Combating Unfair Competition in Case of Copying and Imitating Goods

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Combating Unfair Competition in Case of Copying and Imitating Goods

31 August 2020

With the competition escalated, the actions of infringers may often evolve. A clear case of such an evolution is imitating (copying) an exterior style or image of goods, a kind of mimicking the goods well-regarded by a consumer. But how does the legislation help a company protect the appearance of its products?

The legislation has long contained the provisions that make it possible to effectively combat “classic” infringements of intellectual property rights, i.e. illegal uses of trade marks and other means of individualization, copyright or patent right items.

However, there have been no express provisions in this part of the legislation for protection of the so-called style / image of products as such for a quite some time. Clearly, in practice, a protection mechanism might be used by referring to the provisions on unfair competition, subject to its general definition in Federal Law No. 135-FZ dated July 26, 2006 On Protection of Competition, the basic provisions of the Paris Convention for the Protection of Industrial Property dated March 20, 1883, and the fact that the list of unfair competition forms as such is not exhaustive, which allows the regulator — the Federal Anti-Monopoly Service — to be more flexible in responding to acts of unfair competition.

Amendments to the Law on Protection of Competition

Federal Law No. 275-FZ dated October 05, 2015 has substantially expanded the range of legal tools to combat unfair competition. In particular, the Law on Protection of Competition has been supplemented with Article 14.6 that has set forth a prohibition on unfair competition in the form of confusion.

Part 1 of this Article predictably covers a prohibition on unfair competition in the form of illegal use of means of individualization (trade mark, trade name, business name, allegation of origin of goods) by placing it on the goods, labels, packages or using it otherwise with regard to the goods sold or otherwise commercialized in the Russian Federation as well as by using it on the Internet, including placing ?????????

However, part 2 of the said Article is exactly dedicated to combating unfair competition in the form of copying or imitation of:

  • Appearance of the goods commercialized by the competing business entity,
  • Package of such goods,
  • Label,
  • Name,
  • Colour scheme,
  • Identity as a whole (corporate clothes, appearance of sales area, showcase (collectively)),
  • Or any other elements individualizing the competing business entity and (or) its goods.

With regard to the introduced term “confusion”, in its letter No. AD/66643/18 dated August 22, 2018, the regulator has specified that confusion in general means a situation when a consumer of one product:

  • Identifies such product with the product of another manufacturer,
  • Or admits, despite their differences, that these products may be manufactured by one and the same person.

In this regard, the Federal Anti-Monopoly Service has emphasized that such behaviour in the market results in possible redistribution of consumer demand from the manufacturer of the original goods in favour of the goods of the infringing competitor as a result of the consumer’s mistaken purchase of the goods made by the infringer, since the similarity of packages gives the erroneous impression that the goods belong to one and the same manufacturer.

Distinction between Confusion Types in Unfair Competition

As the regulator has underlined in its letter No. AK/44651/17 dated June 30, 2017, such distinction is necessary because the products may be individualized both with certain designations not registered as trade marks and overall appearance, package design elements and any other means. In case of confusion, the products of a business entity resemble the products of a competitor by any parameters so that a consumer can mistake its goods for the competitor’s goods.

Copying and Imitation: What Is the Difference?

In its letter No. IA/74666/15 dated December 24, 2015 On Application of the Fourth Anti-Monopoly Package, the Federal Anti-Monopoly Service of Russia has specified that:

  • Copying of the item’s appearance means reproduction of the appearance of an item of any other business entity (entrepreneur) and its commercialization.
  • Imitation of the goods’ appearance means a sort of emulation of the competitor’s goods to create an impression for buyers that such goods belong to the line of the imitated goods.

At the same time, the regulator has underlined that copying (imitation) of the appearance of the item or its parts cannot be recognized as unlawful if such copying is caused by their functional use only.

Case Consideration Practice

In recent years, the practice of consideration by the Federal Anti-Monopoly Service of Russia of the cases involving unfair competition in case of imitating / copying goods has developed more widely.

Clearly, the cases of the Federal Anti-Monopoly Service, which have been subject to judicial control, in particular, of the Intellectual Property Rights Court, are also specifically interesting. It should be noted that the legislation makes it possible to initiate a case on unfair competition not only by turning to the Federal Anti-Monopoly Service, but also directly to a court under the procedure for adversary proceedings.

Let us consider the recent judicial acts, the subject of which has been the analysis of the decisions rendered by the Federal Anti-Monopoly Service on unfair competition in the form of imitation / copying of goods.

So, for example, in one of the cases (Resolution of the Intellectual Property Rights Court No. S01-933/2019 dated October 03, 2019 on case No. A40-275171/2018), the following situation has been considered. The Russian subdivision of a major global manufacturer of hygienic goods has filed a complaint with the Federal Anti-Monopoly Service indicating that the goods imitating packages of various complainant’s goods (men’s deodorants, shower gels, cream soap and shower gel cream, toothpastes, and mouthwashes) are commercialized in the defendant’s chain stores.

Having considered the files of the case, the Federal Anti-Monopoly Service has come to the conclusion that the defendant’s actions to commercialize goods in the packages in dispute result in confusion with the complainant’s products due to the use of the complainant’s design solutions.

When appealing against the decision of the Federal Anti-Monopoly Service, the defendant has drawn the courts’ attention to the argument that there have been no competitive relations between it and the complainant, referring to the disproportion of market shares, sales, and revenues of the defendant and the complainant.

However, the courts have rejected these arguments, having stated that:

  • Small outputs,
  • Limited geographic area of goods sales,
  • Small revenues,
  • And no (or small) advertising and marketing costs do not grant a right to parasitize on the reputation of any third parties and good awareness of the imitated goods, which has been formed, among other things, based on a largescale advertising campaign to promote the third party’s goods under consideration.

In another case (Resolution of the Intellectual Property Rights Court No. S01-1087/2019 dated October 17, 2019 on case No. A19-31735/2018), the Federal Anti-Monopoly Service has concluded on confusion of the complainant’s and defendant’s products (chewing tar) and also taken into account the statement from the Federal State Budget-funded Institution Federal Institute of Industrial Property (FIPS).

Based on the results of the research, it has been concluded in the said statement that the packages in dispute are confusingly similar, since they are associated with each other as a whole due to the fact that they have similar figurative elements (rectangles, frames, images, branches with cones), word elements and informational inscriptions as well as due to the similarity between the composition solution and the colour combination of designations (word elements made in large white letters are located on a green background in the central part of the rectangles at the left of realistic images).

The defendant has tried to challenge the decision of the Federal Anti-Monopoly Service, among other things, by referring to the illegality of the above FIPS’s statement. The court has rejected the defendant’s arguments, having stated that the defendant’s arguments cannot be taken into consideration, since the FIPS’s statement as such may serve as evidence in the case, while the requirements of the procedural law on expert opinion and the formal requirements that it is necessary to indicate in such statement the information about the qualification of the FIPS’s employee who has signed the statement do not apply to this statement.

Another recent case that has been subject to consideration by the Intellectual Property Rights Court in this area has involved sometimes rather acute issue of classification of any element, which the complainant tries to protect, as a “traditional” element inherent in the goods of certain type as such.

So, for example, in Resolution of the Intellectual Property Rights Court No. S01-625/2019 dated August 12, 2019 on case No. A40-225924/2018, the following situation has been considered. A dry bird food manufacturer has filed a claim with the court, stating that its competitor imitates the appearance of the dry bird food packages.

During consideration of the case by the court of first instance, the stated claims have been satisfied, but the court of appeal has dismissed the claim.

The court of appeal has adhered to the position that similar images of birds on the defendants’ goods are placed due to the intended purpose of the products, it is reasoned and traditional, typical for this and other types of goods and it is not a feature inherent only in the packages of the claimant’s bird food. At the same time, the court of appeal has also emphasized that there are no clear criteria for what, in the opinion of the claimant and the court of first instance, is copying or imitation of the claimant’s products, which makes the claims lodged against the defendants uncertain and, finally, results in impracticability to enforce the court decision.

The Intellectual Property Rights Court has supported the position of the court of appeal, having noted that:

  • Only those items that may have the function of individualization (they have distinctiveness or have become distinctive due to their use) may be the items, which unauthorized use may cause confusion;
  • At the same time, for example, sale of goods that look similar to competitor’s goods cannot be considered to cause confusion, given that such analogy is caused by any objective reasons;
  • Similar images of birds on the defendants’ goods are placed due to the intended purpose of the products, it is reasoned and traditional, typical for this and other types of goods and it is not a feature inherent only in the packages of the claimant’s bird food.

This case clearly shows that, when deciding to initiate a case with regard to the alleged imitation of goods, the claimant (complainant) should carefully prepare the reasons supporting the original nature of the elements used by it for the appearance of its goods.

Practical Guidelines and Proving Tactics

Based on the law enforcement practice analysis, the following main sets of evidence elements may be distinguished, on which companies should focus when initiating anti-monopoly cases with regard to unfair competitors in case of imitation / copying of goods:

  • It is necessary to clearly reason that there are competitive relations between the complainant and the alleged infringer, including outline the facts of commercialization of goods in the same market;
  • Thoroughly study the history of how the competitor’s products have appeared in the market and convincingly present the chronology of how its own products in the protected appearance have appeared in the market;
  • Produce documented evidence related to the development of the design (appearance) of your products and their launch on the market (contracts with designers, advertising agencies, information about sales, product demand);
  • Collect convincing evidence confirming actual copying / imitation; Special emphasis should be laid on a clear description of the appearance / design elements (design techniques, etc.) that are used by the complainant and that are copied (imitated) by the alleged infringer;
  • Check whether the potential defendant has its own intellectual property rights, which it may oppose as “protective” ones if a case is initiated (for example, industrial designs) and, if necessary, challenge such rights (for example, by filing an objection to granting a patent for an industrial design if there are relevant grounds);
  • Reason distinctiveness of the listed elements as individualization of the goods manufactured exactly by the complainant to be stably associated for a goods’ consumer exactly with the complainant;
  • Establish a likelihood of confusion — for example, based on sociological and (or) marketing research aimed at establishing whether a consumer is likely to confuse goods and buy one instead of another or at creating the impression that the infringer’s goods (services) are in any way connected with or related to the complainant, belong to the parallel product line, etc.;
  • Reason actual or potential damage (for example, due to a decline in demand).

At the same time, as a general strategic comment, it is worth remembering to consistently deal with the company’s portfolio of intellectual property rights by consistently deciding, for example, to patent relevant solutions for the product appearance or file a new application for a trade mark if the existing brand is modified as well as by searching before launching your products on the market to assess risk of possible claims of any third parties.

The lawyers and patent attorneys of our firm regularly help our clients analyse the prospects of initiating cases on copying and imitation of products, building defensive tactics if there are any ungrounded claims, conducting relevant cases in protection of intellectual property rights, and we will be happy to provide you with legal assistance based on our experience.

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