Next parallel imports government discussion on 2 July - FAS deputy head

01.07.2013

The Russian Federal Antimonopoly Service (FAS), the country’s antitrust regulator, will on 2 July participate in a round table parallel imports discussion organised by the analytical centre of the government of the Russian Federation, Andrey Kashevarov, FAS’ deputy head, has told PaRR. Following this discussion, the analytical centre will compile a report for Russian first Deputy Prime Minister, Igor Shuvalov.

As previously reported by PaRR, there is currently a debate in Russia on whether to allow parallel imports. The issue is also referred to as international exhaustion of IP rights, as it questions whether IP rights are exhausted after a product’s first sale. Russia’s competition authority, the FAS, has been lobbying for parallel imports for two years, said Kashevarov. The Russian Ministry of Industry and Trade opposes lifting the ban on parallel imports in the country,as previously reported.

Current practice At present, Russia, as well as its partners in the Customs Union and the Common Economic Space - Belarus and Kazakhstan, in accordance with international obligations, consider parallel imports as a negative phenomenon and an illegal activity, said Alexander Kirilchenko, a senior Associate in the Customs and International Trade Practice at Moscow-based law firm Goltsblat BLP.

In the Customs Union, a right holder loses the exclusive right to use its trademark only after branded goods are imported to the single economic territory of Russia, Belarus and Kazakhstan by the right holder or an authorized dealer, he added.

In Russia, this system ensures free distribution of branded goods between the countries of the Customs Union, but offers protection from companies importing original goods, but not backed by customer service or non-adapted for Russian technical standards, Kirilchenko said. A similar principle is used in the European Union (EU) and many other countries, he added. In Russia, parallel imports are not recognise as a public offense, but as a private tort. This means that the state executive authorities practically don’t interfere in the process, Kirilchenko explained.

The customs authorities are required to inform the right holders of evidence of unauthorized entry of branded goods. In fact, the right holder is left alone [to face all legal risks], said Kirilchenko. An Intellectual Property Rights Court (IP), which will be responsible for IP litigations, will start operating in Russia soon. The newly established Intellectual Property Court will hear cases related to parallel imports only after they pass through ordinary commercial courts of first instance and appeal, said Kirilchenko. Nonetheless, the IP court can develop a uniform approach addressing the legal concerns related to parallel imports cases, he predicted.

A spokesperson for the court told PaRR that it is too early to comment on the court’s influence on parallel import cases. Compensation guidelines The main means of protection against parallel imports remains appeal to the commercial court with the corresponding claim, said Kirilchenko. As a result of long court proceedings, the rights holder may get an award of compensation amounting to between RUB 10,000 (USD 304) to RUB 5m (152,332), or proven damages. The right holder can also obtain an injunction against the import of goods without the consent of the trademark holder.

General guidance on the calculation of compensation in parallel imports cases is provided inparagraphs 43.1-43.5 of the Joint Resolution of the Plenum of the Russian Supreme Court and the Supreme Commercial Court of 26.03.2009 № 5/29, said Vladimir Korneev, deputy chairman of the Intellectual Property Court of Russia. The court determines damages and compensation in parallel import cases in each case individually.

The court takes into account the circumstances of a case, including directions regarding evidence (apportionment of the burden, evaluation of evidence by the court, etc.), said Anna Smola, deputy head of public law division at Russia’s Supreme Commercial Court (VAS). Andrey Kashevarov said that the FAS is against those right holders who prefer to distribute their goods only through one or a few distributors and so discriminate against others.

Hence, FAS believes that litigation initiated by right holders trying to prevent smaller distributors from selling their goods is unfair in principle, he added. Litigation over parallel imports shows that courts are not too generous in awarding compensation and damages. At the same time there is a current tendency to increase the level of awards and compensation damages, said Kirilchenko.

In one of the first lawsuits involving German sports clothes producer UVEX and parallel importer LLC "FAP", the right holder has received RUB 100,000 compensation. At present, compensation can reach RUB 1m in similar litigations, he said. The maximum amount of compensation actually awarded in an action in Russia was RUB 5m, in a case involving American pharmaceuticals and health care products company Abbott Laboratories and a parallel importer of its medical equipments, LLC "Kufran-C", according to Kirilchenko.

by Natalia Lapotko in London

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