International Intellectual Property Transactions in Russia

 

April 30, 2024

BRACE Law Firm ©

 

Rights to intellectual property objects are increasingly acquiring an international and cross-border character in modern market interactions. To regulate international intellectual property transactions, parties use not only the law of the country where the intellectual property was created, but also the law of the country where it is sold, as well as international law.

In accordance with Federal Law No. 164-FZ dated December 8, 2003, On the Fundamentals of State Regulation of Foreign Trade Activity (the "Law No. 164-FZ" or the "Law on Regulation of Foreign Trade Activity"), foreign trade in intellectual property involves the transfer of Exclusive Rights to intellectual property objects or the granting of the right to use intellectual property objects by a Russian person to a foreign person or by a foreign person to a Russian person.[1]

At the same time, intellectual property represents the result of creative labor in the fields of science, art, literature, economics, and technology.[2] These results include scientific, literary, and artistic works; computer programs; databases; performances; phonograms; broadcasting or cable casting of radio or television programs (broadcasting by terrestrial or cable organizations); inventions; utility models; industrial designs; selection achievements; topologies of integrated circuits; trade secrets (know-how); company names; trademarks and service marks; geographical indications; names of places of origin of goods; and commercial designations. A similar definition is established in Annex No. 26 to the Treaty on the Eurasian Economic Union (the "EAEU Treaty"), [3] which provides that international treaties[4] and acts comprising EAEU law, along with the legislation of member states, provide legal protection for intellectual property.

Key International Treaties Regulating International Intellectual Property Transactions

The following are the primary regulatory documents governing intellectual property relations at the international level:

• Annex No. 26 to the EAEU Treaty, Protocol on the Protection and Safeguarding of Rights to Intellectual Property Objects;
• The Treaty on Trademarks, Service Marks, and Appellations of Origin of Goods of the Eurasian Economic Union;
• The Agreement on the Procedure for Managing Copyright and Related Rights on a Collective Basis;[5]
• The Treaty on the Coordination of Actions to Protect Rights to Intellectual Property Objects, aimed at coordinating the actions of authorized bodies of the Eurasian Economic Union member states to prevent, detect, suppress, and investigate violations of intellectual property rights;[6]
• The Universal Copyright Convention (the "Geneva Convention");[7]
• The Agreement Concerning the International Registration of Marks;[8]
• The Berne Convention for the Protection of Literary and Artistic Works dated September 9, 1886;[9]
• The Convention for the Protection of Industrial Property;[10]
• The Agreement Concerning the International Registration of Marks;[11]
• The Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms,[12] etc.

Despite the extensive international legal regulation of intellectual property transactions, it is important to note that within the framework of sanction restrictions imposed by unfriendly countries, the issue of supplying goods under the parallel import procedure arises. This procedure involves importing products under a registered trademark into Russia without the right holder's permission and serves as a necessary measure due to prevailing political and economic circumstances. Key aspects of supplying goods via parallel import include:

• Selling goods without the right holder's permission entails significant risks for consumers who may purchase and use low-quality and potentially unsafe goods;
• Warranty obligations and service maintenance for goods imported into Russia remain unresolved, which violates Article 6 of the Law of the Russian Federation No. 2300-1 dated February 7, 1992, On Protection of Consumer Rights, requiring manufacturers to ensure the possibility of using a product during its service life.

On the other hand, under current restrictions, parallel import provides the only opportunity to acquire necessary goods manufactured in unfriendly countries.

International License Agreements

Under a license agreement, one party — the holder of the Exclusive Right to a result of intellectual activity or a means of individualization (the "Licensor") — grants or undertakes to grant to the other party (the "Licensee") the right to use such result or means within the limits provided by the agreement. The Licensee may use the result of intellectual activity or means of individualization only within the scope of rights and by the methods expressly provided in the license agreement. Furthermore, any right to use a result of intellectual activity or means of individualization not expressly specified in the license agreement is not deemed granted to the Licensee. [13]

In accordance with the Civil Code, a license agreement must specify the territory where the use of the result of intellectual activity or means of individualization is permitted. If the agreement does not specify the territory, the Licensee may use them throughout the entire territory of the Russian Federation.

Additionally, the term of a license agreement cannot exceed the term of the Exclusive Right to the result of intellectual activity or means of individualization.

The ability to enter into international license agreements allows entrepreneurs to resolve various issues across different fields of activity. For this purpose, international license agreements are used, which can be divided into the following types:

• An international license agreement where the subject is a license for an invention, as well as know-how and a trademark;
• A purchase and sale agreement with the supply of equipment;
• A mixed agreement under which a license is sold and equipment is supplied;
• An agreement for the design and construction of industrial facilities;
• An agreement for scientific-technical or industrial cooperation.

In practice, several types of licenses are distinguished:

• Foreign trade license: a special permit obtained from state authorities for the import, export, or transit of a certain quantity of goods whose free movement is not permitted;
• General license: a permit for the export or import of certain goods without restrictions on quantity and value with the countries listed in the license;
• Individual license: a one-time permit for a specific trade transaction;
• Simple license: grants the right to use a patent for an invention for a certain period, while the Licensor retains the right to use it independently or transfer it to third parties;
• Full or exclusive license: the Licensor may not issue licenses to persons other than the Licensee, and the Licensor may not use the intellectual property object within the limits in which the right of use was transferred to the Licensee under the agreement.

As a rule, an international license agreement, like any foreign trade contract, contains the following main sections, which may be added to or adjusted at the request of one of the parties:

• A preamble reflecting the parties to the transaction, patent data, and the Licensor's ownership rights;
• The subject of the agreement, which may be a patented invention, a technological process, or a trademark;
• The type of license: non-exclusive (simple), exclusive, or full;
• Payment terms — the Licensor's remuneration [14] which may be expressed as:

— Royalties: periodic payments established as fixed percentage rates;

— The Licensor's participation in profits from the sale of licensed products;

— A lump-sum payment: a fixed amount of license remuneration established in the agreement;

— The transfer of the Licensee's securities (stocks and bonds) to the Licensor;

— The transfer of technical documentation: mutual granting of licenses.

• The Licensor's obligations under the license agreement, the scope of which depends on the subject of the agreement;
• The Licensee's obligations under the license agreement;
• The term of the license;
• The liability of the parties for failure to perform their obligations;
• Dispute resolution and applicable law;
• The signatures and details of the parties.

In addition to these sections, an international license agreement may reflect other terms that the parties deem necessary to include or that are required by national legislation.

An important aspect of entering into an international license agreement is the choice of applicable law, including for the resolution of disputes. Foreign partners often specify one of the following options when choosing the applicable law:

• The law of the country of one of the transaction participants;
• The law of the country where the result of intellectual activity will be used;
• The law of the country of the court chosen by the parties;
• The law of another third country.

It is vital to define the applicable law, the judicial body, and other aspects in the text of the international intellectual property transaction, as this will significantly simplify dispute resolution should one arise.

International Intellectual Property Assignment Agreements

Under an assignment agreement, one party (the "Right Holder") transfers or undertakes to transfer the Exclusive Right it holds to a result of intellectual activity or means of individualization in full to the other party (the "Acquirer"). [15] An assignment agreement must be in writing; failure to comply with this requirement results in the agreement's invalidity. [16]

The Acquirer undertakes to pay the Right Holder the remuneration provided for in the agreement, which may take the form of fixed one-time or periodic payments or percentage deductions from income (revenue) — royalties. Gratuitous assignment of Exclusive Rights between commercial organizations is prohibited.

Under an IP assignment agreement, the Exclusive Right often passes from the Right Holder to the Acquirer at the time the agreement is concluded. However, state registration is required for the transfer of the Exclusive Right under an agreement when the corresponding result of intellectual activity or means of individualization is subject to registration. [17] It is important to note that registration is carried out upon the application of both parties or one of the parties to the agreement. [18] The application may be submitted by both parties or by one of them. [19] If only one party submits the application, one of the following documents must be attached at the applicant's choice:

• A notice of the completed disposal of the Exclusive Right, signed by the parties;
• A notarized extract from the agreement;
• The agreement itself.

The application or the attached document must specify:

• The type of agreement;
• Information about the parties;
• The subject of the agreement, specifying the number of the document certifying the Exclusive Right to the result of intellectual activity or means of individualization.

The Government of Russia establishes the procedure and conditions for state registration:

• Decree of the Government of Russia No. 2151 dated December 14, 2023, On Approval of the Rules for State Registration of the Disposal of an Exclusive Right to a Selection Achievement Under an Agreement and the Transfer of Such Right Without an Agreement;
• Decree of the Government of Russia No. 1416 dated December 24, 2015, On State Registration of the Disposal of an Exclusive Right to an Invention, Utility Model, Industrial Design, Trademark, Service Mark, Registered Topology of an Integrated Circuit, Computer Program, or Database Under an Agreement and the Transfer of an Exclusive Right to Them Without an Agreement.

State registration requires the payment of a fee:

• For the consideration of an application for the registration of an assignment of an Exclusive Right to an invention, utility model, industrial design, trademark, or service mark under an agreement and for making a decision based on the results of its consideration; [20]
• For the registration of an assignment agreement for Exclusive Rights to selection achievements; [21]
• For the registration of an assignment agreement for Exclusive Rights to a computer program, database, or topology of an integrated circuit. [22]

Furthermore, the law of the country where the Exclusive Right transferred to the Acquirer is valid applies to the assignment agreement.[23] If it is valid simultaneously in several countries, the law of the country where the Right Holder has its residence or principal place of business applies. [24]

Regarding taxation, it should be noted that the transfer of Exclusive Rights within the territory of Russia is exempt from VAT for:

• Computer programs and databases included in the unified register of Russian computer programs and databases and (or) the unified register of results of scientific research, experimental design, and technological work for military, special, or dual purposes, as well as the rights to use such programs and databases (including updates and additional functional features), including by providing remote access via information and telecommunications networks, including the Internet; [25]
• Inventions, utility models, industrial designs, topologies of integrated circuits, and trade secrets (know-how). [26]

However, starting from January 1, 2021, the transfer of rights to use Russian and foreign software not included in the unified register of Russian computer programs and databases is subject to value-added tax as provided by the Tax Code of the Russian Federation. [27]

Difference Between a License Agreement and an Assignment Agreement

Under Russian civil law, entering into a license agreement does not entail the transfer of the Exclusive Right to the Licensee, [28] which fundamentally distinguishes such an agreement from an assignment agreement. The Licensee may use the intellectual property object only within the scope of rights and by the methods expressly provided in the license agreement; if certain rights are not explicitly reflected in the agreement, they are deemed not granted to the Licensee. In contrast, under an assignment agreement, the Acquirer receives all rights in full.

A common condition for both agreements is the contract price if the agreement is for consideration. The agreement must specify the amount of remuneration or methods for determining it; otherwise, the agreement is deemed not concluded.

International Software Development Contracts

The development of technology and software requires legal formalization. However, protection in this field is regulated under copyright treaties developed in line with the Berne Convention. [29]

A computer program is a set of data and commands presented in an objective form, intended for the operation of computers and other computer devices to achieve a specific result, including preparatory materials obtained during its development and the audiovisual displays it generates. Copyrights for all types of computer programs[30] (including operating systems and software packages), which can be expressed in any language and any form, including source code and object code, are protected in the same way as copyrights for literary works. [31] The primary international act establishing legal protection for computer programs is the Berne Convention.

Copyrights for all types of computer programs (including operating systems and software packages) are protected as copyrights for literary works. A computer program is an objectively presented set of data and commands intended for computer operation to achieve a specific result, including preparatory materials and generated audiovisual displays.

During the term of the Exclusive Right to a computer program or database, the Right Holder may, at its discretion, register such program or database with the federal executive body for intellectual property. The transfer [32] of the Exclusive Right to a registered computer program or database to another person under an agreement or without an agreement, as well as the pledge of the Exclusive Right to a registered computer program or database, are subject to state registration with the federal executive body for intellectual property.

An application for state registration of a computer program or database must relate to a single program or database and must contain:

• An application for state registration specifying the Right Holder and the author (unless the author has waived the right to be mentioned as such), as well as the residence or location of each;
• Deposited materials identifying the computer program or database.

The federal executive body responsible for regulatory and legal regulation in the field of intellectual property establishes the rules [33] for formatting registration applications.

Technological advancements have also enabled the remote (digital) conclusion of transactions through electronic means of communication, both nationally and internationally. This became possible through the use of an electronic digital signature, which, according to Article 2 of Federal Law No. 63-FZ dated April 6, 2011, On Electronic Signatures, is information in electronic form attached to or otherwise associated with other information in electronic form (the signed information) and used to identify the person signing the information.

Another international act regulating software relations is the Geneva Convention, which requires certain formalities before legal protection arises. The Geneva Convention states that national legal requirements are deemed met if, starting from the first publication of the copyright object, all its copies bear the special identification mark "©" (copyright symbol).

The WIPO Copyright Treaty, adopted in development of the Berne Convention, also regulates software relations. [34] The primary reason for developing the WIPO Treaty was the advancement of modern information technology, including the Internet. This document focuses on protecting copyright objects expressed in digital form.

Other important documents regulating software relations include the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)[35] and EU Directive No. 91/250/EEC dated May 14, 1991, On the Legal Protection of Computer Programs, which was replaced by Directive No. 2009/24/EC dated April 23, 2009. The latter Directive stipulates that legal protection applies to the expression of a computer program in any form, but ideas and principles underlying any part of a program, including its interfaces, are not protected by copyright.

For a uniform understanding of the legal norms governing software protection, the Presidium of the Intellectual Property Court approved the Overview of Practice of the Intellectual Property Court on Issues Arising from the Application of the Civil Code Provisions on Legal Protection of Computer Programs and Databases [36] (the "Overview of Practice"). The Overview of Practice highlighted several positions regarding:

1. Software:

1.1. The presumption created by the registration of a computer program may be rebutted, including during the consideration of a case involving an Exclusive Right violation;

1.2. State registration of a computer program may be challenged by a person considering themselves the Right Holder by filing a claim to recognize the right to that program against the person listed as the Right Holder in the Register of Computer Programs;

1.3. Joint unlawful use of a computer program and its distribution kit constitutes a single act of violation;

1.4. A conclusion regarding the use of a computer program, specifically through reproduction or processing, may be made based on a comparison of the plaintiff's source code (text) with the defendant's copy;

1.5. Comparison of source codes (texts) is possible when these objects are submitted to the court on media along with program listings; 1.6. A court may conclude the use or non-use of a computer program using specialized knowledge, including specialist consultations, expert opinions, and other evidence, etc.

2. Databases:

2.1. The database manufacturer is recognized as the person who organized the creation of the database, including the work of collecting, processing, and arranging its constituent materials. When establishing the existence of an Exclusive Right held by the database manufacturer, it is legally irrelevant which persons actually filled the database;

2.2. To recognize a person as a database manufacturer, the deciding factor is not the person's subjective intent to invest in the database, but rather the actual incurrence of substantial costs for its creation;

2.3. Information about social network users may constitute database content within the meaning of Article 1260 of the Civil Code, etc.

The consideration of software-related cases by the Presidium of the Intellectual Property Court and the consolidation of these decisions into the Overview of Practice allows for a uniform interpretation and application of software law.

Summarizing the above, both international law and national legislation in the field of intellectual property rights protection are continuously evolving. New regulatory acts that meet modern requirements are being adopted to govern relations in this field.

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References

[1] Clause 5 of Article 2 of the Law No. 164-FZ.

[2] Article 1225 of the Civil Code.

[3] Signed in Astana on May 29, 2014.

[4] The Treaty on Trademarks, Service Marks, and Appellations of Origin of Goods of the Eurasian Economic Union. Signed in Moscow on February 3, 2020.

[5] Concluded in Moscow on December 11, 2017.

[6] Signed in Grodno on September 8, 2015.

[7] Concluded in Geneva on September 6, 1952. The document entered into force for the USSR on May 27, 1973. The Convention was supplemented by Additional Protocols No. 1, No. 2, and No. 3, in which Russia does not participate.

[8] Concluded in Madrid on April 14, 1891.

[9] Decree of the Government of the Russian Federation No. 1224 dated November 3, 1994, On the Accession of the Russian Federation to the Berne Convention for the Protection of Literary and Artistic Works as Revised in 1971, the Universal Copyright Convention as Revised in 1971 and Additional Protocols 1 and 2, and the 1971 Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms.

[10] Concluded in Paris on March 20, 1883.

[11] Concluded in Madrid on April 14, 1891.

[12] Concluded in Geneva on October 29, 1971. Russia acceded by Decree of the Government of the Russian Federation No. 1224 dated November 3, 1994.

[13] Clause 1 of Article 1235 of the Civil Code.

[14] Decision of the panel of arbitrators of the ICAC at the RF CCI dated May 13, 2022, in case No. M-127/2021. In violation of the license agreement, the defendant failed to perform obligations and allowed a debt to form on the payment of the license fee. The amount of the license fee was agreed upon by the parties in an additional agreement to the license agreement. The arbitration court established that the defendant recognized the existence of the debt for the license fee. The amount of the debt was not challenged by the defendant and is not refuted by the case materials. Accordingly, the panel of arbitrators considers the plaintiff's claim to recover the debt amount under the license agreement to be justified and subject to full satisfaction.

[15] Article 1234 of the Civil Code.

[16] Clause 37 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 10 dated April 23, 2019, On the Application of Part Four of the Civil Code of the Russian Federation.

[17] Paragraph 2 of Clause 2 of Article 1234 of the Civil Code.

[18] Clause 3 of Article 1232 of the Civil Code.

[19] Ibid.

[20] Decree of the Government of the Russian Federation No. 941 dated December 10, 2008, On Approval of the Regulation on Patent and Other Fees for Legally Significant Actions Related to a Patent for an Invention, Utility Model, Industrial Design, State Registration of a Trademark and Service Mark, State Registration and Granting of an Exclusive Right to a Geographical Indication, Appellation of Origin of Goods, as well as State Registration of the Assignment of an Exclusive Right to a Result of Intellectual Activity or Means of Individualization, Pledge of an Exclusive Right, Granting of the Right to Use Such Result or Means Under an Agreement, and Transfer of an Exclusive Right to Such Result or Means Without an Agreement.

[21] Decree of the Government of the Russian Federation No. 735 dated September 14, 2009, On Approval of the Regulation on Patent and Other Fees for Legally Significant Actions Related to a Patent for a Selection Achievement, State Registration of the Transfer of an Exclusive Right to a Selection Achievement to Other Persons, and Agreements on the Disposal of This Right.

[22] Subclause 4 of Clause 1 of Article 333.30 of the Tax Code.

[23] Resolution of the Intellectual Property Court dated October 17, 2014, No. S01-110/2013 in case No. A40-153965/2012, On Recognizing Trademark Assignment Agreements Invalid and Recognizing Exclusive Rights to Trademarks. The court decided to deny the claim because the plaintiff failed to specify the provision of British Virgin Islands law under which the lack of approval for the challenged agreements would result in their invalidity.

[24] Clause 7 of Article 1211 of the Civil Code.

[25] Subclause 26 of Clause 2 of Article 149 of the Tax Code.

[26] Subclause 26.1 of Clause 2 of Article 149 of the Tax Code.

[27] Letter of the Ministry of Finance of Russia No. 03-07-08/101332 dated November 20, 2020.

[28] Clause 1 of Article 1233 of the Civil Code.

[29] WIPO Copyright Treaty, adopted by the Diplomatic Conference on December 20, 1996.

[30] Resolution of the Intellectual Property Court dated June 15, 2017, No. S01-355/2017 in case No. A76-12830/2015, On Recovering Compensation for Violation of Exclusive Copyright to Licensed Computer Programs. During the court proceedings, it was established that computer programs with signs of being counterfeit were installed on computer hard drives. The plaintiff is the right holder of the software products, whose registration was carried out in accordance with the US Copyright Law. Meanwhile, the USA and Russia are participants in the Berne Convention for the Protection of Literary and Artistic Works. The claim was satisfied due to the confirmation of the fact of unlawful use of computer programs, the exclusive rights to which belong to the plaintiff.

[31] Article 1261 of the Civil Code.

[32] Order of the Ministry of Economic Development of Russia No. 707 dated September 30, 2015, On Approval of the Administrative Regulation for the Provision by the Federal Service for Intellectual Property of the State Service for the State Registration of the Transfer of an Exclusive Right to an Invention, Utility Model, Industrial Design, Trademark, Service Mark, Appellation of Origin of Goods, Registered Topology of an Integrated Circuit, Computer Program, or Database Without an Agreement.

[33] Order of the Ministry of Economic Development of Russia No. 211 dated April 5, 2016, On Approval of the Rules for Filing an Application for State Registration of a Computer Program or Database, the Rules for Drafting Documents Serving as the Basis for Legally Significant Actions for the State Registration of a Computer Program or Database and Their Forms, the Procedure for State Registration of a Computer Program and Database, the List of Information on a Registered Computer Program or Database Published in the Official Bulletin of the Federal Service for Intellectual Property, the List of Information Specified in the Certificate of State Registration of a Computer Program or Database, the Form of the Certificate of State Registration of a Computer Program, and the Form of the Certificate of State Registration of a Database.

[34] Resolution of the Intellectual Property Court dated November 16, 2023, No. S01-1929/2023 in case No. A36-7440/2022, On Recovering Compensation for the Unlawful Use of Computer Programs. According to the software-technical expertise report, software products were found on the computer hard drives that differed from licensed analogs: they operated without the hardware-software (local) protection key provided by the right holder as a protection complex against unauthorized access; documents confirming the right of use were absent. The claim was satisfied due to proof of the use of software in the defendant's activities, the exclusive rights to which belong to the plaintiff, considering the lack of evidence of the lawfulness of using the disputed computer programs.

[35] Federal Law No. 184-FZ dated July 26, 2017, On the Adoption of the Protocol Amending the Agreement on Trade-Related Aspects of Intellectual Property Rights.

[36] Approved by the Resolution of the Presidium of the Intellectual Property Court No. SP-21/26 dated November 18, 2021.