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Among the relatively new and quite complex financial instruments
for the Russian market, in the context of a rapidly developing
digital economy, it is necessary to distinguish cryptocurrencies,
which are of common interest and which have been discussed a lot
recently. As per the CoinMarketCap (a popular cryptocurrency data
aggregator), there are more than 4,000 different cryptocurrencies
in the world now.
In the last year, the world saw a rapid growth of the crypto
market. In December 2021, its overall capitalization reached USD2.3
trillion. As per some estimates, Russian individuals’ crypto
transactions reach USD5 billion a year. Russian individuals are
active users of online platforms trading in cryptocurrencies.
In addition, Russia is among the global crypto mining capacity
leaders (as per the report for public consultations entitled
“Cryptocurrencies: Trends, Risks, and Measures” issued by
the Central Bank of the Russian Federation on 20 January 2022).
It is clear that Russia is one of the key players in the crypto
market and the legal regulation of crypto currencies in our country
is an inescapable reality and is most vital as never before.
Legislative Regulation of Cryptocurrencies in Russia
On 1 January 2021, Federal Law No.259-FZ dated 31 July 2020 On
Digital Financial Assets, Digital Currency, and Amendments to
Certain Legislative Acts of the Russian Federation (hereinafter
referred to as the “DFA law”) became effective in Russia,
which, as per clause 1 of Article 1, “regulates the relations
arising during the issue, accounting, and circulation of digital
financial assets, specific features of the activities of an
operator of the information system that issues digital financial
assets and of an operator of the digital financial asset exchange
as well as the relations arising during the circulation of a
digital currency in the Russian Federation”. Before 1 January
2021, there was no legal definition of a cryptocurrency in the
legislation of the Russian Federation, its essence or regulation of
issue and circulation were not determined there as well.
What are the key aspects of the DFA law? The first thing that
catches the eye in the DFA law is that there is no term
“cryptocurrency”. Instead of the usual term
“cryptocurrency”, the legislature introduces another term
– “digital 2/3 currency”, which, rather than making it
clearer as expected, has created some confusion and uncertainty
even at a level of the terminology, since a question immediately
comes up: are cryptocurrency and digital currency the same thing or
not? We can assume that the reason why the law authors have decided
to “hide” cryptocurrencies under the term “digital
currencies” is their frequent use in criminal activities and
criminal schemes, for example, for money laundering or sale of
drugs, for which reason the term “cryptocurrency” sounds
negative and has a bad reputation, while the term “digital
currency” has not smeared its name.
So, a digital currency is a cryptocurrency designation
officially approved in the legislation of the Russian Federation.
First and foremost, the DFA law clearly separates digital financial
assets and digital currencies. As per the DFA law, these are two
completely different things. In its current form, the DFA law
focuses primarily on the regulation of digital financial assets.
Since this article is about cryptocurrencies in their classical
meaning, we will not dig into the analysis of digital financial
assets but will focus specifically on cryptocurrencies (or digital
currencies as per the DFA law).
As defined in the DFA law, a digital currency is a set of
electronic data (a digital code or a designation) contained in an
information system, which are offered and (or) can be accepted as a
means of payment, which is not a currency of the Russian
Federation, a currency of a foreign state and (or) an international
currency or unit of account, and (or) as an investment, in respect
of which there is no person obliged to each owner of such
electronic data, except for the information system operator and
(or) nodes obliged only to ensure compliance of a procedure for
issuing this electronic data and carrying out actions with the same
to make (change) records in such an information system with its
rules (clause 3 of Article 1 of the DFA law).
In accordance with this definition, a digital currency can
include all classic decentralized or pseudo decentralized
cryptocurrencies, for example: Bitcoin (BTC), Litecoin (LTC), ZCash
(ZEC), Monero (XMR), Ether or ETH (Ethereum blockchain
platform’s own cryptocurrency).
Among the key aspects of the DFA law relating to the digital
currency, it is worth noting that, despite the fact that a digital
currency is classified as a means of payment (which follows from
its definition in the DFA law), clause 5 of Article 14 of the DFA
law prohibits the acceptance of payment for goods, works, and
services in a digital currency in Russia and clause 7 of Article 14
prohibits the dissemination of information about the offer and
acceptance of a digital currency as a method of payment for goods,
works, and services. It is also worth noting that a digital
currency is now officially recognized as property, which allows it
to be included in civil transactions.
In addition, the DFA law currently contains no procedure or
rules for digital currency transactions, it merely makes a
reference to other federal laws that do not exist yet: “The
organization of an issue and (or) the issue and (or) the
organization of circulation of a digital currency in the Russian
Federation shall be regulated in accordance with the federal
laws” (clause 4 of Article 14 of the DFA law).
Thus, in its current form, the DFA law is a sort of compromise
solution between a complete ban on cryptocurrencies and their full
legalization. The DFA law, which adoption has been waited for by
the crypto community for about three years, should seemingly have
brought legal certainty, after all, in terms of the Russian
regulation of cryptocurrencies, but in fact it just has laid the
foundations for the regulation of the crypto industry in our
country. Currently, in Russia, there is no ban on cryptocurrency
as, however, there never has been. You can make any cryptocurrency
sale and purchase transactions or pledge, exchange, gift, and
bequeath it. It is not quite clear what awaits the crypto market
further on. The legislation on the regulation of cryptocurrencies
is being elaborated at full speed; however, it is already obvious
that the government has come to the conclusion that
cryptocurrencies need regulation and strict control, not a ban in
any way.
Rospatent’s Practice in Expert Examination of Designations
Representing Names of Crypto Services, Crypto Platforms,
Cryptocurrency Exchanges, or Cryptocurrencies
But can there be any difficulties with registration of
designations representing the names of cryptocurrencies, crypto
services, platforms, and exchanges as trade marks in Russia? Yes,
there can be.
Problems have also periodically occurred before the DFA law
became effective and they still periodically occur.
The word “periodically” is used here for a reason
since the Rospatent’s position is often inconsistent and
unpredictable when registering designations representing the names
of cryptocurrencies, crypto services, platforms, and exchanges as
trade marks, so it is impossible to assert in advance whether
Rospatent will refuse to register such a designation as a trade
mark or not. For example, below is a rather extensive list of the
trade marks already registered in Russia, which are the names of
cryptocurrencies, crypto services, platforms, and exchanges, that
have been granted legal protection both before and after the DFA
law became effective (the list is not exhaustive):
It is worth noting that the overwhelming majority of the above
trade marks have been registered without preliminary refusals to
register by the expert examination panels.
However, despite the fact that Rospatent has already registered
a considerable number of trade marks containing the names of
cryptocurrencies, crypto services, platforms, and exchanges (the
above list is not exhaustive) in the name of various right holders,
including for the goods and services directly related to the
cryptocurrencies (i. e., the lists of goods and services contain
items that directly indicate that the right holder’s activities
are related to the crypto market, for example: “downloadable
computer software for digital currency and cryptocurrency
exchange” or “financial exchange services, namely
exchange transactions for trading and selling digital currency and
cryptocurrency”), the latest practice shows that the
probability of Rospatent’s refusal to register such marks is
still quite high.
Applicants trying to register trade marks in Russia, which are
the names of cryptocurrencies, crypto services, platforms, and
exchanges, still periodically face the Rospatent’s refusal to
register such designations as trade marks referring to subclause 2
of clause 3 of Article 1483 of the Civil Code of Russia, under
which “No state registration of designations representing or
containing elements that contradict the public interest, principles
of humanity and morality as trade marks is allowed”. The
expert examination panel’s arguments are:
- The claimed designation is the name of a crypto service or the
name of a cryptocurrency; - As per the press centre of the Central Bank of Russia, due to
the lack of security and legally binding entities, transactions in
“virtual currencies” are speculative. The Bank of Russia
warns that the provision by legal entities of services in the
exchange of “virtual currencies” for Russian rubles and
foreign currencies as well as for goods (works, services) will be
considered as potential involvement in shady transactions in
accordance with the legislation on anti-money laundering and
combating the financing of terrorism.
As a source, the expert examination panel refers to the press
releases of the Bank of Russia “On the Use of “Virtual Currencies”,
in particular, Bitcoin in Transactions” dated 27 January
2014 and “On the Use of Private “Virtual
Currencies” (Cryptocurrencies)” dated 4 September
2017.
In this regard, the claimed designation cannot be registered as
a trade mark (service mark) based on the provisions provided for in
clause 2 of clause 3 of Article 1483 of the Civil Code of Russia,
since such registration of the designation as a trade mark (service
mark) and its use in civil transactions as a means of
individualization of goods and (or) services are qualified by the
expert examination panel as contradicting the public interest.
The press releases of the Bank of Russia “On the Use of
“Virtual Currencies”, in particular, Bitcoin in
Transactions” dated 27 January 2014 and “On the Use of
Private “Virtual Currencies” (Cryptocurrencies)”
dated 4 September 2017 referred to by Rospatent are issued as press
releases by the press centre of the Bank of Russia, are not signed
by anyone, are not registered and, accordingly, cannot be
considered as regulations binding upon federal state authorities,
state authorities of constituent entities of the Russian Federation
and local authorities, all legal entities and individuals, since
such regulations must be issued in the form of directions,
statutes, and instructions and must be duly registered (Article 7
of Federal Law No.86-FZ dated 10 July 2002 (as amended on 30
December 2021) On the Central Bank of the Russian Federation (Bank
of Russia) (as amended, effective from 11 January 2022)). Thus, the
press releases always referred by Rospatent in support of its
refusal under subclause 2 of clause 3 of Article 1483 of the Civil
Code of Russia cannot be legally considered to have legislative
effect or to be applicable when interpreting the legislation, for
which reason it can be concluded that there is no regulatory
position of the Bank of Russia on this issue.
In addition, these press releases do not contain any direct
statements that cryptocurrencies are quasi-money and are banned in
Russia, on which basis the expert examination panel could qualify
the registration of designations representing the names of
cryptocurrencies, crypto services, platforms, and exchanges as a
trade mark and their use in civil transactions as means of
individualization of goods and (or) services as contradicting the
public interest, and that the registration and use of such trade
marks may result in a violation of the legislation of the Russian
Federation in other areas of legal regulation. Moreover, in its
press release dated 4 September 2017, the Bank of Russia even
reports that “along with interested federal state authorities,
the Bank of Russia monitors the crypto market and develops
approaches to the definition and regulation of cryptocurrencies in
the Russian Federation”, thereby indicating the
government’s intent to put the crypto market in order at the
legislative level in the near future.
Thus, it seems that the above press releases of the Bank of
Russia cannot be sufficient to support the Rospatent’s position
when making decisions about the contradiction of designations
representing the names of cryptocurrencies, crypto services,
platforms, and exchanges to the Russian public interest.
In addition, as per the draft law on the regulation of
cryptocurrencies brought by the Ministry of Finance of Russia in
the Government of Russia on 18 February 2022, which has been
prepared based on the previously approved Framework of Legislative
Regulation of Mechanisms for Organizing the Circulation of Digital
Currencies, the changes proposed in the draft law are aimed at
forming a legal market for digital currencies establishing the
rules for their circulation and pool of members (more details on the Ministry’s website).
The new draft law explicitly indicates the government’s
position aimed at legalizing the crypto market, not completely
banning. Thus, such designations cannot contradict the public
interest, since the balanced position of the official Russian
government, reflecting the public sentiment, as we see, is in no
case aimed at banning the circulation of cryptocurrencies; on the
contrary, the official government is after legalizing and
streamlining relations in the crypto market.
It is also worth noting that the rule of law specified as a
ground for refusal to register designations, namely, subclause 2 of
clause 3 of Article 1483 of the Civil Code of Russia, provides for
contradiction to the public interest of the designation itself or
its elements.
As a rule, the names of cryptocurrencies, crypto services,
platforms, and exchanges are either fantasy words, such as BINANCE
or ETHEREUM, or words that are semantically neutral with respect to
the goods and services related to cryptocurrencies, such as RIPPLE
or GEMINI.
Obviously, such designations for goods and services related to a
cryptocurrency cannot actually contradict the public interest,
since they contain neither direct nor associative calls for
purchase or use of cryptocurrencies in transactions, do not form
positive attitude to cryptocurrencies, have no offensive meaning,
etc. In other words, it is apparent that such designations
themselves do not contradict the legal foundations of public order
and cannot cause any negative associations with the goods and
services for which the protection of designations is claimed. In
fact, this is confirmed by the position of Rospatent itself that
has registered both these particular marks and other marks,
including for the goods and services related to a
cryptocurrency.
If you follow the Rospatent’s logic, the expert examination
panel should also refuse to register trade marks representing the
names of tobacco or alcoholic beverages based on contradiction to
the public interest just because there are a number of restrictions
related to tobacco smoking, consumption of nicotine containing
products and alcoholic beverages, and their sale under the current
legislation in Russia.
The court practice of challenging the Rospatent’s decisions
to refuse to register designations representing the names of
cryptocurrencies, crypto services, platforms, and exchanges as
trade marks based on subclause 2 of clause 3 of Article 1483 of the
Civil Code of Russia is too small and is limited to two decisions
of the Intellectual Property Rights Court dated 10 September 2021
in case No. SIP-387/2021 and dated 31 January 2022 in case No.
SIP-386/2021. Both cases involve parallel applications in the name
of one applicant: No. 2019721082 for classes 09, 35, 38, and 42 and
No.2019721067 for class 36. At the same time, it is worth noting
that the applicant’s activity is not related to
cryptocurrencies and the claimed goods and services do not contain
any items directly related to cryptocurrencies but, according to
the information found by the expert examination panel on the
Internet, the claimed designations include a designation that is
the name of a cryptocurrency, for which reason it has been refused
to register the claimed designations, including based on subclause
2 of clause 3 of Article 1483 of the Civil Code of Russia with
references to the above press releases of the Bank of Russia.
In the above decisions of the Intellectual Property Rights
Court, the judicial chamber concludes that the Rospatent’s
conclusion on the contradiction of the designations, claimed for
registration and containing the name of a cryptocurrency, to the
public interest is not grounded enough, since Rospatent has not
provided the reasons how the registration of the claimed
designations for individualization of particular goods and services
of classes 9, 35, 36, 38, and 42 according to the International
Classification of Goods and Services will be perceived as
contradicting the public interest. The court also “draws
special attention to the inconsistent position of Rospatent when
analysing the designations containing the name of cryptocurrencies
for compliance with subclause 2 of clause 3 of Article 1483 of the
Civil Code of Russia” noting that “Rospatent has
registered trade marks containing the names of cryptocurrencies in
the name of various right holders for various goods and services,
including financial services of class 36 according to the
International Classification of Goods and Services”.
Also, the judicial chamber “takes into account that the
records on each application are kept independently, while this
circumstance does not exempt Rospatent from its obligation to take
into account the decisions already taken in similar or same
situations” and notes that “when refusing to register the
disputed trade mark, Rospatent has not reasoned the existence of
circumstances serving as a basis for making a different
decision” pointing out that “state authorities are
obliged to perform the functions imposed on them subject to the
principle of protection of legitimate expectations.
Predictable behaviour of a state authority that has official
power is one of the factors that control the arbitrary rule, create
conditions for implementing the principle of legal certainty, and
contribute to forming trust in the law and state actions among
parties to legal relations”.
It is noteworthy that “in the court session, the
Rospatent’s representative has explained in response to the
court’s question that the applicants may have provided
documents on the admissibility of such registration during other
registrations of the trade marks, which include the names of
cryptocurrencies”.
The court has objected to this statement that the arguments not
documented cannot be taken into account and also has noted that
“the contradiction of the designation to the public interest
is an absolute ground for refusal to register the trade mark if the
relevant circumstances are revealed; in connection with the above,
it is impossible to overcome the ban on such registration by
providing authorization documents”.
Thus, the court has concluded that “the Rospatent’s
conclusions that the claimed designation contradicts the public
interest do not comply with the current legislation and the
registration practice of the administrative authority”.
It is worth noting that, unfortunately, the lawfulness of
Rospatent’s use of references to the above press releases of
the Bank of Russia in support of the refusals to register
designations under subclause 2 of clause 3 of Article 1483 of the
Civil Code of Russia has not been challenged by the claimant and
has not been considered in these cases by the court.
It is noteworthy that Rospatent has filed a cassation appeal
against the decision of the Intellectual Property Rights Court
dated 10 September 2021 in case No. SIP-387/2021; however,
Rospatent does not challenge in it the above court’s
conclusions on subclause 2 of clause 3 of Article 1483 of the Civil
Code of Russia (note that the subject matter of consideration of
the cassation appeal is the court’s conclusions on other
grounds for refusal). We can only assume that Rospatent has no
arguments other than those previously presented, for which reason
Rospatent has concluded that it has been futile to challenge the
court decision in this part. As a result, the cassation appeal
filed by Rospatent has been dismissed.
Despite the position already indicated by the court regarding
the Rospatent’s conclusions that the designations claimed for
registration and containing the name of the cryptocurrency
contradict the public interest, Rospatent still refuses to register
such designations as trade marks based on subclause 2 of clause 3
of Article 1483 of the Civil Code of Russia. In such cases, in its
decisions on international applications, Rospatent does not even
refer to the press releases of the Bank of Russia but simply
indicates that the claimed designation contradicts the public
interest since it is the name of a cryptocurrency, which
circulation is not allowed in Russia, referring to the official
website of the Bank of Russia www.cbr.ru. Perhaps the Rospatent’s
position is that if something is not yet allowed at the legislative
level, then it should be considered as banned. However, this
position is not unchallengeable. The legislation actually cannot
and should not describe all possible things and actions with the
same, unless certain activities or operations with certain things
require special regulation or banning.
The only thing prohibited by the effective DFA law with regard
to cryptocurrencies is to accept payment for goods, works, and
services in a digital currency (cryptocurrency) in Russia and to
disseminate information about the offer and acceptance of a digital
currency as a method of payment for goods, works, and services in
Russia. At the same time, under the DFA law, the organization of an
issue and (or) the issue and (or) the organization of circulation
of a digital currency in the Russian Federation will be regulated
in accordance with the federal laws, which are currently being
actively prepared. In addition, the Russian Government is not
considering the option of banning cryptocurrency. It is obvious
that the official website of the Bank of Russia, to which Rospatent
refers as the source, contains no information that the
cryptocurrency circulation in Russia is not allowed or banned.
Summing up the above, the Rospatent’s arguments that
designations containing the name of cryptocurrencies, crypto
services, platforms, and exchanges contradict the public interest
based on the apparently outdated press releases of the Bank of
Russia, which, apart from not being bank regulations, do not either
correspond to the current plans of the Russian government aimed at
forming a legal crypto market and not at their banning, or even
based on an entirely unclear statement that the crypto circulation
in Russia is not allowed, can be considered as ungrounded and
unlawful. Moreover, the Rospatent’s position is at variance
with the position of the Russian Government, which, as mentioned
above, does not consider the option of banning cryptocurrency in
Russia.
It is also worth noting that Rospatent, along with refusing to
register designations containing the name of cryptocurrencies,
crypto services, platforms, and exchanges based on their
contradiction to the public interest, has increasingly begun to
ground its refusals also on the impossibility to fix the exclusive
right to cryptocurrency names because they can be used by the
general public as a means of payment, but it is yet probably too
early to say that this trend of Rospatent becomes sustainable. In
any case, whether such a ground for refusal is lawful or not should
be separately analysed and such an analysis can be performed in an
individual article.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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