Russia introduces ruble-based payment procedure for IP-related contracts

On May 27, 2022, the Russian President adopted Decree No. 322 “On the temporary procedure for the performance of obligations to certain creditors” (“Decree“).

According to the decree, Russian persons (including the Russian state, regional state authorities, municipalities and Russian residents) are responsible for making payments for the use of intellectual property to foreign owners of intellectual property rights ( including penalties, fines and other payments) by transferring funds in rubles to a special type O bank account opened in the name of the foreign owner of the intellectual property right.

The decree applies to payments made to the following types of foreign owners of intellectual property rights:

  • People from states that have imposed sanctions on Russia (“hostile states“) including people under their control
  • People who publicly supported or called for the imposition of sanctions against Russia and Russian people
  • Persons who have restricted the use of intellectual property belonging to them in Russia or who have ceased their business activities in Russia
  • People who have spoken negatively or publicly disseminated false information about Russia, its armed forces and Russian state bodies

The specific characteristics of the type O bank account will be determined by the Russian Central Bank in the next 10 days. However, the decree already establishes that a foreign owner of intellectual property rights can transfer rubles from the special account type O to a bank account outside Russia only with the permission of the Government Commission for the Control of Foreign Investments .

In addition, unless the foreign owner of the intellectual property rights has formally consented to the opening of a type O bank account in his name, Russian persons (licensees) have the right not to pay any royalties to such foreign person (while retaining the legal right to continue using the relevant intellectual property) until such consent is obtained.

At the same time, the decree does not apply to the following:

  • Owners of foreign intellectual property rights from hostile states, who duly fulfill their obligations under their contract with the Russian resident (i.e. who have not ceased to fulfill their contractual obligations in Russia )
  • Contracts related to intellectual property necessary for the import of medicines, medical devices, industrial, agricultural and food products into Russia
  • Contracts related to intellectual property necessary for the provision of communication services (including Internet access) and the production or use of computers, software and servers in Russia
  • IP-related payments made by Russian individuals that do not exceed 100,000 rubles, if the IP objects are to be used for personal purposes.

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Elaine R. Knight