Solomon’s decision of the Supreme Court of the Russian Federation in the field of the customs law

In industrial Russia, intellectual property becomes, if not a fundamental element, then an integral one for the formation of a high-tech, innovative economy. In this regard, it is simply necessary to maintain a high level of the defense of intellectual property. 

The inclusion in the Customs Intellectual Property Register (hereinafter referred to as the CIPR) allows right holders, first of all, to defend themselves and direct consumers from the appearance of counterfeit products in the market, which are usually of poor quality; to identify the violators of the exclusive rights, to estimate the real volume of imported original products, to prevent the loss of profit and the decrease of the sales of the own products, respectively, and to strengthen the own positions in the market.

A large volume of non-original products in the market leads inevitably to the decrease of the investment attractiveness of Russia, the competitiveness of the Russian enterprises, as well as to the decrease of the number of jobs, what also affects the country’s image in the international arena.

The Federal Customs Service of Russia is designed to counteract the import of the counterfeit products into the territory of the Russian Federation. The greatest effectiveness in combating the import of the non-original products is achieved mainly, when the trademark is included in the Customs Intellectual Property Register.

5141 subject matters are included in the CIPR as of December 31, 2019. Although the subject matters’ number is growing, these indicators are too small compared to, for example, the number of the trademarks registered in Rospatent, where more than seven hundred thousand subject matters are registered as of the date of writing this article.

In 2019, the customs authorities of the Russian Federation identified 11.94 million units of the counterfeit products (the proceedings in respect of 4.28 million units are not completed as of 31.12.2019), while in the monetary terms, the prevented damage that could have been caused in connection with the introduction of the counterfeit products into civil circulation amounted to 8.1 billion roubles.

Thus, the Federal Customs Service has special powers in the field of the defense of the rights to the subject matters of intellectual property. The defense of the intellectual rights by the customs authorities is, without exaggeration, a main barrier at the border that prevents the free movement of the counterfeit products.

But currently, the matter of improving a procedure for entering the subject matters of intellectual property in the CIPR is acute again. Earlier, the relevant task has been to replace the obsolete Administrative Regulations of the Federal Customs Service for executing the state function of maintaining the Customs Intellectual Property Register, approved by Order of the Federal Customs Service of Russia of August 13, 2009 No. 1488 (hereinafter referred to as the obsolete Regulations) with a new one corresponding to the modern realities and trends of the informatization of the customs environment. 

The specialists in the field of the customs law (for example, P.N. Afonin, E.S. Lebedeva) have proposed to make the following, in their opinion, key changes, such as:

• A possibility to file an application via electronic portals – the Personal Account of the participant of the international economic activity and the website of the State Services;
• Minimizing the number of the documents required to file the application for the inclusion of the subject matters of intellectual property due to obtaining the required documents and the information from the authorized agencies through the IEIS;
• Reducing the time period for making a decision from 1 month to 20 days, etc. 

The new Regulations, approved by Order of the Federal Customs Service of Russia of January 28, 2019 No. 131, entered in force on July 8, 2019 (hereinafter referred to as the current Regulations). But instead of simplifying the process of the initial inclusion of the subject matter of intellectual property in the CIPR, they contain the paragraphs that are contrary to a sound logic and they have always raised questions. Let us examine, in my opinion, the most odious paragraph. 

In accordance with Paragraph 19.3 of the current Regulations, the application for the inclusion of the subject matter of intellectual property in the Register must contain the information on the identified cases of the violation of the right holder’s rights. Thus, if the applicant fails to give documentary evidence of either the import of the counterfeit homogeneous products marked with a confusingly similar designation, or of the fact of parallel imports, then the Federal Customs Service of Russia will simply refuse to include them in the CIPR. And what, in this case, should be done by those right holders, who have just started manufacturing their products? Should they create such cases themselves? In any case, it also takes some time for this and requires the right holders’ money.

And if earlier the obsolete Regulations (Paragraph 95) has allowed to dispute the decision on the refusal in the inclusion in the CIPR according to a pre-judicial procedure in the Federal Customs Service of Russia, then in accordance with Paragraph 90 of the current Regulations, the pre-judicial (extra-judicial) appeal of the decisions and actions (inaction) of the Federal Customs Service of Russia, as well as of its officials, is not stipulated by Part 2 of Article 286 of the Federal Law, what is also not to the benefit of the right holders, because it increases significantly the time period for disputing the illegal decision of the Federal Customs Service of Russia.

Do you remember Solomon’s decision of the Constitutional Court of the Russian Federation of February 13, 2018, which became a turning point in the field of parallel imports? Then, the decision of the Constitutional Court of the Russian Federation imposed in fact a prohibition on unfair competition, by means of which foreign importers were receiving hundreds of billions of dollars from Russia.

In the case of the mandatory submission of the information on the identified cases of the violation of the right holder’s rights at the stage of filing the initial application for the inclusion in the CIPR, Limited Liability Company Trivium-XXI went all the way. And already Solomon’s decision was made by the Supreme Court of the Russian Federation on January 21, 2020 in case No. A40-241863/2018. 

When resolving the dispute, the courts, while guided by the provisions of Articles 305, 306 of the Federal Law of November 27, 2010 No. 311-FZ “On the Customs Regulation in the Russian Federation” (hereinafter referred to as the Law on the Customs Regulation), by the obsolete Regulations, proceeded from the fact that the appeal to the customs authorities with the purpose of the inclusion of the trademark in the Customs Intellectual Property Register was possible, only if there was the reliable and sufficient information on the actual violation of the rights of the owner of the trade mark by other persons during the customs clearance of the product.

The courts upheld the position of the customs authorities that the applicant, when filing the application, had not provided evidence of the violation of his rights to the trademark, which should be obligatory attached, when filing the application for the inclusion of the information on the subject matters of intellectual property in the CIPR.

As the Judicial Chamber on Economic Disputes of the Supreme Court of the Russian Federation established in its decision of January 21, 2020 in case No. А40-241863/2018, the obsolete Regulations established for the right holders a declarative nature of the procedure regulated in the legislation for the purpose of suppressing promptly the facts of importing into the customs territory of the Russian Federation the products violating the rights of intellectual property, for example, marked with someone else’s trademark. In this regard, the interpretation of Paragraph 25 of the obsolete Regulations as prescribing to provide together with the application the additional information on the facts of the already committed violations of the right holder’s rights was incorrect, since it did not correspond to the purpose of the measures stipulated by Chapter 57 of Law No. 289-FZ. Otherwise, the actions of the customs authorities for maintaining the CIPR would be associated only with the facts of the already committed violations of the law, what, in turn, would make it meaningless to maintain the CIPR as the means of contributing to the identification and the prompt suppression of the violations of the law and as the means of the defense of the right holders’ rights.

The court session in the Arbitration Court of the City of Moscow in case No. A40-241863/2018 is scheduled for August 12, 2020. We shall continue to monitor the outcome of the dispute with the Federal Customs Service of Russia. 

P.S. I wonder whether the current Administrative Regulations of the Federal Customs Service of Russia for executing the state function of maintaining the Customs Intellectual Property Register, approved by Order of the Federal Customs Service of Russia of January 28, 2019 No. 131, in connection with decision of the Supreme Court of the Russian Federation of January 21, 2020 in case No. A40-241863/2018, will be revised, or the customs will further have its own way?