Russian Court Says Parallel Imports Do Not Constitute Trademark Infringement

On December 13, 2017, the Moscow Arbitration Court ruled in support of the Federal Antimonopoly Service’s (FAS) stance on parallel imports, namely that companies cannot prohibit importation of authentic products even if the goods are imported by unauthorized importers.

Tokyo-based automotive company KYB Corporation, the holder of a number of ‘KYB’ trademarks in Russia, has one official distributor in the country, CUBE Eurasia, LLC, exclusively authorized to import and sell ‘KYB’-branded goods. The Japanese company failed to issue permission letters for importing ‘KYB’-branded goods to Russian companies TMR IMPORT, LLC and AVTOLOGISTIKA, LLC, which turned to FAS claiming that KYB’s practices lead to restriction of competition on the market.

In July 2017, FAS issued a written admonition to KYB and three other companies — Daimler AG, Renault S.A., YD Diagnostics. KYB attempted to overturn the warning before the Moscow Arbitration Court, but the court declared it justifiable.

The court ruled that KYB’s actions violated the unfair competition law, namely Art. 14.8, which sets forth that “any other forms of unfair competition, besides those provided for in the articles 14.1–14.7 of the Law, are prohibited”.

Referring to a non-legally binding remark of the Constitutional Court of the Russian Federation from a ruling issued in April 2008, the Moscow Arbitration Court stated that:

The diversity of forms and methods of unfair competition is not always in direct contradiction to the legislation, which is why the question of the actus reus in each particular case should be considered based on the right holder’s tactics towards their competition, and should take into account the definitions and categories used in the competition protection legislation.

In this particular case, the court concluded that companies marketing legally purchased goods do not infringe IP rights or commit acts of unfair competition.

The court declared that the IP infringement provisions of the Code on Administrative Offenses are not applicable in this case, because they relate to the unauthorized use of trademarks on goods that do not originate from the trademark holder or the licensee. In this case, the goods originated from the right holder and the parallel importer was not communicating false information about the right holder/manufacturer.

This ruling is in line with the court’s current practice that keeps favoring the FAS’s stance on parallel imports, even though it appears to be contrary to Art. 1484 of the Russian Civil Code, according to which parallel imports constitute trademark infringement. The court considered that the provisions of Art. 1484 were intended to prevent situations that could cause confusion.

By: Julia Zhevid

For more information, please contact Julia Zhevid at our Russia office.