Managing Partner / Patent Attorney of the Russian Federation / Eurasian Patent Attorney
Features of application of the legislation on exhaustion of the exclusive right to a trademark
The mode of the exclusive right exhaustion to a trademark is intended to indicate when the right holder loses the right to make claims regarding the violation of its right to a trademark. The exhaustion principle does not allow the trademark owner to exercise his exclusive right concerning the same goods twice.
The smaller the scope of the principle of exhaustion of trademark rights, the more opportunities there are to inflate prices and create a limited offer of original products. Although the international exhaustion principle of the exclusive right to a trademark was in effect in Russia until the end of 2021, the regional is currently in effect.
1487 of the Civil Code of the Russian Federation it is not a violation of the exclusive right to a trademark to use it by other persons concerning goods that were put into civil circulation on the territory of the Russian Federation directly by the copyright holder or with his consent. However, due to the membership of the Russian Federation in the Eurasian Economic Union, the goods may also be put into civil circulation on the territory of the EAEU member states.
At the same time, in practice, the copyright holder pursues sales of its own goods quite often – for example, in the case of the PASTHER trademark, the plaintiff demanded compensation because the defendant, having purchased a certain amount of labeled products from the plaintiff himself, sold a significantly larger amount of it. However, the courts rejected the claim, finding that the" extra" products were also introduced into civil circulation by the plaintiff but were purchased by the defendant through other sales channels.
However, the existence or absence of exhaustion of the exclusive right is not always obvious. For example, one of the controversial situations that have given rise to controversial court practice is the placement of a trademark on the signboard of a store that sells goods that were put into circulation by the trademark owner or with his consent, and the mark is registered for such goods and services for their sale.
In some cases, The Intellectual Property Rights Court noted that the use of a trademark on a sign, in this case, is an offense, since it is not proven that the sign on the defendant's store with the trademark of Avtovaz company, where auto parts are sold, belongs to the copyright holder of this trademark, or was made and placed on the facade with his consent. At the same time, there is a reverse practice, according to which use on the signboard is not recognized as a violation, since the exclusive right to goods sold in the store has been exhausted.
The key issue in cases involving exhaustion of rights is whether or not the right holder consents to introduce goods into circulation. Most often, this is a license/dealer/distributor agreement, but in rare cases, written approval of the copyright holder is also accepted.
For example, in case N C01-305/2016, the trademark owner OREO 1487 of the Civil Code of the Russian Federation found that the suspension of customs release of goods was leveled by a letter from the representative of the copyright holder stating that he did not object to the resumption of the release of these goods in accordance with the established procedure.
In a trademark case ARGUS, VARDEX, SHAVIV, the court accepted as evidence of the legality of the use of trademarks a letter issued by the exclusive licensee of the copyright holder to the respondent. The letter established that the respondent "is an authorized organization for the supply of products submitted by [the exclusive licensee of the copyright holder]." Thus, the court found that the plaintiff himself gave the defendant the right to use trademarks.
An interesting embodiment was found in the case N C01-1144/2018 - a non-exclusive licensee imported marked goods into the Russian Federation but did not apply for the issue of imported goods. Therefore, the court recognized the goods as ownerless property with subsequent recognition as the property of the port, which then sold it to the defendant. The courts stressed that after the customs authority permitted the release of the declared goods, the person did not apply to the port for the issue of this product does not negate the fact that the disputed goods were put into circulation with the rightsholder's consent.
In some acts, courts indicate the legality of the use of a trademark with reference to art. 1487 of the Civil Code of the Russian Federation can be proved by the fact that " the product looks like the original one, the trademark is used in the form in which it is used by the copyright holder himself, and the right holder or his licensee is indicated as the manufacturer on the product (package)." At the same time, the rightsholder has the right to challenge these arguments, for example, pointing out that the disputed goods were not produced by him or his licensee, confirming this by the discrepancy between the disputed goods and the goods produced by him or the lack of production of the disputed goods in general.
Among the many issues that arise in the subject of exhaustion of exclusive rights to a trademark, of special note is the question of parallel imports, which refers to "the importation from abroad to the countries of the EAEU by importing the original goods, marked a trademark of the copyright holder, but without his permission, [that] creates a conflict of interests of importers and copyright holders claim to absolute authority to control parallel imports".
The complexity of the issue of exhaustion of the exclusive right in general and parallel import, in particular, led to the need for clarification by one of the highest courts of the Russian Federation.
The Constitutional Court of the Russian Federation recognized the need to distinguish between liability for parallel import and sale of truly counterfeit products. According to Resolution of the Constitutional Court of the Russian Federation No. 8-P of 13.02.2018 on importation into the territory of the Russian Federation without the consent of the trademark owner of the product on which this mark is placed by the copyright owner or with his consent, it is not assumed to apply the same size (severity of consequences) civil liability measures, such as when importing counterfeit goods (where the trademark is placed not by the copyright holder and not with his consent), if, in the circumstances of a particular case, this does not entail losses for the rightsholder comparable to losses from the introduction of counterfeit goods into circulation.
Thus, the Constitutional Court of the Russian Federation pointed out the need to assess the proportionality of the application of liability measures in each case by the criterion of the presence or absence of losses for the right holder. At the same time, the court stressed that goods imported into the Russian Federation in the order of parallel import can be withdrawn from circulation and destroyed only if they are found to be of poor quality and (or) to ensure safety, protect people's lives and health, protect nature and cultural values.
So, for example, in the case on the trademarks VOLKSWAGEN, VW, VAG, the court rejected the claim for the seizure and destruction of goods, recognizing as proving the ownership of the exclusive right to the trademark by the plaintiff and the illegality of its use by the defendant, but not establishing the illegality of the origin of the goods. At the same time, the quality of auto parts was confirmed by the certificate of conformity of the Customs Union.
In a trademark case PHILIPS the plaintiff also could not prove the poor quality of the products - neither the defendant's replacement of the trademark with another designation nor the lack of regular maintenance of the disputed equipment confirmed this argument since the court established the fact of its production by the plaintiff.
On the one hand, the ban on parallel imports aims to protect the trademark owner, but its abuse of rights can lead to restrictions on competition and/or higher prices.
It can be assumed that the existence of parallel imports should not entail significant negative consequences. However, it directly affects the interests of foreign rights holders. It favors consumers – while there is no risk of an outflow of foreign investors (since foreign markets are usually more competitive), nor the risk of reducing investment (since the quality of goods produced in the Russian Federation and abroad differs, and investments are not made in all sectors of the economy).
The risk of an increase in the number of counterfeit goods is also minimal since obvious counterfeit goods differ from the original and the right holder still has such a legal instrument as entering a trademark in the customs register, which protects the interests of trademark owners.
Originally published in World Trademark Review