Intellectual Property In Russia To Become Subject Of Antitrust Regulation

Intellectual property in Russia will become a subject of antitrust regulation starting next year, according to recent statements of an official spokesman of the Russian Federal Anti-Monopoly Service (FAS).

According to Igor Artemyev, head of FAS, it is planned that immunity for IP will remain, but will not apply to the transfer of inventions and products that are manufactured with the use of exclusive rights.

Artemyev means that right holders (which have a dominant position in the market) will no longer be able to include in their licensing agreements with buyers of their technologies (products) the terms of sales of their products. That means that right holders will not be able to set their prices and to restrict the number of buyers (contractors), as that will be considered as a violation of the Russian antitrust regulation.

The initiative to extend antitrust regulation to IP rights was first put forward by the FAS at the beginning of the current year. However, at that time it was rejected by the national government.

In addition, it was sharply criticised by companies, which argued that its implementation would significantly deteriorate their working environment in Russia and reduce the return on investments.

However, since that time the initiative of the FAS has received support in the Russian courts, which have taken several decisions finding that the immunity does not apply to the turnover of these products in Russia.

These debates even reached the Russian Supreme Court, which after the consideration of the case of Teva Pharmaceuticals, a well-known drugmaker from Israel (which terminated on a unilateral basis its agreement with Bioteck, its former Russian distributor) decided that companies that have a dominant position in the Russian market should not violate the local antitrust regulations, regardless of their patent rights.

In the meantime, the US technology company Google has faced similar problems. The company insisted that its mobile application has a status of intellectual property, and therefore cannot be a subject of any claims. However, as a result of an investigation conducted by FAS, the latter found that Google’s mobile apps, including stores, should be consider as “products”, while their developer holds a dominant position in the Russian market and abused it.

Google challenged the decision of FAS in court, but lost in the first and second instances.

According to Russian media reports, the latest initiative of the FAS has already been supported by the Russian government, which means that companies will lose their immunity for IP, as soon as their products and inventions are put into transfer.

That also means that even in the case of signing of a licence agreement with a right holder (as well as the approval of selling price by them), prices will be determined by the market after the beginning of sales of these products.

Still, some restrictions in the agreements will remain in effect even after the launch of a product in the market, and in particular those which are related to the conditions of its production, or royalties payable in accordance with the agreement between the sides.

In the meantime, according to Ruslan Bannikov, a well-known Russian lawyer and head of Bannikov and Partners law office, the complete abolition of immunity could really harm right holders, but the decision of the FAS seems like a step in the right direction. However, according to him, the government should understand that the value of patent rights includes the years of development and huge investments in research.

He added in the interview with Intellectual Property Watch that the initiative of FAS may devaluate these investments, and will result in the ability of the Service to withdraw patents.

The FAS proposal has predictably sparked criticism from business. According to analysts of the Russian Association of Industrialists and Entrepreneurs, one of Russia’s leading public associations, which unites leading local businesses, the best way to protect intellectual property is to ensure the stability of the current legislation in this field.

According to them, the new initiative will result in the creation of serious problems for right holders in the promotion and the launch of innovative products in the Russian market, due to the risks of antitrust prosecution from local regulators.

According to Bannikov, the FAS wants to gain control of the intellectual property sphere, but it is always a monopoly by its nature. He has also added that it would be more correct for FAS not to intervene in the regulation of specific contracts and relations between the parties, but to fine monopolists for their actions.