The present state of unrest in Ukraine has piqued various debates around the world. The current topic is unique in its own way and indicates the deep-rooted challenges that Russia Ukraine will be facing. The future of this conflict is uncertain. It is extremely important to understand that wars have never benefitted any country in any manner, as eventually, various facets of their economy crumble, including Intellectual Property. IP rights grant monopolistic rights, thus, becoming important to the for invader’s economic interests. The present article will attempt to shed light on the impending impact of the Russia Ukraine conflict on IP rights by drawing analogies from situations that have been faced by other countries who were or are at unrest.
Economic Sanctions
Economic sanctions are defined as penalties levied against a country and its officials or even citizens or organisations either as a punishment or in order to provide disincentives for the some targeted policies and draconian actions.
Economic sanctions provide a policy tool that is an alternative to imposing military forces to punish wrongdoer countries or forestall objectionable actions. The interesting feature of economic sanctions is that they are applicable way beyond the country who is issuing such sanctions. Sanctions are meant to cause economic degradation of the countries it is issued against in order to discourage it from its wrongful actions. Thus, they can prove to be very costly to their targets as cutting off global trade, and economic interdependence can cause a total crash in the economy and the country’s treasury.[1]
To quote an example – several geopolitical challenges have been responded to in the form of economic sanctions, including North Korea’s nuclear program and, presently, Russia’s intervention in Ukraine. In the past, the US has issued various pressing sanctions against adversaries such as Iran, Russia, Syria, and even Venezuela.[2]
IP Rights in Sanctioned Countries
It is important to venture into this topic with a generic approach in order to compare the situation of these countries with the present Russia Ukraine conflict and its potential impact. It is imperative to understand the “obligation of use” in sanctioned countries. Therefore, a very intriguing issue arises- whether non-use could result in cancellation or not, when economic and trade sanctions can have force majeure argument against such requirements or not?
Let’s explore the condition of IP rights in some sanctioned countries.
1. Iran, Syria and Sudan
Currently, IP rights owners are not exactly prohibited from enforcing their IP rights in Iran, Sudan and Syria under the existing sanctions imposed by the US and EU. However, difficulties arise in businesses as they have to ensure that any company or individual they do business with in Iran and Syria is not listed on either the “identity-based restrictions” or the “activity-based restrictions”. IP rights owners present in the EU or the US are required to comply with all applicable sanctions. This increases the burden on IP Owners. It is important that businesses who have economic interests in sanctioned countries must conduct regular assessments in order to avoid any kind of breach of the EU or US sanctions. Otherwise, serious penalties could be imposed on them.
1.1 “Activity-Based” restrictions
These restrictions prohibit certain defined activities under the EU Regulations from being carried out in Iran or Syria by anyone subjected to the Regulations. These activities are principally connected with oil & gas, shipping industries, insurance and even banking and finance. Fortunately, the enforcement and protection of IP rights are not included in this list.
1.2 “Identity Based” restrictions
These types of restrictions subjected to the EU Regulations prohibit anyone from engaging in any economic activity with certain “designated persons”. The EU Regulation dictates that persons dealing with such designated persons’ economic resources and funds are frozen. The implication on IP owners is that it restricts IP Owners from dealing with them directly or indirectly.
1.3 Impact on IP rights owners
According to the above information, IP owners are not prohibited from enforcing their IP rights in Iran or Syria by the Regulations. However, they must ensure that they avoid any dealings that breach the “identity based” restrictions. This implies that IP Owners wishing to do business in Iran or Syria have to carry out due diligence on current or future licensees, distributors and customers to ensure that they are not designated, persons.
The consequences of the breach of the EU regulations can cost the IP Owners heavily as it could result in punitive penalties that would be imposed against such companies and individuals, including imprisonment.
One of the possible impacts of these sanctions is that trademark registration is vulnerable to a non-use and, thus, cancellation. If the marks aren’t used for three consecutive years after registration, it will lose its registered status. Therefore, trademark protection is particularly complicated when it comes to seeking protection in a sanctioned country like Iran. The only argument or defence left to be pleaded that of “force majeure”. However, no straightforward rules are set on this argument. Thus, it has been observed that with such discouragement imposed on IP owners, they tend to be reluctant to deal with anyone from Iran or do business in Iran.
2. The US-China Trade war and impact on Intellectual Property
The main contention in the US-China trade war was the inadequate protection provided by Beijing to US Intellectual properties. Let’s take a dip into their history to better understand the impact of this trade war.
The US has threatened China with the potential imposition of sanctions about three times in the past. (In 1991, 1995, 1996). However, somehow every time, a last-minute agreement was reached between the two countries. China had poor IP records, and that’s why former President Washington wanted to stop imports from China. However, he never went through with the plan. However, China failed to abide by those even after repeated agreements as their IP framework remained incompetent.[3]
One of the noteworthy reasons for such failure on the part of China was due to the fact that the standard of IP protection in the US was far more advanced than that of China. Consequently, the obligations placed on China was much higher. The onus was too heavy, and it also meant that China had to make significant changes to their legislation. This would be time-consuming and would require the same legal expertise as the US drafters, which China lacked at the time.[4]
When it came to trade secret misappropriation, China had to make sweeping changes in its judicial procedure. As a result of which, it was expected that the US IP owners would be able to effectively protect their IP rights in China. This also impacted the Chinese market as improved legislation would mean more foreign applicants and subsequently attracting more investment.
Lastly, one of the potential benefits of the 2020 Phase One of the Economic and Trade Agreement between the United States and China is the change in the earlier practice, wherein foreign IP owners had to mandatorily transfer or license their IPs to the Chinese Government. Trade secret theft could be prevented with effective and transparent IP protection and change in regulations.
3. The Crimea Conflict: Its impact on Intellectual Property in Russia and Ukraine
A roundtable was held addressing the pressing issues related to intellectual property protection by the Ukrainian IPO in Crimea (Now Russia’s Occupied Territory). The discussion was essentially on the legal status of the Crimean IP rights owners and their rights on the territory of Ukraine.
President Putin regulated the IP protection on the Crimean Peninsula territory by the signing the Federal law on the additional amendments. Accordingly, Russia recognized the exclusive rights to utility models, industrial designs, inventions, trademarks, service marks etc., that were originally registered in Ukraine and were owned by the proprietors permanently residing in Crimea. However, Russia stated that the existing rights have to be re-registered to the Russian PTO. This law was in tune with the fact that such IP owners have become the citizens of the Russian Federation.
While addressing the status of pending Ukrainian applications, it was directed that the IP owners re-file the applications in Russia. This goes on to show that Russia entirely denies Ukraine’s status as a country, and taking over IP rights is a way for Russia to gain economic control over Crimea. Thus, the prior rights held by Crimean IP owners are extinguished.
This move will mess up the status of various IPs and will also cost the IP owners their time and money since they will have to start from scratch and re-file or restart the registration process.[5]
The analogy with Current Russia- Ukraine escalated the conflict’s impact on Intellectual Property.
The European Patent Office has recently suspended all cooperation with the Russian Patent Office in the wake of the invasion. The EPO further stated that the decision will also apply to Belarus’s patent office (the National Center of Intellectual Property) and shall be effective immediately. EPO member states will debate potential further measures on March 22.[6]
Elsewhere, Ukrainian patent lawyers have pleaded that international IP associations must cut ties with Russia due to their inhuman and ruthless onsetting invasion. The National Association of Patent Attorneys of Ukraine has urged IP organisations to suspend membership for Russian attorneys.
Mounting pressure has accumulated over law firms that have IP bases in Russia. Baker McKenzie, which also has branches in Moscow and St Petersburg in Russia, has stated that they have to change a lot of their internal management and transform to operate Russia-related operations and work for clientele to align with all applicable sanctions and comply with the dynamic laws.
Such Law firms have also expressed extremely regrettably that this invasion and the economic sanctions mean exiting certain relationships completely. In other words, they lose clients in order to dissociate themselves from Russian clientele.
India’s impending predicament
India and Russia’s Space Cooperation and the impact of the war on IP in space-related activities.
India’s space sector is growing rapidly and is moving towards a sustainable environment, where new space enterprises will dominate the discourse.[7] Russia’s space enterprise has developed a potential space mobility platform called the “Zeus TEM”. This is expected to significantly impact human space exploration worldwide and holds immense potential for new India-Russia space collaboration.[8] Zeus TEM could also serve as a power source to power the components of deep space interplanetary missions.[9]
It is unclear as to how India and Russia’s space-related activities will board as India’s diplomatic stance has not confirmed or denied anything. But with the rouble declining, there sure will be an impact on IP in the space related activities.
A joint statement was issued after the India-Russia summit, where they signed a pact on collaborating for ZEUS. The pact is aimed at enhanced cooperation between the Russian State Space Corporation ‘Roscosmos’ and the ISRO.[10] As the present events are commencing, ZEUS might just become a failed attempt at collaboration with sanctions looming over India’s diplomacy.
Now, this programme may be at the risk of getting scrapped. This was another emerging opportunity for the establishment of some IP rights related to this programme.
Conclusion: After the above discussion, one thing is clear that even though sanctions are against an enemy state, the restrictions imposed cause immense difficulty to IP Owners in terms of business, licensing, assignment, registration. Another significant difficulty is retaining existing registrations. The technical difficulties added procedural burden and crashing economy of enemy state due to these sanctions are enough warning for IP owners not to venture into the economic arena of sanctioned countries.
The present Russia-Ukraine conflict is an epitome as it highlights how IP is a major aspect of any economy. Now that Russia is slowing moving towards getting boycotted, it will have to deal with various countries cutting ties with Russia and withdrawing their businesses. The potential impact is that not only their business sector will crash, but firms working in the IP sector too will shift their services, leaving a vacuum in their economy. Recuperating from the same would not be easy. International IP firms in Russia will have to exit their obligations towards their Russian clients and even wrap up their partnerships with their Russian counterparts. India’s impending fate is still unclear, but to say the least, what could happen is that the pending IP applications in Russia will either get abandoned amidst the rising unrest or will lapse with no effort towards its renewal.
Consequently, the time and resources spent in either getting these IP applications registered or retained will be completely wasted. This, of course, is far less than the humanitarian concerns looming around, but this economic facet of the war had to be explored in order to gain clarity on the impact of war on IP.
References:
[1] https://www.investopedia.com/articles/economics/10/economic-sanctions.asp
[2] https://www.cfr.org/backgrounder/what-are-economic-sanctions
[3]https://www.gtlaw.com/es/insights/2020/1/impact-of-the-china-us-trade-deal-on-intellectual-property-protection
[4] US-China “Trade Peace”: Intellectual Property Rights and Textiles, https://www.press.umich.edu/pdf/0472113585-ch6.pdf
[5] https://www.petosevic.com/resources/news/2014/07/2926
[6] https://www.managingip.com/article/b1wzv65sfwb6wg/european-ip-offices-cut-ties-with-russia-over-ukraine-invasion
[7] Aditya Pareek & Andrey Gubin, India-Russia Space Cooperation: A Way Forward https://takshashila.org.in/wp-content/uploads/2021/10/India-Russia-Space-Cooperation-A-Way-Forward.pdf
[8] “Russia’s Zeus Nuclear-Powered Tug to Search for Extraterrestrial Life, Roscosmos Chief Says.” Sputnik International. June 15, 2021. https://sputniknews.com/science/202106151083151768-russias-zeus-nuclearpowered-tug-to-search-for-extraterrestrial-life-roscosmos-chief-says/.
[9] Zak, Anatoly. Russia reveals a formidable nuclear-powered space tug. https://www.russianspaceweb.com/tem.html.
[10]https://www.business-standard.com/article/current-affairs/india-russia-vow-to-deepen-space-collaboration-sign-cooperation-pact-121120601496_1.html
Disclaimer: The present article intends to provide general guidance on the subject, and you can also consult us in your specific case.
