Implications of US sanctions for rights holders

The United States maintains various economic sanctions around the world, which can directly affect rights holders. Rights holders may also be affected when they do business with Arab League countries that maintain the boycott against Israel.

Worldwide marketing has become commonplace in our global economy, elevating the importance of IP protection around the world. The United States maintains various levels of economic sanctions against a number of countries, regions, individuals, organisations and entities, which can directly affect rights holders. This article provides an overview of the state of US economic sanctions and the impact this is having on IP rights in the targeted countries, as well as the state of the Israel boycott among Arab League countries and how this is affecting IP rights. The information set out in this article is based on information publicly available at the time of writing, primarily from the Office of the US Trade Representative, the US Department of Commerce and the US Department of the Treasury.

In an effort to advance US foreign policy and national security objectives, the United States maintains laws and regulations that impose economic sanctions against certain countries, regions, individuals, organisations and entities (31 CFR §501 et seq). The Department of the Treasury’s Office of Foreign Assets Control (OFAC) manages the US sanctions programmes. Generally, US persons (individuals and companies) are prohibited from engaging in trade and investment activities with embargoed and sanctioned countries, regions, individuals, organisations or entities. There are sanctions against individuals and organisations in numerous countries, although often these do not affect the nation as a whole. Most recently, the United States imposed several sanctions on Russian and Ukrainian nationals and on Russia’s Bank of Rossiya as a result of Russia’s actions in the Crimean Peninsula.

The US government has also prohibited cooperation with unapproved boycotts and embargoes by other countries (15 CFR §760 et seq). The Arab League secondary boycott of Israel is the principal foreign economic boycott that US companies should be concerned with today. This boycott has three tiers. The primary boycott prohibits citizens of an Arab League member nation from buying from, selling to or entering into a business contract with the Israeli government or an Israeli citizen. The secondary boycott extends the primary boycott to any entity worldwide that does business with Israel. A blacklist of global firms that engage in business with Israel is maintained by the Central Boycott Office and disseminated to Arab League members. The tertiary boycott prohibits an Arab League member nation from doing business with a company that in turn deals with companies that have been blacklisted by the Arab League. The US government has enacted anti-boycott legislation to counteract the Arab League’s boycott of Israel. Penalties for violation of US anti-boycott laws can include civil and criminal fines, imprisonment and the loss of tax credits or export privileges.

US sanctions programmes

Inevitably, rights holders have been affected by these sanctions. These prohibitions have at times included a ban on the payment of fees and expenses for protecting and maintaining IP rights in certain countries. With the exception of North Korea, the existing US sanctions programmes allow individuals or companies to do the following in sanctioned or embargoed countries:

  • File and prosecute applications to obtain a patent, trademark, copyright or other form of IP protection.
  • Receive a patent, trademark, copyright or other form of IP protection.
  • Review or maintain a patent, trademark, copyright or other form of IP protection.
  • File and prosecute opposition or infringement proceedings with respect to a patent, trademark, copyright or other form of IP protection.
  • Pay fees due to a foreign government.
  • Pay reasonable and customary fees due to attorneys or representatives in a foreign country in connection with the above-referenced activities.

There are two types of OFAC licence: general licences and specific licences. General licences exclude certain classes of activity and payments from sanctions programmes and eliminate the need to obtain written consent from OFAC (31 CFR §501.801(a)). A specific licence is a permit issued by OFAC allowing a company or individual to engage in a prohibited activity in the sanctioned country (31 CFR §501.801(b)). If a general licence has not been granted, a specific licence must be obtained. Specific licences are discretionary. At the time of writing, OFAC required a specific licence for US companies that want to protect their IP rights in North Korea.These activities are allowed either because they are not prohibited by each country’s sanctions or because OFAC has granted a licence allowing such activities.

Because the US sanctions programmes change quickly and often without much advance public notice, practitioners whose clients wish to protect IP rights outside the United States should carefully review OFAC’s regulations before retaining firms, paying fees to government agencies or transmitting payments through financial institutions in those countries.

Currently, the US sanctions programmes include the following countries: Balkans, Belarus, Central African Republic, Côte d’Ivoire, Democratic Republic of the Congo, Cuba, Iran, Iraq, Lebanon, Libya, Myanmar (Burma), North Korea, Somalia, Sudan, Syria, Ukraine, Yemen and Zimbabwe. Only a small number of these sanctions are comprehensive, affecting the entire country. Each country is discussed below.

Filing a request for a specific licence

A request for a specific licence must be made in writing to OFAC. Written applications for a specific licence must satisfy the elements set out in 31 CFR §501.801(b) of the Reporting, Procedures and Penalties Regulations. The application must:

  • be in letter form, signed and served via mail or courier;
  • fully disclose the names of all parties concerned with or interested in the proposed transaction;
  • state the amount of prospective payment;
  • supply a taxpayer identifying number; and
  • state whether the request relates to a new filing, an existing registration or a contentious matter such as an opposition, cancellation or litigation of IP rights.

Specific licence applications should be addressed to the appropriate division or individual within OFAC or to its director.

US sanctioned countries

Balkans

No licence is required for IP protection. Sanctions target specific persons and entities associated with Serbia’s former regime. Regulations do not restrict the ability of US persons to protect IP rights in the Balkans. Serbia requires use of a mark to maintain trademark protection. Non-use for a period of five consecutive years may result in cancellation.

Belarus

No licence is required for IP protection. Sanctions target specific persons and entities. Regulations do not restrict the ability of US persons to protect IP rights in Belarus. Belarus also requires use of a mark to maintain trademark protection. Non-use for a period of five consecutive years may result in cancellation.

Central African Republic

No licence is required for IP protection. Sanctions target specific persons and entities contributing to the conflict in the Central African Republic. Regulations do not restrict the ability of US persons to protect IP rights in the Central African Republic.

Côte d’Ivoire

No licence is required for IP protection. Sanctions target specific persons and entities. Regulations do not restrict the ability of US persons to protect IP rights in the Côte d’Ivoire. The Côte d’Ivoire is also a member of the African Intellectual Property Organisation (OAPI). A mark must be used in at least one country in the OAPI during a five-year period to maintain trademark protection.

The Republic of Congo

No licence is required for IP protection. Sanctions target specific persons and entities affiliated with militia groups. Regulations do not restrict the ability of US persons to protect IP rights in the Republic of Congo. As the Republic of Congo is a member of the OAPI, a mark must be used in at least one country in the OAPI during a five-year period to maintain trademark protection.

Cuba

OFAC has granted a general licence for IP rights protection (31 CFR §515.528) expressly authorising the filing and prosecution of IP applications, receipt of IP protection, renewal or maintenance of IP registration and the filing of opposition or infringement proceedings. The general licence further expressly authorises the payment of reasonable and customary fees due to the government of Cuba or to attorneys or representatives within Cuba for IP protection-related activities. A mark must be used within three years of the date of registration to maintain trademark protection.

Iran

OFAC has granted a general licence for IP protection (31 CFR § 560.509) expressly authorising the filing and prosecution of IP applications, receipt of IP protection, the renewal or maintenance of IP registration and the filing of opposition or infringement proceedings. The general licence further expressly authorises the payment of reasonable and customary fees due to the government of Iran or to attorneys or representatives within Iran for IP protection-related activities. As with Cuba, in Iran a mark must be used within three years of the date of registration to maintain trademark protection.

Iraq

OFAC has granted a general licence for IP protection. Effective May 23 2003, OFAC granted a general licence (see 31 CFR §575.533), which authorises US persons to engage in all transactions previously prohibited by the Iraq Stabilisation and Insurgency Sanctions Regulation (31 CFR §576.101 et seq; see Opinion Letter, January 9 2004, www.treasury.gov/resource-center/sanctions/Documents/iq010904.pdf ). Thus, the general licence authorises the filing and prosecution of IP applications, receipt of IP protection, renewal or maintenance of IP registration and filing of opposition or infringement proceedings, and payment of fees to the government of Iraq or attorneys or representatives within Iraq for IP protection-related activities.

Iraq lacks adequate statutory protection for IP rights. A draft law that would improve patents, trademarks and copyrights has been stuck in the constitutional review process since 2007. The government’s ability to enforce protections is limited. Because the business climate in Iraq continues to evolve, practitioners should periodically review the following US government websites for additional information: www.export.gov/Iraq and www.state.gov/e/eb/cba/iraq.

Lebanon

No licence is required for IP protection. Sanctions target specific persons and entities that sought to undermine the Lebanese government. Regulations do not restrict the ability of US persons to protect IP rights in Lebanon.

Libya

OFAC has granted a general licence for IP protection. Effective September 19 2011, OFAC granted General Licence 8 authorising US persons to engage in all transactions involving the government of Libya, its agencies, instrumentalities and controlled entities, as well as the Central Bank of Libya. Thus, General Licence 8 can be read to authorise the filing and prosecution of IP applications, receipt of IP protection, renewal or maintenance of IP registration and filing of opposition or infringement proceedings. The existing sanctions are confined to former members of the Gaddafi regime. A mark must be used for five consecutive years or risk being removed from the register for non-use.

Myanmar (Burma)

OFAC has granted a general licence for IP protection (31 CFR § 537.522) expressly authorising the filing and prosecution of IP applications, receipt of IP protection, renewal or maintenance of IP registrations and filing of opposition or infringement proceedings. The general licence further expressly authorises the payment of reasonable and customary fees due to the government of Myanmar or to attorneys or representatives within Myanmar for IP protection-related activities. Myanmar appears to require use of a mark to maintain trademark protection and re-registration every three years.

North Korea

Executive Orders 13466 (June 26 2008) and 13570 (April 11 2011) of the president and OFAC Regulations 31 CFR §510.101 et seq require that parties obtain a specific licence to register, maintain and protect their IP rights in North Korea.

Russia

In March 2014 the US government imposed sanctions against Russian nationals and companies that are considered to have a direct involvement in destabilising Ukraine. These sanctions do not affect a US person’s right to protect IP rights in Russia. To avoid being attacked on the grounds of non-use, a trademark must be used within three years of the registration date or for the three-year period preceding filing of a cancellation action.

Somalia

No licence is required for IP protection. Sanctions target specific persons and entities. Regulations do not restrict the ability of US persons to protect IP rights in Somalia. A mark must be used within three years of registration to maintain trademark protection.

Sudan

OFAC has granted a general licence for IP protection (31 CFR §538.514) which expressly authorises the filing and prosecution of IP applications, receipt of IP protection, renewal or maintenance of IP registration and filing of opposition or infringement proceedings. The general licence further expressly authorises the payment of reasonable and customary fees due to the government of Sudan or due to attorneys or representatives within Sudan for IP protection-related activities. Failure to use a mark for five consecutive years may result in cancellation.

Syria

OFAC has granted a general licence for IP protection. Effective February 2012, OFAC granted General Licence 15, which permits the filing and prosecution of IP applications, renewal and maintenance of IP registration, and filing and prosecution of opposition or infringement proceedings, along with payment of any fees required for these activities. A mark may be cancelled if it has not been used within three years of filing of a cancellation action.

Ukraine

In March 2014 the US government imposed sanctions against Russian nationals and companies that are considered to have a direct involvement in destabilising Ukraine. These regulations do not restrict the ability of US persons to protect IP rights in Ukraine. To avoid being attacked on the ground of non-use, a trademark must be used for three consecutive years from the registration date.

Yemen

No licence is required for IP protection. Sanctions target the property and interest in property of specific persons and entities within the government of Yemen pursuant to Executive Order 13611. These regulations do not restrict the ability of US persons to protect IP rights in Yemen. To avoid being attacked on the ground of non-use, a trademark must be used within five years of the date of application.

Zimbabwe

No licence is required for IP protection. Sanctions target specific persons and entities that have tried to undermine the Zimbabwe government (see Executive Orders 13288, 13397 and 13469). These regulations do not restrict the ability of US persons to protect IP rights in Zimbabwe. To avoid being attacked on the ground of non-use, a trademark must be used within five years. The period is calculated from two months prior to the date of filing of the cancellation action.

Arab League Boycott of Israel

The Arab League – which comprises 22 Middle Eastern and African nations – has formally boycotted Israel since the country’s formation in 1948. In response, the United States passed anti-boycott legislation in the 1970s which prohibits US persons and companies from cooperating in any way with the boycott. Relevant here is that ‘cooperation’ includes answering boycott-related questionnaires. A US company that fails to report questionnaires or cooperates in any way with the boycott is subject to criminal and civil penalties, including fines, loss of tax credits and loss of export privileges. The Department of the Treasury and the Department of Commerce oversee various aspects of anti-boycott enforcement. US companies should exercise due diligence in ensuring they are in compliance with both agencies. Countries may change their boycott regimes without advance notice; thus, frequent review of the Department of Commerce’s Office of Anti-Boycott Compliance website is advisable.

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Countries affected by US sanctions programmes

The impact of anti-boycott regulations on IP rights is difficult to determine. There are no US sanctions against the majority of Arab League nations and most Arab League countries do not participate in the boycott. A small handful of Arab League countries are on the 2014 US Special 301 Report (2014 US IPR Watch List) due to inadequate protection of IP rights. There are occasional reports of outdated boycott language on commercial documents in many of the countries that no longer participate in the boycott. Overlooking boycott language is the most likely threat to US companies doing business with Arab League members. Each of the 22 Arab League nations is discussed below.

Arab League boycott of Israel

Algeria

Algeria does not enforce the secondary or tertiary aspects of the boycott; neither does it maintain diplomatic or direct trade relations with Israel. Nonetheless, indirect trade has been reported and enforcement of the primary boycott appears to be inconsistent.

Bahrain

Bahrain no longer enforces the boycott, although boycott language in outdated documents has been occasionally reported.

Comoros

Comoros does not officially participate in the boycott.

Djibouti

Djibouti does not officially participate in the boycott.

Egypt

Egypt has not enforced the boycott since 1980, pursuant to the 1979 Egypt-Israel Peace Treaty. Nonetheless, boycott language is occasionally found in outdated forms. The political unrest following the Spring 2011 uprisings has created uncertainty as to whether Egypt will resume boycott activities.

Egypt is on the 2014 US IPR Watch List. The United States has noted Egypt’s weak enforcement of IP rights, lack of deterrent-level sentences for IP rights infringements and other IP rights failures. However, Egypt has been working towards improving these issues.

Iraq

Iraq’s participation in the boycott appears to be on the rise. In 2013 the US Department of Commerce reported 79 instances of boycott-related requests, such as questionnaires. The same year, the Iraqi Ministry of Health promised the United States that it would stop issuing requests, yet it continued to do so. In 2014 the ministry informed the United States that it would move to end the practice. Iraq’s South Oil Company and the Ministry of Electricity had previously stopped using boycott language in their forms, but have recently resumed issuing documents with this language.

IP rights protection and enforcement functions are currently spread across multiple Iraqi agencies. Reform is necessary for Iraq to build a single, cohesive agency. US companies have lost an estimated $1 billion in sales opportunities since 2010 due to boycott-related requests.

Jordan

Jordan has not enforced the boycott since entering into a peace treaty with Israel in 1994. In 1995 Jordan and Israel entered into a trade agreement, which was essentially Israel’s first trade agreement with an Arab nation. The agreement was expanded in 2004.

Kuwait

Kuwait has not enforced the secondary or tertiary boycotts since 1991 and has not enforced the primary aspect since 1996. Kuwait claims to have removed all boycott language from commercial documents since 2000; nonetheless, the Office of Anti-boycott Compliance reports documents with outdated boycott language.

Kuwait is on the 2014 US IPR Watch List and may potentially be moved up to the Priority Watch List as a result of its failure for over 14 years to amend its copyright law to reflect international standards. Enforcement of IP rights has been in sharp decline in recent years, with the exception of the Kuwait Customs IP Rights Office.

Lebanon

Lebanon practises one of the most comprehensive boycott enforcements and has participated in the boycott since 1955. Lebanese individuals, organisations and companies are prohibited from buying, selling or in any way acquiring Israeli products.

Lebanon is on the 2014 US IPR Watch List but has made recent progress. Several legislative improvements to IP rights policy are pending and several IP rights treaties have been forwarded by the Lebanese Cabinet. Still, Lebanon’s Cybercrime and IP Rights Bureau lacks adequate resources for proper enforcement.

Libya

Libya’s interim government has not yet announced its official stance on the boycott, although Libya has traditionally participated in the boycott. Libya does not maintain diplomatic relations with Israel and Libyan law mandates participation in the boycott. Companies are typically required to certify that no goods were produced in or transported through Israel. Foreign ships are prohibited from calling at Libyan ports if they have called at an Israeli port within the previous year. This appears to be an increase in boycott activity since 2009, when the Office of the US Trade Representative described Libya as having “a boycott on the books, but… Libyan officials report that the boycott is not currently being actively enforced” (see Office of the US Trade Representative, National Trade Estimate Report on Foreign Trade (2009)).

Mauritania

Mauritania does not enforce the boycott, although it has not maintained diplomatic relations with Israel since 2009 due to Israeli military engagement in Gaza.

Morocco

Although the Moroccan government officially recognises the primary boycott, Moroccan law does not enforce it. On the contrary, Morocco has become one of Israel’s main trading partners both in Africa and among Arab nations.

Oman

Oman no longer enforces the boycott of Israel, although boycott language in outdated documents has been occasionally reported.

Palestinian Authority

In a 1995 letter to the United States the Palestinian Authority promised not to enforce the boycott against Israel. Although local sentiment has sometimes called for unofficial boycotts of Israeli products, the government has honoured its 1995 commitment.

Qatar

Qatar no longer enforces the boycott, although boycott language in outdated documents has been occasionally reported.

Saudi Arabia

Saudi Arabia no longer enforces the boycott, although boycott language in outdated documents has been occasionally reported.

Somalia

Somalia does not officially participate in the boycott.

Sudan

Sudan does not enforce the secondary or tertiary aspects of the boycott, but does support the boycott and has legislation requiring compliance with it.

Syria

Syria maintains a comprehensive boycott regime which is assiduously enforced. In addition to the Arab League’s blacklist of firms, Syria maintains its own blacklist. Enforcement of the boycott has not had a significant effect on US businesses, due to US sanctions against Syria.

Tunisia

Tunisia ended enforcement of the boycott in the 1990s, when it established diplomatic ties with Israel. There is no sign that the post-2011 interim government has changed this policy.

United Arab Emirates

The United Arab Emirates does not enforce the secondary or tertiary aspects of the boycott, but does still recognise its primary aspect. The degree to which the primary boycott is enforced is unclear. US companies receive a comparatively high number of boycott-related requests, but the UAE government has taken steps to rectify this. Requests are mostly related to outdated documents. The UAE government has issued newsletters informing businesses that boycott language is in violation of UAE policy.

Yemen

Yemen participates in the primary boycott by refusing to trade directly with Israel. However, there are no laws in place to enforce the secondary or tertiary boycotts; nor is it the Yemeni government’s official stance to carry out those aspects of the boycott.

Conclusion

Currently, with the exception of North Korea, the US sanctions programmes allow persons or entities to protect their IP rights in sanctioned countries either because the regulations do not prohibit such activities or because OFAC has granted a general licence allowing such activities. A US person’s ability to protect IP rights in Arab League countries enforcing the boycott of Israel is less clear. It may be difficult for rights holders to register their rights in nations whose applications or other forms include boycott-related requests. Even if there are no US sanctions against these nations, boycott-related requests could still be an obstacle.

Because the US sanctions programmes and unapproved boycott countries change quickly, often with no advance notice, it is important that practitioners review OFAC and Department of Commerce and Department of the Treasury regulations before retaining firms, paying fees to government agencies or transmitting payments through financial institutions in sanctioned or Arab League countries. It is also important that practitioners carefully review all documents for boycott-related language prior to receipt or submission – including applications, purchase orders, contracts, bills of lading or other documents – and report any such language to the Office of the US Trade Representative.

E Martín Enriquez ([email protected]is an attorney at Lewis Roca Rothgerber LLP 

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