Government Commission approves positive review of draft law on turnover fines for leaks of personal data (“PD”)

We previously informed you about the draft law that would impose ****turnover fines for PD leaks****, as well as fines for the failure to ****notify the Russian Federal Service for Supervision of Communications, Information Technology and Mass Media (“Roskomnadzor”) about the intention to process PD**** and the illegal transfer (****leak****) of PD. The bill has already been adopted by the State Duma in the first reading.

On 1 April 2024, the ****Government Commission**** approved a ****positive review**** of the draft law and:

• Supported the initiative of the Ministry of Digital Development, Communications and Mass Media of the Russian Federation to take into account ****mitigating circumstances**** (the payment of ****monetary compensation**** to victims of PD leaks and the data controller’s annual and significant ****investments**** in measures to ensure the ****information security of PD**** during the last three years) and ****aggravating circumstances**** (the use of communication means or non-certified means of encoding (encryption) when committing a violation);

• Recommended clarifying the amount of fines for PD leaks for the ****proportionality**** and ****feasibility of the execution**** of such a punishment;

• Proposed including provisions in the law about ****accidental PD leaks****;

• Strongly called for ****increasing penalties for leaks of biometric PD****.

We recommend not only implementing mechanisms to ****prevent PD leaks****, but also conducting an ****audit of PD information security****, checking whether the company has submitted a ****notification**** about its intention to process PD.

Reminder

In accordance with clause 4 of Article 1370 of the Civil Code of the Russian Federation, if an employer does not apply for a ****patent to the Federal Service for Intellectual Property (“Rospatent”)**** within ****six months**** from the date of ****notification from an employee**** about the creation of an ****invention****, ****utility model**** or ****industrial design****, then the ****right to obtain a patent**** for the corresponding result of intellectual activity ****may be returned to the employee****. This was noted by the Intellectual Property Rights Court in its ****decision dated 7 March 2024 in Case No. SIP-793/2023****.

Facts of the case

In 2013, an employee of a joint-stock company, as part of his job duties, created a ****utility model**** (wiper drive). In 2015, he was transferred from the joint-stock company to a limited liability company, and three years later the joint-stock company was declared ****insolvent****. In 2017, a ****patent for a utility model was obtained**** with the limited liability company listed as the patent holder.

Three years later, the limited liability company discovered that its patent was being used, and first filed an application against the offending party with the ****Federal Antimonopoly Service (“FAS”)****, and then in ****court****. The offending party’s actions were deemed to be an act of ****unfair competition****. The latter, in turn, filed a demand in court to ****invalidate the patent****.

The patent was invalidated by a court decision. ****The right to obtain the patent remained with the employee****, because the employer did not perform the necessary actions envisaged by clause 4 of Article 1370 of the Civil Code of the Russian Federation within the prescribed period.

Below are a few interesting points that were reflected in the court decision:

• The limited liability company was created in violation of the provisions of Article 115 of Federal Law No. 127-FZ “On Insolvency (Bankruptcy)” dated 26 October 2002 in order to ****withdraw the joint-stock company’s liquid assets****;

• The general director of the joint-stock company was prosecuted under ****Article 196 of the Criminal Code of the Russian Federation**** (intentional insolvency) and sentenced to 4.5 years ****in prison**** with a ****fine**** of 150,000 RUB (approximately 1,615 USD or 1,484 EUR);

• The technical solution created by the employee during his work at the joint-stock company corresponds to the technical solution for the disputed patent;

• The employee did not object to filing a patent application, because, as he noted, during the period when the disputed patent was obtained, ****he did not have special knowledge concerning intellectual property****, and therefore could not assess the actions of the limited liability company.

Question

What legal grounds are applicable to ****transfer employees’ PD**** to a third party for the purpose of ****conducting a special assessment of working conditions****?

Answer

Conducting a special assessment of working conditions is a ****mandatory obligation**** of the ****employer**** according to Article 214 of the Russian Labour Code, for which the company must transfer the ****insurance number of the individual personal account**** of employees to the organization conducting the special assessment. ****The consent of the employees is not required****.