The transfer of rights to foreigners to trademarks and patents may require the approval of the legal commission

It is proposed to extend the special procedure for approving transactions for the sale of interests in foreign companies from “unfriendly” countries leaving the Russian market to rights to intellectual property (IP). This amendment is contained in the draft decree prepared by the Ministry of Industry and Trade. Now a significant part of local Russian brands is controlled by foreign companies – this is fraught with risks of their transfer, including to neighboring countries, such as Kazakhstan, experts note. The need to approve transactions will lead to a reduction in their number, but will simplify the transfer of rights to Russian companies in a number of cases.

Published on regulation.gov.ru, the draft amendments to the decree of the President of the Russian Federation “On additional temporary measures of an economic nature to ensure the financial stability of the Russian Federation”, prepared by the Ministry of Industry and Trade, provide for the extension of a special procedure for transactions of foreign companies from “unfriendly” countries to the alienation or pledge of exclusive rights to results of intellectual activity and means of individualization. IP includes not only brands, but also technologies (in the form of patents and computer programs), as well as copyrights.

Since the adoption of the decree in March 2022, the approval of the government commission for control of foreign investment has been required only for transactions for the sale of shares or shares of such companies (as well as their real estate). The explanatory note to the draft states that the extension of a special regime for approval of transactions should “minimize the risk of unfair law enforcement practices.”

Kommersant’s interlocutors indicate that strengthening control over the transfer of rights to IP objects, on the one hand, is associated with localization plans, including in pharmaceuticals (this requires the purchase of rights to produce drugs), on the other hand, with the legal process surrounding the transfer rights to produce products under trademarks owned by the Carlsberg Group. Let us recall that on October 4, the Danish company, which previously owned Baltika, terminated licensing agreements with it for its brands – this step was a reaction to the transfer of the enterprise to the temporary management of the Federal Property Management Agency.

“The transfer of rights to other companies, including Kazakhstan, allows us to produce products under these brands and supply them to the Russian market. This could affect sales of Baltika itself,” explains Kommersant’s interlocutor on the market. Now foreign companies have the opportunity to seek more favorable terms of the transaction due to the risk of transfer of rights to neighboring countries.

“At the moment, there remains a threat of losing trademarks, patents and other IP objects that are significant for Russia due to unscrupulous actions of third parties from “unfriendly” countries – measures introduced in 2022 to legalize parallel imports in relation to some foreign brands made it possible to restore the influx into the country foreign goods. However, these measures did not prevent third parties from carrying out transactions to alienate and encumber IP objects registered in Russia to the detriment of Russian copyright holders. Foreign companies from “unfriendly” countries could sell exclusive rights to Russian trademarks, patents, software without any restrictions at any price,” explains Alexey Sapozhnikov, managing partner of Sapozhnikov and Partners.

A significant part of local Russian brands is still controlled by foreign companies, notes Alexey Fedoryaka, head of the civil law and litigation practice at Redl and Partners. According to him, there were a lot of transactions with IP objects: when leaving the market, companies had to make a decision – to sell brands to Russian companies or to keep them in order to be able to return. In such cases, Russian dealers and licensees found themselves in a situation of uncertainty with licensing agreements – a foreign company could sell production rights to competitors. This also made it possible to influence the price – to increase or decrease it, the expert says. At the same time, foreign copyright holders had the opportunity to limit Russian copyright holders in writing brand names in Cyrillic if the names were similar.

“In general, it will be more difficult for foreign companies to leave the market – they will have to sell IP rights at a price favorable to the Russian person. At the same time, those companies that were not going to leave anyway are not affected by this decree – nothing changes for them. For those companies that are in line to sell the entire business, along with IP rights, too, the legal commission would still value the trademarks in the value of the company being sold. The changes to the decree will most affect companies that wanted to leave while retaining IP (for example, by transferring IP objects from their Russian subsidiary to a foreign one), adds Alexey Fedoryaka.

Experts interviewed by Kommersant expect that the number of transactions on the transfer of rights will be reduced – the legal commission will approve only transactions that are beneficial to the Russian market. This will also make it more difficult to conclude deals, and the price of foreign trademarks will likely decrease – it will be easier and cheaper for Russian companies to buy them, the same effect had the same effect on the value of company shares. There was also a practice when the parent company accumulated and then issued licenses to factories in Russia; Accordingly, when selling these signs, the need to sell the company itself, “which has nothing,” says a market interlocutor, was lost.

Formally, the change in the decree does not affect investors from “friendly” countries in any way – they can buy and sell Russian assets without the permission of the government commission. The same regime applies to IP – companies can purchase and sell trademarks. In practice, however, restrictions on exiting the market tend to cause concern for anyone wishing to invest in it.

Tatiana Edovina, Oleg Sapozhkov