Tightening up in the Balkans

By Anamarija Stancic Petrovic, director of PETOSEVIC Croatia, and Mihajlo Zatezalo, director of PETOSEVIC Serbia. Published in World Intellectual Property Review Annual 2010, 2010.

Legislation in the Western Balkan countries (Croatia, Bosnia, Montenegro, Macedonia,
Albania, Serbia and Kosovo) is already largely in line with most European Union directives, as required for the EU entry. When it comes to enforcing the legislation before the courts, each country is different. Yet, they have all made progress, to varying degrees, to better protect intellectual property. Recent case law in Serbia and Croatia demonstrates the general trends.

Serbia

Recent case law in Serbia shows progress in enforcing intellectual property rights, in particular against counterfeiters—a trend that is mirrored throughout the region.

A common obstacle in the fight against counterfeiting has traditionally been the region’s weak economy. Constant pressure from various state agencies, the public and non-governmental organisations to donate any seized counterfeit products for humanitarian purposes presented a substantial difficulty for the authorities in charge of protecting IP. It was de facto nearly impossible to strictly follow IP laws and prescribed procedures such as the seizure and destruction of counterfeit products.

Over the past few years, this attitude has started to shift. Some say that both the government and the public have come to accept intellectual property protection in order to satisfy the requirements for entry into the EU. Whatever the reason, Serbia has seen a significant improvement not only to IP protection, but also the efficiency of its court system. Court cases that used to take years now take from six to nine months.

The courts in smaller towns are much more experienced in IP cases than before. The capital, Belgrade, used to be one of the few places where one could find a judge with experience in IP disputes. Now, in smaller towns such as Uzice, Zajecar, Sombor and Kraljevo, where local courts are often the courts of first instance in customs seizure matters, judges are increasingly familiar with the issues and the law. PETOSEVIC lawyers continue to successfully argue cases in small towns and to an extent educate judges, some of whom are not far from retirement age but are still willing to learn.

The amount of goods seized by customs increased by 7.24 percent in 2009. Customs is increasingly successful in seizing and destroying various types of consumer goods, including clothes, shoes, technical appliances, food, car parts and office supplies.

Another important change is the willingness of the courts to issue preliminary injunctions within 48 hours. This was not always the case and shows a significant improvement in court efficiency in Serbia.

All of the above have pushed the infringers to change their tactics too. With more sophisticated systems in place to prevent intellectual property violations, some infringers have turned away from importing counterfeit goods to importing and manufacturing lookalikes.

The shift in the attitude to IP protection can be seen in a recent Nike case where Serbian customs seized more than 20,000 pairs of fake shoes bearing the ‘Nike’ trademark, covered by the sign ‘Adike’ and belonging to a Serbia-based importer.
By scratching and removing the Adike sign, the customs authorities discovered the counterfeit Nike trademark underneath. The court case was completed within a year, after which the infringer gave up counterfeiting activities in Serbia and
moved out of the country.

A few months after the final ruling in this matter, all 20,000 pairs of counterfeit shoes were destroyed under customs supervision. This shows the readiness of the responsible authorities in Serbia to effectively fight counterfeiting.

Croatia

Croatia is witnessing a similar trend to neighbouring Serbia. IP cases before the Croatian courts are increasingly sophisticated. Issues of parallel imports and passing-off, which were uncommon in the past, are becoming more frequent.

In a recent parallel import case, two local Croatian companies selling automobile spare parts imported and sold original products belonging to a multinational petroleum company of Dutch and British origin without authorisation. The infringers displayed the petroleum company’s trademarks on their websites for the promotion and sale of genuine goods made by the petroleum company.

The problem was that Croatian law does not prohibit parallel imports, nor the use of a company’s trademark on a website to promote the sale of genuine products. Considering this and the fact that the Croatian Trademark Act has an unfavourable provision on the exhaustion of trademark rights, the claim could only be filed
under unfair competition.

PETOSEVIC argued that the use of the petroleum company’s trademark on the defendants’ websites represented a dishonest and fraudulent rivalry in trade and commerce. This argument was supported by the fact that the defendants’ websites indicated that they were authorised petroleum company representatives in Croatia,
when in fact, the plaintiff had no direct business connection with the two defendants.

As a result of the action brought before the court, the parties resolved the dispute amicably and the infringers ceased to use the plaintiff’s trademarks on their websites.

Similarly in Bulgaria, the law does not prohibit parallel imports. On June 15, 2009, the General Assembly of the Commercial Division of the Supreme Court of Cassation (SCC) attempted to address the question of whether parallel imports
constitute trademark infringement.

The SCC reached the conclusion that the import of original goods, affixed with the trademark and consent of the trademark proprietor, when the import is carried out without the consent of the trademark holder, does not fall within the definition of infringement in the law.

Dissenting opinions were given by three judges who emphasised the relevance of the doctrine of exhaustion in cases of infringement.

Practitioners in Bulgaria, similarly to their counterparts in Croatia, are increasingly
successful at finding ways to protect their clients’ rights against parallel imports through alternate provisions of the intellectual property laws.

Another recent trademark infringement case in Croatia also shows that the judges are more invested in deliberating IP cases.

In Didi d.o.o. v. Divisio d.o.o, the plaintiff, a Croatian company, sued a Croatian distributor of clothes manufactured by OUI Gruppe, a major German fashion company. The clothes are distributed in Croatia under the trademark ‘OUI’.

The German fashion company, however, did not own the right to the OUI mark at the time the lawsuit was filed. The trademark registration for the OUI mark was owned by the plaintiff.

PETOSEVIC acted on behalf of the defendant. The plaintiff’s claim was based on the trademark registration for the OUI mark, seeking to prevent the distribution of OUI clothing in Croatia.

During the lawsuit, the plaintiff offered to sell the OUI trademark to the defendant.

However, the plaintiff was not effectively using the mark, and following our advice, the defendant filed for cancellation. The plaintiff’s trademark registration was cancelled and the claim was withdrawn.

In addition to dismissing the case, the judge commented on it, which is unusual in Croatia and signalled a shift in the willingness of courts to protect intellectual property rights.

He stated that the plaintiff acted in bad faith by suing the defendant on the basis of a mark that the plaintiff knowingly did not use. Moreover, the plaintiff further abused the system by attempting to sell the mark to the defendant.

The court warned the plaintiff that such abuse is punishable by law. The court comment is not a precedent, but it represents a documented shift in attitude in Croatia, which, like Serbia, has long opposed the strict EU-like protection of intellectual property rights due to weak economies in the region.

This case also demonstrates the difficulty of enforcing unregistered rights in Croatia, despite the use of the mark and the presence in the local market. It also shows the increased efficiency of the Croatian courts and State Intellectual Property Office. The case was completed in several months, compared with up to four years in the past.

The plaintiff was ordered to pay approximately €1,500 for the cost of the court proceedings.

Progress has been made in protecting intellectual property rights in the Western Balkans, and this should establish a favourable long-term climate for foreign investment and encourage the arrival of large corporations in countries such as Croatia, Montenegro, Macedonia, Albania, Bosnia, Serbia and Kosovo.

Anamarija can be contacted at: anamarija.stancic@petosevic.com

Mihajlo can be contacted at: mihajlo.zatezalo@petosevic.com