Government Commission Will Coordinate Transactions on the Alienation of Intellectual Property of Rightholders from Unfriendly Countries

Earlier we reported on the fact that the Ministry of Industry and Trade of Russia has developed a draft by-law extending a special procedure for the execution of transactions to transactions involving intellectual property objects.

This legislative initiative has been developed. On 20 May the Decree of the Russian President No. 430 “On the Temporary Procedure for Acquiring the Exclusive Rights of Certain Copyright Holders and Fulfilling Monetary Obligations to Certain Foreign Creditors and Persons Controlled by Them” (hereinafter referred to as the “Decree”) was signed and came into force.

The Decree establishes the need to obtain permission from the Government Commission to carry out transactions for the acquisition of exclusive rights to the results of intellectual activity or means of individualization, if:

  • the acquirer under transaction is the Russian Federation, subjects of the Russian Federation, municipalities or Russian residents;

  • the rightholder of the exclusive rights is a person from an unfriendly country1.

Similar rules apply to transactions concluded to secure them – in particular, the conclusion of surety agreements, independent guarantees also require permission from a Government commission.

At the same time, the Government Commission, when approving the transaction, may include in the permission a condition that remuneration and other payments (penalty and other penalties) under the transaction must be credited by the acquirer to a special “O” type account2 opened in Russian bank in rubles in the name of the rightholder. Making payments to such an account will be considered proper fulfillment of obligations to the foreign rightholder. However, to transfer funds from such account to another account of the rightholder (including one opened abroad), a separate permission from the Government Commission will be required.

Following payments must also be credited to the “O” type account:

  • for the execution of transactions for the acquisition of exclusive rights concluded before the entry into force of the Decree, but not executed by that time;

  • for the fulfillment of obligations from independent guarantees and sureties issued to secure transactions that must be executed using an account of type “O”.

It is important to note that the Decree does not apply to transactions involving the alienation of copyrights and many allied rights. Also, the provisions of the Decree will not apply to transactions for which the amount of obligations does not exceed 15 million rubles (including in foreign currency equivalent).

Thus, the list of transactions for which permission from the Government Commission is required is expanding. However, now the question remains what documents and information will be necessary to obtain such a permission, as well as the actions of the rightholder and the acquirer necessary to coordinate the transaction.

The adoption of the Decree is a natural step of the Russian legislator, caused by external sanctions restrictions. Therefore, as we predicted earlier, the changes will primarily block transactions involving the alienation of exclusive rights to trademarks, patents and know-how owned by EU and US companies.

1 The list of unfriendly countries was approved by the Decree of Russian Government dated 5 March 2022 No. 430-r
2 The procedure for opening and making payments through a special “O” type account is regulated by Decree of Russian President dated 27 May 2022 No. 322