The violation of intellectual property rights and the creation of a new internal market
Since the beginning of Russia's invasion of Ukraine, many western companies have pulled out of the country. Besides having to comply with Western sanctions against Russia, companies have become aware of the risks to their reputation by continuing their normal businesses.
For these reasons, some of the world's best-known brands ceased trading in Russia in March 2022, initiating a period of violations perpetrated against companies’ assets.
This article will mainly focus on McDonald's case, giving an overview of the consequences of its exit from Russian market on its intellectual property (IP) rights.
McDonald's history in Russia and its current shutdown
On January 31st, 1990, McDonald's opened the doors of its first restaurant in Pushkin Square, Moscow. This event was not merely the opening of an American business in the Soviet Union's territory, but, most of all, it represented the beginning of an era of new freedoms for the Russian people [1]. Indeed, two years later the Soviet Union finally collapsed.
“McDonald's arrival in Moscow was about more than just Big Macs and fries [...]. It was the most prominent example of glasnost in action, Soviet Union President Mikhail Gorbachev's attempt to open up his crumbling country to international relations"[2].
The opening of the first American fast-food chain in Russia was considered a milestone in its President’s new glasnost policy, which, since the beginning of the late 1980s, was focused on openness and transparency [3].
Although many were skeptical about McDonald’s success, in 32 years of activity the company has managed to open 850 restaurants and has hired more than 62,000 employees.
"In the thirty-plus years that McDonald's has operated in Russia, we've
become an essential part of the 850 communities in which we operate" CEO Christopher John Kempczinski stated on March 8, 2022 [4].
Now the American company has decided to temporarily suspend all its operations in Russia because of the sanctions in response to the crisis in Ukraine, on the one hand, and of the need to safeguard its business reputation, on the other hand.
"Our values mean we cannot ignore the needless human suffering unfolding in Ukraine", Kempczinski stated in the same statement [5].
By doing so, McDonald’s, together with other very well-known brands, distanced itself from Putin's current political policy.
In response to this, during a government meeting Putin affirmed that Russia should “introduce external management” on departing companies “and then transfer these enterprises to those who want to work”, adopting a legislative proposal that would clear the path for the government to take over or sell businesses that quit the country [6].
Russia's reaction to Western sanctions and the improper use of registered patents
While the world is focused on the humanitarian crisis in Ukraine, many other economic aspects and international business relations are endangered by the conflict.
On March 4, 2022, the United States Patent and Trademark Office (USPTO), cut ties with the Russian intellectual property offices [7].
On the other hand, Russia, on March 5, 2022, issued a decree permitting the use of patents for inventions, industrial designs, and utility models originating in those that are now considered “unfriendly countries” for Russia [8]. This policy applies to all patent holders who are nationals of one of the identified countries or who are just doing business in one of their territories.
The McDonald's case is one of the most exemplary Russian retaliations against US brands, which concerns the improper use of the legendary McDonald’s “M”. In fact, a Russian fast-food chain called ‘Uncle Vanya’ has taken over McDonald’s restaurants in Russia.
"McDonald's announced that they are closing. Well, okay, close. Tomorrow there won't be McDonald's, but Uncle Vanya's", Vyacheslav Volodin, speaker of the Russian State Duma, stated [9].
Moreover, the Russian company also applied to register the Cyrillic letter ‘B’ (the equivalent of the Roman ‘V’ for ‘Vanya’) in a style that reminds of McDonald’s ‘Golden Arches’. The logo is so similar to the one owned by the American fast-food company that consumers could believe that nothing has changed, leaving the market shares likely unaffected. This can give rise to an unjustified profit based on a clear intellectual property right violation.
Something similar has already happened in history. During the First World War, assets of the German company in the USA and UK were taken over by local companies under local legislation. However, a significant difference with the present situation is that Russia is not at war with the ‘unfriendly countries’ from which rights are being unlawfully appropriated. In addition, it should be underlined that Russia even claims that it is not ‘at war’ with Ukraine, but rather it is just conducting a ‘special military operation' [10].
Furthermore, this nationalization trend is also the effect of Putin's aim to create a self-sufficient Russian market, based on national workforce and raw materials. This trend is clearly opposed to Russia’s former President’s policy and international transparency aim, i.e. Gorbachev’s glasnost.
The effects of such actions on IP rights could be substantial, particularly in light of the multinational corporations that have temporarily halted operations in Russia, including Disney, Coca Cola, Ikea and Instagram [11]. Indeed, Russian officials continue to discuss and implement further legal measures that constantly erode protections for foreign intellectual property and other company assets.
In conclusion, the Ukrainian crisis, besides being an armed conflict, is also putting companies’ rights in danger. Their trademark rights, patents and intellectual property rights aren’t protected anymore, not even in Russian Courts. This war is jeopardizing companies’ economic situation and employment stability, but mostly the world’s economic environment as a whole.
It remains to be seen, once the current crisis in Ukraine has ended, whether the Russian government will eventually restore rights to the current owners.
BIBLIOGRAFIA
[1] [2]
Danielle Wiener-Bronner, CNN Business, “McDonald's transformed Russia ... now it's abandoning the country”, March 10, 2022.
[3]
Enciclopedia Treccani.
[4] [5]
“McDonald's To Temporarily Close Restaurants & Pause Operations in Russia” (This article was originally sent via email from CEO Chris Kempczinski to McDonald’s employees and franchisees), March 8, 2022.
[6]
Jeanne Whalen, “Russia considers nationalizing Western businesses that have closed over Ukraine invasion”, March 10, 2022.
[7] [11]
Ann Fort, Jennifer Sandlin, Jeremy Spier, jdsupra, “United States halts work with Russian Patent Office, while Russia lessens foreign intellectual property protections”, March 21, 2022.
[8]
“US Companies Losing Their Patent Rights in Russia”, Fredrikson & Byron PA.
[9]
Cheryl The, “A Russian fast-food chain called Uncle Vanya wants to trademark a logo that resembles McDonald's Golden Arches”, MAR 18, 2022.
[10]
Phillips Ormonde Fitzpatrick, “Intellectual property in a time of war”.