In July 2018, the State Duma of the Russian Federation adopted in the first reading a bill on adding a new type of intellectual property – a geographical indication – to the Civil Code of the Russian Federation.
According to the bill, “a geographical indication is a designation which makes it possible to identify goods as originating from a particular geographical area where special quality, reputation and other characteristics of the goods are attributed mostly to its geographical origin”.
Moreover, “at least one production stage must be performed in this geographical area which impacts the quality, reputation and other characteristics of the goods”. This clarification is significant in terms of differentiating a type of intellectual property from a similar one – an appellation of origin.
An appellation of origin was introduced into Russian legislation in 1992 and since then has been regarded as an extraordinary rather than a practical way to protect intellectual property rights, which is confirmed by an utterly low number of registrations of appellation of origin in Russia (fewer than 200 registrations).
According to many right holders, the main difficulty in obtaining registration for an appellation of origin lies in the complicated registration procedure and the necessity to meet a number of formal requirements. In particular, when applying for registration of an appellation of origin, the applicant must confirm that they perform all production stages within the specified geographical area. If production of goods includes several cycles, a number of which (including the packaging stage) are performed outside the specified region, protection to this appellation of origin will not be granted.
What is more, one of the requirements for registering an appellation of origin is the conclusion by a federal executive body authorised by the government of Russia confirming that the applicant’s goods produced within a specific geographical area have special properties defined mainly or exclusively by natural conditions and/or human resources characteristic of this area (such bodies are the Ministry of Health of Russia, the Ministry of Industry and Trade of Russia, the Ministry of Agriculture of Russia and the Russian Federal Service for Alcohol Market Regulation).
As a result, goods reputation as being originating from a specific territory is not enough for registering the name of such goods as an appellation of origin and thereby obtaining the necessary protection unless all the formalities are observed.
A geographical indication will make it possible to identify goods as originating from a geographical area where certain quality, reputation and other characteristics of the goods are defined largely by their geographical origin (as opposed to an appellation of origin, under which the goods are individualised according to their special qualities). In order to obtain protection it is necessary to confirm that at least one production stage impacting the quality, reputation and other characteristics of the goods is performed within a specific geographical area.
The legal protection of geographical indications as well as appellations of origin of the goods will arise upon registration with the Russian Federal Service for Intellectual Property. The applicant will be able to define independently which way of protection to choose.
Protection of geographical indications will be an important innovation in Russian intellectual property law and a step towards developing business in regions and liberalising procedures for protecting names of geographical areas as a means of individualising goods. Foreign manufacturers will also benefit from this new law as, under the bill, they will be able to obtain protection in Russia for geographical indications registered abroad.
Industrial designs will have temporary legal protection
In December 2018, the State Duma of the Russian Federation adopted Federal Law N 549-FZ of 27 December 2018 “On amendments to Part Four of the Civil Code of the Russian Federation”, which makes it possible to obtain temporary legal protection for industrial designs. The amendments will come into effect on 27 June 2019.
According to the authors of the bill, its purpose is to protect the rights of designers, including fashion designers who create clothing and footwear which require legal protection, by making their creations eligible for registration as industrial designs.
The authors believe that such amendments are necessary since the state registration of industrial designs in Russia takes a long time (20 months and two weeks), during which the rights of designers to clothing and footwear designs are not protected, although fashion collections become outdated very fast.
Temporary protection for industrial designs will be provided starting from the date of publication of the relevant application and until the date of the official issuance of the patent unless the industrial design application is withdrawn or denied. Anyone who uses the claimed industrial design during the said period is obliged to pay a remuneration to the applicant when the patent is issued.
The temporary protection was granted to industrial designs by the Patent Law of the Russian Federation, which was repealed when Part 4 of the Civil Code of the Russian Federation came into force. According to the former law, the temporary protection came into effect as of the date on which a person or a legal entity using the design was respectively notified by the applicant. Now the temporary protection is granted automatically form the date of the publication of the relevant application. It will be seen on practice whether these amendments will prove useful for fashion designers. However, it is noteworthy that the specified period of 20 months and two weeks is a maximum within which a patent for industrial design should be issued provided that the application is accepted. Providing application formalities are met, and if a prior patent search is performed on a paid basis, this term can be significantly reduced. Furthermore, rights to clothing and footwear designs are protected under copyright law.
Draft law on legalisation of parallel import
In October 2018, the Federal Antimonopoly Service of the Russian Federation (FAS) forwarded to the Ministry of Economic Development its recommendations on amendments to the Civil Code of the Russian Federation concerning partial legalisation of parallel import into Russia (import of original goods without the permission of the right holder).
The suggestion made by the FAS is to deviate from the national principle of exhaustion of exclusive trademark rights and to introduce the possibility of allowing, with a government permit, parallel import for five years of goods meeting the following criteria: the goods are unavailable or in short supply in Russia; prices for the goods are inflated or the goods’ quality differs significantly from similar goods sold in other countries (exceptions are locally produced goods).
For several years, the FAS has been advocating for the legalisation of parallel import and, basically, cancellation of the national principle of exhaustion of exclusive trademark rights. The law addresses the partial parallel import of specific goods (medicines, goods for children and motor vehicle spare parts). The legalisation of parallel import of the specific goods was approved by the Board of the Eurasian Economic Commission (EEC) but subject to approval by all members of the Eurasian Economic Union (EEU). Adherence to this condition will not allow implementation of the FAS's current suggestion. The process of approving the necessary amendments into the EEU agreement is still in progress.
The steps towards legalising parallel import have caused justified concerns in the business community. The national principle of exhaustion of trademark rights established in Russia at present is acknowledged by IP experts as an optimal means of protecting the rights of trademark owners. Deviation from this principle will entail weakening this protection, especially for foreign manufacturers, causing further deterioration of the investment climate in Russia.
II. LAW ENFORCEMENT PRACTICE
Constitutional court permitted the legitimacy of parallel import
One of the most remarkable (and controversial) resolutions in IP related court practice in 2018 was the Resolution of the Constitutional Court of the Russian Federation of 13 February 2018 “on the examination of the constitutional provisions of clause 4 of Article 1252, Article 1487 and clauses 1, 2 and 4 of Article 1515 of the Civil Code of the Russian Federation with regard to the claim of OOO PAG”.
The case was based on the claim of OOO PAG challenging the constitutionality of the provisions of the specified Articles of the Civil Code of the Russian Federation. Previously, the Commercial (Arbitrazh) Court of the Kaliningrad region upheld the claims of the trademark owner, Sony Corporation, against OOO PAG for violating trademark rights by importing into the territory of the Russian Federation goods bearing the SONY trademark without prior permission from the copyright holder. The goods (i.e. thermally sensitive recording paper for medical diagnostic equipment), which were original goods imported into Russia by OOO PAG without the permission of the Sony Corporation, were withdrawn and destroyed.
According to OOO PAG, because the provisions of the Civil Code of the Russian Federation may be interpreted by courts in such a way that goods legally bearing trademarks and manufactured, labelled and sold by the manufacturer itself or with its consent outside the Russian Federation may be qualified as counterfeit, such provisions violate constitutional principles of legal certainty and justice.
The claim by OOO PAG argues in essence the unconstitutionality of the national principle of exhaustion of exclusive trademark rights embodied in Article 1487 of the Civil Code of the Russian Federation as hindering parallel import and establishing equal legal consequences for violating this principle and for importing counterfeit goods.
Upon consideration of the claim, the Constitutional Court of the Russian Federation expressed the following legal opinion:
- courts are entitled to dismiss claims against the import of goods made without the permission of the trademark holder, if such goods are marked by the trademark holder itself or with its consent and have been placed into a stream of commerce outside the Russian Federation, if due to the bad faith of such a trademark holder, the satisfaction of such claim may pose a threat to the lives and health of citizens and other public interests;
- civil liability for importing goods into the territory of the Russian Federation without the prior consent of trademark holder of the goods marked by the trademark holder itself or with its consent may be equivalent to the liability for importing counterfeit goods only provided that the trademark holder suffers comparable losses;
- the goods marked by trademark holder itself or with its consent may be removed from commercial circulation or destroyed only if such goods are of low quality and/or in order to provide security and protection of people’s lives and health.
Therefore, the Constitutional Court of the Russian Federation supported Russia’s recent tendency towards weakening of the parallel import regime, i.e. basically making it legitimate. It also warned trademark holders that any attempt on their part to put a stop to parallel import may be deemed an act of unfair competition.
First compulsory licence granted in Russia
In 2018, for the first time, a Russian court upheld a claim for a compulsory license based on clause 2 of Article 1362 of the Civil Code of the Russian Federation.
Under this law, a licence to use an invention or utility model must be issued if the patent holder cannot use the invention to which it has the exclusive rights without infringing the rights to another patent (the first patent). Mandatory conditions for upholding such a claim are the refusal of the first patent holder to enter into a licence agreement with the proprietor of the dependent patent on terms under the established practice, and evidence that the invention dependent on the invention under the first patent is an important technical achievement and has substantial economic advantages over the invention or utility model under the first patent.
A landmark decision was handed down by the Commercial (Arbitrazh) court of Moscow in June 2018 and gained further support during the appeal hearing by the 9th Commercial (Arbitrazh) court of appeal (case A40-71471/2017). A compulsory simple (non-exclusive) licence for the patent protecting the active substance Lenalidomid, owned by the pharmaceutical company Celgene, was granted to the plaintiff O.R. Mikhailov related to OOO NATIVA, the co-plaintiff.
A patent dependent on Celgene’s patent was granted earlier in the name of O.R. Mikhailov. The plaintiffs also claimed that the Russian medicine is much cheaper than the foreign analogue.
The cassation claim filed by Celgene before the IP Court resulted in conclusion of a settlement agreement between the parties and overruling of the decisions of lower courts. Nevertheless, the precedent was established.
Interestingly, the FAS has been advocating compulsory licencing in Russia since 2016. In 2018, the FAS drafted a bill on compulsory licensing of medicinal products which permits the production of analogues of foreign medicines without the prior consent of the respective patents holders if this is necessary for the sake of national security and the protection of the life and health of Russian citizens. According to the FAS, such initiative was taken to prevent the possible risk of patent holders abusing their dominant positions by establishing and maintaining unreasonably high prices and refusing to manufacture and deliver necessary medicines and medical products.
At the same time, market players believe that implementation of compulsory licences will diminish the level of patent protection in Russia and undermine the investment climate in the pharmaceutical market.
III. NEWS OF THE EURASIAN ECONOMIC UNION
In December 2018, the Council of the Eurasian Economic Commission (EEC) signed the Agreement of Eurasian Economic Union on trademarks, service marks and appellations of origin of goods.
The task of completion of domestic procedures required to sign the Agreement was brought up before the EEU members already in 2016 when the draft of the Agreement was firstly approved.
The aim of the Agreement is to create a registration system of unified EEU trademarks and appellations of origin of goods valid throughout all EEU countries.
In accordance with the draft Agreement, a unified trademark application will be filed with the national patent office of the Union’s country (office of origin), which will also be responsible for conducting a formal examination. The examination of the application will be conducted by each national office including the office of origin within six months from the date when the office of origin submitted the notification about the application i (similar to the Madrid trademark registration system).
Implementation of the registration procedure of a unified trademark is an important and long-awaited step in the process of integration of the EEU market. However, whether right holders will find a unified trademark effective will depend on the practical realisation of the relevant processes and whether the needs of market players will be addressed. It is hard to tell from the documents available today if a new procedure will be simpler, faster or cheaper than registration in the Union countries using the Madrid system. For instance, the amount of the relevant duties is yet unknown.
Guidelines and technical instructions required for the Agreement to come into force are to be adopted no earlier than 2020.