New procedure for approval of transactions on acquisition of IP objects from foreign rightsholders
Presidential Decree of the Russian Federation No. 430 dated on May 20, 2024, establishes a temporary procedure for acquisition by the Russian residents of exclusive rights to certain results of intellectual activity (RIA) and means of individualization (MI) from foreign rightsholders from unfriendly states (“Presidential Decree No. 430”).
➢Which transactions and operations does the procedure apply to?
–Transactions on acquisition of exclusive rights to the results of intellectual activity or means of individualization in which the Russian Federation, subjects of the Russian Federation, municipalities and residents act as acquirers, and the rightsholders are persons from unfriendly foreign states who alienate their exclusive rights to RIA or MI, as well as
–Transactions on performance and/or enforcement of monetary commitments under such transactions
➢What is the new temporary procedure about?
From May 20, 2024, the abovementioned transactions and operations shall be performed only subject to the approval of the Governmental Commission for Control of Foreign Investments in the Russian Federation.
➢What is the content of approval of the Governmental Commission?
Depending on the subject of a particular transaction, the approval may contain:
–a provision on payment of remuneration as well as other payments (including penalties, fines and other financial sanctions) related to the acquisition of exclusive rights to RIA or MI under the abovementioned transactions by transferring funds to a special ruble account of type “O” (the mode is established by the Presidential Decree of the Russian Federation No. 322 as of May 27, 2022, “On the temporary procedure for performance of obligations to certain rightsholders”);
–other terms and conditions for performance of the specified transactions.
➢What will happen to transactions entered into but not executed as of May 20, 2024?
Monetary commitments under such transactions may be fulfilled only by transferring funds to a special ruble account of type “O” opened with an authorized bank by the acquirer of exclusive rights in the name of the rightsholder.
Transfer of funds from a special account of type “O” to a bank account, including one opened in a bank outside the territory of the Russian Federation, of the rightsholder, a foreign creditor or a controlled person will require an authorization from the Governmental Commission.
➢Which transactions are expressly excluded from the scope of the new interim procedure?
Presidential Decree No. 430 excludes from the scope of the new interim procedure:
–Transactions involving the acquisition of exclusive rights to works of science, literature and art; results of performances; phonograms; messages of broadcasting or cable broadcasting organizations;
–Transactions for which the acquirer’s obligations do not exceed RUB 15 million (equivalent amount in foreign currency).
➢Important to note:
–Presidential Decree No. 430 establishes a restricted list of results of intellectual activity, which alienation is not subjected to its provisions. Thus, such independent results of intellectual activity and means of individualization as computer programs, databases being objects of copyright, trade secrets (know-how) are not an exception to the application of Presidential Decree No. 430. Transactions on alienation of such RIAs and MIs shall be subjected to approval by the Governmental Commission.
–It should be noted that the Presidential Decree No. 430 does not apply to other means of disposal of exclusive rights to RIA and MI, except for alienation. Therefore, granting the rights to use RIAs and equivalent MIs under license agreements concluded or already in force with rightsholders from unfriendly states, persons related to them or controlled by them is performed without the approval of the Governmental Commission. Payment of royalties and other payments under such agreements is carried out in accordance with the procedure provided for by the Presidential Decree of the Russian Federation No. 322 as of May 27, 2022, “On the temporary procedure for performance of obligations to certain rightsholders”.
–As of today, there is no official list of documents and information to be submitted to the Governmental Commission to obtain the approval for performing the abovementioned transactions, however, we believe that the Russian Government may further establish such a list and require, for example, additional information regarding the alienated IP object, its market evaluation, so that the Governmental Commission can assess the proportionality of the transaction price to the real value of the RIA and/or MI acquired from foreign “unfriendly” rightsholders.
***
Please note that the present Newsletter is drafted exclusively for information purposes and does not constitute legal advice.
We hope that you find it useful. We will be happy to provide you with further information upon your request.