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GORODISSKY & PARTNERS
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Intellectual Property in the Eurasian Union - The Good, the Bad and the Ugly

18 October 2017

The EAEU, even if it simplifies and enhances turnover of goods between these countries presents nevertheless new challenges for their respective trademark owners. Each country has its own trademark registration system. With all that, there are no customs borders between those states and the goods are carried freely from one country to another country. This means that if a trademark is registered in one of these countries and not registered in another country, the particular item may or may not infringe against certain trademark rights. This may cause problems to the trademark owner/his distributor and makes it highly advisable to register the trademark in all five countries.

To make things easier (and cheaper) for trademark owners, the EAEU countries have agreed to establish a common Eurasian trademark. Currently, the agreement on the common EAEU trademark is at the stage of approval by the participating member states.

A common trademark entails a common customs register. This issue is also high on the agenda and has been discussed in parallel with the common trademark. In fact, all formalities for the unified register have been complied with, but are not yet in place. As in the case of the EAEU trademark, it is expected that the unified register will be operable soon. Pending that, trademarks must be registered in each particular country and in each national customs register.

Some counterfeit goods come to Russia from Europe, but most of them come from the South. Russia has a long border running for thousands of miles with China, Kazakhstan, and Kyrgyzstan also has a border with China. Russian customs may monitor counterfeit goods when they come from countries outside of the EAEU. Hence dealing with counterfeit goods coming from EAEU countries (even though their customs also monitor the goods at their respective borders) is only possible in the marketplace where police are involved or when suing infringers directly.

The fight against illegal counterfeiting can be problematic, even though there are good laws and enforcement opportunities

The fight against illegal counterfeiting can be problematic, even though there are good laws and enforcement opportunities. Within the framework of this article, counterfeiting may be interpreted broadly. A long time ago, some businesses brought their goods to Russia without registering trademarks. Trademark squatters registered those trademarks in their name and tried to sell the trademarks to the original owners, often successfully. Sometimes trademark squatters were sued and the trademarks subsequently returned to their real owners.

A while later, government fees were introduced, legislation improved and so this practice discontinued, but at the same time, another problem came to the fore. Many manufacturing companies do not trade directly in Russia, but sign contracts with distributors and while doing this, may overlook registration of trademarks. This co-operation may last for some time without a hitch, with certain goods earning a reputation in the marketplace until later on, good business relations eventually fracture. Distributors have oftentimes registered such trademarks in their own name and created obstacles to their former business partners. Alternatively, they may engage in parallel imports, and this is ultimately the result of negligence on the part of original trademark owners. However this situation may be rectified due to new intellectual property legislation and laws on unfair competition, which еnable the revocation of pirated trademarks, although this does involve a considerable expense of time and money. The presence of the EAEU on the IP scene may create additional issues in this situation, given that goods move freely through the EAEU, the trademarks may not be registered in all the EAEU countries, the Eurasian trademark is not yet in place and there may be unforeseen factors which have yet to bet revealed, due to the young age of the EAEU.

Unfortunately, even large global corporations may fall victim to unfair distributors. In one case, a U.S. corporation having a widespread network of subsidiaries in a number of countries was selling medical equipment and disposable products to Russia through a Russian distributor. For this purpose, the subsidiary from Sweden arranged medical certification of the equipment through its representative office in Russia, whose director was Mr. Taronishvili (future plaintiff). Mr. Taronishvili was a co-founder of a Russian distribution company through which medical equipment was being sold, with sales in Russia beginning in 2003 and proceeding successfully for years. In 2005, a company associated with Mr. Taronishvili registered the trademark under which medical products had been supplied to Russia. This did not affect the distribution of medical equipment in any way, and successful trade would continue for several years.

A long time ago, some businesses brought their goods to Russia without registering trademarks

For commercial reasons, the Swedish subsidiary eventually changed their distributor and Mr. Taronishvili was left out of business. He decided to get even with the Swedish subsidiary by blocking supplies of the equipment. The trademark had been registered in the name of the company associated with him, and therefore arranging this disruption of the Swedish subsidiary was not difficult. He also launched a campaign sending letters to hospitals, intermediaries who had been buying the equipment, and to other professionals who had any connection to the trade. It was obvious that the trademark had been registered in bad faith.

The Swedish company was subsequendy requested to produce evidence of the use of their trademark before the date of registration of the opposing trademark. Various options were proposed to the company, such as the Chamber of Patent Disputes, and the antimonopoly body, however proper evidence was not provided. It should be noted that the mere presence of goods in the marketplace, does not always establish a link between a trademark and its owner. Very often the structure of business is sophisticated to such a degree that between a given trademark on a product and the trademark owner, there may be a number of intermediaries. This is normal from a business point of view, but may be difficult to follow, depending on how goods change hands through the marketplace. Legislation sets forth that any given trademark owner shall display their trademark which means that they should be aware of, or control the movement of goods or services in relation to the trademark. It so happens that many trademark owners neglect this requirement, and lose track of (or do not care about) the movement of their goods. In these circumstances, it becomes impossible to connect the trademark owner with a particular trademarked product available in the marketplace. This is critical when the manufacturer and the trademark owner (particularly when a trademark is registered in a foreign country, and not in Russia) want to assert their position. This requirement also becomes a tool when it is necessary to cancel a trademark for non-use.

Given that the Swedish company was not able to collect proper evidence and thus prove unfair competition, it decided to cancel the pirated trademark for non-use. The non-use cases are examined by the IP court, and a court case was initiated. In order to have the right to sue the trademark owner, the Swedish company had to prove its interest in the prosecution of the case.

As was noted above, the company could not collect evidence showing that the trademarked goods had originated from that company. The respondent (trademark squatter) aptly used this argument against the goodwill of the Swedish company. Conversely, the respondent showed to the court that he was using the trademark originally registered by himself. He was indeed purchasing medical equipment under the disputed trademark from other sources outside of Russia and was selling it to many medical institutions. It may very well be the case that the equipment was manufactured by the same company which was trying to cancel its own misappropriated trademark, so the result was that the court refused to cancel the pirated trademark.

It is a shame that the case was decided in favour of the trademark squatter, but the court cannot be reproached for not being guided by the principles of good ethics and morality. It merely accepted the factual evidence presented by both parties. The case was appealed by the Swedish company several times, going right up to the Supreme Court, however the judgment remained in favour of the squatter.

This is a clear case illustrating the importance of registering a trademark in Russia and other countries of the EAEU before placing products in the marketplace. This situation may have various overtones in other cases; there were cases where the real trademark owners were able to cancel pirated trademarks and assert their rights, however the necessary procedures involved much expense and time which negatively affected the business. EG

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