Industries litigation through private sector-based strategy solves Russian IP infringement.

In exploring the likelihood of Western corporations’ receipt of compensation for the infringement of their IP rights, some attorneys have recommended implementing a private sector-based strategy.130 Foreign businesses can adopt a proactive approach aimed at protecting and enforcing their IP rights or receiving compensation for IP infringement by pursuing litigation in Russian courts and settling with Russian subsidiaries.131

In stark contrast to the Russian executive and legislative branches, which are in favor of weakening Western IP rights, the Russian judiciary has voiced its reservations and scrutinized the targeted policies.132 After seeking protection of its trademark “L.O.L. Surprise!” toys, U.S. corporation MGA Entertainment, Inc. received a favorable judgment from the Russian Arbitration Court of the Tomsk Region.133 The Arbitration Court held that Russia must adhere to its international legal obligations as stipulated in Article V(I) of the Berne Convention: to guarantee the same level of IP protection to companies within the country of origin and within other states who are parties to the Convention.134 Since the ruling, legal commentators have speculated on whether Russian courts will resist Putin’s efforts to turn non-enforcement of IP rights into a countermeasure against the West.135

Another case important for gauging the Russian judiciary’s perspective of Western entities’ IP rights involved Entertainment One’s (eOne) lawsuit against a local Russian entrepreneur.136 eOne’s lawsuit was one of the first major IP claims filed in a Russian court by a Western entity after the issuance of Decree No. 299.137 The London-based media company, which owns the popular children’s TV show Peppa Pig, sued a Russian citizen for trademark infringement after he unlawfully used Peppa’s image in selling counterfeit toys.138 The Arbitration Court of the Kirov Region dismissed the claim, finding that, due to the United Kingdom’s sanctions regime against Russia, the claimant’s actions in filing a claim were an “abuse of right.”139 Citing the text of Article Ten of the Civil Code, which prohibits the exercise of civil rights with the intent to harm another person, the judge concluded that the sanctions imposed by the plaintiff’s country of origin were evidence of the plaintiff’s bad faith.140 Attorneys were quick to note that a higher court would likely reverse the decision, as the ruling did not provide a strong legal basis, and tied a nation’s sanctions policy with a private entity’s claim.141 Their predictions were correct—a higher court overturned the decision on appeal and held that the Russian Constitution and various international agreements to which Russia is bound obligate providing equal protection to foreign entities’ IP rights.142 Nevertheless, the Court only granted the plaintiff compensation for 20,000 rubles (about 330 USD), half of the originally requested amount.143

Overall, most courts have been willing to uphold Russia’s legal commitments to international treaties in litigation concerning domestic IP disputes, but some judges have continued to adhere to the Kremlin line.144 In an April 2022 ruling by the Arbitration Court of Sevastopol, Judge Aleksey Smolyakov dismissed a claim from ABRO Industries, Inc., a U.S. chemical products manufacturer.145 ABRO Industries’ claim was dismissed on grounds similar to the Kirov Court’s dismissal of eOne’s claim—that the plaintiff had acted in bad faith as a result of Washington’s sanctions regime against Russia.146 ABRO Industries originally sought recovery of 50,000 rubles (about 826 USD) as compensation for trademark infringement by a Russian businessman who illegally sold imported goods such as silicone grease under the brand, “ABRO Masters.”147 Evidently, filing suit against private parties in Russia may not always end with a favorable result for Western companies.148 Even when results are favorable, damage awards have been minimal thus far.149

Instead of pursuing litigation in the Russian court system, several Western companies settled with their Russian subsidiaries or transferred assets to local entities.150 The list of corporations that settled or transferred assets is long and diverse, including French tire maker Michelin, which transferred its business activities to a locally-managed entity, and American chains like Pizza Hut, which sold its business to a local operator.151 Some companies were content with leaving the Russian market, no matter the loss to their bottom line.152 One such company was Japanese car maker Nissan Motor, which sold all of its Russian assets to a state owned corporation for less than one dollar.153 Similarly, the U.S. media company Hearst Corporation pulled the licenses for its magazines in Russia and transferred them to new Russian owners.154 Despite such prominent examples, analysts have noted that settlement talks with local Russian entities have been fraught, because most sanctions are still in force and the Kremlin continues to maintain a tight grip over the private industry.15