How to protect your mark in a changing Russia

Vladimir Biriulin and Evgeny Alexandrov of Gorodissky & Partners explain to Simon Crompton the impact of Russia’s new IP court, the Customs union and other factors on trade marks in the country

Simon Crompton: What kind of trade mark activity do you see from foreign companies in Russia, and how frequent are enforcement actions?

Vladimir Biriulin: In general, foreign companies are very active in registering their trade marks. We can’t speak for the rest of the market, but we file hundreds of trade marks every month for foreign clients. Enforcement is the necessary next step: if you do not enforce your right, there is no point in registering a trade mark. Enforcement in Russia has improved greatly over the last 10 years, indeed since the beginning of the free market reforms, and we now believe that enforcement here is at the same level as other developed countries.

Can you offer any comparison of how enforcement in Russia differs from other countries, in terms of cost, for example?

VB: In terms of cost, Russia is in an advantageous position. A trade mark case here costs between $10,000 and $20,000, which is quite low in comparison with other countries. For example, in the US that enforcement may cost $1 million, or in any European country it will be around €100,000 ($129,000) or more.

And how much does it cost if you go to appeal?

VB: This estimation is based on the costs of the first instance court. If we go to another court for appeal, then this stage will cost less than the first.

Can you give us a sense of how effective the enforcement is?

Evgeny Alexandrov: Russian legislation provides criminal, civil and administrative measures against the infringement of IP rights. In relation to the national courts, let me offer you some figures. In 1997 about 100 cases concerning intellectual property were handled by the Russian courts. Now this figure is more than 3,500 per year.

Is that an increase in domestic companies, or is that foreign companies coming in?

EA: The official statistics do not distinguish between foreign and domestic companies.

VB: But we have seen a slow but steady increase in foreign activity.

EA: And many of the most interesting cases, which have had a great impact on court practices, have been initiated by foreign companies, often regarding parallel imports. In the past it was difficult to get injunctions and compensation for the infringement of IP rights. But over the past few years, there have been several cases in which the trade mark owner has managed to get compensation. In one trade mark case, around $10 million was awarded, and in another case for infringement of copyright around $250 million was awarded.

Can you give details of those cases?

EA: Yes, in the first case, of trade mark infringement, the plaintiff was a Russian confectionary company called Red October, and the defendant was another Russian company called Slavyanka. First of all the case went through the anti-competition stage, in which the anti-competition body established that Slavyanka had illegally used Red October’s trade mark. The right holder then filed a suit for infringement, and won $10 million.

The second case concerned copyright infringement. It was a dispute between two Russian publishing houses. One of them filed a law suit for the illegal reproduction and publishing of a book, by the famous Russian writer Alexander Biliaev, and at first instance the plaintiff was awarded around $250 million.

What do you think those two cases demonstrate for foreign trade mark owners?

EA: They show that Russian courts are prepared to award fair amounts of compensation. In the past, they were not in a position to award such large amounts.

Did the cases provide any lessons for how trade mark owners should conduct litigation?

EA: Yes, in the first case, between the two Russian confectionary companies, the Supreme Commercial Court spelt out the way in which compensation should be calculated. In the past, the wording of the law had been unclear as to the amount of compensation that could be claimed and awarded. Now the court has determined that it is possible to claim for up to double the value of the counterfeit products. The court explained that this principle applied to identical and confusingly similar trade marks. Now foreign companies have better guidance on the amounts they can realistically claim.

How long does enforcement take in Russia?

EA: For the first instance court, it takes around four to six months, which is around the same as other countries.

And has that been a recent change?

EA: This has been the case since 2002, when there were significant procedural changes that laid down specific time periods in which courts were to consider individual cases.

Furthermore, since November 2011, Russian courts have been using a video-conferencing system, which has allowed them to save both time and money. For example, if a plaintiff is in Moscow and the case is being held in Vladivostock, whereas in the past a few days would be required to participate in the court hearing in person, now the plaintiff may contribute through a video conference in merely a few hours.

We also now have electronic filing of lawsuits and other procedural documents, an option which considerably reduces the time and cost for the parties involved.

Do you have any advice on how companies should prepare for cases, in terms of evidence, for example?

EA: Yes, this is a very important issue. Evidence must first be vetted, so that anything obtained illegally is not submitted. The evidence must also show the connection between the infringing product and the defendant. For this purpose, the plaintiff may use test purchases, invoices, receipts, contracts, or other documents that show that the defendant put the infringing products on the Russian market, or is selling them, or is somehow connected to the infringing products.

We also use public notaries, particularly in cases of infringement on the internet. The public notary is able to certify pages that are printed out from the offending website, and these printouts may then be used as written evidence in court.

There are certain requirements demanded of documents submitted to the court. For example, all foreign documents must be certified, and a Russian translation provided and notarised. Documents issued by official bodies in foreign countries must be notarised and apostilled.

VB: Furthermore, the chairman of the Supreme Commercial Court came up with an initiative to conduct in situ judgments and examination of cases, which means that the judges from the arbitration court will go to the parties involved.

Given the importance of the legality of evidence, what tips would you have for working with private investigators?

VB: Private investigators are extremely useful for obtaining evidence that may be used in court, or may lead to valid evidence. Evidence overall must always be drawn from a combination of different areas though. We examine the suit from every possible angle, on a case-by-case basis. So there are no general recommendations here as to whether to use private investigators or not.

Let’s turn our attention to the new IP court. Could you explain what its status is, and what impact you expect it to have?

VB: The new IP court will begin work in February 2013. The Supreme Commercial Court has already prepared a building for it, and 20 judges who specialise in intellectual property have been recommended. There will also be a staff of technical experts who can advise the judges should the need arise. The judges will also be free to ask the opinion of universities, scientists, and other independent experts.

An extremely experienced head judge, Lyudmila Novosyolova, has already been appointed by the Supreme Commercial Court. She started her practice in the Supreme Commercial Court in 1992, not as one of the judges handling IP cases, but she is one of the most well-respected judges in civil law.

As to the structure of this court, there will be two instances: the first instance and the cassation court. There will also be a presidium of the court. The court of first instance will consider appeals against decisions of the Russian Patent and Trademark Office, and disputes involving licence agreements and IP ownership.

The cassation court will deal with appeals from the court of first instance, as well as infringement cases that come from the regional courts. In some cases the decision of the court of cassation may be further appealed to the presidium. The court of last instance will be the Supreme Commercial Court.

Do you have any concerns about the court, and how it will work?

VB: Everything is ready for the February start. The judges and technical experts are very experienced, and so their decisions will be well-qualified and grounded. We expect this court will provide a unified process for IP issues, to be used as common practice in the enforcement of IP rights in the Russian courts as a whole.

For a while now in Moscow there has been a special team of judges tasked with examining solely IP cases, and so it cannot be said that the Russian system has been deficient in such technical expertise until now. But there are no limits to perfection!

In the past, judges were also able to order in technical experts to assist in cases, particularly when dealing with patents and inventions. The specialised IP court will simply streamline this process by having experts on the payroll at hand to assist with a hearing.

How has practice on parallel imports changed?

VB: The parallel imports situation has been difficult over the past few years. Initially, parallel import cases were brought under the administrative code. The confusion with parallel imports was that Russian law contains an article on exhaustion of rights. It does not directly prohibit parallel imports, it simply implies it, and so different people interpreted this provision in different ways.

With the a famous case involving Porsche, the Supreme Arbitration Court decided that such cases should not be prosecuted according to the administrative procedure, but under civil procedure. Subsequent to this decision, there was a lull in the prosecution of parallel imports because people were not ready to initiate civil cases, perhaps because a civil case is more expensive than an administrative one. In an administrative case, a governing body intervenes against an infringer, the trade mark owner is a third party, and thus it is cheaper for that owner to participate.

With the new civil cases, the courts started off with contradictory decisions, but little by little we have reached the stage where parallel imports have been universally banned.

And when was that stage reached?

VB: Around six months ago. In a recent case involving BMW for example, where the case went from the court of first instance, to appeal, and back to the court of first instance, it was definitely decided that parallel imports should be banned. Therefore, we may now say with 100% certainty that if the trade mark owner wants to forbid parallel import, he will be able to do so.

How important is it for foreign brand owners to enforce their rights?

VB: My advice would be to monitor infringement of trade mark rights meticulously, whether it be counterfeit or parallel products, and always prosecute the infringers. Infringers are very attentive people, and they examine which trade mark owners protect their rights. If an owner is indifferent to his rights, infringers will bring counterfeit and parallel products to Russia, and there will be a domino effect.

That brings us onto working closely with Customs, and so the new Customs union with Russia’s neighbours. Could you explain the background to the agreement, and how it will affect foreign trade mark owners?

VB: The main idea behind the formation of the Customs union was to improve the circulation of goods between these countries. Approximately one year ago, the Customs borders between the countries were lifted, so that now products may move freely from one country to another without restriction. But that imposes certain requirements on trade mark owners, because they now need to protect their IP rights in each country of the union.

Which countries are in the Customs union?

VB: Russia, Khazakstan and Belarus. There are talks of Tajikistan and Kyrgyzstan joining in the future.

Could this cause problems for brand owners, having to deal with trade mark systems are not as developed as Russia’s?

VB: The trade mark registration systems are more or less similar in all the countries of the Customs union. At the moment the trade mark owner should register with each country of the Union; we expect there to be a common trade mark register put in place, but it is difficult to say when this will happen. This will make it very easy for Customs to monitor the flow of goods.

Could you explain how the common trade mark register will work?

VB: Basically, when the trade mark is entered into the common trade mark register, it is entered into the database of the Customs office, and the information will be available to every one of the thousands of checkpoints. As soon as any suspicious goods come into the possession of Customs, they immediately see it flagged up on the register. They inform the trade mark owner or his representative of the suspicious goods, and the trade mark owner decides whether the goods are counterfeit or not. The process may only take a day or two if the trade mark owner responds quickly.

What is your most important piece of advice for foreign trade mark owners?

VB: The crucial thing is to register your trade mark and enter it into the Customs register, as in my opinion, Customs as it is now is the most effective enforcement agency in Russia.

EA: I would advise trade mark owners to have a clear chain of supply of the goods to Russia, and to have documents showing their effective use of the trade mark in Russia (such as distribution and supply contracts, and Customs declarations). In this way they do not risk another party initiating a non-use cancellation action.