Permission of the Government Commission for the transactions involving intellectual property

The Ministry of Industry and Trade of Russia has proposed amendments to Presidential Decree No. 81 of March 1, 2022, expanding the list of transactions involving “unfriendly” foreigners, which require permission from the Government Commission for Control of Foreign Investments in the Russian Federation.

Minpromtorg considers it necessary to establish a permissive procedure for transactions involving the alienation or pledge of exclusive rights to a result of intellectual activity or a means of individualization. According to the Ministry, this measure will minimize “the risk of unfair law enforcement practice, ... as well as will contribute to ensuring additional cash flow to the federal budget” through the payment of a matching contribution by the beneficiary of the transaction.

Currently the permission of the Government Commission must be obtained for transactions involving shares in Russian companies, as well as for most deals involving securities and real estate (with a number of exceptions) if the party to the transaction is a person from an “unfriendly” state. So far, the voluntary contribution to the budget has been set only for the transactions with shares in Russian LLCs and amounts to 15% of the market value of the asset. In this case, the valuation of shares is performed by an independent appraiser, and then the report is subject to verification by a self-regulatory organization (both the appraiser and the SRO must be from the lists recommended by the Ministry of Finance).

So far, only the restrictions established by the Presidential Decree No. 322 from May 27, 2022 have been applicable to intellectual property. This document defines the procedure for the fulfilment by residents of obligations related to the use of results of intellectual activity and (or) means of individualization, the right holder of which is an “unfriendly” person. If such right holder publicly supported the anti-Russian sanctions, prohibited the use of its intellectual property in Russia due to the imposition of sanctions, or ceased, suspended or significantly restricted the production (supply) of goods, provision of services and (or) performance of work in Russia after the start of a special military operation, the resident shall make payments under license and sub-license agreements and other agreements on the use of intellectual property, as well as penalties thereunder to a special “O”-type ruble account opened in a Russian bank in the name of a rights holder from an “unfriendly” country. The transfer of funds to such an account is recognized as a proper fulfillment of obligations by the debtor, and to transfer money to another, including foreign, account of the right holder, the latter needs to apply to the Government Commission for yet another permission. In some cases, this procedure does not apply, for example, if payments under agreements on the use of intellectual property:
  • do not exceed 100 thousand roubles (or the equivalent of this amount in foreign currency) and are made by an individual Russian resident who uses IP for personal (not related to entrepreneurial activity) needs;
  • are made to a right holder from a “unfriendly” state who duly fulfills his obligations under the contract.