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How Western Sanctions on Russia Benefit Chinese Companies: Insights on Chinese IP in Russia

28 May 2024

New fast-changing reality offers new challenges. A number of companies from the so-called “unfriendly countries” have re-considered their trading and other business activities in Russia due to the sanctions imposed by the West and in some cases have announced total termination, winding down or transfer of business in Russia. Doing so they have paved the way for new market players to introduce their brands to the Russian market, especially Chinese automobile brands that have recently occupied significant share of the Russian car market following termination of car-related business by some western brands.

In recent years there have been a lot of rumors and politically motivated speculations about changes in the IP protection landscape in Russia caused by external unfavorable factors. However, up to the present moment, the IP institute continues to work effectively to protect the rights of IP owners from all over the world, making no distinction between the trademark holders. The same applies to the IP owned by Chinese business. All statutory mechanisms for protection and enforcement of rights, both administrative and judicial, remain operational and reflect the invariability of the legal approach and procedures.

It is worth saying that despite the sanction regime adopted towards Russia and some counter measures taken by the Russian Government, the IP owned by foreigners including those from the so-called “unfriendly” countries, not to say about IP owned by persons from the “friendly” countries, especially China, is still securely guaranteed and protected as usual in Russia. The IP applications, including trademark applications, are prosecuted the same way as before without any politically motivated approaches being applied. The same applies to the enforcement of IP rights owned by foreign entities. The Russian law and other local regulations or statutory acts do not contain any restrictions in connection with prosecution and enforcement of IP. Russia remains an active member of various IP related international agreements. Moreover, Russia has just become a contracting party to the Geneva Act of the Lisbon Agreement of international protection of appellations of origin and geographical indications. All these facts clearly demonstrate that IP institute in Russia is developing quite effectively, providing the best IP solutions for the IP owners from all over the world, including those from China. In other words, there should be no concerns about the state of affairs in IP market in Russia. However, that also means that IP owners should pay due attention to their IP protection in Russia, both in terms of securing IP rights and defending those rights against possible infringement using the best practices available by virtue of the current Russian IP laws.

Naturally, when entering a new market with a high-end brand it is worth thinking about its protection first.

Russia is a first-to-file country; thus, trademark protection arises from trademark registration. Currently, it is possible to obtain trademark protection in Russia through national or international trademark filing systems. In terms of trademark examination procedure both systems are basically the same. The Russian PTO carries out examination on absolute and relative grounds ex-officio in respect of applications filed through national or international procedure. The set time period of trademark examination is 12 months. It should be mentioned though that the Russian PTO works hard towards minimizing the terms and at present examination of applications normally lasts about 6 months or even less. Moreover, accelerated examination procedure is available for national filings, which may minimize the trademark examination process to 2 months.

Using a designation without its registration as a trademark entails certain risks.

One of the obvious risks is a risk of trademark infringement, which may be caused by two factors. The first one is existence of prior identical or similar mark for similar goods or services owned by a third party. Of course, it is possible to carry out a trademark clearance search before launching the mark to the market, but the trademark search may not eliminate the infringement risk in full since, for instance, it may not reveal marks filed on a later date claiming convention priority.

Secondly, a trademark may be stolen by a brand squatter and as Russia is a first-to-file country, such possible registration of the trademark will ultimately lead to “infringement” of the trademark rights of the brand squatter.

Further, issues concerning filings that have been made in the name of distributors or local representatives frequently arise. Such filings are not necessarily made in bad faith. Most commonly distributors take proactive approach to protect the brand on the new market. However, such registrations may lead to unpredictable consequences, including the worst-case scenario that the distributors’ agreement is terminated while the trademark remains in the distributor’s name. As the holder of the registration, the distributor could prevent use of the mark by the genuine right holder and import of any product bearing the mark into Russia.

Of course, Russian legislation foresees legal instruments to deal with the marks registered by a local distributor in its name without the true owner’s consent. However, needless to say, that it is in the best interests of the rightful owner to get the mark registered in its name in order to avoid costly and time-consuming procedure for trademark invalidation.

Once the mark matures into registration, the trademark holder enjoys the exclusive right to use the mark and to dispose this right, to include the mark as an intangible asset, to record the mark in the IP Customs Register (thus preventing the unauthorized import of branded goods into Russia) and also to prevent the registration of identical or confusingly similar marks in respect of similar goods or services.

The latter may be achieved by way of filing observation letters (the so-called “informal oppositions”) against third parties’ marks (especially against bad-faith filings).

In first place, the observation letter is used to draw examiner’s attention to prior trademark rights registered in Russia for similar goods or services, but what makes it an indispensable instrument is that it provides the trademark holders with possibilities to point out to other grounds for refusing registration of a designation, apart from existing prior trademark rights, including those that are not verified in the course of examination.

Nevertheless, it should be noted that any proactive measures (such as filing an observation letter) may serve the right holder the good turn, if the trademark owner uses its mark in Russia properly. It is the trademark holder’s obligation to use the mark as registered. If the trademark is not in use within three consecutive years from the date of its registration, it may be terminated in full or in part based on decision of the IP Court upon request of an interested third party.

To conclude, intellectual property protection keeps stable and statutory mechanisms remain fully operational in Russia. Any new trademark that enters the Russian market may become a famous brand and a valuable asset through time, thus it is advisable to treasure it from the very beginning: to obtain timely protection for the mark, to use it properly and to protect it from copycats by means of monitoring of newly filed applications.