At the crossroads of IP and Russia sanctions: what IP Rights holders need to know

Overview of EU and UK sanctions applying to IP rights and trade secrets

EU and UK sanctions against Russia and Belarus introduced since February 2022 have restricted large amounts of commercial activities related, be it directly or indirectly, to Russia and Belarus.

Increasingly, specifically within the EU, new restrictions have been introduced which further impact holders of IP rights and trade secrets, sometimes even where there is no connection to Russia. Below we have included an overview of EU and UK sanctions which impact IP rights and trade secrets, including the newer EU measures that require EU persons to include contractual clauses prohibiting the onward sale, licensing or transfers of IP to Russia for certain goods.

1. General IP rights prohibitions on the sale, licensing, or transfer of IP rights related to certain items to Russia (EU sanctions)

From 24 June 2023, EU persons (which includes companies incorporated in the EU and their branches wherever located, EU nationals wherever located, and any person conducting activity within the EU) have been prohibited from:

• selling, licensing, or transferring in any other way, IP rights or trade secrets;
• granting rights to access or re-use any material or information protected by means of IP rights or constituting trade secrets,

to any natural or legal person, entity or body in Russia or for use in Russia when related to:

• goods and technologies which are subject to export restrictions under 
  • Articles 2, 2a, 2aa, 3, 3b, 3c, 3f, 3h and 3k of the Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine (the “EU Russia Sanctions Regulation”); and
  • Articles 1ba, 1bb, 1e, 1f, 1fd, 1ga, 1gc, and 1sa of the Council Regulation (EC) No 765/2006 of 18 May 2006 concerning restrictive measures in view of the situation in Belarus and the involvement of Belarus in the Russian aggression against Ukraine (the “EU Belarus Sanctions Regulation”); or
• the provision, manufacture, maintenance and use of those goods and technology.

The EU Commission defines IP rights broadly and has confirmed in its (non-binding) FAQs on IP rights sanctions (last updated on 5 November 2024) that these restrictions should be broadly interpretated, such that the terms ‘IP rights’ and ‘trade secrets’ should, for example, encompass trademarks, designs, patents, copyrights or utility models.

These are wide-ranging prohibitions, not just restricting the sale of IP rights and trade secrets specifically, but also any transaction where IP rights or trade secrets are in fact directly or indirectly made available to or for use in Russia. For instance, according to the EU Commission's FAQs on sanctions targeting IP rights, "selling trade marks or patents as well as sharing a trade secret with a third country operator while knowing, suspecting or accepting the risk that those IPRs or trade secrets will be used to manufacture restricted goods destined for Russia" is restricted. As would be "granting access to data covered by copyright to obtain regulatory registrations or any other licenses, including in third countries, to manufacture restricted technology or goods which will be used in Russia".

2. "No use of IP rights in relation to Russia" clause (EU sanctions)

This measure, laid-down by Article 12ga of EU Russia Sanctions Regulation, which is coming into force in the coming weeks, requires all EU persons to include a contractual clause in any agreements related to specific items (the so-called Common High Priority Items List). 

The contractual clause should prohibit using, or allowing the use by possible sublicensees of, “material or information which is protected by IP rights or protected as trade secrets related to [Common High Priority items]” where those items “are intended for sale, supply, transfer or export, directly or indirectly, to Russia or for use in Russia”. The agreements are also required to include adequate remedies in the event of a breach of that clause. 

More precisely, EU persons:

• Must contractually prohibit their third-country commercial counterparts, and require them to prohibit possible sublicensees of such intellectual property rights or trade secrets, from using such IP rights, trade secrets or other information in connection with such items that are intended for sale, supply, transfer or export, directly or indirectly, to Russia or for use in Russia;
• When selling, licensing or transferring in any other way IP rights or trade secrets, as well as granting rights to access or re-use any material or information protected by intellectual property rights or protected as trade secrets, related to 'common high priority items'; and
• Report any breaches of these contractual clauses by third-country counterparts that they become aware of to national competent authorities. 

The Common High Priority Items List is decided on by the EU, the US, the UK and Japan in coordination and comprises of dual-use goods and advanced technology items used in Russian military systems which have been found on the battlefield in Ukraine, or are critical to the development, production or use of those Russian military systems.

The obligation to include the "no use of IP rights in relation to Russia" clause applies:

• from 26 December 2024 for contracts concluded from 25 June 2024;
• from 26 June 2025 for contracts concluded before 25 June 2024.

Not including the full “no use of IP rights in relation to Russia” language in relevant agreements will amount to a breach of the EU Russia Regulation. Similarly, not reporting to the competent authorities a breach of the clause by a counterpart would also amount to a breach. Such breach may lead to civil and/or criminal penalties under the relevant Member States laws given that EU sanctions are enforced at Member States level.

At the date of writing, there is no equivalent IP-specific requirement in the EU’s Belarus sanctions.

3. Trade restrictions (UK sanctions)

There is no explicit prohibition or contractual requirement comparable to that of the EU in relation to IP in the UK’s sanctions on Russia and Belarus. There are, however, broadly drafted restrictions on facilitating the transfer of particular goods and technology to the Russian or Belarus market. For example, the UK’s sanctions on Russia prohibit directly or indirectly making certain goods and technology available for use in Russia or to a person connected with Russia; an entity is “connected with” Russia where it is (i) incorporated or constituted under the law of Russia or (ii) domiciled in Russia. Depending on the specific facts, this could capture licensing, transferring or selling IP to Russian entities.

Relatedly, caution should be exercised when filing patents in Russia and/or Belarus where the patents relate to goods or technology that are subject to UK export prohibitions (or indeed UK export controls). This is because patent applications could involve the provision of information in sufficient detail that it renders the information restricted for transfer to a person connected with Russia and/or Belarus (which would include Rospatent, given it is domiciled in Russia).  

4. Prohibition to accept applications or registrations of certain IP rights (EU sanctions)

We also note that from 25 June 2024, under Article 5s of EU Regulation 833, IP offices and other competent institutions constituted under the law of a Member State or the Union will be prohibited from accepting new applications for registration of trademarks, patents, industrial designs, utility models, protected designations of origin, and geographical indications filed by Russian persons, including if jointly filed with a non-Russian person (this includes joint applications where one of the applicants is a national or permanent resident of a EU Member State, the EEA or Switzerland).

Article 5s only requires that new applications, requests and submissions must not be accepted. However, this includes new requests related to an application or request that was filed before 25 June 2024. Such requests could include requests to amend pending applications, oppositions against pending applications, notices of comment or requests for supplementary information. Requests/submissions filed after the registration procedure has been finalised and the IPR has become effective are not subject to a restriction and can be accepted.

5. Prohibitions related to listed entities (EU and UK sanctions)

The UK and EU’s sanctions on Russia and Belarus prohibit making 'economic resources' (which includes IP rights) and ‘funds’ available to a designated person. These measures are referred to as ‘asset freeze measures’. Consequently of these asset freeze measures, IP should not be transferred, sold or licensed to designated persons. In addition, when registering IP rights and paying or receiving any associated fees, an entity would need to be conscious of the restrictions on dealing with the funds of, or making funds available to, designated persons.

The EU also has a number of transaction bans with specific entities or kinds of entities, for example with certain named state-owned entities. These transaction bans encompass the payment of licensing fees and granting or renewing licences of IP rights.

Unlike the other restrictions discussed in this article, these asset freeze measures and transaction bans are not specific to the EU and UK Russia sanctions regime. In other words, regardless of the sanctions regime that applies, whenever a listed entity is identified in any given transaction it is important to take the appropriate measures and ensure that for example no fees are paid to such persons or no IP is transferred to them unless exceptions apply.

6. Best efforts obligation that non-EU subsidiaries do not breach IP prohibitions (EU sanctions)

Pursuant to Article 8a of the EU Russia Sanctions Regulation, EU persons who own or control non-EU entities shall undertake their ‘best efforts’ to ensure that those non-EU entities do not participate in activities that ‘undermine’ EU sanctions, which includes the above-described IP prohibitions. 

According to recent guidance from the European Commission, this ‘best efforts’ obligation means, as an example, that EU persons should act in order to prevent the non-EU entities they own or control from using IP rights or trade secrets to produce sanctioned goods, when these goods are exported to Russia. This is the case even if such IP rights or trade secrets have been transferred to the non-EU subsidiary prior to the adoption of EU sanctions.

More broadly, the European Commission guidance states that the European Commission expects EU persons which own or control non-EU entities to “seek to ensure their awareness of the activities conducted by the non-EU entity”. This could be achieved, for example, through internal compliance programs, sanctions trainings etc.

Authored by Aline Doussin, Kate Poppitt, Pierre Estrabaud, Dan Shapland, Florence Yiu, and Helka Kittila.