasian Patent Office are required to be in the Russian language. Moreover, with new proscriptions against conducting business within Russia being issued daily, prospective holders of Russian or Eurasian patents may want to reassess their prosecution strategies until they determine whether they are engaging in actions prohibited by sanctions.

Additionally, the Office of Foreign Assets Control of the US Department of the Treasury has not yet published a response to inquiries made regarding the permissibility of making patent-related payments to Rospatent and the Eurasian Patent Office. Thus, the permissibility of actions related to current and ongoing prosecution of Russian and Eurasian patent applications, including submissions of payments and annuities, remains in doubt.

If you have any questions about your pending application portfolios before Rospatent or the Eurasian Patent Organization, Morgan Lewis is actively monitoring the ever-changing situation and stands ready to advise you about your patent prosecution options. Morgan Lewis can also provide advice on developing a coordinated and robust enforcement strategy to protect patentees affected by the use of Decree No. 299 in the event that Russian entities attempt to import infringing goods into jurisdictions in which patentees hold corresponding patents.

The USPTO Ends All Cooperation with Rospatent

On March 22, 2022, the USPTO issued a statement announcing that it had formally ended all engagement with officials from Rospatent, the Eurasian Patent Organization, and the Belarus national patent office.[11] The statement also included a warning to applicants filing international applications under the Patent Cooperation Treaty (PCT), advising that these applicants “exercise caution” if they are considering “selecting Rospatent as an International Searching Authority (ISA) or International Preliminary Examining Authority (IPEA).” The USPTO cautioned that the processing of PCT applications selecting Rospatent to conduct prior art searches or preliminary examination may be prevented, adding that the “transmittal of required fees” for search and examination “through financial institutions” may be thwarted.

Previously, on March 11, 2022, the USPTO ended its cooperation with Rospatent under the Global Patent Prosecution Highway program (GPPH).[12] Under the GPPH, participating countries can rely on the prior examination proceedings of an allowed application or granted patent within another participating nation to expedite prosecution of corresponding patent applications within their own jurisdictions.

With the USPTO’s GPPH announcement, the USPTO will no longer grant requests to participate in its GPPH program when the requests rely on prior examination procedures carried out by Rospatent. The announcement also applies to GPPH requests granted prior to March 11, 2022; any pending applications that were afforded expedited examination by the USPTO under the GPPH program based on examination performed by Rospatent will be removed from the GPPH program and placed back into regular processing and examination procedures before the USPTO.

Whether the USPTO will allow an applicant whose patent has been returned to regular examination under these new rules to resubmit a request to participate in its GPPH program based on another jurisdiction’s examination procedures is yet to be determined. Morgan Lewis continues to assess the USPTO’s decisions and actions with respect to cooperation with Rospatent and the Eurasian Patent Organization.

The USPTO’s announcements follow the European Patent Office’s decision on March 1, 2022, to end its cooperation with Rospatent, the Belarus national patent office, and the Eurasian Patent Organization.[13]

Ongoing Considerations in an Ever-Changing Environment

Morgan Lewis’s intellectual property team is assessing the continually changing legal environment occurring internationally and stands ready to advise our clients with respect to intellectual property prosecution and enforcement strategy. We remain vigilant in monitoring the situation with respect to Russia’s treatment of intellectual property rights, including patents, trade secrets, trademarks, and copyrighted materials.

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Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Ukraine Conflict Task Force
Giovanna M. Cinelli
Alexey Chertov
Joanna Christoforou
Kenneth J. Davis
Anastasia Dergacheva
John L. Hemmer
Bruce Johnston
Grigory Marinichev
Michael Masling
Kenneth J. Nunnenkamp
Georgia M. Quenby
Christina Renner
Melanie Ryan
Vasilisa Strizh
Carl A. Valenstein
Heather Sears
Jiazhen (Ivon) Guo
Katelyn M. Hilferty
Nicola Kelly
Christian Kozlowski
Alyssa R.M. Pugh
Daniel Lopez Rus
Charles C. Rush
Eli Rymland-Kelly



[1] Russian Civil Code, Part IV, item 1 of Article 1360.

[2] Decree of the Government of the Russian Federation No. 1767 dated October 18, 2021, item 2.

[3] Id.

[4] Order of the Government of the Russian Federation No. 3718-r dated December 31, 2020; Order of the Government of the Russian Federation No. 3915-r dated December 28, 2021.

[5] Decree of the Government of the Russian Federation No. 299 dated March 6, 2022.

[6] On March 7, 2022, the Russian government determined the initial list of countries committing “unfriendly actions towards Russia,” which included the United States, Canada, the European Union, the United Kingdom, Ukraine, Montenegro, Switzerland, Albania, Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, North Macedonia, Japan, South Korea, Australia, Micronesia, New Zealand, Singapore, and Taiwan. This list may be expanded if more countries impose sanctions on Russia.

[7] Decree of the Government of the Russian Federation No. 299 dated March 6, 2022.

[8] Eurasian Patent Organization Procedures.

[9] Eurasian Patent Organization States Party to the Convention.

[10] European Patent Office, “Standing together for peace in Europe”; USPTO Statement on Engagement with Russia, the Eurasian Patent Organization, and Belarus.

[11] USPTO Statement on Engagement with Russia, the Eurasian Patent Organization, and Belarus.

[12] Patent Prosecution Highway (PPH) – Fast Track Examination of Applications.

[13] European Patent Office, “Standing together for peace in Europe.”