Russia has been facing sanctions which has resulted in serious negative impacts on Russia’s economy. In response to the sanctions, Russia has issued a decree stating that Russian companies can infringe on the intellectual property rights of companies that are owned in “unfriendly countries” legally. This decree means that Russian entities would be able to appropriate patents without the threat of litigation. As such, companies owning the intellectual property would not be entitled to any compensation or damages resulting from “compulsory licenses” granted to patents. Affected companies cannot enforce their patent and design rights against Russian imitators and are effectively legalizing intellectual piracy.

It seems the U.S. might have foreseen this as the U.S. government added Russia to its “priority watch list” of countries. This watch list identifies countries that do not sufficiently protect US intellectual property. The suspension of intellectual property rights was introduced by the U.S. with the Trading with the Enemy Act which seized copyright and patents owned by enemy countries. Although at the moment Russia has only imposed these restrictions on patents, Russian officials have hinted that other intellectual property rights including software and trademarks could be subject to sanctions. According to Russia’s Ministry of Economic Development, authorities are considering restrictions on the use of intellectual property contained in certain goods whose supply to Russia is restricted, which could affect inventions, computer software, and trademarks.

Should Russia decide to impose a similar decree on trademarks, it would give them the opportunity to exploit large global chains and operate them on their own without compensation to the trademark holders. As an example, McDonald’s stated that it would temporarily close all 850 of its restaurants in Russia and should Russia withdraw trademark protections, Russia could essentially take those restaurants, hire employees, and call them McDonald’s.

The Russian decree is already in effect and has caused trademark and copyright infringement lawsuits to be dismissed. In one case, there was a trademark infringement lawsuit filed by a British company which produces the animated series Peppa Pig. A Russian Judge dismissed the lawsuit and stated that his decision was influenced by the fact that the U.S. was an “unfriendly” country to Russia and thus their intellectual property is unprotected.

The question stands on whether Russia will face the consequences for these actions as all countries need to respect the laws of the World Trade Organization (“WTO”). The WTO is a comprehensive multilateral agreement on intellectual property that recognizes the connection between intellectual property and trade and the need for a balanced system. The WTO stands to guarantee that foreign businesses are able to enforce intellectual property rights against imitators.

As affected countries begin to feel the negative impact of Russia’s decree, they may seek the WTO court and ask for sanctions to be imposed. The WTO offers a security exception which allows WTO members to breach their obligations for national security. However, this has never been invoked nor tested before the WTO judges. Another consequence Russia could face, is being expelled from the WTO, which would essentially mean no country would be able to bring Russia into WTO court as it would no longer be a member.

The impact of this situation will provide companies with the reminder of how important intellectual property protections are and cause them to be wary when deciding which countries to file and invest in.