Spoiled by war
What happens when IP comes under attack? Cherrie Stewart digs into how trade marks have fared in troubled times.
War brings devastation to countries, businesses and individuals. Disruption ripples outwards from war‑torn countries.
Trade routes are interrupted or obliterated. Trading partners cease to exist.
Alongside the physical attack, an economic war is waged, with tangible and intangible property used as a weapon either in an attempt to apply pressure to a party or to prevent support for a war.
Although acts of sacrifice and peace‑making efforts are made, there are also those who will take advantage of conflict and the chaos that war brings – and IP rights are not unaffected.
This has been the case throughout history, and recent events affecting Ukraine have seen the strategy continue.
While this article can’t provide an in‑depth analysis of the effect of the Russo‑Ukrainian War on IP, it is an attempt to understand some of the issues and potential consequences that have, and may still, result from a time of aggression and confusion.
Conflicting ideas
At the turn of the 19th century, there were two schools of thought concerning the nature of war.
One notion was that war between nations is a war between their individual citizenries. Another was that war is a confrontation between states and not among individuals, who were enemies only accidentally.
The Hague Conventions of 1899 and 1907 sought to harmonise these views and put into place international agreements as to how war would be conducted, with the aim of minimising disruption to ordinary people.
Article 46 of the Hague Convention of Land Warfare states that “private property cannot be confiscated”.
This has its roots in the Magna Carta of 1215, which codified conditions concerning the safety of foreign merchants and their wares.
Essentially, a foreign merchant and their goods could have “safe and secure” passage into, out of and within England.
In addition, if they were in England when war was proclaimed against their country, they would be detained “without injury to their bodies or goods until information be received by us, or by our chief justiciar, how the merchants of our land found in the land at war with us are treated; and if our men are safe there, the others shall be safe in our land”.
This principle appears to have been diluted during both world wars, when governments in all the countries involved put into place Acts and decrees that allowed them to sequester (ie, forcibly take possession of or confiscate) large amounts of property, including bank deposits, industrial facilities, corporate bonds and IP that belonged to individuals or businesses of the nations with which they were at war.
The sequestration of property was not a new policy. Indeed, during the English Civil War and Interregnum of the 17th century, the policy of sequestration was implemented by Parliament.
This allowed Parliament to confiscate the property of anyone deemed to be supporting King Charles I.
The First World War began on 28th July 1914, and by the end of that year, the UK, France and Germany had launched attacks on enemy property within their own borders.
In the UK, the Trading with the Enemy Act 1914 was adopted, which held that confiscated enemy assets had to be put in trust and business activities monitored by the Board of Trade.
This Act gave rise to an interesting piece of law, Daimler Co Ltd v Continental Tyre and Rubber Co (Great Britain) Ltd [1916] 2 AC 307, regarding whether a company as a legal person could be considered to have “enemy” character.
Here, the House of Lords determined that the individuals in ultimate control of a company determined its character and therefore a legal person – a definition that can include a company – could be considered to be an “enemy”.
Following the Paris Convention in June 1916 when the Allied governments met to, among other things, agree on how to deal with enemy subjects and property, liquidation of enemy property became the common practice.
In the UK, an amendment was made to the Trading with the Enemy Act 1914 and property was liquidated and held in trust pending the outcome of hostilities.
Treaty of Versailles
As part of reparations under the 1919 Treaty of Versailles, IP that had been sequestered by governments under various national acts was either nationalised or sold to private companies.
For example, the German company Bayer AG owned a patent for the formula for a form of acetylsalicylic acid and trade mark registrations for the mark ASPIRIN.
These rights were sequestered along with other assets of the company in the US.
Trade mark registrations for the Aspirin mark and patents relating to it, as well as IP related to other products in many countries, ultimately ended up in the ownership of US company Sterling Products Inc.
Having acquired the rights to the marks and patents, Sterling required technical assistance from Bayer. Sterling and Bayer entered into an agreement to the mutual benefit of both parties allowing Bayer to recoup some of its losses that had resulted from the reparation provisions under the Treaty of Versailles and Sterling to benefit from Bayer’s technical know‑how.
Interestingly, these agreements led to some of Sterling’s assets being seized by the US Government in 1941, when it was then deemed to be collaborating with the enemy to the benefit of the Nazi regime.
Ultimately, the assets, including the Canadian trade mark registration for the mark ASPIRIN, which were lost as a result of the reparation agreement of the First World War, were restored to Bayer when parts of the Sterling business were purchased by Bayer in 1994 – around 75 years after they were first lost.
Bayer was not the only company to lose IP rights as a result of the seizure of enemy assets. For example, at the end of the First World War, the Chemical Foundation purchased 4,500 German‑owned chemical patents from the US Government for a fraction of what they were worth.
During the Second World War, the UK Government again confiscated assets in British territories owned by residents of enemy countries, including the former Nazi Germany, Italy and Japan, and countries occupied by them, under the Trading with the Enemy Act 1939.
So, it appears that the consensus in international law is that war is between states and not among individuals.
The sanctions that are in place are focused against the state, state institutions and key individuals, but are not blanket sanctions against the citizens and businesses of the country as a whole.
In the recent context, these types of sanctions are, as stated by the UK Government, “aimed at encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine”.
Battle against bias?
We do not live in a bubble, and the impact of the culture and events with which we are surrounded can influence our thoughts and actions.
Consider the March 2022 case of a Russian judge ruling against Entertainment One, the company that produces Peppa Pig animations.
This copyright and trade mark infringement lawsuit brought against Ivan Kozhevnikov was widely reported in the UK media.
With sensationalist headlines such as “PUTIN’S PORKIES: Russia sanctions PEPPA PIG in latest bizarre act of retaliation against the West over Ukraine invasion penalties”, there was public outcry over what was widely considered to be an unfair judgment.
It was reported that the judge in question had admitted that the decision was influenced by “unfriendly actions of the United States of America and affiliated foreign countries”, which heavily suggested that IP was being used as a weapon by Russia.
Was this a singular incident caused by a possibly overly patriotic and nationalistic judge who had not maintained the required impartiality, or was it an indication of a change of policy in Russia?
Could the fact that, on appeal, the Peppa Pig decision was overturned in June 2022 indicate it to be the former?
At the same time that controversial story hit the headlines, a cluster of articles appeared stating that many applications for Western trade marks filed by Russian nationals had been “accepted” by the Russian Patent and Trade Mark Office, Rospatent.
In response, Rospatent issued a statement on 1st April 2022, indicating that: all Russian trade mark applications, whether accepted or not, are published; that the publication of an application did not in any way indicate that the mark had been accepted for registration; and that there had been a departure from the normal practice of Rospatent.
It specifically pointed out that an application to register DYADYA VANYA (дядя Ваня in Russian), similar to MCDONALD’S, had already been withdrawn.
Reputational risk
The reality of bias also means that individuals will take sides in any conflict and firms seen as trading with the enemy may face a public relations battle – even more so if the company has been seen to have profited from war or conflict.
Take the case of the international brand Hugo Boss.
The brand’s founder and namesake was a member of the Nazi Party, designed and produced Nazi uniforms and used slave labour from concentration camps.
After the Second World War, Hugo Boss himself was stripped of his right to own a company, but the company continued to operate under the management of his son‑in‑law and has become an international brand and one of Germany’s largest clothing companies.
More than 80 years later, the company still has to defend itself against claims of “collaboration”.
In 1999, it contributed to a fund to compensate former forced labourers and, in 2011, the company issued an apology that expressed its “profound regret to those who suffered harm or hardship at the factory run by Hugo Ferdinand Boss under National Socialist rule” – this after the publication of a book that revealed new details about the role of forced labour in its factories.
When Russia invaded Ukraine in February 2022, many Western companies pulled out of Russia in an attempt to prevent a public backlash against them.
Those who were deemed slow to act found themselves on the defensive after being criticised for their apparent lack of action – sometimes unfairly perhaps.
For example, high street staple Marks & Spencer found itself in the proverbial crosshairs.
Despite having published a statement in support of Ukraine on 3rd March 2022 and pledging a package of financial support, M&S was hit by UK headlines such as: “M&S ROW: Marks & Spencer has blood on its hands after failing to shut shops in Russia, Ukrainian MPs claim” and “M&S criticised for ‘not going far enough’ to support Ukraine”.
True, in Russia, 48 stores operating under the MARKS & SPENCER trade mark remained open.
However, since these were operated by a Turkish franchisee, Fiba, using the trade marks under licence, M&S was not contractually able to close the shops.
It did, however, suspend shipments to Fiba’s Russian business.
Coca‑Cola also found itself trying to balance the need to maintain the goodwill in its brand and the need to maintain and enforce its trade mark rights.
Coca‑Cola did not take what was deemed by the masses sufficient action to stop trading in Russia, and a social media campaign under the hashtag #BoycottCoca‑Cola resulted.
On 8th March 2022, the Coca‑Cola Company issued a statement announcing that it was “suspending its business in Russia … We will continue to monitor and assess the situation as circumstances evolve”.
Filling the void
The refusal of major brands to export goods to Russia has its own consequences.
In particular, it has led to a number of third parties trying to fill the void and an increase of parallel imports into Russia. Russian Decree No. 506 came into force upon its publication on 30th March 2022.
It authorised the identification of types of goods that could be exempted from the laws that relate to regional exhaustion of IP rights.
By May 2022, the Russian Government had published a list of goods for which parallel imports would be acceptable, and in connection with which the principles of regional exhaustion would no longer apply.
The list included 55 categories of goods, such as pharmaceuticals and medical products, chemical products, textile fibres and materials, clothing and footwear, equipment and devices for the nuclear industry, electrical machinery and equipment, land vehicles, ships, furniture, and many more, although each category is further qualified.
As a result, Coca‑Cola and many other companies have had to take a number of actions in an attempt to prevent parallel imports of their goods into Russia.
Having unsuccessfully blocked Pivoindustria LLC from importing branded products, such as Fanta and Coca‑Cola Cherry, into Russia – and despite soft drinks not being on the “acceptable” list published by the Russian Government – Coca‑Cola is at the time of writing seeking judgment in multiple cases in the Russian courts.
The Russian Government’s adoption of Decree No. 299, which, in effect, allows the use of patents from countries deemed “unfriendly” (eg, the UK) without licence and without appropriate consideration being paid to the owner of said IP, so long as such use is deemed to be needed for the purpose of national security or for other qualified purposes, is not the first act of its kind.
During the First World War, the Australian Government, upon discovering that certain essential products were in short supply, suspended German patents concerning them and allowed local businesses to apply for permission from the Government to manufacture patented products and use the associated trade marks.
Once again Bayer found itself affected. Its patents were suspended and the right to manufacture aspirin were given to Shmith, Nicholas & Co. Realising that the trade mark ASPIRIN could be reclaimed by Bayer after the war, Shmith, Nicholas & Co adopted and registered the trade mark ASPRO.
A further concern to trade mark owners withdrawing from Russia is the possibility of trade mark registrations becoming vulnerable to non‑use cancellation actions.
A Russian trade mark registration becomes vulnerable if it has not been used by its owner, or with the owner’s consent, within three years of registration.
As enacted in Article 5 of the Paris Convention for the Protection of Industrial Property Rights, of which Russia is a party, proper reasons for non‑use include “if legal or economic conditions have prevented the use of the mark in a given country, for example, if the importation of certain products has been prohibited, or prevented by war, or if there was no market for such products” and this is reflected in Russian law and past practice.
Will the withdrawal of trade in support of Ukraine during the Russo‑Ukrainian War be considered a proper reason for non‑use of a mark in the eyes of Russian courts?
Is this non‑use of trade marks in Russia outside the control of the trade mark owners? These remain open questions.
While the UK is applying economic pressure to Russia, and the possibility of taking more direct involvement in the conflict has been raised, the two countries are not, at the time of writing, “at war”.
Territorial changes
War can also change the geographical boundaries of territories, which has an impact on territorial rights such as IP rights.
At the close of the Second World War, Germany was divided into two territories. In West Germany, a “patent‑office‑free period” began, which ended on 1st October 1948, when mechanisms for the application for patents or the registration of trade marks were once more in place.
Meanwhile, in East Germany, an IP system was set up by the German Economic Commission, a body established by the Soviet occupying power, and an IP office was opened in Berlin in September 1948.
When the Republic of Ireland first gained its independence from the UK in 1921, all UK registrations ceased to cover Ireland.
For approximately seven years, there were no trade mark registrations.
It wasn’t until the Industrial and Commercial Property (Protection) Act, 1927 was passed that the owners of UK rights were given the opportunity to apply for the protection they had once enjoyed in that territory.
The conflict between Russia and Ukraine has already resulted in territorial changes. In 2014, Russia claimed Crimea as part of its territory, and owners of Ukrainian patents and trade mark registrations were given the opportunity to maintain their local registered rights by opting into the Russian trade mark system and obtaining a comparable mark there.
The applicant had to be a resident of, or have a permanent location in, Crimea, and the trade mark registration or patent had to have been valid on 18th March 2014.
It has been discussed that the potentially conflicting rights resulting from the integration of such Crimean rights into the Russian trade mark register could be resolved in a similar way to the integration of the trade mark registers of East and West Germany in 1990.
In other words, where there is a clash of rights, each party’s rights would be restricted, as appropriate, to either Crimea or Russia.
On 22nd July 2014, the Ukrainian Government conferred the legal status of an occupied territory on Crimea and declared that it would remain subject to the Ukrainian regime in IP matters.
Consequently, there appear to be dual IP rights in Crimea and confusion over jurisdiction.
No timeline by which clarity may be found is apparent.
While we do not know precisely what the future holds, if the Russo‑Ukrainian War continues, we can predict that the difficulties for brand owners will increase and the ability of CharteredTrade Mark Attorneys to provide advice regarding protection of trade marks in Ukraine, Russia and Belarus, and potentially other territories, without including a multitude of caveats, will be severely hampered.
If history is our guide, however, what we can be certain of is that the ramifications of the Russo‑Ukrainian War will affect the owners of IP rights for many years to come.
Cherrie Stewart is a Chartered Trade Mark Attorney and Director at MacLachlan & Donaldson (Ansons)
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Author
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Cherrie Stewart
Trade Mark Attorney / Director, MacLachlan & Donaldson
