The Overlap Between Intellectual Property Laws and Competition Laws in the Russian Federation

Anne Wright Fiero

The relationship between intellectual property laws and competition laws is no stranger to debate. In the Russian Federation, as in the United States, the long-term goal of both systems is to benefit the consumer by ensuring free and fair competition and by encouraging investment and innovation in new technologies.¹ However, an inherent tension also exists between laws that may grant monopoly power to intellectual property holders and laws that restrict the exercise of that monopoly power.

Brief Overview of Russian Intellectual Property and Competition Laws

Russia amended its intellectual property laws in 2006 (effective January 1, 2008), consolidating them into the Russian Federation Civil Code. See supra, n. 2 (“Civil Code (Part Four)”). The latest iteration of intellectual property law provides for the private, exclusive ownership of intellectual activity, which includes the “individualization of legal persons, goods, works, and services.” Civil Code (Part Four),art. 1225 (defining intellectual property, also known in Russia as industrial property); id., art. 1229 (discussing grant of private ownership over intellectual and industrial property rights). The Russian intellectual property system is based on a first to file rule (not the first to invent or use system of U.S. law), meaning that priority is given to an intellectual property right based on the date an application to register that right is filed with “the appropriate Federal executive authority on intellectual property”. Id., arts. 1350(2), 1381, 1494; see also S. Budylin and Y. Osipova, Total Upgrade: Intellectual Property Law Reform in Russia, 1 Col. E. Eur. LJ 1, 19 (2007).

The Federal Service for Intellectual Property, Patents and Trademarks, known as ROSPATENT, is responsible for administering intellectual property laws in the Russian Federation. In recent years, ROSPATENT has worked more closely with the Federal Antimonopoly Service (known as “FAS”), the government entity tasked with ensuring the freedom of economic activity and creating conditions favorable to the “effective functioning” of the markets. See supra, n. 2 (“Competition Law”), Ch. 1, art. 1. On April 9, 2010, the two entered into an “Agreement of Cooperation”, promising to work jointly on: stimulating competition, encouraging innovation, sharing information, and developing amendments to Russia’s Competition Law with a focus on the protection of intellectual property rights. See http://www.fips.ru.sitedocs/ rp_fas.pdf (text of Agreement of Cooperation (in Russian)).

Russia implemented its current Competition Law in 2006 (effective July of 2009), with a primary focus on dominant control (i.e., monopolization), concerted action, and unfair competition. Competition Law, art. 1. Recent amendments include the extension of the Competition Law to activity occurring outside Russia², a lower market share threshold needed to establish “dominant” market control, and expanded investigatory powers of the FAS. Id., arts. 5.1(1), 5.61, 25.2, 25.3 and 25.4.

Overlap Between the Laws

Russian Competition Law addresses intellectual property rights. For example, Article 14 (generally prohibiting unfair competition), bars the illegal use or exploitation of intellectual property. Specifically, it prohibits the sale, exchange or other way of input of a commodity into circulation if there was illegal use of the results of intellectual activity and equalized to them means of individualization of a legal person, means of individualization of production, works [or] services.

Competition Law, art. 14.1(4) (emphasis added).

Since the Competition Law was amended, FAS has barred a handful of activities arising under this unfair competition clause.³ In the last two years, FAS not only issued terminating directions, but also imposed severe fines in connection with various trademark violations. See, e.g., FAS Press Release of 16 February 2011, available at: http://www.en.fas.gov.ru/ news/news_31216.html (discussing Federal Arbitration Court of Moscow confirmation of FAS $348M Ruble fine against MOEK OJSC for violating, in part, unfair competition provisions in Part 1; Article 14); FAS Press Release of 21 January 2011, available at: http://www.en.fas.gov.ru/ news/news_31170.html (decision of Saratov Regional Arbitration Court upholding decision against “Chisty Gorod” Ltd. based on violations of Article 14); FAS Press Release of 23 April 2009, available at: http://www.fas. gov.ru/english /news/n_23734.shtml (direction to terminate based on confusing use of marks in the sale of sausage products); FAS Press Release of 19 May 2009, available at http://www.fas.gov.ru /english/news/ n_27930.shtml (The FAS also issued a Directive to Terminate Infringement, and imposed a 7,132,643 RUB fine (approximately $235,000), against the Bank of Moscow, based on the bank’s improper use of the name “Sochi 2014” in connection with one of its mutual funds).

Competition Law also prohibits the abuse of a dominant market position, but clearly exempts the exercise of exclusive intellectual property rights:

[the] [r]equirements of this Article are not extended over the actions on implementation of exclusive rights for the results of intellectual activity and equalized to them means of individualization of a legal person, means of individualization of production, executed works or rendered services.

Competition Law, art. 10.4 (emphasis added).

Although it is not totally clear how FAS, or the Russian courts, will interpret this exemption, it is not likely that intellectual property holders will enjoy a blanket antitrust exemption. FAS has increased, not decreased, its scrutiny over dominant market players, including those holding private intellectual property rights, and has proposed heightened penalties for those misusing intellectual property rights. See, e.g., supra, n. 7; see also FAS Press Release of 7 April 2009, available at: http://www.fas.gov.ru/english/news /n_23326.shtml (concerning FAS Order No. 193, dated3 April 2009, adding 10 pharmaceutical companies to FAS “Register of Economic Entities” whose share of the relevant market exceeds 35%); cf. Competition Law, art. 5.61 (allowing for proof of dominant control with less than 35% of the market when, among other things, competitors face high market barriers due to technological restrictions (such as exclusive patent rights)); see also gazeta.ru/culture/2010/07/22/a-3400407.shtml (discussing imposition of 7.6 million ruble fine (approximately $250,000 M) against publisher – more than its total annual revenue – in connection with copyright infringement of well-known Russian science fiction writer’s works) (in Russian).⁴

Russian intellectual property legislation also contemplates an intersection with Competition Law. It provides, for example, that the legal protection afforded to the holder of a trademark can be invalidated if the holder abuses his right and/or engages in unfair competition. Civil Code (Part Four),art. 1512.2(6); cf. Competition Law, art. 14.1(4) (generally barring the illegal use of any form of intellectual property as unfair competition). No similar grounds currently exist for invalidation of copyright or patent rights based on misuse or unfair competition.⁵

Conclusion

The extent of the overlap between Russian intellectual property laws and Russian Competition Law remains an open question. Russia is clearly focused on adopting practices and policies that will position the country as a global market player. Recent joint action by the FAS and ROSPATENT also suggests that the two agencies will work in tandem to develop laws that are more consistent with international standards, and complementary to both competition and innovation.

1 See, e.g., Grazhdanskiy Kodeks RF [GK] [Civil Code], Part Four (Russ.), Federal Law No. 230-FZ, 18 December 2006, 289 Rossiiskaia Gazeta 25 (2006) (effective 1 January 2008) (“Civil Code (Part Four)”), art. 1229; Law on Protection of Competition, No. 135-FZ, 26 October 2006, 31 SZ RF (Part 1), item 3434 (amended 17 July 2009) (“Competition Law”), Ch. 1, art. 1.

  

2 Provisions of the Competition Law are applicable to agreements reached outside of Russia and/or to people or entities doing business outside of Russia, if the impact

“affect[s] the state of competition in the Russian Federation.” Competition Law, art. 3. The FAS determines, in its discretion, whether activity restricts competition within the Russian Federation. Id., art. 3, comments.

3 In 2006, for example, FAS issued a “Direction to Terminate Infringement” to the company OOO, based on evidence that the company was infringing another’s copyright and/or authorship rights through the sale of counterfeit DVDs. Report of FAS on Competition Policy in 2006, available at http://www.fas.gov.ru/english /decisions/15843.shtml. In 2007, FAS issued similar Instructions to Terminate Trademark Violations to: (1) Ladoga Industrial Group (for using a birch tree logo confusingly similar to a registered trademark), and (2) KhimExpo (for using product labeling confusingly similar to a registered trademark). See FAS Press Releases of 13 March 2007, available at http://www.fas. gov.ru/english/news/n_11642.shtml and http://www.fas.gov.ru/english /news/n_11618.shtml. In 2008, FAS likewise issued Directions to Terminate Trademark Violations to: (1) Master Beverages Industries PTE, Ltd. (for using a confusingly similar product label) and (2) Delphin Industries (for using confusingly similar labels on its oil products). See FAS Press Releases of 12 December 2008 and 11 December 2008, available at: http://www.fas.gov .ru/english /news /n _21469.shtml and http://www.fas. gov.ru/english/news/n_21487.shtml.

4 The Economic Registry has some consequences for merger control (including heightened duties to notify FAS concerning board or leadership changes), and it allows the FAS to more closely monitor a listed entity for potential monopolistic behavior, but otherwise entry on the Registry imposes no specific duties or consequences.

5 ROSPATENT has proposed amendments to the Civil Code concerning the early termination of trademark and patent rights, but those draft regulations do not, as yet, provide for early termination or nullification of a patent based on its use in “unfair competition”. See http://www1.fips.ru/wps/wcm/connect/eeab8a004bfda528a5ebddoc7e 0eb6d/reg_nedystv.pdf?MOD=AJPERES (text of proposed Administrative Rules (in Russian)). Nevertheless, ROSPATENT has recently invalidated a patent based on conduct that, at least in part, the FAS had found to be a violation of Competition Law, art. 11.1(8) (prohibiting concerted practices that may lead to high barriers to entry created by exclusive patent rights). See FAS Press Release of 10 February 2009, available at: http://www .fas.gov.ru/english /news/n 22115.shtml (invalidating Elektroapparat patent based on, among other things, improper use and marketing of patents). As the cooperation between these agencies continues to improve, actions against intellectual property holders who engage in unfair competition may increasingly be grounded not just in Competition Law, but in the intellectual property laws as well.