Possible new restrictions concerning intellectual property for companies from "unfriendly" states

In December 2023, the Ministry of Industry and Trade developed a draft Executive Order of the President of the Russian Federation (hereinafter - the "Draft Order"), which will amend Presidential Executive Order No. 81 dd. 1 March 2022 "On additional temporary economic measures to ensure the financial stability of the Russian Federation".

A special procedure for transactions approval

Pursuant to the Draft Order, a special procedure for approving transactions between residents and foreign persons (entities) from "unfriendly" states and the persons (entities) they control applies to transactions, involving the alienation of intellectual property rights or their pledge. A special procedure for approving a transaction involves obtaining permission from the Government Commission, similar to the existing permits for deals with shares in Russian companies and real estate deals. To prepare for the adoption of the Draft Order, the Ministry of Industry and Trade has already submitted to the Government a draft Order of the Government of the Russian Federation approving the procedure for issuing such permits by the Government Commission.

Currently, the Draft Order is undergoing an anti-corruption examination. The probability of its adoption in the near future is high. If the Draft Order is adopted, it will enter into force immediately from the moment of publication.

Risks for foreign companies

At present, Russian companies with foreign participation may consider the transfer of rights to trademarks and other intellectual property objects to parent companies due to the cease of their business activities in Russia.

It should be considered that at the moment neither the deadlines for the Commission's decision nor the reasons for refusal have been set. Also, it is not yet known which criteria for approving transactions shall be applied by the Government Commission. We cannot exclude that conditions similar to those currently in force will apply for the approval of deals with shares in Russian companies and real estate deals (in particular, sale with a 50% discount and payment of a 15% special contribution to the budget of the Russian Federation). After the adoption of the Draft Order, foreign companies that plan the mentioned deals may also face difficulties, such as a long decision-making period to approve the deal or its refusal.

What should Russian and foreign companies do

We recommend taking the following actions to avoid the above mentioned risks:

• Evaluate the existing intellectual property rights, primarily trademarks, and the expediency of transferring the rights to these objects to the parent company or its Russian subsidiary;
• Arrange deals with intellectual property objects in the near future between companies from “unfriendly” states and residents of the Russian Federation, including (if applicable) the process of registration of alienation of intellectual property objects in Rospatent;
• Consider new possible requirements for the approval of deals while planning future deals with intellectual property.