Russia's countermeasures: zero per cent compensation to patent holders from "unfriendly countries"

Please note that these updates do not provide an exhaustive description of the sanctions and countermeasure in place, and they may not be construed as legal advice. Any person or entity involved in business activities in any way related to Russia, should carefully assess whether and how they are affected by the new sanctions. Schjødt's sanctions team is ready to assist in this regard.

• According to Article 1360 of the Russian Civil Code,^[1] in case of extreme necessity related to ensuring the defence and security of the state, the protection of citizens’ life and health, the Russian Government has the right to allow the use of inventions, utility models or industrial sample without a patent holder’s consent by notifying about this as soon as possible and paying a proportional compensation.
• According to the Governmental Order of October 18, 2021 No. 1767,^[2] the amount of such compensation is 0.5 per cent of the actual revenue of the person who has exercised the right to use an invention, utility model or industrial sample without the consent of the patent holder. The compensation is supposed to be annually paid.
• As of March 6, 2022, the compensation mechanism has been amended by the Governmental Order No. 299,^[3] as follows:

"With regard to patent holders, associated with foreign states who commit unfriendly actions against Russian legal entities and individuals (including if such patent holders have citizenship of these states, the place of their registration, the place of their primary business activities or the place of their primary profit from activities are these states), the amount of compensation is 0 percent of the actual revenue of the person who exercised the right to use the invention, utility model or industrial sample without the consent of the patent holder from the production and sale of goods, performance of work and provision of services for the production, performance and provision of which the corresponding invention, utility model or industrial sample was used."

• In this context, for patent holders from "unfriendly countries" (defined not only in terms of where they have citizenship and are registered, but also where they have their place of primary business activities or derive their primary profit), the amount of compensation is reduced to zero per cent (0 %) of actual revenue from the production and sale of goods, the performance of work and the provision of services where a relevant invention, utility model or industrial sample was used. We assume that this would allow the Russian legal entities and individuals who are or will be granted the right to use certain inventions, utility models or industrial sample without the patent holders’ consent, not to pay any compensation to patent holders from "unfriendly countries".

The list of “unfriendly countries” has been approved by the Governmental Order of March 5, 2022 No. 430-p^[4] and currently includes:

• Andorra
• Great Britain (including Bailiwick of Jersey, Anguilla, British Virgin Islands, Gibraltar)
• Member States of the European Union
• Iceland
• Canada
• Liechtenstein
• Micronesia
• Monaco
• New Zealand
• Norway
• The Republic of Korea
• San Marino
• North Macedonia
• Singapore
• United States of America
• Taiwan (China)
• Ukraine
• Montenegro
• Switzerland
• Japan
• For all other countries, the amount of compensation is still 0.5 per cent.

The current situation is very fluid and more measures are expected in the coming days. We will continue to monitor the situation closely.

^{[1] Article 1360 of the Civil Code of the Russian Federation (Part 4) of December 18, 2006.}

^{[2] Order of the Government of Russia "On Approval of the Methodology for Determining the Amount of Compensation Paid to the Patent Holder when Deciding to Use an Invention, Utility Model or Industrial Sample without its Consent, and the Payment Procedure" of October 18, 2021 No. 1767.}

^{[3] Order of the Government of Russia “On an Amendment to Clause 2 of the Methodology for Determining the Amount of Compensation Payable to a Patent Holder When a Decision is Made to Use an Invention, Utility Model or Industrial Sample without its Consent and the Payment Procedure” of March 6, 2022 No.299.}

^{[4] Order of the Government of Russia "On a List of Countries and Territories Committing against Russia, Russian Legal Entities and Individuals Unfriendly Actions" of March 5, 2022 No. 430-p.}