Ukraine: Alcohol Beverage Factory Fined for Unfair Competition

In May last year the Commercial Court of Ukraine issued a final decision against the state-owned alcohol beverage factory Pysarivskyi spyrtzavod in an unfair competition case involving its competitor, a brandy factory Uzhgorodskyi koniyachnyi zavod.

This case is important because it questions the consistency between the trademark legislation and the legislation regulating the procedures for obtaining market authorization for alcoholic beverages in Ukraine. Namely, when filing a request for market authorization, the correspondent law requires the proof of the filed trademark application only. Once the request for market authorization is filed, along with the copy of the trademark application, the correspondent bodies do not check whether the trademark protection was actually granted. Therefore, it is possible to obtain market authorization for producing an alcoholic beverage and have its name registered by the licensing bodies, even if the PTO eventually refuses the trademark application.

Background

In June 2009, the Antimonopoly Committee of Ukraine ruled against the state-owned Pysarivskyi spyrtzavod, holding that its actions constituted unfair competition and were contrary to honest practices in industrial and commercial matters. Namely, the Antimonopoly Committee found that Pysarivskyi spyrtzavod used the trademark GRAFSKYI UZHGORODSKYI illegally, thus infringing the rights of Uzhgorodskyi koniyachnyi zavod’s trademark UZHGOROD and creating a false indication of the origin of the products.

In August 2009, Pysarivskyi spyrtzavod filed a claim with the Commercial Court of Kiev, arguing that the Antimonopoly Committee’s decision was illegal and that the opinion issued failed to give the full explanation of the circumstances of the case. The grounds for the case were the permission/license (market authorization) to use the trademark GRAFSKYI UZHGORODSKYI in relation to brandy, obtained on the basis of a trademark application filed by the plaintiff in September 2007. The plaintiff also argued that the trademark GRAFSKYI UZHGORODSKYI could not be misleading as to the place of origin of the products and that the Antimonopoly Committee did not prove that Pysarivskyi spyrtzavod intended to take advantage of the business reputation of the owner of the trademark UZHGOROD, considering that the trademarks UZHGOROD and GRAFSKYI UZHGORODSKYI were not similar and the brandy produced by the plaintiff and the defendant was different in terms of their recipe.

The Antimonopoly Committee filed a counterclaim with the Commercial Court of Kiev requesting that its decision be upheld. The proprietor of the trademark UZHGOROD supported the Committee’s statements in the counterclaim. When the Commercial Court upheld the initial decision, thus rejecting Pysarivskyi spyrtzavod’s lawsuit, the case was appealed before the Court of Appeal, which issued an identical ruling.

Pysarivskyi spyrtzavod then brought the case before the Higher Commercial Court of Ukraine, which remitted the case for reconsideration, with the explanation that the Antimonopoly Committee failed to specify in its ruling which honest practices in industrial matters were breached by Pysarivskyi spyrtzavod.

Final Decision

After considering all the explanations and petitions of the parties, the Commercial Court of Ukraine issued a final decision on May 16, 2011, establishing that the plaintiff’s actions constituted unfair competition in accordance with the Law of Ukraine “On Protection against Unfair Competition” and Article 10bis of the Paris Convention. The Court explained that Pysarivskyi spyrtzavod had no legal basis to use the trademark GRAFSKYI UZHGORODSKYI during the production and commercialization of the brandy, and, moreover, gave a false indication of origin of UZHGORODSKYI, which would indicate that the brandy was produced in the region of the town of Uzhgorod. It found that such use pointed to the plaintiff’s intent to use the business reputation of the defendant. Because the brandy of the plaintiff was not produced in the region of the town of Uzhgorod, such indication was deceptive and misled the public as to the place of origin of the products.
This decision was not appealed. Production of the brandy under the trademark GRAFSKYI UZHGORODSKYI was stopped, and a fine of USD 21,127 (EUR 16,717) was imposed on Pysarivskyi spyrtzavod.

By: Elena Zubenko

For more information, please contact Elena Zubenko at our Ukraine office.