In the wake of Russia’s actions in Ukraine, the European Union has implemented a series of stringent sanctions that have sent ripples through the global business community. These measures have particularly impacted intellectual property (IP), including trademark and community design rights, creating a complex landscape for rights holders and traders to navigate. This article aims to provide a comprehensive overview of the current sanctions and prohibitions affecting IP rights, focusing on the new obligations for EU persons, including specific contractual clauses.

The Evolving Landscape of IP Rights Sanctions

Since February 2022, the EU has progressively tightened their sanctions regimes against Russia and Belarus, significantly restricting commercial activities related to these countries. The scope of these sanctions has expanded to encompass IP rights, with recent measures even affecting transactions that may not have an obvious connection to Russia. This evolving situation necessitates a thorough understanding of the current prohibitions and obligations for IP rights holders.

General IP Rights Prohibitions in EU Sanctions

As of June 24, 2023, the EU has implemented broad prohibitions on the sale, licensing, or transfer of IP rights and trade secrets to Russian entities or for use in Russia. These restrictions apply to EU persons, which include EU-incorporated companies and their branches worldwide, EU nationals regardless of location, and any individual conducting business within the EU. The prohibitions cover a wide range of IP-related activities, including:

• Selling, licensing, or transferring IP rights;
• Granting access to or allowing re-use of material or information protected by IP rights.

These restrictions are particularly far-reaching, as they apply to goods and technologies subject to export restrictions under various articles of the EU Russia Sanctions Regulation and the EU Belarus Sanctions Regulation. The European Commission has provided guidance indicating that these prohibitions should be interpreted broadly, encompassing various forms of IP such as trademarks, designs, patents, copyrights, utility models, and trade secrets.

The “No Use of IP Rights in Relation to Russia” Clause

One of the most significant recent developments is the introduction of Article 12ga in the EU Russia Sanctions Regulation. This provision, set to come into effect soon, mandates that EU persons include a specific contractual clause in agreements related to items on the Common High Priority Items List. This clause must prohibit the use of IP rights related to these items for sale, supply, transfer, or export to Russia, either directly or indirectly.

Key points of this new requirement include:

• The clause must be included in contracts concluded from June 25, 2024, by December 26, 2024
• For contracts concluded before June 25, 2024, the clause must be included by June 26, 2025
• EU persons must report any breaches of these contractual clauses to national competent authorities

This obligation represents a significant shift in IP rights management, as it requires proactive measures even in agreements that may not have an apparent connection to Russia. Failure to include this clause or report breaches could result in civil and/or criminal penalties under relevant Member State laws.

Restrictions on IP Applications and Registrations

From June 25, 2024, EU Regulation 833 will prohibit IP offices and other competent institutions in EU Member States from accepting new applications for registration of various IP rights filed by Russian persons. This includes joint applications where one of the applicants is Russian, even if other applicants are from EU Member States, the EEA, or Switzerland.

While this prohibition applies to new applications, it also extends to new requests related to applications filed before June 25, 2024. This could include requests to amend pending applications, oppositions, or requests for supplementary information. However, requests filed after the registration procedure has been finalized are not subject to this restriction.

New Trademark Application Rules by the Latvian Patent Office

The Latvian Patent Office has unveiled new trademark application regulations to align with international sanctions and protect national interests. Now, individuals who file a new trademark application in Latvia must complete an additional declaration confirming they are not subject to sanctions. This step reinforces Latvia’s dedication to international compliance and maintains the integrity of its trademark registration process.

Prohibitions Related to Listed Entities

EU sanctions regimes include asset freeze measures prohibiting making economic resources (including IP rights) and funds available to designated persons. This effectively bars the transfer, sale, or licensing of IP to such individuals or entities. Additionally, when registering IP rights or handling associated fees, entities must be vigilant not to engage in transactions with designated persons.

The EU has also implemented transaction bans with specific entities, including certain state-owned enterprises. These bans encompass the payment of licensing fees and the granting or renewal of IP licenses.

Best Efforts Obligation for Non-EU Subsidiaries

Article 8a of the EU Russia Sanctions Regulation imposes a “best efforts” obligation on EU persons who own or control non-EU entities. This requires them to ensure that these non-EU entities do not participate in activities that undermine EU sanctions, including IP-related prohibitions.

Recent guidance from the European Commission clarifies that this obligation extends to preventing non-EU subsidiaries from using IP rights to produce sanctioned goods for export to Russia, even if these rights were transferred prior to the adoption of EU sanctions. The Commission expects EU persons to implement measures such as internal compliance programs and sanctions training to ensure awareness and compliance among their non-EU entities.

Navigating the Complex Sanctions Landscape

For EU persons navigating this complex sanctions landscape, several key actions are recommended:

• Thoroughly assess your intellectual property (IP) activities to ensure they don’t involve EU-sanctioned goods or critical items. This includes verifying whether patents, trademarks, or designs are linked to products restricted for political or safety reasons.
• Conduct diligent checks, such as restricted party screening, to confirm no involved parties face EU asset freezes. If a counterparty is sanctioned, halt transactions immediately, seek legal counsel, and secure the necessary licenses for legal compliance or disengagement. This proactive strategy shields your business from legal troubles and preserves its global reputation and ethical standards.
• Establish rigorous procedures to vet all transaction parties, using restricted party screening to avoid dealings with entities on government watchlists or flagged for illegal activities. Before finalizing contracts, ensure no ties to fraud or terrorism exist, safeguarding your business’s legal standing and reputation.
• Assess co-applicants for IP rights in the EU to determine if they are “Russian persons” under new restrictions.
• Ensure non-EU subsidiaries don’t inadvertently violate EU sanctions laws, especially regarding IP rights usage.
• Develop comprehensive sanctions compliance programs to prevent breaches of EU sanctions. These programs should educate and train employees, establish clear protocols, and regularly audit practices. By adopting these measures, businesses can effectively navigate the complex sanctions landscape, minimizing legal risks and maintaining operational integrity.

Conclusion: Vigilance in a Changing Landscape

The intersection of IP rights and international sanctions has created a complex and rapidly evolving regulatory environment. Rights holders and traders must remain vigilant and proactive in their approach to compliance. As the geopolitical situation continues to develop, it is likely that further adjustments to sanctions regimes will follow, potentially introducing new challenges and obligations in the realm of IP rights management.

By staying informed, implementing robust compliance measures, and seeking expert guidance, businesses can navigate these turbulent waters while safeguarding their intellectual property interests and maintaining legal compliance in an increasingly interconnected global marketplace.

Our services focus on assisting you with registering trademarks and community designs in Latvia and across the European Union. If you are applying as an individual rather than a business, you might need to provide additional documents to complete the registration process. We guide you through these steps to ensure a smooth and efficient application process.