Russia’s Improving But Precarious IP Environment

On December 6, 2012, the U.S. Congress passed a bill establishing permanent normal trade relations with Russia that will qualify U.S. businesses for enhanced IP protections in Russia based on Russia’s recent World Trade Organization (WTO) accession. Although Russia’s WTO accession provides greater assurances that it will protect foreign IP owners’ rights, its lack of sufficient IP enforcement and political repression continue to make Russia a precarious IP protection environment for foreign exporters and businesses.

Russia’s WTO accession makes Russia more accountable to foreign IP owners based on their acceptance of enhanced international IP commitments. By joining the WTO, Russia is required to adopt minimum international IP protections under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The U.S. and other WTO members will also be able to initiate WTO dispute settlement proceedings against Russia if they fail to live up to their TRIPS commitments. This gives WTO member countries the power to levy punitive tariffs against Russia if Russia is found to be in non-compliance with TRIPS, ultimately giving such countries the ability to indirectly but more effectively enforce their citizens’ IP rights in Russia.

Such protections could not come sooner as Russia has been criticized for failing to uphold international IP rights, which has had substantial economic implications for foreign businesses. The U.S. Trade Representative’s Office placed Russia on its 2012 Priority Watch List for countries failing to sufficiently enforce international IP rights, primarily citing inadequate copyright enforcement. Inadequate enforcement has led to substantial profit losses for foreign businesses, as the International Intellectual Property Alliance reported that unauthorized file sharing in Russia led to over $1 billion in lost profits for domestic and foreign film industries in 2011, while Russia’s pirated software market was last valued in 2010 at $2.8 billion.

Russia has made strides to improve IP enforcement, yet its political repressiveness towards private businesses and personal freedoms should cause concern for IP exporters. Russia has recently passed IP enforcement reforms by establishing specific IP Courts and amending its Criminal Code with new monetary thresholds for criminal copyright infringement, both of which were applauded by industry groups and foreign government agencies. Despite these advances, Russia’s political climate still poses an obstacle to sufficient IP enforcement. The National Security Project, a Washington think tank, identified Russia’s repressive treatment towards private businesses as being a threat to IP rights based on several factors including politically partial judiciaries and arbitrary government prosecution, making businesses unable to adequately protect their IP through the Russian judicial system.

Governmental restrictions on the freedom of speech also pose IP protection concerns as seen in the recent controversy with the female punk rock band Pussy Riot. Earlier this year, members of Pussy Riot were arrested, convicted, and sentenced to two years in prison for “hooliganism” based on song lyrics and videos critical of Russian President Vladimir Putin and the Russian Orthodox Church. While largely overshadowed by the band members’ imprisonment, Russia’s IP authority Rospatent refused to register the band’s name as a trademark based on the mark’s use of the band’s name with its “negative and provocative” suggestiveness. In fairness, the U.S. and other countries prevent trademarks from being registered for scandalous and disparaging content. Yet, the political significance of the band’s speech begs to ask whether Rospatent’s registration refusal was based solely on speech the Russian government found offensive. If such restrictions on IP rights can be placed on its own citizens, there is no indication that foreigners would be immune from similar acts.

So what does Russia’s currently improving but precarious IP protection environment mean for businesses and exporters? Russia’s WTO accession and recent reforms will provide greater protection for foreign IP owners in Russia, yet IP enforcement and political obstacles remain, and should be seriously considered when deciding whether to enter the Russian market.

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