Russia-UAE economic ties strengthen with $9bn trade

IP prosecution and registration
IP disposal and transactions
IP enforcement and litigation

The Russian Federation (Russia) and the United Arab Emirates (UAE) established diplomatic relations immediately after the UAE’s formation in 1971. Since then, both countries have progressively developed their economic ties and commercial activities. In 2022, the trade turnover between the two countries grew by 22 percent, reaching about $9 billion.

The UAE is one of the most developed countries in the Middle East, primarily producing and exporting oil, among other products. Therefore, it may have innovations in the oil sector that could be patented in Russia, another major oil-producing country. Russia may be interested in utilizing these inventions and technologies under license agreements or other arrangements.

The UAE exports or re-exports a variety of goods, including agricultural products, light and textile industry articles, plastics, and organic chemistry products. These goods, when imported into Russia, require intellectual property (IP) protection. Patents, trademarks, and designs are key IP assets that must be registered. Appellations of origin and geographical indications are also available for certain products.

The current situation opens up new opportunities, logistics, and trade channels in Russia. Therefore, IP related to goods or services distributed in the Russian market should be carefully considered and properly protected to prevent misappropriation or third-party registration. IP registration in Russia grants exclusive rights to address infringement, passing off, or unfair competition. Additionally, IP assets can be commercialized or monetized in Russia.

IP prosecution and registration

Protecting intellectual property (IP) is quite straightforward in Russia. The key authority for this is the Federal Service for Intellectual Property (Rospatent). If an inventor or a company has an invention, they may patent it to protect the technology. Prosecuting an invention involves drafting, filing, and handling an application. When an application is filed, it first undergoes a formal examination.

Once all formal requirements are met, Rospatent accepts the application. For a patent application, a substantive examination takes place about six months after filing, unless the applicant requests an earlier examination. This time span allows the applicant to explore business opportunities and determine whether they are in a position to start or expand trade activities in Russia. Conventional priority may be claimed if the application is filed within 12 months of domestic filing.

Many applicants file applications under the Patent Cooperation Treaty (PCT) in their own country and, after a certain period, transfer these PCT applications into the so-called ‘National Phase’ in Russia, which has a term of 31 months from the initial filing. Applications for any IP, including inventions and utility models, must be filed through a Russian patent attorney. This requirement is not only legal but also practical, as the patent attorney will review the application for compliance with formal requirements and may provide insights regarding the application and the technology subject to the patent. While this does not constitute a full-scale or guaranteed examination, the patent attorney may offer opinions regarding the invention’s specification and claims. Patent searches are recommended before filing to avoid patent rejection on grounds such as lack of novelty.

Rospatent now operates efficiently. A patent may be granted within 9 to 12 months if there is no office action, which favors an earlier start of business activities. Patent protection typically lasts for 20 years for invention patents.

The prosecution of trademarks or service marks follows a similar process, though it includes specific formalities and aspects important from a registration perspective. Both formal and substantive examinations are applicable to trademarks and service marks. In these cases, a Russian trademark attorney is invaluable. They guide the applicant from filing to registration, offering advice during the examination process and in response to any office actions. In Russia, word, figurative, and combined marks can be registered. Once a trademark is registered, it is valid for 10 years and can be renewed an unlimited number of times.

Designs are also under patent protection and subject to registration. Design rights are granted and attested by a patent, provided that the design is new and original. A design patent covers aesthetic characteristics or the external appearance of a product, but not its functions. The design patent, once issued, is valid for a total of 25 years, including all possible renewals. Designs may also be protected under copyright law.

IP disposal and transactions

Once an invention patent is granted, a trademark registered, or a design patent issued, the patent/trademark holder acquires the right to dispose of it through various types of transactions or written agreements. This can include assignments, licenses, franchises, or pledges. For patents or trademarks, these transactions must be registered to be valid for third parties.

Assignments of IP rights can be made in whole or in part (for trademarks), with or without goodwill (for trademarks), and with certain jurisdictional restrictions (for international trademark registrations). Under Russian law, IP assignments are considered complete transfers or sales of exclusive rights. Therefore, IP assignment agreements typically do not contain any restrictions or limitations on the subject matters contracted (patents or trademarks). However, an assignment may not be feasible if the assignor wishes to retain other confusingly similar trademarks or designs, partially keep the trademark for certain goods or services similar to those assigned, or if there are other grounds for misrepresentation or confusion risks.

IP rights can also be licensed in whole or in part (under specific circumstances), with or without goodwill (for trademarks), and with certain jurisdictional restrictions (the default territory is the entirety of Russia unless the agreement specifies otherwise). IP licenses must specify the contracted term; otherwise, the default term is five years. Licensing can be on a sole, exclusive, or non-exclusive basis. The license agreement can include other limitations, terms, and provisions, such as the scope of use, sublicensing rights, compensation clauses, termination conditions, etc.

Franchising is a popular business model for IP monetization and product distribution in Russia. A franchise is considered a complex IP license, which includes the right to use trademarks, know-how, and copyrights. Patents are rarely licensed in franchising. The franchise agreement must be between commercial companies and include a compensation clause. Various forms of franchise fees, such as lump-sum payments, pre-payments, royalties, and marketing fund deductions, are generally acceptable.

Product price fixation is possible under Russian law, allowing franchisors to set prices for goods or services distributed by franchisees in Russia. Non-competition clauses are enforceable in Russia, and there are several case law examples that have provided protection to franchisors against competing franchises. Franchise agreements are usually accompanied by additional materials and agreements, including operations manuals, brand-books, service contracts, supply agreements, and others.

Finally, security interests over IP rights in Russia are commonly taken in the form of pledges. Trademarks and designs are the most frequently pledged intangible assets. While the scope of the pledge usually covers the entire exclusive rights in practice, it’s also possible to pledge the IP owner’s right to use a trademark or design, or the licensee’s right to use them (the so-called ‘pledge of obligations’). A pledge of IP rights consists of two stages: the creation of the pledge through a security agreement and foreclosure in the event the debtor fails to fulfill their obligations under a facility or loan agreement. Any transfer of IP rights to a creditor or third party during foreclosure proceedings must be recorded with Rospatent.

IP enforcement and litigation

Infringement of patent, trademark, and design rights in Russia can be addressed through administrative, civil, and/or criminal proceedings. Additionally, a special administrative procedure based on unfair competition and a cease and desist letter option (a non-judicial remedy) are available for IP owners to enforce their rights against infringers.

Under the Code on Administrative Offences of the Russian Federation, unlawful use of a patent, trademark, or design entails an administrative fine payable to the government budget and confiscation of counterfeit goods. Administrative proceedings begin with a petition for action filed by the IP owner with the competent Police or Customs department. This procedure generally takes about 4-6 months to complete.

Civil proceedings commence with a statement of claims (lawsuit) filed by the IP owner with the competent court. During civil proceedings, the plaintiff can seek several remedies: (1) injunctive relief (both preliminary and permanent injunctions are available); (2) monetary relief (compensation or damages, including lost profits, attorney fees, and court fees are recoverable); (3) recognition of exclusive rights; (4) seizure and destruction of counterfeit goods (at the expense of the infringer); (5) publication of the court order. Civil proceedings in the first instance court (trial) generally take about 6-9 months. Appeals are possible.

In accordance with the Criminal Code of the Russian Federation, unlawful use of a patent, trademark, or design entails criminal liability for the infringer, but only if it causes a substantial amount of damages to the IP owner. Criminal proceedings begin with a petition for action, which the IP owner must file with the competent Police department. These proceedings consist of two basic stages: (1) preliminary investigation and (2) court hearings. The statutory criminal sanctions for IP infringement may include (1) a criminal fine, (2) forced labor, or (3) imprisonment. The total duration of criminal proceedings is usually hard to predict, but they can often last more than a year.

IP infringement may also be considered a matter of unfair competition or passing off, both of which are prohibited in Russia. The Federal Antimonopoly Service (FAS) is empowered to consider disputes related to unfair competition or passing off through a special administrative procedure. This procedure starts with a petition for action filed with the FAS by the IP owner or a person who believes their competitor is imitating their product. If the action for unfair competition is successful, the infringer would be compelled to cease the illegal use of IP rights or the imitation of the product and pay an administrative fine to the government budget. This specific, quasi-judicial procedure usually lasts about 6-9 months.

Finally, sending a demand or cease and desist (C&D) letter to the alleged infringer requesting a voluntary cessation of IP infringement is probably the simplest out-of-court remedy available under current practice, prior to filing a lawsuit in court. This action is mandatory only if the IP owner intends to seek monetary compensation from the infringer in court later on. However, many IP owners frequently use this enforcement method as a pre-trial remedy in Russia. Pre-trial letters are also mandatory in conflicts related to trademark non-use cancellation.