Prohibited Activities
On February 28, 2022, the Department of the Treasury initiated prohibitions related to transactions involving certain financial institutions in Russia, including the Central Bank of the Russian Federation.1 The directive specifically prohibits a United States person (unless otherwise excepted or licensed) from engaging in any transaction involving the listed financial institutions, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities. Under the directive, the prohibitions are specifically worded to include: (1) any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions of the directive; and (2) any conspiracy formed to violate any of the prohibitions of the directive.
Notably, the prohibited activities do not expressly prevent any transactions of a U.S. person with Rospatent. And although the United States Patent and Trademark Office (USPTO) has cut off direct engagement with Rospatent for carrying out activities such as use of the Global Patent Prosecution Highway (GPPH) program2, Rospatent is not currently a sanctioned entity under the directive. This, however, is essentially a distinction without a difference. Moreover, since the USPTO (and also the European Patent Office) has already cut ties with Rospatent, there still remains the possibility that Rospatent itself will be added to the sanctions at a future date and thus completely eliminate any pursuits by U.S. persons with Rospatent.
The current sanctions directly affect entities seeking patent protection in Russia since payments of required fees related to patent applications and granted patents in Russia are processed through the Central Bank of the Russian Federation. This includes a number of financial transactions, such as payment of government filings fees for directly filing a patent application in Russia or filing a national phase of an international PCT application in Russia, as well as incidental fees incurred during prosecution of pending Russian patent applications and payment of yearly maintenance fees for issued Russian patents. This would also include payment of yearly maintenance fees for patents obtained through the Eurasian Patent Organization (EAPO) and maintained in Russia since such fees paid to the EAPO must be forwarded to Rospatent. Because of the intertwining of Rospatent with the Central Bank of the Russian Federation, any fees paid to Rospatent must be considered equivalent to making a transaction through said bank.
Patent prosecution in Rospatent requires engagement with a Russian patent practitioner. While U.S. entities pursuing patent interests in Russia are unlikely to directly engage Rospatent and pay fees that are ultimately processed through the prohibited bank, it is clear from the directive that strategies, such as routing payments through countries that are neutral in relation to sanctions, are prohibited. As noted above, the directive prohibits any transaction that actually “evades or avoids” the other prohibitions of the directive, as wells as any transaction that “has the purpose of evading or avoiding” the other prohibitions. This language appears to have the potential to ensnare purposeful non-adherence as well as actions that unwittingly end in non-adherence (e.g., forgetting to discontinue an automated payment of a patent maintenance fee to Rospatent).
Deadline for Administrative Transactions
U.S. entities still have time to complete administrative transactions with Rospatent despite the February implementation of the directive. On March 2, 2022, the Department of the Treasury issued a general license authorizing certain transactions that are otherwise prohibited by the directive.3 The license authorizes U.S. persons to pay taxes, fees, or import duties, and purchase or receive permits, licenses, registrations or certifications to the extent such transactions are prohibited under the directive, provided such transactions are ordinarily incident and necessary to such persons’ day-to-day operations in the Russian Federation. For at least U.S. entities whose day-to-day operations include securing and maintaining intellectual property, including in Russia, this license provides a window to complete activities and avoid violation of the directive. Currently, the transaction window provided under the license runs through 12:01 a.m. eastern daylight time on June 24, 2022.
Forming a Russian Patent Strategy
The incursion of Russia into Ukraine has been underway for shortly more than one month, but there is no way to know when hostilities may cease. Moreover, even when peace is achieved, it is impossible to know how long the current sanctions against Russia may continue. Those familiar with patent law know that the business of obtaining patents is a deadline-driven venture, and uncertainty of time quickly breaks apart the paradigm. A “wait and see” approach thus has the potential to result in a loss of patent rights as well as possible liability for knowingly or unknowingly engaging in activities that are prohibited under the directive. Anyone engaged in patent activities in Russia thus would be advised to undertake a portfolio review and utilize the time remaining under the General License to form a plan that ensures compliance with the current sanctions. This can include at least the following items.
Anyone engaged in patent activities in Russia thus would be advised to undertake a portfolio review and utilize the time remaining under the General License to form a plan that ensures compliance with the current sanctions.