One man’s trash3 November 2021
IP is protected by many laws, not only by a package of specific legislation such as patent law, trademark law, etc. In Russia, those laws are bound in one book: “Part IV of the Civil Code”. Several other laws also include isolated provisions dedicated to IP.
One might think that the rights of IP owners are tightly protected. Not always so. Practice shows that infringers are no less inventive than inventors themselves. As soon as a law or a regulation is enacted, unscrupulous people begin searching for the ways to go around a patent or a trademark.
Understandably, they are interested in patents and trademarks that carry good marketing potential. In patents, they look for the flaws in the claims allowing them to formally stay within the bounds of the law. In trademarks, they invent designations that may seem similar to the protected trademarks. It is true that, in many cases, justice can be sought and restored—however, that involves expense in terms of effort, time and money. For example, it took years to settle the issue of parallel import in favour of trademark owners.
Depending on the nature of the product, infringers seek specific ways to freeride on others’ IP.
Some years ago, there were several cases where manufacturers of printers strongly objected against the repeated use of their printer cartridges. It is obvious that remanufactured cartridges may have inferior quality in comparison to the original items. However, the lower price of second-hand cartridges lures many users into buying them.
Incidentally, different countries outline different policies regarding remanufactured items. For example, the US Supreme Court ruled (several years ago) in favour of remanufacturers, stating that the right of ownership prevails over patent rights. The case concerned a patent infringement lawsuit brought by Lexmark against Impression Products: the latter bought used ink cartridges, refilled them and sold them to users.
Russian law seems to have kept the same approach to cartridges. Several lawsuits were lost by manufacturers of printers/cartridges. Those judgments could be applied to any devices allowing a repeated use.
Spare parts and trademark rights
Now, the situation seems to have taken a turn for the better. The Russian Ministry of Internal Affairs sued the company Reikanen Parts (respondent) for infringement of trademark rights within the framework of an administrative case. The respondent collected and used automotive parts from many companies (Audi, Skoda, Mercedes, BMW, Volvo and others), before repairing and selling them.
The police found and seized many of these spare parts. The automotive companies were involved as third parties and submitted their comments to the court, which mandated an expert examination confirming that the seized spare parts had marked differences in comparison with the original goods and should not be regarded as originals.
The respondent asked the court to invite to the hearing the expert who had made the report. The expert, however, confirmed his findings and again stated that the goods examined by him did not look like the originals and had obvious counterfeit features. Thus, the court dismissed the argument of the respondent, who insisted that he had not produced the goods but only repaired them.
The court broadly interpreted the concept of “production”. It explained that production may be realised not only by going through the full cycle of manufacture but also by means of repairs or remanufacturing. The respondent could not explain where the goods had come from. He indicated only that he stripped the parts from the cars and repaired those parts. Incidentally, representatives of the trademark owners compared the confiscated products with the originals and found essential differences that should rule out their sale.
The court also relied on Ruling 11 of the Plenum of the Supreme Court of the Russian Federation, which earlier had explained that liable parties are not only the persons who applied a trademark to the goods. The methods of use of a trademark are not limited by direct placement of a trademark on the goods and should be more broadly construed.
Unlawful use of a trademark should also include cases where the trademark is used without approval of the trademark owner. This statement echoes the important decision of the Constitutional Court regarding parallel import.
The court confirmed that the trademark owner has the exclusive right to use his trademark. Article 14.10 of the Code of Administrative Offences covers cases of infringement such as the unlawful reproduction of the means of individualisation, as well as the marketing of trademarked goods without approval of the trademark owner.
The court agreed with the third parties invited to participate in the hearings that goods sold under trademarks such as Audi, Volkswagen and others create an impression that the goods belong specifically to the trademark owners—which is not the case. Besides, such goods may not be safe for the consumer and thus could cause damage to the trademark owners.
The “Law on protection of consumers’ rights” (February 7, 1992) provides that the manufacturer of the goods must ensure safety of the goods during the prescribed term of service, which cannot be guaranteed in the case of remanufactured products. The respondent did not provide evidence proving that he had taken adequate steps to be consistent with the law.
As a result, the court fined the respondent and confiscated the seized goods.
The respondent appealed against the judgment at the court of appeal. He acknowledged that he had restored automotive parts but asserted that the expert examination was biased. The appeal court confirmed that it is not allowed to use designations that are confusingly like trademarks without the permission of the owner, and such unauthorised use entails liability (in this particular case).
The respondent stubbornly continued to appeal against the judgment, this time in the cassation instance (IP court). As prescribed by the regulations, the respondent could only rely on the alleged incorrect application of the material norms of the law and its ensuing wrong conclusions.
He continued in the same vein, claiming that the exclusive right could not be extended to the repairs and restoration of the goods. The IP court, however, confirmed the conclusions of the lower courts in that products subjected to repairs and restoration become different from the originals. Hence, they should be considered counterfeit in the absence of permission from the trademark owner.
The court also opined that marketing is not only sales, production, etc, but also exposition of the product at trade fairs. Also, the system of marketing IP given in the law is not exhaustive.
The respondent argued that he had not produced the goods and therefore did not use the trademarks. The court explained that the word “production” also embraces the repair and restoration of the products, which results in the creation of a new product that is different from the original.
The court also dwelt on the principle of the exhaustion of rights. Following the above statement, it explained that the IP owner cannot hinder sales of products that were marketed on his approval. In this case, the repaired products are not characterised by features inherent to the originals. Finally, the court pointed out that the respondent’s arguments boiled down to the negation of conclusions made by the lower courts and dismissed the appeal.
This time, the respondent made a gesture of despair and complained to the Constitutional Court claiming that article 14.10 of the Code of Administrative Offences contradicts constitutional principles. The Constitutional Court examined the relevant documents and did not find any base to accept and consider the complaint.
This case went through all possible court instances. It was not a case of evident parallel import, but nevertheless it culminated in a judgment favouring the trademark owners. This confirms that Russia abides by its allegiance to the national/regional exhaustion of rights.