The Russia-Ukraine conflict has caused many U.S. companies to end or suspend operations in Russia. The end result could be the loss of patents and assets in the country, according to a new report.
What Happened: Russia has legalized patent theft from countries that are “unfriendly” to it, according to a Washington Post report.
Previous owners will not be compensated for their previous patent rights, according to a new decree from the country.
“Russian officials have also raised the possibility of lifting restrictions on some trademarks, according to state media, which could allow continued use of brands such as McDonald’s that are withdrawing from Russia,” the article states.
Trademark attorney Josh Gerben of Gerben Law said the new decree could add risks to companies with business in Russia.
“It’s just another example of how (Putin) has forever changed the relationship that Russia will have with the world,” Gerben said.
Russia said that the new measures could help limit the impact of supply chain issues and shortage of goods and services due to sanctions from countries such as the U.S.
Patent thefts are not too common but have been an issue during wars. The U.S. established the Office of Alien Property Custodian to help with seizures of enemy property during World War I and World War II, Gerben said.
Bayer lost the trademark rights to aspirin in the U.S., U.K. and France as a result of the Treaty of Versailles.
Related Link: 5 Companies That Stand To Lose Due To Operations In Russia, Ukraine
Why It’s Important: Intellectual property rights outside of the U.S. has been a popular topic over the years with some countries being less favorable to IP and leading to dozens of copyright companies in some regions.
Russia was one of nine countries on an intellectual property “priority watch list” last year.
One of Gerben’s hypothetical examples of how the new patent theft could work is McDonald’s Corp (NYSE:MCD).
Russia could “take those McDonald’s that got shut down and just let local operators operate the restaurants and call them McDonald’s,” Gerben tweeted.
McDonald’s announced earlier in the week that it would temporarily close 850 restaurants in Russia. The company, which is heavily franchised, sees around 9% of its revenue come from company-owned restaurants in Russia.
Fortune 100 companies could see their brands and patents stolen in Russia without fear of lawsuits and litigation.
“It’s significant because such a threat pressures the companies, who owe a duty to their shareholders, to think twice about further isolating Russia,” Gerben said. “If a company could lose a lot of money/stock value from having their intellectual property seized in Russia, does it need to consider shareholder value over moral obligation?”
Under the new decree, companies could face a no-win scenario of staying in Russia to protect their brand, revenue and shareholder value, while also facing public shame for operating in the country that is causing geopolitical conflict.
“The war atrocities are so bad that many companies appear — like McDonald’s — to feel the risk of continuing to do business in Russia outweighs the potential loss in value from having their trademarks and patents seized.”
MCD Price Action: McDonald’s shares are up 2.96% to $228.57 on Friday afternoon.
Photo: Sandra Cohen-Rose and Colin Rose via Flickr Creative Commons
