The Russia-Ukraine war has impacted many parts of the global economy, and most of the discussion has understandably concentrated on the conflict’s geopolitical implications. However, if there is one element that should require much attention, it is the subsequent battle over intellectual property.
In early March 2022, a few weeks after the Russian invasion of Ukraine, the U.S. Patent and Trademark Office and the European Union Intellectual Property Office halted work with their Russian counterparts, Rospatent, prompting Russia to issue a decree legalizing the unauthorized use of patents and other related IP rights owned by corporations from “unfriendly” countries on Russian soil. The list of unfriendly countries is vast, and includes the United States, the EU states, the United Kingdom, Australia, Japan, South Korea, Canada and Ukraine, among others, which have imposed sanctions or taken action against any Russian company or individual.
This decree modifies the compensation given to a patent owner when an invention, utility model or industrial design is used without permission, as well as the mechanism for making this payment. This implies that any individual or corporation headquartered in Russia can utilize international patents without the without having to pay damages for infringement. As a result, any person or any company that had patent or trademark protection in the Russian Federation will be unable to assert such rights if they are headquartered in an unfriendly nation. In order to alleviate the impact of sanctions on supply chains and the availability of goods in Russia, the Russian Ministry of Economic Development is contemplating removing protection for IP assets other than patents, including trademarks and copyrights.
In addition, retailers in Russia are now authorized to import items without the authorization of the trademark owner. That means a Russian importer might purchase branded clothes in another nation and bring them into Russia without first consulting the brand owner.
Legal claims in the midst of war
“This is a dangerous development, but one that is always a risk in the international IP system,” says Michael Williams, a partner at Gilbert + Tobin in Sydney. “Since IP rights are protected and enforced on a territorial basis, it is open to any sovereign state to suspend IP protections in its territory under domestic laws. However, Russia’s actions will put it in conflict with its obligations under international conventions, which require signatories to provide reciprocal protections under their laws in return for the benefits of protections under the laws of other convention countries. Russia will have broken that compact.”
He adds that in the short term, Russia’s actions are likely to lead to legal claims and trade retaliation by states whose businesses are affected including against Russian assets and business activities in other countries. “There is already evidence of seizure of Russian assets outside of Russia and this is likely to expand to include seizure or suspension of Russian IP assets,” he says. “In the short-to-medium term, Russia’s actions will significantly weaken international confidence in Russia as a country willing to protect IP. It typically takes decades for a country such as Russia to build trust with international businesses to believe that they can safely do business there. It is likely to take decades for the international community to be prepared to place the same trust in Russia to protect their IP.”
On parallel imports, Jyeshta Mahendran, a partner at Shearn Delamore & Co. in Kuala Lumpur, says that in a number of countries, parallel imports do not constitute an act of trademark infringement.
“Notwithstanding the fact that a trademark owner can object to parallel importation if the trademark owner has put into the market his goods and exported such goods, or his licensees or subsidiaries have sold the said goods knowing that they were to be exported to the countries in question, he is taken to have impliedly consented to such,” she says. “Unless there are terms to the contrary in any license agreements or contracts, the trademark owner cannot expect to control to where or whom the goods bearing his trademark end up being supplied down the supply chain.”
She adds: “Such a change in position may be motivated by the commercial difficulties brought about by the heavy sanctions imposed by foreign countries by halting exports and sales of their goods in Russia. While such a change in the treatment of parallel imports is a means of ensuring the continuous flow of imported goods into the country and maintaining competition for local Russian businesses, it remains to be seen whether this will impact the commercial goodwill of the country with its trading partners in the future.”
A war tactic since the beginning?
Russia isn’t the first country to remove IP asset protection in this way. During the first World War, the Allies confiscated patents held by enemy countries, mostly German and Austrian patents. The United States alone seized more than 4,000 enemy patents, which was made possible through the adoption of the Trading with the Enemy Act of 1917, a law allowing the seizure of copyrights and patents owned by enemy countries. This act was known to have notoriously caused the confiscation of the patent for aspirin, which was a German invention.
Similar measures were adopted on the German and Austro-Hungarian sides. Many Germans opposed these war measures because they would be placed in a very critical position and exposed to retaliation as they had numerous patents overseas, which were worth considerably more than what the Allied nationals held in Germany.
Also during World War I, the word ANZAC was of vital importance to the Australians fighting in the war when, on May 18, 1916, the Australian Government passed the War Precaution (Supplementary Regulation) 1916, which stated that the word ANZAC could not be trademarked by any other entity.
It is also essential to note that patent sharing decreased dramatically during the two World Wars, as no country wanted to let any other country know of their technological advances. Another example would be the Dumaresq, a mechanical calculating device invented around 1902, which was designed to make naval warfare more accurate. When the inventor, John Saumarez Dumaresq, was given permission to patent the device, he is said to have assigned it absolutely to the British secretary of state for war so that no other country could benefit from the invention.
During World War II, similar measures of confiscations and takeovers were implemented against enemy properties. In 1941, the assets of U.S. drugmaker Sterling Products were seized by the U.S. government because of its agreement with I.G. Farben (Bayer Germany), which was deemed as a benefit to the Nazi regime.
The United Kingdom had a similar Trading with the Enemy Act. The measure caused one of the more prominent cases of the time between Daimler, a British Rubber Co., whose shares were dominantly German held.
Daimler brought the case to court, refusing payments, concerned whether the payments it would make to Continental would be considered trading with the enemy and hence, illegal. On appeal, the House of Lords ruled that wars allow the possibility when the shareholders’ identity does affect the corporate personality and thus held that the continental, while incorporated in England, was considered German controlled.
“There were widespread actions taken by governments on both sides of the war leading to the sequestration and confiscation of enemies’ assets, including businesses, land, patents, shares, bank accounts and other belongings,” says Williams. “I assume countries such as Germany and Japan did suspend protections for foreign IP under their laws to pursue nationalistic objectives during the wars. And that after the end of the wars, regular protections of IP rights returned, no doubt slowly as a part of reconstruction efforts by those countries. War reparations took into account including IP assets from foreign countries that were affected.”
Arjel de Guzman, a founding director at OPTMARKS Brand Protection and Intellectual Property Consultancy in Manila, says that IP rights, in particular, have been weaponized as a non-violent war tactic. “This is not surprising because, after all, these IP rights have economic and political ramifications which may sway or even influence the economic or political positions of those affected by the war either directly or indirectly,” he says.
How wars affect IP
De Guzman says that wars have always affected how society is being molded. “Many international treaties and conventions were adopted in the aftermath of wars,” he says. “The United Nations, including WIPO, were established as a necessary consequence of war.
Legislation is likewise affected by wars where countries adopt policies to institutionalize how the state regards wars and related activities.”
He adds: “States have been historically able to spearhead municipal and local organizations because of the impelling need brought about by war. Take for example during the second World War, when air supremacy seemed to be the goal of every country engaged in war. In the U.S., European-designed airplanes were prevalent because, as some have commented, the Wright Brothers held a broad scope of patent rights which stunted the growth of the airline industry. Such a situation caused the U.S. government to create the Manufacturers’ Aircraft Association (MAA), a trade association that actively encouraged its members to cross-license their airplane technologies through a patent pool in support of the country’s war effort.”
For Williams, global IP protections depend on reciprocity and collective agreement on international standards for IP protection. “These have been developed and refined over the last hundred years,” he says. “The recent actions of Russia are a reminder that the system is fragile and vulnerable to being undermined by any state that ceases to abide by its international obligations.”
He adds that aggressors may be tempted to engage in illegal conduct under international or domestic laws in times of war. “Historically, cyberattacks and product counterfeiting are tempting options for aggressors to cause damage to other countries or gain financially through illegal means in times of war,” he says. “The current war will drive Russia further apart and expose it to international sanctions, trade retaliation and claims against its businesses and assets, including IP assets, abroad. The IP system will largely exclude Russia from its protection. These steps will be taken through forms of legislation – international legislation through declarations and domestic laws.”
Meanwhile, disputes are likely on the rise in international tribunals and in local domestic courts of countries and businesses affected by Russia. These are likely to run for many years, including decades to come.
Mahendran says that the proprietors of intellectual property rights may potentially lose their rights indefinitely without the prospect of regaining them. “It may be difficult or impossible for these rights to be protected, enforced and commercialized in the country in question, even after any of these laws and decrees have been revoked and repealed, due to the sheer amount of infringement and misappropriation of rights that may have taken place,” she says. “Loss of priority, novelty, moral rights and unauthorized disclosure, among others, can result in irretrievable loss of IP rights. IP owners will be less than willing to invest and set up business in a country where the creations of their mind will be easily misappropriated and not given the protection that should be rightly accorded. The infiltration of e-commerce and the digital space has further created an environment which has amplified the incidence of cyber attack targeted at IP rights which become even more vulnerable during trying times such as in the face of the present ongoing conflict.”
This is echoed by C.F. Tsai, president at Deep and Far Attorneys-At-Law in Taipei, who says, “Wars always bring forth insecurity, deteriorated legislation and aggravated disputes. Making wars is far easier than making peace worthy of industrious collaboration from all mankind.”
The war and brand solution
When scenarios such as that of Russia happens, De Guzman says that brand owners can take a legal response to the situation.
“Despite these attacks on IP and other property rights during wars, companies and businesses must see to it that their rights and interests are protected within the bounds of the law,” he says. “There are numerous international treaties and policies which provide avenues for grievance and even reparations for damages caused by war-induced hostile acts against them. It is most important that businesses exploit these legal remedies to not further complicate the already volatile situation.”
He adds that wars generally impede the exchange of ideas and interactions of personalities which form part of the international IP ecosphere.
“Between 1914 and 1918, the annual average number of patent applications fell in certain countries (France, Germany, Austria) by 40 percent in comparison to the years between 1910 and 1913 because IP-related works were greatly impeded,” he says. “Patent agents and professional patent consultants found it increasingly difficult to correspond with their colleagues in foreign countries. It is important that the free exchange of ideas and the restoration of the impeded IP system be restored so that IP can recover after the devastative effects of war. It entails a collective process and effort. Germany had a similar association established in 1917 when the Association of German Aircraft Producers was established to pool all important airplane patents from different national inventors.”
Govind Chaturvedi, a trademark, social media law, and data expert in Delhi, says that brands should also adopt their own ways during wars. “They also take their moral stands and support armies,” he says.
“However, the course of redressal does not change and remains the same.” Since IPR requires that the nations work together which promotes goodwill among the consumers, this also allows the proper redressal of the infringement of IPR in all countries.
“Hence, it is important to keep the enforcement of IPR uniform in all countries,” he says. “The brands need to make sure that their brand is enforced at all times, in order to make sure that the same does not affect the goodwill and reputation of the brand. We have seen a number of brands adapt to the Covid situation and hence brands also need to make the same effort in keeping their brand alive, as their association with the product/service should not be disconnected in the minds of the consumer.”
Tsai adds, “Either brand owners or multi-corporations can only make use of commercial strategies or measures to counteract, alleviate or rescue the situation on the one hand – while asking help from national dominations co-exercised by multi-countries on the other.”
Excel V. Dyquiangco
This article was originally published by Asia IP Magazine.