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February 06, 2015

The Russian economy is currently in turmoil, and these internal monetary issues are affecting companies in the West who are doing business there. There are three main elements responsible for the economic downturn:

  • Currency Crisis – In 2014 the Ruble dropped in value 40% against the US Dollar.
  • Falling Oil Prices – Demand for an important Russian asset has weakened.
  • Imposed Sanctions – Geopolitics is having a large negative economic impact.

Soaring prices have created surges of Russian consumer purchases, resulting in lines to buy big ticket items like TVs and computers, as the buying power of the currency diminishes from day to day along with the population’s confidence for a near future rebound. Though these surges in purchases can benefit companies in the short term, the current state of brands doing business in Russia is one filled with a number of concerns. This post will focus on one key element affecting brands doing business in Russia today – Trademark Protection.


Companies Suspend Business in Russia

Economic sanctions have been imposed on Russia by the US in an effort to convince the President of the Russian Federation, Vladimir Putin, to return the Crimean Peninsula to Ukraine and discontinue incursions there. The repercussions of this has resulted in Russia denying trademark protection to brands. The trademark protection for the name and logo of one of the Big Three United States auto makers was taken away by Russia’s Intellectual Property Court as the result of an October 27th, 2014 decision. In essence, the court said that in Russia, this brand and its cars were not well known within their country – even though their name has historical significance as a motor vehicle pioneer and innovator, and is currently acknowledged worldwide as a formidable established automobile industry global brand. Though the court cited a number of technicalities and unfulfilled requirements on behalf of the car manufacturer in the ruling, this action is interpreted by many to be retaliatory in nature, driven by the current political standoff between the United States and Russia. What this means is that others can legally use the name and trademarks of prominent US automobile or computer brands. For example, replacement parts could be manufactured and stamped with the brand name and logo, and counterfeiters can produce such substandard products that are not tested and authorized by the original company. Inside the US, if this were to happen, the brand can use legal methods to initial a criminal seizure or criminal injunction and law enforcement would step in to prosecute and shut down the illegal operation. In Russia currently, that enforcement will cease, and this will open the door for a wide number of trademark infringements. Subsequently, a number of companies have suspended aspects of their business in Russia, concerned about the potential threat to intellectual properties incurred from illegal use of their brand, trademarks and products.


Geopolitics Affecting the Global Marketplace

In this situation, the prevailing geopolitical issues have had a far reaching impact, and contributed to a negative situation for both Russian consumers and many or the brands offering products there. Western companies have much at stake, considering the amount of time and effort already spent over decades establishing themselves in the marketplace. It may not be appropriate for them to curtail operations, but rather modify practices accordingly to address their increased risks, threats and vulnerabilities in the current Russian economic and political climate. Actionable intelligence is a valued asset for brands, especially in the global marketplace. Services like Pinkerton’s Global Risk Group (GRG) can provide real time updates and “situational awareness” solutions for identified concerns worldwide.

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