Patents Are Winding Down in Russia

Ordinarily, a deadline that is three months away is normal for patent prosecution. Yet, Russia’s devastating invasion of Ukraine spurred rapid, unexpected Western sanctions that are anything but normal. The U.S. deadline for sanctions on Russia affects more and runs deeper than just about everything before. Because of this, and because sanctions must capture conduct that may be seen as evasive, patent practitioners should review decisions and cases now.

June 23, 2022 is a critical day for U.S. businesses with patents or patent applications in Russia. It is the last day that they may pay anything to the Russian patent office, commonly referred to as Rospatent.[1]

Three months from now may seem like a long way away, but practitioners should beware that this deadline affects filing, search, and other decisions right now, even if a company ends up quitting its Russian patents.

While Rospatent is not a sanctioned entity under the raft of penalties levied by the United States on Russia, and there is no per se prohibition on filing for patents through Rospatent, the lack of a way to pay Rospatent will effectively bar U.S. applicants from filing there. That applies to filing directly or nationalizing through an international PCT application.

Rospatent accepts payments from applicants through the Central Bank of the Russian Federation—a bank specifically targeted with sanctions by the United States and other countries. While sanctions started in late February,[2] certain transactions are permitted a wind down period granted by the U.S. Department of the Treasury. Technically, the wind down period is promulgated by a “general license” and authorizes U.S. persons to pay taxes, fees, import duties, permits, licenses, registrations, and certifications to the Russian central bank provided that they are ordinarily incident and necessary to conduct day-to-day operations in Russia.[3] This presumably encompasses payments for patents. The period expires at 12:01 am EDT, June 24, 2022.[4]

If one wishes to file a patent application in Russia, whether direct or a PCT national phase, one must ensure that the filing payment is processed by Rospatent through its bank before the deadline.

As usual with sanctions, one cannot circumvent them by having a third party, such as a law firm in a neutral country, pay the sanctioned entity on one’s behalf. In fact, the sanction text calls that out, going so far as to separately delineate any transaction that i) “has the purpose of evading or avoiding” the sanctions, or ii) actually “evades or avoids” them.[5] This implies that the latter may be subject to strict liability. Even an absent-minded payment could instigate a troubling criminal prosecution.

Why would anyone want to file a patent in Russia given the present circumstances? One reason is for a foreign patent license. According to Russian patent law, if an invention is conceived in Russia, then the first patent application on the invention must be filed in Russia.[6] This is irrespective of the inventor’s nationality. If a patent is not filed there first and the application is deemed to include “state secret” information, then there may be criminal penalties for the applicant.[7] This could be dangerous for an inventor or employee of the applicant living in Russia.

Russian law broadly and vaguely defines “state secrets” for science and technology achievements, research and development, design works, and know-how as “having an important defense or economic significance and affecting the security of the state.”[8] Conceivably, this definition could be stretched to encompass novel inventions in biotechnology, machine learning, autonomous vehicles, and other rapidly evolving technologies.

After six months from filing a patent application in Russia, Russian law allows it to be filed abroad, even if nothing is heard from Rospatent.[9] Thus, if any inventors on a patent application are located in Russia, a company may wish to file an initial application in Rospatent first to reduce risk to them. At least this is an option before the deadline.

The prohibition on paying Rospatent is not only for filing a patent application, but also for searches conducted in an international PCT application.

A decade ago, Rospatent was promoted in the U.S. as a low cost alternative for an international search authority (ISA). Its ISA fees were almost half those of the Korean Intellectual Property Office (KIPO). Just a few months ago, a colleague and I debated whether to select Rospatent as the ISA for a particularly price-sensitive PCT application. Now, we are glad that we didn’t.

Although an applicant pays PCT search fees through his or her own country’s receiving office or the International Bureau of WIPO, the applicant cannot control when those fees are actually forwarded to the ISA. As of this writing, WIPO has not cut off ties to Rospatent, unlike the European Patent Office or U.S. Patent and Trademark Office.[10] That means that fees from WIPO could be forwarded to Rospatent a month after an applicant pays them, as evidenced by a notification of receipt of search copy in an application, or perhaps after the international search report is rendered three to nine months later.[11]

If an applicant’s payment goes to Rospatent after the June 23 deadline, it may be liable for initiating the transaction.

The same applies if Rospatent is selected for subsequent searching in a PCT application, such as selection as an international preliminary examination authority (IPEA). The IPEA performs searches and examinations in response to Article 34 amendments and arguments made during the chapter 2 international phase.

Maintenance fee payments to Rospatent for issued patents are also prohibited. On Russian patents, maintenance fees start accruing at the third year after filing but do not start being due until grant. Payment prohibitions apply both to patents granted through Rospatent as well as patents granted through the regional Eurasian Patent Organization (EAPO).[12] The EAPO’s banks are not currently sanctioned.[13] However, it forwards patentees’ maintenance fees to Rospatent for Russian patents, so the effect is the same.

Paying an annual maintenance fee with Rospatent before the sanction deadline may extend a patent’s life for another year, but it may be a waste of money. In response to sanctions, the Kremlin recently decreed that patentees from “unfriendly” countries, such as the United States, will not be compensated for unauthorized patent infringement.[14] In effect, it grants a 0%, royalty-free compulsory license for all U.S. applicants’ patents in Russia.

U.S. applicants held about 23,000 patents in force in the Russian Federation as of the latest WIPO data.[15] If the patentees are forbidden to pay Rospatent, and the government has reduced their royalties to zero, then patentees will have little choice but to let their Russian patents expire.

Even if Russia’s war with Ukraine ends quickly, it is likely that U.S. sanctions and Russia’s counter-decrees will last for years. Russia was already on the U.S.’s priority watch list for IP theft.[16] Economic volatility in Russia could last for decades. For companies, the bad taste of suddenly worthless patents and nationalized assets may last a generation.

The winding down of U.S. applicant patents in Russia has begun, and the upcoming June 23 deadline for U.S. sanctions affects practitioner decisions now.