WTR - Anti-counterfeiting 2016 – Russia Chapter

Legal framework

The following national laws apply to counterfeiting:

• the Civil Code;
• the Criminal Code;
• the Code on Administrative Offences;
• the Law on Customs Regulation; and
• the Competition Law.

Generally recognised principles and norms of international law, as well as international treaties to which Russia is a signatory, are regarded as integral parts of the Russian legal system. If an international treaty establishes rules that differ from those stipulated by a national law, then the treaty’s rules apply. Further, the Civil Code stipulates that international treaties apply to civil law relations directly, except where a domestic act was required to implement the treaty.

Russia is a party to the following international treaties relevant to counterfeiting:

• the Paris Convention for the Protection of Industrial Property;
• the Agreement on Trade-Related Aspects of IP Rights;
• the Customs Code of the Customs Union;
• the Universal Postal Convention; and
• the Madrid Agreement.

Border measures

Border measures against counterfeit goods are available in Russia on the basis of the Customs Code of the Customs Union, the Law on Customs Regulation, the Code of Administrative Offences, the Civil Code and the Criminal Code. The Customs Code of the Customs Union contains general provisions on customs control and grants Customs some major powers. The Law on Customs Regulation provides more in-depth country-specific regulations and powers to Customs, while the Code on Administrative Offences indicates specific remedies for trademark and copyright infringements. In particular, the Law on Customs Regulation sets out administrative procedures for the seizure of counterfeit goods.

A rights holder may apply for its trademark or copyright to be included in the Customs Register of Intellectual Property. When applying for inclusion, the rights holder must provide:

• proof that it holds the relevant IP right;
• information about any other person authorised to use the IP right;
• sufficient information to enable Customs to identify the counterfeit goods;
• a secured warranty to compensate for property damage in the event that goods are wrongly intercepted; and
• other relevant data.

All customs authorities are obliged to check the Customs Register of Intellectual Property regularly. There is no official fee for adding an IP right to the register. However, adding a trademark makes the rights holder responsible (if it supports the customs claims) for any property damage that might be caused to the declarant, owner or recipient of goods as a result of their suspension, if a court rules that the goods are not counterfeit.

The maximum term of recordal of a trademark in the Customs Register of Intellectual Property is two years, with the possibility of renewal for further two-year periods, provided that the trademark is still valid. However, Customs usually records a trademark for one year (with the possibility of renewal).

On inclusion of a trademark in the register, Customs will monitor imports of goods bearing this trademark. Where such goods are imported by an unknown importer, customs officers will:

• suspend the goods’ release for 10 working days; and
• inform the rights holder of the situation no later than the day after the suspension and give it the opportunity – under Customs’ supervision – to take tests, samples and specimens of the allegedly counterfeit goods and to examine, photograph or otherwise collect documentary evidence.

The main purpose of authorising Customs to suspend the release of suspect goods is to allow the rights holder to ascertain whether the goods in fact infringe its rights and, if so, to launch an action. The rights holder can enforce its rights by applying various judicial remedies available under the law.

In the event of infringement, the rights holder may approach Customs with an application for action so that the latter can initiate administrative proceedings and sue the infringer in court, according to the Code on Administrative Offences.

Another enforcement option for the rights holder is a civil action, whereby it can seek damages or monetary compensation and publication of the judgment.

Failure to initiate legal action within the above-mentioned 10-day period will result in the goods being released. If the trademark is not registered in the Customs Register of Intellectual Property, Customs still has the right (but not the obligation) to seize the suspicious goods ex officio. However, this may happen only once for each particular trademark and the term of seizure may not exceed seven days. Customs rarely uses this procedure; hence, registration is strongly recommended.

While considering border measures, a rights holder should take into account that Russia is a member of the Customs Union. At present, this is composed of Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan. There are no customs borders between member countries, which means that goods move freely within the borders of the Customs Union. This emphasises the importance of trademark registration in all member states. If a particular trademark is not registered in every member state, the counterfeit goods may move to Russia without restriction and will have to be caught on the market. In this case the rights holder will have to initiate a civil case or engage police to initiate an administrative action, depending on the nature and gravity of the infringement.

Criminal prosecution

Article 180 of the Criminal Code provides for criminal liability for trademark infringement.

If the damage caused by the unlawful use of a trademark is significant (more than Rb250,000) or the infringement is repeated, criminal charges may be brought against the infringer.

The infringer may face a fine of Rb100,000 to Rb300,000 or imprisonment for up to two years with a fine up to Rb80,000. When such activities are a result of collusion or carried out by an organised group, the penalty may be imprisonment for up to six years and/or a fine of Rb500,000 to Rb1.5 million. Within the framework of criminal proceedings, the rights holder may also claim for damages.

Criminal proceedings consist of two stages: a preliminary investigation, which is initiated by an application filed by the rights holder with the police, and court hearings. A sentence handed down by the first-instance court may be appealed to a higher court. The duration of criminal proceedings is hard to predict; however, they usually take between two and three years. Administrative proceedings

In addition to these measures and remedies, two more administrative routes can be used to combat infringement.

First, unauthorised use of another party’s trademarks constitutes an administrative offence under Article 14.10 of the Code on Administrative Offences and entails administrative liability for the infringer.

Administrative proceedings start with the rights holder filing a petition with the police, based on which the police will conduct a raid on the infringer’s premises and seize any discovered counterfeit goods. They will then pass samples of these to the rights holder (or its authorised local representative) so that it can confirm the origin of the counterfeits.

Once the police have evidence of infringement, they will prepare an administrative violation report and place all materials before the court. The administrative penalties for the production and sale of counterfeit goods are seizure of such goods and a fine, as well as confiscation of all seized goods for destruction. The fines imposed on individuals, legal entities and their officials are as follows:

• individuals – double the cost of the counterfeit goods, but no less than Rb10,000;
• officials – triple the cost of the counterfeit goods, but no less than Rb50,000; and
• legal entities – five times the cost of the counterfeit goods, but no less than Rb100,000.

The advantages of administrative proceedings are that infringers are brought to account in most cases and the requirements for establishing guilt are less strict than in criminal cases (where direct intent must be proven). Further, administrative proceedings take from two to four months from filing of the petition with the police to first-instance decision and the costs are significantly lower than for civil or criminal proceedings.

Administrative proceedings also allow for the destruction of counterfeit goods.

Within the framework of administrative proceedings, a rights holder may obtain a court decision which establishes:

• the fact of the infringement;
• the extent of the counterfeiting; and
• the infringer’s profits from selling the counterfeit goods.

All of these facts allow for more compensation within the framework of subsequent civil proceedings.

However, sometimes the police make mistakes when drawing up procedural documents (eg, administrative violation reports) that can lead to an infringer escaping punishment and seized goods being released.

In addition, administrative procedures result in low fines.

Illegal trademark use may also qualify as unfair competition under the Competition Law. The Anti-monopoly Service hears unfair competition cases through a special administrative procedure, which is initiated through an application filed by the rights holder. Within the framework of this procedure, the rights holder may claim only for the infringer’s actions relating to the illegal use of the trademark to be recognised as acts of unfair competition and for the infringer to cease those actions. If the Anti-monopoly Service decides in favour of the rights holder, it will require the infringer to cease the infringing behaviour. Non-compliance will result in administrative penalties.

Civil enforcement

Under Article 1484 of the Civil Code, a rights holder has the exclusive right to use its trademark in any lawful way. No other person may use signs that are similar to the trademark in respect of goods for which the trademark has been registered – or similar goods, if such use is likely to cause confusion – without the rights holder’s consent.

A rights holder usually initiates enforcement by sending a cease and desist letter to the alleged infringer. However, while this is a simple and effective non-judicial measure, it is not mandatory.

Preliminary measures

The court may issue preliminary injunctive relief prohibiting the defendant from performing certain actions or ordering the seizure of the defendant’s property.

Any petition for injunctive relief must be considered by the court no later than the day after the claimant files it. Injunctive relief may be sought at any stage of the court proceedings if failure to provide it would result in significant damage to the claimant or complicate or prevent enforcement of the court judgment.

Before ordering injunctive relief, the court may require the claimant to post security against possible damages to the defendant.

This might include a deposit in an amount determined by the court or a bank guarantee, warranty or other financial security. The court cannot decline injunctive relief if the claimant posts security with it.

Remedies

Remedies available under Article 1252 of the Civil Code for the unlawful use of a trademark include claims for:

• cessation of the infringement;
• damages or monetary compensation;
• removal from the market and destruction (at the infringer’s expense) of counterfeit goods and labels and packages bearing unlawfully used trademarks or confusingly similar signs; and
• publication of a court judgment in order to redress the damage to the rights holder’s reputation.

Action for damages

A rights holder may claim damages for losses and lost profits amounting to at least the profits derived by the infringer from the infringing activity.

However, instead of claiming damages, the rights holder may claim:

• statutory compensation of between Rb10,000 and Rb5 million, determined at the discretion of the court;
• twice the cost of the counterfeit goods; or
• twice the cost of the licence fee usually charged for lawful use of the trademark in comparable circumstances.

Confiscation

According to Article 1515(2) of the Civil Code, the rights holder may claim the destruction (at the infringer’s expense) of counterfeit goods and labels and packages bearing an unlawfully used trademark or confusingly similar designation.

The court can order the removal from the market and destruction (at the infringer’s expense) of equipment, other devices and materials used or intended to violate the rights holder’s exclusive rights, if the law does not provide for their confiscation for the state’s benefit.

Specialised court

A civil case must be filed at the first-instance commercial court in the location of the infringer. In 2013 the IP Rights Court was established in the system of commercial courts in Russia. The IP Rights Court is a specialised commercial court of first and cassation instances for disputes relating to the protection of IP rights. For instance, as a court of cassation, the IP Rights Court deals with trademark infringement cases considered at first instance by commercial courts and then by commercial appeal courts.

All such cases are considered at the IP Rights Court by a panel of at least three judges. The IP Rights Court may engage an expert to clarify specific questions on the matter of dispute; for these purposes, it may send a binding order to any authority, organisation or person.

Anti-counterfeiting online

The same provisions that apply to trademark infringement in the brick-and-mortar marketplace also apply to e-commerce.

Further, the Civil Code provides that a rights holder has the exclusive right to use its trademark on the Internet, including in a domain name. Therefore, rights holders can prevent third parties from cybersquatting and trading (ie, advertising, offering for sale and selling) in counterfeit goods online.

Online investigation strategies In online anti-counterfeiting actions involving domain names in the country-code top-level domains ‘.ru’, ‘.su’ and ‘.рф’, rights holders should first secure evidence of infringement.

The most common means of doing this is through notary verification of the website’s contents.

The next step is to identify the infringer, the domain name administrator and the operator of the business carried out on the website. This can be done by forwarding an attorney request to the website administrator or the domain name registrar.

ISP liability

In 2013 Article 1253.1 on the liability of information intermediaries was introduced into the Civil Code. The article provides that internet service providers (ISPs) are liable for online IP infringement on a common basis in case of fault, unless they:

• did not know or should not have known that the use of the IP right was unlawful; and
• when notified in writing by the rights holder about the infringement, promptly undertook necessary and sufficient measures to remove it.

In a December 23 2008 decision the Supreme Commercial Court held that ISPs will not be held liable for information placed on a website if they neither initiated the placement nor selected a recipient, and this did not affect the information’s integrity.

The court also noted that courts should consider whether an ISP:

• cooperated with any request to suspend an infringing content provider’s services; or
• identified the party that placed the infringing content on the Internet.

Preventive measures/strategies

Rights holders should ensure that their rights are not vulnerable – namely, that the trademark is duly registered and properly used. This is essential, since an infringer’s most likely counter is to challenge the infringed rights (eg, by filing an action for cancellation for non-use). Rights holders should use local IP counsel and private investigators to secure evidence of the trademark’s proper use and evidence of any unauthorised use.

Control of contractual relationships with third parties

Since trademark use by a licensee or by another party authorised by the rights holder is considered to be proper use, rights holders should oblige licensees and distributors to provide them with documents proving use of the trademark.

It is also common practice in contractual relationships to oblige a licensee or distributor to inform the rights holder of any actual or suspected infringement, passing-off or illegal use of the trademark by a third party.

Precautionary marking

The Civil Code stipulates that a rights holder may use a precautionary sign by its trademark indicating that it is a trademark registered in Russia. This may take the form of:

• a letter ‘R’ or a circled letter ‘R’ (®); or
• a word sign ‘trademark’ or ‘registered trademark’.

The Civil Code also stipulates that a franchisee must inform customers that it is using a trademark by virtue of the franchise contract. However, the enforceability of the exclusive rights – particularly the right to recover damages – will not be affected by whether any precautionary sign was affixed to the products.

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