Armando Ambrosio further examines in an article on Legalcommunity the prospects for Italian companies in Russia, following the recent decision by the Russian government to return the management of its subsidiary, Ariston Termo Rus, to the Ariston Group.

This move has been welcomed by the Italian business community. However, the geopolitical landscape remains complex, and Italian companies still face significant challenges, particularly in strategic areas such as international payments and dividend repatriation.

Armando explains that the reversal of external management could represent a first step toward normalizing economic relations with Russia, but uncertainties linked to ongoing peace negotiations continue to make the outlook unstable.

To delve deeper into the topic, we invite you to read the article here. 

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The Ariston Group has resumed management of its plant in Russia, which had been temporarily nationalized by the Russian government nearly a year ago. This move marks a significant step toward normalizing economic relations between Russia and the European Union and also offers new opportunities for Italian companies interested in operating in Russia.

Armando Ambrosio, Partner in charge of the Moscow office and the Russia & CIS Desk, explores this development in an article for HuffPost. He analyzes the political and economic implications of this decision, highlighting how Russia aims to reward companies that remained active during the crisis and how this may influence future investment strategies.

Discover more about the dynamics at play and the opportunities by reading the full article here.

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La Russia ha introdotto il rublo digitale, una nuova forma di valuta che coesisterà con le versioni contante e non contante. Il progetto, in fase sperimentale per un anno, coinvolge 15 banche e mira ad aprire il mercato finanziario all’innovazione, contrastare l’impatto delle sanzioni finanziarie occidentali e modernizzare il sistema economico e finanziario

Articolo di Armando Ambrosio pubblicato su Agenda Digitale

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The Russian Intellectual Property Court recently issued a landmark decision on case SIP-666/2022, supplying additional guidance and elaboration on the notion of interested party in trademark cancellation cases.

The term “interested party” is used in Part IV of the Russian Civil Code regulating intellectual property, namely, with regard to trademarks in articles 1486, 1511, 1513 and 1514.

Article 1486 of the Civil Code provides that in case of non-use of a trademark, an interested party may claim its cancellation. The same subjective qualification is required by article 1486 for the filing of a cancellation action on grounds that a trademark was registered in breach of the law. According to the provision of article 1514, a party filing a cancellation action against a trademark, which became a commonly used name of goods, should also prove its interest. Finally, article 1511 likewise refers to the interest requirement that needs to exist for a party claiming cancellation of a collective trademark used for goods lacking unified and equable characteristics. It, therefore, follows that the interest requirement amounts to a horizontal, overarching common denominator for third parties to avail themselves of a number of statutory provisions that in the abstract justify the removal of a previously granted trademark from the system.

The Supreme Court of the Russian Federation in its Resolution of the Plenum no. 10 dated 23 April 2019 (Resolution) provided explanations in the matter of interested party assessment in cases of trademark cancellation for non-use. In item 165 of the Resolution, the Court held that, for there to be found interest, all circumstances of the case in their entirety should indicate that the claimant is truly focused on the further use of the same or a similar mark for similar goods.

There are, though, no listed criteria to be looked at by a claimant or the court seized for measuring the sufficiency of the interest that needs to underly a trademark cancellation action. The assessment is, therefore, made by court on case-by-case basis.

The less recent case law had held that, besides other evidence, claimants should always provide application(s) for registration of similar marks for similar goods as a confirmation of their interest in the further use of the challenged trademark. The current case law tends to find instead that this is not sufficient.

By its decision in case SIP-666/2022 the IP Court shed fresh light on the assessment of interest in this context.

The case (case no. SIP-666/2022) had been initiated by French beauty and fragrances multinational L’Oréal, claiming cancellation of mark AZZARO protected in Russia under international registrations on the ground of non-use during the previous three consecutive years. L’Oréal, as the owner of family of trademarks comprised of the AZZARO word element, and protected for cosmetics and perfumery (03 Class of the Nice Classification), claimed cancellation of the AZZARO trademark of French company Loris Development, registered in Russia for alcoholic drinks and tobacco (33, 34 Classes of the Nice Classification).

L’Oréal had devised its cancellation action to forestall the potential launch of alcoholic drinks and tobacco products on the Russian market under the same name. It argued that the marketing of alcoholic and tobacco products under the AZZARO mark may lead to its dilution, namely, by blurring the association of the AZZARO brand with L’Oréal and causing harm to its reputation. More particularly, L’Oréal was keen on avoiding the appearance on the market of goods whose image was increasingly less socially acceptable, such as alcohol and tobacco products.

Before commencing a legal action against the AZZARO trademark of Loris Development, L’Oréal had filed an application itself seeking protection of the AZZARO mark for alcoholic drinks, tobacco and tobacco related products, which was predictably denied registration due to existence of the AZZARO trademark sought to be cancelled.

The IP Court recalled that there is no legal definition of “interested party”, and a non-use cancellation action can be filed by any third party showing a lawful interest therein. It furthermore specified that producers of goods similar to those which are protected by the trademark, who have a genuine intent to use the mark and engaged in relevant preparatory work to that end, can qualify as an interested party for the purpose of a cancellation action. The Court moreover relied on item 165 of the Resolution.

Further, the IP Court specified that interest can rest on the need to remove a mark resulting in the dilution of the trademark of the claimant, where the co-existence and use of similar marks may lead to confusion among consumers and uncertainty in identifying the origin of goods.

According to the ruling, the assessment of potential confusion includes an evaluation of the similarity of the goods concerned, which is thus of the essence to identify interest.

The IP Court found that L’Oréal was producing and marketing cosmetic products and its trademarks were registered and protected for cosmetic products, whilst the challenged trademark covers non-similar goods. Thus, the Court drew the conclusion that there was no risk of confusion between the marks, and the existence of the similar mark did not preclude L’Oréal from using its AZZARO marks for cosmetic products.

At the same time, the Court held that the mere fact of filing an application, which was denied registration, could not amount to sufficient proof of interest and intent of the claimant to use the trademark for alcoholic drinks and tobacco products.

L’Oréal also relied on the foreign “dilution doctrine”, which was explained by the Court to result in the need for enhanced protection of marks with a reputation for dissimilar goods that may evoke associations with the protected mark. The higher the reputation of the mark, the more it is exposed to dilution. L’Oréal claimed that both variants of dilution, namely, dilution by blurring and dilution by tarnishment, were relevant to the case.

The IP Court, though, held that the claimant failed to prove that L’Oréal was widely known to Russian consumers as a producer of relevant goods in 03 Class of the Nice Classification affixed with the AZZARO mark. Information provided by L’Oréal about press news, publications on the purchase of the AZZARO brand and its history was considered by the Court insufficient, as it did not prove that consumers knew the mark and associated L’Oréal with the AZZARO brand. As a result, the Court found that the high reputation and notoriety of the AZZARO mark and its claim for enhanced protection were not substantiated by the claimant.

Besides, the Court found the argument whereby the use of the mark for alcoholic and tobacco products harmed the reputation of L’Oréal ungrounded as well as speculative. This stance was moreover adjudged inconsistent, as the claimant itself had filed an application for registration of the mark for alcoholic drinks and tobacco products.

According to the judgement, the ownership of a trademark with an earlier priority is neither sufficient as sole evidence, nor mandatory, to prove interest in the cancellation of a later trademark on non-use basis.

To sum up, the IP Court drew the conclusion that L’Oréal failed to prove its interest in using the mark for alcohol and tobacco products, and dismissed the claim. A trademark can be cancelled on non-use grounds if both requirements are met, namely, proved interest of the claimant and absence of evidence of use of the mark by the rightholder, so that the lack of either is sufficient to deny the claim.

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A non-competition clause is a special restriction limiting a business activity voluntarily assumed by a party towards the other party after termination of an agreement. It is quite usual in franchise agreements. It provides additional protection of IP rights, once the contractual obligations are no longer applicable. The concept may look straightforward enough, but in situations of conflict between the right-holder and the franchisee, non-competition clauses may become uncertain and potentially at the source of litigation.

The Supreme Court of the Russian Federation recently concerned itself with the subject in case A71-13420/2020, and issued its decision on 09 June 2022 on the claims of a franchisee challenging the validity of a non-competition clause after termination of the agreement. More particularly, the assessment of the Supreme Court addressed the penalty claims of a franchisor originated by the continuation of a competing activity after termination of the agreement by a person affiliated with the franchisee, as well as the counter-claim of the defendant seeking a finding of nullity of the relevant non-competition clause. The first instance court had rejected both claims and counter-claims, and the appeal and cassation courts upheld the first instance judgment. As a result, the Supreme Court as the highest instance of jurisdiction was revising the case.

The non-competition clause of the agreement under dispute foresaw the obligation of the franchisee to refrain from competing actions during the term of the agreement and three years after the termination thereof, and the right of the right-holder to terminate the agreement in case of breach by the franchisee of the non-competition obligation. The contract also contemplated a penalty in the amount of 1 million Rubles (about Euro 16 000) for any unlawfully competing action, performed by the franchisee or its affiliates.

The courts of first, appeal and cassation instances had found that the agreement had been unilaterally terminated before claims of breach of the non-competition clause and for payment of the penalty were filed. Based on the fact that the agreement was then no longer in force, all courts had rejected the claims of the right-holder.

The Supreme Court referred first to the general legal regime of franchise agreements, in particular, to the provision of article 1033 of the Civil Code whereby the parties may consensually agree on some restrictions of their rights. In particular, the law expressly contemplates among permissible restrictions the assumption of the obligation of the right-holder to refrain from granting similar rights to other parties, or the obligation of the franchisee not to compete with the right-holder by engaging in a business activity similar to that covered by the franchise agreement.

The Supreme Court furthermore referred to item 3 of Resolution no.35 dated 06 June 2014 of the Supreme Arbitration Court of the Russian Federation. That item explained the enforcement mechanics of part 2 of article 453 of the Civil Code, which provides that the obligations of the parties cease to exist upon termination of the agreement, unless otherwise prescribed by law, the agreement itself or pursuant to the core – that is, the very intrinsic nature – of the obligation. The Supreme Court clarified that, by its Resolution, the Supreme Arbitration Court had confirmed that the termination of a contract released the debtor from the obligation which was the subject of the contract. However, the same Resolution specified that the terms and conditions of the contract governing post-agreement relations, or those applicable after termination, remained in full force and effect unless otherwise agreed by the parties. Since security measures provided for in the contract (such as a contractual penalty) are accessory to and follow the destiny of the main obligation, if the main obligation remains in force upon termination, then the security provision equally survives.

Based on the facts of the case, the Supreme Court found that the franchise agreement contained a clause aimed at governing the relations of the parties after termination of their agreement, namely, the non-competition obligation of the franchisee. This obligation was expressed to be valid for a term of three years after termination of the contract, so the parties had intended the clause to survive such termination. Furthermore, the Supreme Court adjudged the penalty clause, which was referred to within the non-competition clause, also valid and applicable, as it secured the main obligation, which had not come to an end with the termination of the franchise agreement.

As a result, the Supreme Court set aside in part the decisions of the lower courts and ordered the retrial of the case by the first instance court. The penalty claim of the right-holder because of the opening of a competing activity by a person affiliated with the franchisee was, though, rejected as the claimant had failed to prove the affiliation between that person and the franchisee.

On 29 August 2022 the first instance court issued on remand a revised decision and granted claim of the right-holder for payment of the penalty for breach of the non-competition clause contained in the franchise agreement.

One may wonder if the above conclusions of the Supreme Court are applicable to the validity of non-competition clauses included in an intellectual property license agreement, but this is not the case. Let us see why.

Both license and franchise agreements share the feature of granting rights to use the IP object of a contract only for the term of the latter. Once the relevant contract terminates, the licensee/franchisee must discontinue the use of the IP rights of the right-holder The unlawful continuing use of such IP rights by the licensee/franchisee after the contract expiration or termination hence constitutes an infringement, and Russian law provides the right-holder with a number of statutory remedies – namely, seeking a judicial order to desist from the infringement and seeking payment of compensation therefor.

However, this provision does not cover a situation where the former licensee/franchisee does not unlawfully use IP rights, but rather continues to unduly use the competences and experiences developed during the term of the agreement, for building up and/or continuing to engage in its own business on the same market. That is the case of a negative obligation such as that contained in a non-competition clause expressly obliging the licensee/franchisee to refrain from being active on the same market as a business rival.

Article 1033 of the Civil Code previously mentioned, which provides for the parties’ option to agree on contractual restrictions, including a non-competition clause only addresses franchise agreements and does not cover intellectual property license agreements. Based on the general principle of contractual freedom set out in part 4 article 421 of the Civil Code, the parties are at liberty to agree the terms and conditions of the contract they make unless otherwise prescribed by Russian law.

The provisions of Part 4 of the Civil Code that govern intellectual property license agreement set mandatory terms and conditions for such agreements, but without prejudice to any other provisions. Accordingly, there seems to be no legal prohibition to insert a non-competition clause in a license agreement.

It should, though, be noted that the concepts of license and franchise agreement present significant differences, and this may end up at the source of an extent of legal uncertainty.

According to article 1235 of the Civil Code, an IP right holder may grant or undertake to grant to another party the right to use its right on the terms provided for in a license agreement. A trademark license agreement is a particular case of IP license. As provided by article 1489 of the Civil Code it consists of the grant of the right to use a trademark on the terms of the agreement for all or part of protected goods and optionally specifying the territory of use.

Conversely, a franchise agreement, according to article 1027 of the Civil Code, mandatorily foresees the grant of a bundle of IP rights, including trademark and other rights, in particular, the right to a commercial name and know-how for use in a business activity, for a consideration. That same article provides that the rules of Section 7 of the Civil Code (on IP rights) relative to license agreements are also applicable to franchise agreements, unless this is contrary to more specific provisions applicable to the latter. Since a franchise agreement is a special case of IP license, the special rules applicable to the former prevail over the general provisions, and as aa result do not apply to license agreements.

In other words, the legislator did not bind the rationale for a non-competition obligation to a trademark license, but to other information and rights typically provided for in the franchise agreement. The licensee holds only the right to use an IP right, e.g. a trademark, and is not supposed to obtain any additional information about the business activity of the right-holder. For that reason, it makes sense that he could not enjoy a competitive advantage after the termination of the license.

Based on the contractual freedom principle and the provisions of item 3 of Resolution no.35 dated 06 June 2014 previously mentioned, a non-competition clause included in a license agreement should also be valid after termination of the license, but it is not yet clear if the Russian courts will concur with reconstruction in real life, when seized of a dispute similar to that adjudged on remand in the recent case we reported on.

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General Overview

The general regulatory framework of the precious metals and stones industry in Russia is primarily supplied by Federal Law “On precious metal and precious stones” no. 41-FZ of 26.03.1998. It covers their production, sale, state control and reserves, as well as international operations of the Russian Federation in that area. However, that of precious metals is historically a politically sensitive industry in Russia, which is addressed by a variety of concurrent sources, producing a complex legislative landscape. The inherent complexity and importance of the industry are presently enhanced by the adverse geopolitical circumstances. In this article, we will address certain features and provisions that are likely to be of interest in the international perspective.

Section 6 of Law no. 41-FZ consists of only two articles, and generally allows international agreements for gold mining, production and use, and trade in precious metals and stones. Drafts of agreements, where a party is the Russian Federation or a territorial entity thereof, must be submitted to the Russian Government for prior examination and overcome a mandatory legal and economy assessment, and furthermore need to be ratified and registered after their conclusion.

The industry production sharing agreements are subject to special rules and procedures supplied by Federal Law “On agreements on production sharing” no. 225-FZ of 30 December 1995, with the exception of rough diamonds, which cannot be the object of product sharing.

There are also other relevant instruments in existence addressing the export of precious metals.

Based on the principles of freedom of movement of goods, capital and labor force of the Eurasian Economic Union (EAEU), which comprises a common customs territory including Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan, certain aspects of gold export transactions fall under the regional level, whilst other aspects are governed by Russian law at the national level.

Import and Export

The import into and export from the EAEU countries of precious metals need to comply with an authorization-based procedure set out in Decision of the Eurasian Economic Commission no. 30 “On non-tariff regulatory measures” dated 21 April 2015 (EAEU Decision no. 30) Attachment no.2, which besides other goods applies to precious metals and raw materials containing precious metals.  Attachment no.14 of EAEU Decision no.30 lays down the procedure of import into and export from the EAEU of such precious metals and raw materials.

The general rules of Decision no. 30 are not applicable, if the EAEU Member State adopts specific rules at the national level in the following excepted matters:

• radio and stable isotopes of precious metals and goods made thereof;
• import or export of precious metals or raw materials containing the same for holding by the State treasury;
• import or export of precious metals or raw materials containing the same by national (central) banks;
• import or export of coins made of precious metals that constitute a lawful mean of payment.

Besides, valuable cultural artifacts and goods for private use made of gold and precious metals are not subject to the special EAEU procedure.

Licenses, Customs Controls, Administration

General rules on license issuance are provided for in the Attachment to Attachment no.7 to the Agreement on the Eurasian Economic Union signed in Astana on 29 May 2014, and relevant Instructions on the filing of applications for export or import license grant were approved by Decision of the Board of the Eurasian Economic Commission no. 199 dated 06 November 2014.

Single-use export licenses are granted for a certain deal or contract in accordance with its terms and conditions, lasting for a term not exceeding 1 year. General licenses cannot exceed the 1 year term either, whilst the term of exclusive licenses is established on a case-by-case basis.

Customs control of raw materials containing precious metals and goods made thereof is carried out at special purpose customs terminals/stations (which are ad hoc customs checkpoints of the Central Excise Customs of the Russian Federation) upon production of an export license duly granted by the relevant national authority of the EAEU Member State of registration of the exporter.

The detailed regulation of import from and export to foreign countries outside of the EAEU of precious metals, raw material containing them, and precious stones is moreover to be found in Order of the President of the Russian Federation no.1137 dated 20 September 2010 (as amended on 01 July 2021), whose main contents may be summarized as follows:

• The issuance of export licenses for precious metals falls under the competence of the Ministry of Industry and Trade, which reviews applications and issues licenses (in accordance with the Administrative Procedure on license issuance adopted by Order of the Ministry of Industry and Trade no. 3624 dated 18 October 2017);
• The Russian Government sets the quantity limits for export of precious metals (except gold), and precious stones from the State Fund (Reserve) of precious metals and stones of the Russian Federation;
• The Russian President may approve gold exports from the State Fund of Russia, as well as of other precious metals, which are in excess of the planned quantities/values set by the Russian Government, as well as natural rough diamonds of 10,8 karats and above in weight, and unique natural rough diamonds;
• The approval of the sale of part of the gold reserves stored at the Central Bank of Russia falls within the competence of the Central Bank itself in accordance with a special procedure agreed with the Russian Government;
• The State Authority on building up the State Fund of precious metals and precious stones of the Russian Federation, on storage, release and use of precious metals and precious stones (Gohran of Russia), the Federal Assay Chamber and the Russian Customs are the state bodies authorized to control production, internal sales, import and export of gold and other precious metals.

The Federal Assay Chamber is a control body of the Ministry of Finance. It performs control of product quality and entities that comply with special requirements and are allowed to produce and sell gold. The Chamber issues special authorizations (grants license) to such entities and maintains the relevant list of gold producers and sellers.

As mentioned above, the Russian Central Bank exercise discretionary control, including export deals, over gold reserves in its possession. The right to perform a certain gold export deal by other entities (license) is granted by the Ministry of Industry and Trade in accordance with orders of the Russian Government.

Quantitative and Market Highlights

The Russian Central Bank has been carrying out extensive purchases of gold in the internal market for state reserves since 2014, and by the end of 2019 the gold stocks of Russian international reserves had reached US $ 120 bln. by April 2020, which was close to cap 21% of total state reserves of the Russian Federation^[1].

During 2019 the Central Bank reduced the volume of gold purchases from Russian producers and announced discounts for procurement of gold on the internal market^[2]. Discounts were aimed to stimulate internal purchases of precious metals by Russian commercial banks to fill the gap between produced volumes (supply) and needs of the internal market (demand, without considering state purchase).

Alongside with procurement measures from Russian producers, the Government liberalized and simplified procedures for export by financial institutions and producers, which lead to an increase of exports overall after 2019. For example, during January-April 2020, 71,9 tons of gold were exported from Russia, which was 7,9 times the export volume during the same period in 2019.

Decisions on license issuance or rejection are made by the Ministry of Industry and Trade within 15 working days (10 working days in case of filing the application online) subject to providing all necessary documents. The rejection can be challenged in court in accordance with the general rules of section 22 of the Russian Code of Administrative Judicial Proceedings (no. 21-FZ of 08 March 2015) within 3 months from the date of the decision.

The existing legislative framework furthermore permits other State authorities to issue specific regulatory acts allowing the export of precious metals, including gold. The following are recent examples worthwhile recalling.

On 17 April 2020 the Russian Government issued Regulation no. 539 instructing the Ministry of Industry and Trade to issue general licenses for the export of refined gold and silver in bars (bullions) to mining and producing companies in accordance with their applications approved by the Ministry of Finance.

Based on the new regulations, gold producers sold most of precious metal in bullions to Russian banks, which extended gold exports upon withdrawal of regulatory restrictions. The Russian Central Bank held the largest stock of gold of more than 2,000  tons^[3] and released some gold for export in 2020. Russian commercial banks, including major banks Sberbank, GazpromBank, VneshTorgBank, PromSvyazBank, Otkrytie, were increasing gold stocks since May 2020 and reported to own about 121 tons of gold by September 2020^[4], and then were actively exporting it in 2020-2021 following world market gold price increase.

The main country of destination of Russian gold was the United Kingdom reaching as much as 93%^[5] in 2019-2020 and 84% in 2021. Switzerland, Turkey, Kazakhstan and China were the other main importers in 2019-2020. In 2021 the UK was also the leading gold importer. Switzerland, UAE, Germany, Italy and India had smaller but close volumes of import share, and China imported twice less. The Russian gold export in April-May 2020 overtopped the export value of gas and amounted to US $ 3.58 bln^[6].

According to international statistics, in 2019 Russia was ranked only 10th among the world gold exporters^[7]. However, the value of gold exported from Russia in 2020 increased 222% and reached US $ 18.7 bln^[8].  This increase achieved the country 6th place in the highest dollar value gold world exporters rating. In 2021 gold export value went down to US $ 17,4 bln. moving Russia to the 7th place^[9].

Geopolitical changes in 2022, sanctions and countersanctions

The geopolitical storm of 2022 following the Ukrainian crisis did not leave the gold unaffected.

As from March 2022, the Russian gold mining industry was hit by restrictions imposed by the independent precious metals market authority, namely the London Bullion Market Association (LBMA), which excluded six Russian gold refineries from “good delivery” status^[10], thereby for practical purposes cutting off sales of Russian bullion sales to London or Zurich. Loss of that status also made impossible gold export to many other foreign countries.

Besides, the usual practice when Russian refineries sold gold to major Russian commercial banks, and the latter exported it, became unfeasible, as these banks were sanctioned by the USA, the UK^[11] and EU, and could not perform international transactions, including gold export operations.

In March 2022 the Russian Ministry of Finance reported that the amount of gold produced in Russia in 2021 was 346,42 tons^[12], but neither monthly, nor quarterly data for 2022 were released. Simultaneously, the Federal Customs Service stopped publishing gold export statistics.

As a remedy to limitations of gold export in bullions, regulation no. 485 was adopted by the Government on 26 March 2022 allowing the issuance of licenses for export of gold and silver in grains, as well as platinum and platinum-group metals in bars, grains and powders.

Conversely, the export of waste and scrap of precious metals or clad with precious metals, other waste and scrap containing precious metals, and waste and scrap of electrotechnical products mainly used for extracting precious metals, was temporary banned by the Russian Government. In accordance with Regulation no.2401 of 23 December 2021, such items were declared of significant importance for the Russian internal market and could not be exported outside the EAEU starting from 01 February 2022 till 31 July 2022. By the time of expiry of the Regulation, the situation again changed, the ban was not extended, and the export of gold and precious metals is no longer limited by the physical form of the metals.

The Russian authorities did not issue other restrictions of gold export so far. However, at the end of June 2022 G7 states agreed to ban the import of Russian gold and the USA^[13], Canada and Japan issued relevant sanctions^[14].

The USA enforced the sanctions immediately at the end of June, the UK and EU – on 21st of July (EU as a part of the 7th package)^[15] and Switzerland joined the restrictions in August 2022. The EU sanctions apply not only to bullions, but also to gold in other forms, like powders, waste and scrap, coins, articles of jewelry and parts thereof.

In that perspective, the abovementioned Regulation no. 485 can be considered a counter- sanction measure in response to the ban of import of Russian gold in bars, but it does not apply in general to counter restrictions on operations with Russian gold.

In this challenging situation for gold export, after almost 2 years suspension, the Russian Central Bank resumed internal purchases of gold. The state bank buys in gold from the Russian refineries with 15-17% discount from the LBMA quotation.

On 12 July 2022 the Union of Russian Gold Prospectors (Union) published an open letter requesting State support to the industry, which is facing a deep crisis with sales and profitability putting at risk growth and development, and even the existence of small producers. Representatives of the industry explained that the Central Bank used to buy gold from producers with a 5% discount, which is considerable gold being at stake, but in the current situation purchases are made with as much as 15% off market price. The high exchange rate presently applying to the Russian Ruble cuts sale prices for export, whilst costs incurred inside the country does not decrease^[16].

Against that background, representatives of the Union suggested

• increasing purchases of gold for State reserve purposes at prices economically viable for producers,
• fixing minimum prices for gold on the internal market, and
• offering credits to industry players at the rate of 5%.

Meanwhile, on 12 July 2022 the Petropavlovsk company, a well-known large Russian gold producer registered in the UK, announced the initiation of bankruptcy proceedings, since the amount of its debt reportedly exceeds the value of its assets. Besides, the activity of the company was for practical purposes blocked by foreign sanctions, equity prices at the Moscow stock exchange fell by as much as 80%, and its bank (Gazprombank, which is also placed under foreign sanctions) failed to provide the usual business facilities and asked for the immediate return of its credit lines.

Russian producers still can sell gold to Middle East and Asia, however, at discounted prices. The Russian press cited industry experts, who said that export of gold in 2022 was shifted into UAE and China, and Russian refineries were selling gold with discounts of 20-30% from stock prices. China significantly increased imports of Russian gold, and according to Chinese customs statistics, the country imported in July 2022 8,6 times more gold than in June 2022.

Finally, Russian refineries faced another constrain to gold export, which materialized in the second half of 2022. Russian press recently reported that gold producers complain that the state authorities refuse to issue relevant authorizations for export of gold at the discounted prices that are below the world market price, so the Russian gold export is under pressure both outside and inside of the country

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According to Russian law, a trademark may be registered in Russia subject to successful examination by the Russian Patent Office (Rospatent). Unlike to the EUIPO rules, the substantive examination of the application in Russia includes absolute and relative validity assessment. This means that the Rospatent checks both the distinctiveness of the mark and the existence of any conflicting rights (similar trademarks).

The existence of similar trademarks protected for similar goods prevents registration. Although a full opposition procedure similar to that in force under the EUIPO rules does not exist in Russia, the holder of an existing trademark may file with the Rospatent a letter of observations arguing that the mark under application should not be registered as being confusingly similar with existing mark. If the Rospatent disagrees with the position of a rightholder and grants protection to the mark applied for, a cancellation action against such registered mark can be filed claiming similarity with the earlier trademark and uncompliance with a legal requirement.

The Chamber for Patent and Trademark disputes (the Chamber) is an ad hoc body of the Rospatent competent to review objections brought against the Rospatent decisions under the administrative procedure, including those claiming the cancellation of trademark registration. According to Russian law, the decisions of the Chamber can be further challenged before the Russian IP Court.

Based on the provisions of articles 1512 and 1513 of the Russian Civil Code, US soft drinks multinational The Coca-Cola Company (Coca-Cola) had filed a cancellation action against a trademark owned by a Russian soft drinks producer with the Chamber claiming that the FANTOLA mark was confusingly similar with its own FANTA trademarks, and that the FANTOLA registration was therefore in breach of legal requirements and should be cancelled.

The Rospatent rejected the similarity claim with FANTA, and the FANTOLA trademark survived accordingly. For greater details please read our earlier article “Rospatent Chamber for Patent and Trademark Disputes:  FANTOLA is not confusingly similar with FANTA by Coca-Cola” (at https://www.lexology.com/library/detail.aspx?g=0a3d158c-42c3-4d30-a32b-5d843f507f51).

Coca-Cola then filed with the Russian IP Court a lawsuit claiming invalidation of the Chamber’s rejection decision on the FANTOLA trademark’s cancellation action.

The initial cancellation action was filed with the Chamber on 17 May 2021, and the rejection decision was dated 14 January 2022. The IP Court issued its ruling on the Coca-Cola lawsuit on 17 October 2022 (case SIP-353/2022).

In its lawsuit, the US company had challenged the Chamber’s arguing that the marks were indeed similar, and that the registration of the FANTOLA mark created confusion with FANTA mark and lead to loss of customers and damage of the Coca-Cola reputation. Coca-Cola’s key-reasoning was that FANTA had acquired an own significance as a brand of renown, whilst FANTOLA was plainly made up as a combination of words Fanta and Cola and quite obviously referred to these famous brands.

The owner of the FANTOLA mark filed a statement of defense, claiming an abuse of right by Coca-Cola, pointing out that the claimant had challenged only 2 out of 6 rejection decisions issued by the Rospatent on cancellation actions for different FANTOLA marks. The Russian company was arguing that bona fide conduct would be to challenge all rejections of all 6 cancellation requests, while doing the same for only 2 was not aimed at protection of trademark right and interests, but rather an unduly restricting a competitor. Besides, it argued that Coca-Cola could not be considered an interested party for procedural purposes (it is recalled that the interested party status is an essential qualification for filing a cancellation action) as it had suspended its business activity in Russia and accordingly did not meet the requirement of part 2 of article 1513 of the Russian Civil Code that a cancellation action can be initiated only by an interested party.

The IP Court reviewed the case and the Rospatent position and provided guidance for reconsideration of the similarity assessment made by the Chamber. We provide below the main arguments and reasoning of the Court, which may be of interest for rightholders in building up their defenses in trademark disputes before the Chamber.

The Court affirmed in the first place that Coca-Cola was an interested party for the purposes of seeking the cancellation request of the FANTOLA trademark and ruled that the ownership of a trademark with a priority date earlier than that of a similar challenged trademark was sufficient to satisfy legal requirements.

Besides, the Court noted that the cancellation action had been filed, and the rejection decision had been taken before the suspension of business in Russia, so that Coca-Cola’s rights could not be precluded as a result.

The IP Court moreover found the following faults in the decision of the Rospatent:

• level of phonetic similarity was not duly assessed;
• visual difference of marks was overestimated and did not dramatically affect the creation of an association between the marks;
• semantic features of the FANTA mark were neglected (with a note that contemporary dictionaries contain word “Fanta” as a generic word with the meaning of a soft drink with orange flavor);
• existence of a family of FANTA trademarks, its impact on similarity and potential perception of FANTOLA as a new mark in the family was not assessed;
• evidence provided by Coca-Cola was not duly scrutinized and taken into account.

The Court furthermore noted that to prove the linkage between the mark and a producer one should provide evidence of an emerging association between the product affixed with the mark and the producer. It was clarified that such element cannot be proved by evidence of mere presence on the market, but marketing efforts and actions of the producer to create the association in customers’ minds between the product and the company should be provided as well.

This logical path may be interpreted in the sense that the marks shall be considered confusingly similar, unless the Russian producer convince the Rospatent that customers link the mark with the producer itself.

The Rospatent provided additional explanations in its submissions in the Coca-Cola case, but the Court ruled that these could not remedy ill-grounded arguments and erring decision taken within the cancellation administrative procedure.

The IP Court hence directed the Chamber to re-evaluate the FANTOLA cancellation claim in the light of the principles that it had laid down. It also clarified that the court cannot issue its  decision on the merits of the case, as the litigation phase cannot circumvent the administrative one, and the Chamber is the legitimate body to settle the dispute.

This means that another decision is upcoming, which may radically change the balance of the trademark rights under dispute. The fate of the potential FANTOLA trademark cancellation though remains unclear, as the FANTOLA products are already marketed in Russia. If the mark was cancelled as confusingly similar with FANTA, Coca-Cola could file an infringement claim against the Russian producer and ban use of the FANTOLA mark, so that the eventual change of position of the Rospatent may have an actual material impact on the Russian soft drinks market.

By way of closing comment, we would like to add that the decision of the IP Court is a sophisticated document, substantively as well as procedurally, where legal arguments only have been weighed and applied in an unbiased fashion, fully independently of the nationality of the parties and, actually, so far recognizing to a large extent Coca-Cola ‘s rights and position. We are glad to note that the prophecies of those that foreshadowed the end of IP law in Russia with the advent of the Ukrainian crisis are being proven wrong.

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The post RUSSIAN IP COURT REMANDS FANTOLA MARK CANCELLATION ACTION BY COCA-COLA COMPANY FOR RETRIAL appeared first on Studio Legale De Berti Jacchia Franchini Forlani.

“YaLM 100B is a GPT-like neural network for generating and processing text. It can be used freely by developers and researchers from all over the world.” This is the introduction to a ground-breaking open source technology developed by Yandex on and made public on its platform “GitHub” (https://github.com/yandex/YaLM-100B) on 23 May 2022.

The technology is available in the English and Russian languages, leverages 100 billion parameters and is reportedly the largest GPT-like model for Russian language. It can write different types of texts based on self-learning from sources in Russian (75%) and English (25%). It is published under an Apache 2.0 license comprised of research and commercial use rights.

The Apache license was developed and approved by the Apache Software Foundation, a US charitable organization with the mission to provide software for the public good, which covers terms and conditions for use, reproduction, and distribution of works. Licenses granted under Apache 2.0 are perpetual, worldwide, non-exclusive, not-for-charge, royalty-free, irrevocable and allowing reproduction, public display, public performance, distribution, and sublicense of works. Notwithstanding Apache being born in the US, it is used world-wide by developers of all characterizations and claims to be the world’s largest open source institution.

Yandex is a commercial, publicly traded company founded by Russian developers in 1997 and is one of the major IT players mainly operating in Russia. In a complex global society, where technological progress, commercial interests and geopolitical drivers are increasingly had to reconcile, Yandex’s choice to make freely available to the general public an extremely advanced product may sound surprising and deserves reflection in the broadest sense. This is also a good opportunity for a high level analysis of how a general open license fits within the legal framework of computer licenses laid down by the Russian Civil Code.

Articles 1235 and 1286 provide general rules in the matter of licenses for copyright protected works. Special provisions related to software licensing are rather limited.

Parts 4 and 5 of article 1286 allow the rightholder to grant under a license agreement rights for use, besides those mentioned in article 1280, as a program user rights. Such agreement may be concluded in simple form and is as a rule an “adhesion contract” drawn up by the rightholder.

The legal concept of open license was added by article 1286.1 of the Civil Code in 2014, which contemplates that a work of science, literature or art can be subject of an open license. Computer programs are literature works. An open license is an adhesion contract, which can be concluded by the licensee in a simple form even by performing certain actions. All terms and conditions of the open license agreement shall be made available to the general public and made clear to the licensee before the first use of the work.

The licensor may grant the right to create new intellectual property on the basis of licensed work (derivative work). This means that the licensor makes a public offer to enter into an existing open license to all members of the public, who may in the future use new IP rights created on the basis of (i.e. by derivation from) the licensor’s work on the same terms and conditions as the open license.

The general rule also provides that unless otherwise provided by the open license agreement, the right is deemed granted free of charge and is valid on a worldwide basis.

The law moreover provides for different default license terms to software and other copyright works, setting 5 a year term for all works vs. author’s lifetime term for computer program rights.

Besides, the law reserves the right of the licensor to withdraw the open license, if the licensee grants rights to the licensed work or its new derivative work on terms and conditions other than those provided by the open license.

To sum up, although the governance of software open source licensing under Russian law is not extensive, it yet fits within the established systematic approach to copyright licenses.

IT is by definition global and, according to general information, Russian developers widely use the GitHub platform both to share and obtain open source license software. From the end of February 2022, developers of open source software started restricting access to their works via  GitHub to developers and users from Russia. Later, in April 2022, in compliance with the US technological sanctions against Russia, GitHub banned dozens of accounts from Russia, including both developers and major Russian banks. After that, Russian officials sources announced that a Russian repository of open source software shall be launched before the end of 2022 and shall be available for use by Russian and foreign developers alike.

Meanwhile, Russian developers built and expanded ties with Chinese counterparts, who are eager to attract them and their open source software to the Chinese open source platform OSCHINA and Chinese repository Gitee.

Another recent measure by the Russian authorities has been to provide open licenses to all software codes created under Russian State funding and owned by the Russian Federation. This should result in the grant of open licenses to a potentially indefinite number of users, based on three main drivers:

• software to be placed in a cloud repository system and made available for use by all project members,
• creation of a Russian storage site for keeping track of all versions of software (similar to GitHub or Gitee), which shall be open to all members irrespective of location,
• collection and analysis of knowledge and recommendations on the fundamentals of regulation of open source licensing and the use of State owned software.

So, Yandex’s example may well have marked a new wave notwithstanding the adverse geopolitical conditions, and innovative legislation on open source software licensing is likely to be launched in Russia in the near future.

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