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  • Writer's pictureDavid Baker

Trademarks latest casualty in Ukraine war

In a conflict that has been marked by shockingly high casualty rates among both combatants and civilians, the war in Ukraine has added an unusual, albeit far less important, category to the list: trademarks.

Responding to Western political pressure and mounting economic sanctions, Russia has decreed that Western intellectual property assets are essentially forfeited by companies that have stopped doing business in the country. The long-term impact on these and other Western brands remains to be seen.

Western companies like McDonald’s and Starbucks with a relatively strong presence in Russia have bowed to increasingly strident calls by shareholders and Western consumers to shutter their operations until Russia stops its military operations and withdraws from neighboring Ukraine. But by doing so, those same companies have essentially given up control over their business operations inside Russia and thereby relinquished their trademarks, copyrights, and other intellectual property assets, a move that Russia seems to have welcomed.

In fact, Russian officials have accepted the move much like an employer might accept a threat of resignation by an employee, by stripping away IP rights from U.S. companies doing business in Russia. So, too, they have taken away IP rights from foreign companies from 23 other territories labeled “unfriendly.”

As a result, companies like McDonald's and Starbucks that have left Russia to protest its invasion of Ukraine can do little when Russian businesses steal their trademarks. Unceremoniously, trademark applications have been filed in Russia that bear a striking resemblance to marks belonging not only to McDonald’s and Starbucks but also to Ikea, Hasbro, Instagram, and others. And now that those companies no longer have an official presence in Russia, they are unable to fight back because challenges of competing registrations and unauthorized use are limited to Russian courts.

Theoretically, the World Trade Organization (or “WTO”) can settle IP disputes between the U.S. and Russia under the Agreement on Trade-Related Aspects of Intellectual Property Rights, which concedes jurisdiction to the WTO. However, the U.S. suspension of normal trade relations with Russia effectively nullifies this approach.

Likewise, filing a lawsuit is Russia to enforce IP rights seems useless at the moment. Any U.S. hoping to win an IP legal battle in Russia right now is likely being delusional.

If it’s any consolation, Russia is not a huge market for western nations’ exports. U.S. Commerce Department data shows that the U.S. exported only $6.4 billion in goods to Russia in 2021, which may sound like a lot but is actually less than one fifth of the exports going to Belgium. And for further comparison, U.S. goods exported to China last year totaled $151 billion.

“Russia is incredibly unimportant in the global economy except for oil and gas,” Jason Furman, who chaired the Council of Economic Advisers in the Obama administration, told The New York Times this week. “It’s basically a big gas station.”

Still, there eventually will be an end to the war and a resumption of commerce by foreign corporations in Russia. The big unknown is how soon, if ever, U.S. companies will eb allowed back in.

WHY IT MATTERS. Brand integrity is a critical concept in a world dependent on international commerce and there can be no such thing as brand integrity when individual countries are allowed to change their commercial laws to suit the whims of a rogue leader, a political movement, or even a military conflict.

Even during the darkest days of the world wars, the combatants knew that there would be a world after the conflict ended and that world would be ruled, to a large extent, by commercial transaction supported by the law. But the current situation in Russia is unprecedented.

As an IKEA spokesperson said, “We don't want to speculate. It is too soon to talk about any potential consequences of this.”

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