The problem of parallel imports has become particularly relevant in Russia. The interests of major trademark right holders doing business in Russia are threatened by the increasing use of parallel imports. A joint decree of the Russian Supreme Arbitration Court (SAC) and the Russian Supreme Court (SC) leaves the matter of parallel importation legitimacy in abeyance.
Imports of branded goods produced using trademarks without the consent of the trademark owner are called parallel imports. A parallel import takes place when a good is initially put on the market in one state (generally, in the state of manufacture) and is subsequently imported into another state, whereby this object is subject to legal protection in both countries and the exclusive right to the object is held by one person.
The Concept of Exhaustion
The use of trademarks in the production of goods is connected to the concept of exhaustion. According to the principle of international exhaustion of intellectual property rights, the exclusive right of a right holder with respect to a certain product is deemed ‘exhausted’ once this product is put on the market anywhere in the world. Upon the sale of a good, the right holder loses its right to give any instructions to the good’s new owners with regard to further use of the product, in particular, its exportation to another country or subsequent sale.
In the European Union (EU), the principle of regional exhaustion applies, which means that the exclusive right is deemed exhausted once a good originating from the right holder (or a good manufactured under a license agreement with the right holder) is introduced to the market in one of the other EU countries.
At present, the regime of territorial exhaustion is effective in Russia (similar to regional exhaustion, which is in common use in the EU), whereby even if a good has been sold on repeatedly, it may still be imported to the country only with consent of the trademark owner. This practice was only adopted in 2002, prior to which the international exhaustion regime was applicable; i.e. once a good was sold anywhere, it could then be imported into Russia without the requirement of consent from the trademark owner.
Recent Seizures of Imported Goods
Last year a number of seizures of imported goods initiated by the Federal Customs Service of Russia (FCS) took place in Russia. Both goods illegally bearing trademarks and original goods legally purchased abroad and imported to Russia without the consent of right holders were qualified as infringing goods.
The seizure of a Porsche Cayenne S was a high profile case in this respect. At the end of 2007, a Russian company, which was not an official Porsche dealer, imported a Porsche Cayenne S purchased at an auction in the U.S. An official representative holding the license to use the Porsche and Cayenne trademarks filed a notice of trademark infringement to the Central Excise Customs.
The courts of first and second instances ruled on the seizure of the vehicle, which was defined as an infringing good. The case was finally referred to the SAC, which ruled that only a good illegally bearing a trademark is deemed an infringing good. If a trademark is placed on the good lawfully, i.e. if the good is original and not forged, then such good is not infringing and is therefore not subject to seizure. Since the Porsche Cayenne S in question was manufactured by the trademarks holder and, consequently, does not bear any indication of illegal reproduction of the trademarks, then no administrative liability arises upon its import into Russia. Thus, at present, no administrative liability for parallel imports arises.
The issue of permissibility of parallel imports was also discussed at the SAC and SC level in connection with the introduction of amendments to Chapter IV of the Russian Civil Code, the effective law on the protection of IP rights. However, the joint resolution of the SAC and SC adopted on March 26, 2009, left the issue of parallel import’s legitimacy unresolved. The paragraph relating to the import of original brand goods without consent of right holders, in particular, the cases where such goods were purchased abroad directly from the right holder, was not included into the final version of the resolution.
At present, administrative liability for parallel imports is inapplicable. This implies that the Russian Federal Customs Committee is no longer entitled to seize goods imported without consent from the right holders, which do not, however, qualified as infringing goods. Thus, any persons that are not official dealers of goods’ manufacturers (trademark right holders) may freely import goods into the territory of Russia.
However, trademark owners still have the following methods of fighting parallel imports:
- To detect trademark infringements, it is recommended to register protected trademarks with the intellectual property register of the customs authorities. The registration of trademarks will enable trademark owners to keep track of the latest information on the imports of goods bearing such trademarks and assert their interests in state arbitration courts efficiently;
- To protect their interests in civil proceedings pursuant to Articles 1486 and 1515 of the Russian Civil Code by way of filing claims for the prohibition of illegal trademark use with the courts.