In light of trade restrictions and foreign companies discontinuing business in Russia, the Russian government resolved to remove legal protection of intellectual property (IP) rights embedded in certain goods and trademarks attached thereto, thus enabling parallel import of such goods to Russia without authorization of the relevant IP holder or authorized distributor.
The Russian government adopted Decree No. 506 on March 29, 2022, authorizing the Ministry of Industry and Trade to identify, by proposals of the federal executive bodies, the types of goods exempted from the protections envisaged by Articles 1359(6) and 1487 of the Russian Civil Code on regional exhaustion of IP rights. Decree No. 506 came into force upon its official publication on March 30, 2022.
The government expects that the new regulation, which effectively legalizes parallel import of certain goods to Russia, will allow continued satisfaction of consumer demand in Russia and keep prices for the imported goods at reasonable levels.
Decree No. 506 builds on Federal Law No. 46-FZ, adopted March 8, 2022, which entitled the government to exclude certain goods from the application of the Civil Code provisions concerning IP rights protection.
It is expected that Decree No. 506 will allow the Ministry of Industry and Trade to selectively apply the principle of international exhaustion of the IP rights in relation to the affected goods, as opposed to the principle of national (or regional, within the Eurasian Economic Union) exhaustion set forth under the Russian Civil Code.
In particular, the following provisions of the Civil Code will not apply to the affected goods:
As such, Decree No. 506 does not introduce the principle of international exhaustion of the IP rights in Russia generally (which principle has been strongly supported by the Russian Federal Antimonopoly Service (FAS) for years, but entails amending the Civil Code). Instead, it provides that foreign IP holders will not be able to rely on the principle of national/regional exhaustion of IP rights in relation to certain types of goods to be identified by the Russian authorities, potentially only temporarily, during 2022.
On April 19, 2022, the Ministry of Industry and Trade adopted Order No. 1532 (pending official publication upon registration with the Ministry of Justice) providing a broad list of goods to be covered by Decree No. 506. In total, it covers 55 goods categories, including ores, petroleum, mineral fuels, pharmaceuticals and medical products, chemical products, paper, textile fibers and materials (e.g., cotton, wool, silk), clothing and footwear, base metals, plastics, rubber and products thereof, equipment and devices for the nuclear industry, electrical machinery and equipment, land vehicles, ships, furniture etc.
All of these categories are further subdivided and detailed in order to define certain goods to which parallel import applies. Therefore, it is crucial to assess on a case-by-case basis whether a particular item falls under Order No. 1532.
It is expected that the list of goods may be amended from time to time.
The FAS takes the position that the goods imported to Russia without the IP owner's consent should still be subject to the manufacturer’s warranty, and the manufacturer shall be liable to consumers for defects and bad quality under the general standard of consumer protection laws in Russia.
This may present a substantial risk for foreign manufacturers, which may face warranty claims and bad quality claims from consumers, even if the particular product was not designed for the use in Russia. To mitigate the relevant risks, where possible, foreign manufacturers should audit their distributorship and logistic chains to ensure that their products will not be imported to Russia without their express consent.
Our lawyers have long been trusted advisers to clients navigating the complex and quickly changing global framework of international sanctions. Because companies must closely monitor evolving government guidance to understand what changes need to be made to their global operations to maintain business continuity, we offer this centralized portal to share our insights and analyses. To receive the latest updates, subscribe to our Ukraine Conflict: How to Maintain Global Business Continuity mailing list.
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
Kenneth J. Nunnenkamp
Georgia M. Quenby
Carl A. Valenstein
Jiazhen (Ivon) Guo
Katelyn M. Hilferty
Daniel Lopez Rus
Charles C. Rush
Dr. Axel Spies
Trainee associate Valeria Gziryan contributed to this LawFlash.