You need to know
Raymond Guarnieri:
As the West enacts sanctions and bans the import of Russian oil following its invasion of Ukraine, the Russian Ministry of Economic Development has issued a decree which effectively legalizes patent infringement from anyone affiliated with countries that are unfriendly to the Russian Federation. What does this mean for IP owners around the world? All this and more on today’s episode of Stuff You Should Know About IP.
Raymond Guarnieri:
Dear comrades, Stuff You Should Know About IP is invading the internet with the most imperious of intentions. That is, producing the most engaging content related to intellectual property on the World Wide Web. So if you’re thoroughly amused by our musings on IP, hit that subscribe button wherever you’re listening, and to leave us a comment and share with a comrade. Today’s episode of Stuff You Should Know About IP is brought to you by The Patent Lawyer Magazine. If you want to stay up to date with everything that’s going on in the world of IP and patents, go to www.patentlawyermagazine.com. Each issue is free to read for up to eight weeks. That’s www.patentlawyermagazine.com for global news in the world of patents. Okay, so, Tom.
Thomas Colson:
Ray.
Raymond Guarnieri:
Let’s kick this off.
Thomas Colson:
Yeah. Tell us-
Raymond Guarnieri:
Russia-
Thomas Colson:
Get us started, Ray. Tell us what is going on.
Raymond Guarnieri:
Russia. So-
Thomas Colson:
I’ve heard of-
Raymond Guarnieri:
As we all know dear leader, Vladimir Putin, has invaded the Ukraine. And among all of the really terrible things happening as a result, he’s also essentially legalized patent infringement. And I know there’s been a little bit of debate about exactly what this decree has said. I’ve read a few posts and forums and articles and comments and social media and stuff, but essentially it appears that’s what this decree has done. So, of course, war leads to death and destruction and I don’t want to downplay the human cost of what’s going on whatsoever, but that’s not the nature of this podcast. So, because we should probably stay in our lane, we’re going to talk about this little slice of the story and this decree. So, first of all, just to set the stage here, Russia’s status as a risk for IP theft is not new.
Raymond Guarnieri:
In fact, last year, Russia was listed in a report by the USTR, which is the executive branch of the US government responsible for setting American trade policy, they listed Russia as one of nine countries on a priority watch list for potential IP theft. And the other countries on the list were Argentina, Chile, China, India, Indonesia, Saudi Arabia, Venezuela and, interestingly, the Ukraine. So, now there’s this nice quote in that report that I really like because I think it points to what I believe, and I know you believe, and the listeners of this podcast probably believe are the human costs of IP theft. So, I have this quote, the report said that “intellectual property rights incentivize our creators and innovators to invent new products and technologies. The laws, policies and practices that protect those rights must appropriately balance the interests of creators with those seeking to use their creations and failing to adequately and effectively protect those rights in foreign markets hurts the US economy, the dynamism of American innovators and the livelihoods of our workers.” So nice-
Thomas Colson:
Right. Good overview. Right.
Raymond Guarnieri:
Kind of little bit fluffy words, but it’s really true. We have to have a system that protects our rights and without that, we lose money, we lose the incentive to make better, faster, more cost effective technologies. And, unfortunately, one of the things about war is it tends to cause a breakdown in systems and in the overall orderliness of the world. And, as some of our millions of listeners might already know, that this isn’t necessarily unprecedented in times of war. And even in times of where there’s not a hot war, and I know we’ve talked about this a lot in the past, Tom, where people tend to forget that not everyone is innocent of intellectual property theft. And I know you know some good stories about this.
Thomas Colson:
Well, the thing that’s scary about this is back in the ’90s, I used to get engaged by the Chinese government now and again to go there with a bunch of IP experts and help them build more robust and enforceable IP systems because they wanted to be known as an IP protector so that people would feel comfortable investing there. So, allowing the free reign of intellectual property thieves is not good for the US, it’s that good for even the countries that are allowing the theft, because people don’t want to invest there. So, when I heard at one of the things Russia was doing was seizing patent rights… And, really, what that means is not enforcing patent rights, because patents are out there already, everybody already knows what they are. So, you’re not really seizing them, you’re really just saying, we’re not going to enforce them.
Raymond Guarnieri:
Yeah.
Thomas Colson:
Now, there’s other IP rights, too, like trademarks. And just to give a little bit of broad picture here, what’s happening is there is an economic war going on. There’s a physical war going on in the Ukraine, but we and the rest of Europe are engaged in an economic war with Russia and we are shutting them out of all kinds of systems that they need and we’re seizing assets. So, if you think of IP as an asset, seizing assets, both sides are doing it. I’m sure you know, Ray, how many super yachts have we seized of Russian oligarchs? How many private jets have we seized? How many resort areas have we seized? We’re seizing stuff and then we shut…
Thomas Colson:
See, so here’s the other thing that’s crazy about this. As we become more globalized, you think that sanctions get harder because everybody trades with everybody. But they’ve actually become easier if you happen to be the US, because us and Europe essentially control this SWIFT system, which is really the way that people do international transactions connected to banks. So, we shut them out of the SWIFT system, so now we’re taking their yachts, taking their boats or their private planes, seizing all the assets of their rich people, their oligarchs, who really control the government. Believe me, there’s political science people that would freak out if they heard me say this, but I’m going to really simplify it. Dictatorships are not controlled by one person, they’re controlled by a bunch of rich people, they’re called oligarchs. In fact, there’s a term called an oligarchy, which is essentially a government run by a whole bunch of rich people.
Thomas Colson:
And that’s probably what’s going on in Russia, so by seizing all their assets, we’re making them suffer from being in this war and maybe they go back to the government. So, the oligarchs have power, but the government has the military. So , maybe that gets them and Russia to stop fighting. So, Russia is doing the same thing, but what do they have to seize? Essentially two things. They have businesses that are doing business from all around the world in Russia, like McDonald’s, Microsoft, Apple, Ikea, Toyota, Shell. All of these companies have enterprises in Russia. And what Putin’s saying is he’s going to seize those. So, now imagine you’re a franchisee for McDonald’s and you’re paying your fees back to the parent company in the US. And all of a sudden these companies pull out, they close down operations, so your store is closed.
Thomas Colson:
But, what Putin’s saying is open back up because you’re in business again. McDonald’s is open for business in Russia because we are not enforcing trademark infringement, which means you could have a McDonald’s in Russia and use their trademark with no penalties. So, all these businesses that are pulling out, he’s saying, we’re going to turn them back in. And then Putin said an interesting thing, which is it’s going to be really hard for you to get back in. The reason I think that’s interesting is he’s kind of saying when this is over, we’re going to be doing business again, so we’ll let you back in, but it’s going to be really hard. And this is comparable. Ray, do you remember a podcast we did a few weeks ago about Wendy’s?
Raymond Guarnieri:
Yeah. Yeah.
Thomas Colson:
Right. What happened there? Remind us what happened with Wendy’s in Benelux region.
Raymond Guarnieri:
So, there’s a gentleman, whose name I believe was also Raymond, he has a fish and chips restaurant, I think it’s just one location, in the Netherlands called Wendy’s.
Thomas Colson:
Right.
Raymond Guarnieri:
And he, I think, had either registered trademark or because it had been in use for so long it-
Thomas Colson:
Or both.
Raymond Guarnieri:
Or both, was able to prevent Wendy’s, the American burger chain, from using that trademark in the Netherlands.
Thomas Colson:
Which is effectively kept Wendy’s out with respect to using their trademark. But, here’s the rest of the story. Wendy’s did have a trademark in the Benelux region. They left, they pulled out in like the 19… By the way, they all also were in Russia and they were in the UK. They pulled out because of business reasons and when you pull out within a certain period of time, other people could take your trademark, you’ve effectively abandoned it. So, I did a little quick, like very quick, research on Russian law, 30 seconds on Google. Essentially, if somebody opposes a trademark in Russia, it can be canceled based upon the failure of the trademark owner to use the mark in Russia for three years.
Thomas Colson:
So, if you’re in Russia, you’re doing business you’re Wendy’s, which Wendy’s did, by the way. Wendy’s was doing business in Russia, then they pulled out and you lose your trademark rights. So, Putin might have this mentality. You’re pulling out, we are protecting your trademarks in Russia, McDonald’s, Burger King, Starbucks, whoever, but you are affirmatively pulling out. Now their law says you have to be out for three years, but maybe that’s the concept he’s saying, Hey, you’re pulling out. We still want a McDonald’s here. You’re pulling out, so we’re going to now basically take your trademark and make it available to whoever wants it, which just happens to be all these store owners that were doing business yesterday. And if it wasn’t for McDonald’s shutting them down, they could be in business again tomorrow. Maybe they’d have to buy their own beef and stuff or whatever it is that they need to run a McDonald’s.
Thomas Colson:
But, we talked about this, as well, Ray. They’re seizing assets, we’re seizing assets.Theirs happen to be intellectual property assets because we have a lot of IP. How many Russian named trademarks can you name in the US? And, by the way, we didn’t prep this so I didn’t give you any advanced warning.
Raymond Guarnieri:
The only one I could think of would be Lukoil, I think is Russian.
Thomas Colson:
Yeah. Is Smirnoff Russian?
Raymond Guarnieri:
I think Smirnoff’s made in the US.
Thomas Colson:
No, but is it… Oh yeah.
Raymond Guarnieri:
I mean, it’s a Russian sounding trademark.
Thomas Colson:
Right, but the point is-
Raymond Guarnieri:
I’m pretty sure it’s an American company.
Thomas Colson:
We’re out there in the marketplace every day and we can’t even think of any-
Raymond Guarnieri:
Right, right.
Thomas Colson:
Russian trademarks to seize. But, let’s go back in time to 1917. I think it was April of 1917 when the US joined the World War I, which I think was called the World War at the time. But, there’s a company called Bayer, which we know and love, and Bayer had a trademark on Bayer because they were the first company to figure out how to use this drug without making your stomach upset. And they got a trademark and it was in the US, as well. And then, in 1917, the US seized that trademark.
Raymond Guarnieri:
Yeah.
Thomas Colson:
Okay. Sounds familiar, doesn’t it? Familiar. So, the US seized the trademark and then we took that asset and we sold it. So, we had a forfeiture to seize the asset and Bayer’s other assets, because they were a German company, we sold it to a company called Sterling Products, ultimately called Sterling Winthrop. So, we sold it for $5.3 million and at the time, that was a lot of money. So, we sold it, we took their asset, their trademark, and we sold it and we collected $5.3 million. The rest of that story is, over time, Bayer bought up a bunch of other companies and ultimately, in 1994, they bought Sterling Winthrop’s over-the-counter business and they got their trademark back in 1994. Think about that.
Raymond Guarnieri:
Yeah.
Thomas Colson:
So, this is what happened-
Raymond Guarnieri:
50 years, right?
Thomas Colson:
What’s that?
Raymond Guarnieri:
50 years later.
Thomas Colson:
Yeah. Oh, well, actually 70 years later, because it was 1917. I think we seized it.
Raymond Guarnieri:
Oh, 1917. First World War.
Thomas Colson:
First World War, right. So, ultimately this war, hopefully it’s going to end soon, hopefully something good is going to ultimately happen that this thing ends and the world comes back to normal again. And when the world comes back to normal, the McDonald’s and all those companies, maybe, eventually, will be back in Russia. And as Putin said, it’s going to be hard to get back, but I get the feeling that they’re kind of seizing these assets, sort of, these trademarks. They’re letting people use the assets, but are they ultimately going to hold onto them permanently? Basically, if Putin decides, if their government decides, that they’re out the world system, they’re not going to be part of the system anymore, then they’re not going to enforce trademarks, but it’s going to be a totally different world then. But, if the world re normalizes again, ultimately, these trademarks and patents eventually will be enforced again, you’d think.
Raymond Guarnieri:
Right. Well, it might be kind of hard depending on how long these companies stay out. Because after a few years-
Thomas Colson:
After three years, apparently, it’s legal to take the trademark away.
Raymond Guarnieri:
And, then, even if the war doesn’t last that long, but if it takes, say three years, the war and then McDonald’s isn’t in Russia for 10 more for whatever reason and then they decide to come back, you’re going to have a half a generation of Russian consumers who are used to having, I don’t know, Goulash at McDonald’s-
Thomas Colson:
McDonald’s .
Raymond Guarnieri:
That’s not McDonald’s anymore.
Thomas Colson:
Yeah. And then the question will be-
Raymond Guarnieri:
But, that was McDonald’s under-
Thomas Colson:
But what if it is still McDonald’s, and here’s what I mean. What if these operators just open back up tomorrow as McDonald’s and they already know how to make the stuff, right?
Raymond Guarnieri:
Yeah, right.
Thomas Colson:
They make it everyday.
Raymond Guarnieri:
You’re saying they don’t change anything.
Thomas Colson:
Yeah. So, that will be awkward because now it’s not like there’s no McDonald’s, there’s been McDonald’s the whole time. So, even though the owners pulled out, I guess the question is, do they lose rights to the trademark? They’re saying, Look, we’re not collecting fees, but we still own it. It’s going to be a complicated IP situation.
Raymond Guarnieri:
Yeah. Yeah, well-
Thomas Colson:
Yeah. And by the way, another thing that I found that’s interesting about these asset forfeitures is we don’t actually get the assets to keep. We’re seizing them, these yachts and planes and bank accounts in other countries, but we don’t get the money. We have to actually go through a civil forfeiture proceeding and the prosecution must demonstrate that the asset was involved in a crime. So, these planes and yachts and all this stuff, we freeze them so they can’t use them, so they have no access, and bank accounts in particular, they don’t have any access to their cash, but, at the end of it all, there’s going to have to be a court proceeding. And, that’s probably the big difference between us and them is that we are freezing assets, we’re not keeping the assets. They are arguably saying that they’re taking them and they’re going to start using them.
Thomas Colson:
In fact, one of the problems we have with the seizing of assets is we have to maintain them. I was reading one article about how expensive it is. We’re seizing resort areas and these are like $250 million yachts. I think one off of Italy or something is $550 million yachts. These cost a lot of money to maintain. So, I don’t think they’re doing the same thing in Russia. We’re talking about assets, we’re talking about, oh, they have planes, they seized $2 billion worth of foreign leasing companies planes, Boeing and Airbus. Did you know that?
Raymond Guarnieri:
No, I didn’t know that.
Thomas Colson:
Yeah. So, years ago, apparently Russia made their own planes, but it just wasn’t cost effective anymore so all their airlines have been buying from Boeing and Airbus, like everybody else in the world. So, there’s these companies that buy the planes from Boeing and Airbus, then lease them to the airlines in Russia. And, apparently, they have 500 planes, these are jets, these are not like little pop planes, these are jets that we would go on.
Raymond Guarnieri:
Yeah, commercial planes.
Thomas Colson:
So, they have 500 planes that are leased to Russian airlines, 480 of which are in Russia. They can’t seize them, they can’t get them back and, apparently, by the end of the month, they’re going to be like defaulting on all these planes, but it’s like the old Iron Curtain. This is like the Soviet Iron Curtain, if it’s in Russia, you can’t seize them. In fact, seizing these things has become such a thing that the Biden administration has created this thing they call the… Or no, I think it’s a Republican bill, it’s a vigilante bill and it’s enabling private citizens to go out and seize Russian assets wherever they are. And, you’re protected from penalties, but if you get caught, you could be imprisoned. So, these are seriously brave, super supers hero type people that are going out and seizing planes-
Raymond Guarnieri:
Like dogs, the bounty here, but on steroids.
Thomas Colson:
Except instead of getting a guy in handcuffs, they’re flying a jet out.
Raymond Guarnieri:
Right, yeah.
Thomas Colson:
Or, they’re driving a $250 million yacht out. So, this is a war. It’s not a shooting war for us, we’re not dying there, but we are in an economic war. And, apparently, the pace at which we brought this economic war to bear is unprecedented. Like, we did this in Iran, but I think Russia is the 11th largest economy in the world and they’re a superpower with nukes. Right?
Raymond Guarnieri:
Yeah.
Thomas Colson:
It’s a very different situation. But trademarks are going to be a really interesting thing when this if, we pray this thing ends. And if it ends, maybe we’re back in business with Russians again, and maybe McDonald’s is back in Russia. We got to believe that the world’s going to come back to normal.
Raymond Guarnieri:
Right.
Thomas Colson:
And if it does, it’s going to be a very awkward situation with these trademarks depending upon how long it goes.
Raymond Guarnieri:
Right. Well, I hope that you, our dear listeners, have enjoyed listening to us muse about the IP implications of the Russian invasion of Ukraine. It certainly is interesting from a legal perspective and we’ll just have to see what happens. Let’s hope for this reason, and many more, that this comes to a swift conclusion. So, if you enjoyed this, please leave your comments below, hit the share button, like wherever you are, and don’t forget to subscribe and we’ll see you next time.
