Answer ... Patent filing strategy: Most countries have not forbidden their citizens and companies from filing new applications in Russia or from continuing to pay maintenance fees. However, there is a wave of abandonments already on record and the number of national phase entries today is about half of what it was previously. On the other hand, industrialisation in Russia has reached the point where many Russian entities can readily pick up where foreign companies have left off. By not continuing to build portfolios in Russia, foreign innovators are effectively granting free licences to Russian companies to use innovative technologies and to continue on a path of improving them. This initial strategy may be worth reconsidering.
Compulsory licences: One of the main challenges that foreign patent holders may face in Russia concerns compulsory licensing.
A compulsory licence is available to applicants which can demonstrate that either:
- the patent holder is not practising the invention in Russia; or
- the holder of a second patent cannot practise the second invention without infringing an earlier patent. This is often referred to as a compulsory licence for a second dependent invention.
In 2019, the first compulsory licence for a dependent invention was granted in Russia in the field of pharmaceuticals. In an 8 February 2019 decision, which was subsequently upheld by all upper courts, a first-instance court obliged the patent holder to grant a non-exclusive compulsory licence to the holder of the dependent patent (a generic company). The court set out the terms and conditions according to which the licensee under the compulsory licence could use the invention – which comprised an active ingredient – in any volume, including through manufacture, use, offer for sale, sale and storage for medicinal purposes. The royalty rate was set at 10% of the net profits from the sale of the original product, excluding value-added tax and manufacturer’s direct expenses (eg, expenses for the purchase of raw materials).
The court held that the dependent invention represented an important technical achievement and had considerably greater economic significance than the earlier invention due to its cheaper price.
However, after several rounds of parallel invalidation litigation, the dependent patent was revoked due to lack of novelty and inventive step, after which the compulsory licence was cancelled by court based on new facts. Despite this outcome, there is still considerable doubt within the legal community as to the correctness of the initial decision to grant the compulsory licence, as this was not reversed; it was rather reviewed in reopened proceedings based on new facts. This means that the dubious conclusions of the first-instance court, which were upheld by the appellate court and the IP Court, may still be applied in future cases where a dependent patent is not revoked. Thus, it is not yet clear whether this decision has set a precedent in Russia such that the same approach will be adopted in future decisions.
On 31 December 2020, through Decree 3718-р, the Russian government granted the first compulsory licence to be issued on the grounds of protection of the public interest. A Russian generic company was permitted to use three Eurasian patents owned by the same patent holder within one year. According to the decree, the purpose of the licence was to secure adequate supply for Russian patients of medicines containing the active ingredient remdesivir. The amount of the licence fee was not specified.
The patent holder appealed the decree before the Supreme Court, which acts as a court of first instance in reviewing judicial acts of the government. The patent holder argued, among other things, that the compulsory licence prevented it from:
- selecting entities to authorise to use its invention;
- controlling the quality of products produced under licence;
- imposing limits on production; and
- setting a licence fee.
The Supreme Court dismissed the appeal with reference to:
- international treaties (eg, Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property Rights);
- the Russian Constitution; and
- decisions of the Constitutional Court of Russia.
Essentially, the Supreme Court held that the patent holder’s exclusive rights could be limited in order to ensure the health of Russian citizens. However, the court did not explain why this limitation was necessary in this particular case.
The procedure for granting a compulsory licence on the grounds of protection of public interest seems to be very unpredictable. It is not clear when and on what conditions the Russian government can issue a compulsory licence.
Finally, in 2023, medical research company MIK sought a compulsory licence from Vertex for Trikafta, arguing as follows:
- Vertex had not obtained marketing authorisation for the product in Russia;
- Vertex did not manufacture the product in Russia;
- Vertex imported the product to Russia in limited amounts on a named patient basis;
- There was a high likelihood that supplies of the product would cease completely due to sanctions and logistics problems; and
- While a pack of Trikafta was sold for $20,000, the generic company was ready to supply it for $8,500.
The court of first instance dismissed MIK’s claim in May 2023 on the following grounds:
- Vertex provided supplies of Trikafta through state tenders and charity organisations;
- It presented evidence of sufficient supply of the product;
- There was no evidence that Vertex or its Russian affiliate had refused to supply the product;
- The claimant did not prove that it was ready to use relevant inventions;
- Vertex had never announced its plans to cease supplying the product to Russia; and
- The four-year grace period for some patents covering the product had not yet expired.