The fight against counterfeit by bringing the violator to civil responsibility

Following up upon a series of the articles narrating on the ways to fight against counterfeit, I would like to tell about the fight against counterfeit by bringing a violator to civil responsibility.

I shall consider the civil responsibility measures stipulated by the Civil Code of the Russian Federation (hereinafter referred to as the C.C.R.F.), we shall analyze how courts apply these measures, and I shall also tell what claims should be raised and what ones you should refrain from.

Although I gave a definition of counterfeit in the article on the topic of “The methods of identifying the counterfeited products and the fight against them,” I would like to begin this article with the definition of counterfeit, which did not appear in the previous article.

Thus, in accordance with Paragraph 3.16 “GOST R 58223-2018. The National Standard of the Russian Federation. Intellectual Property. The Antimonopoly Regulation and the Defence form Unfair Competition,” counterfeit is The products containing any protected results of the intellectual activity or the equated to them means of individualization, actions, which (including manufacturing, distributing or other using, as well as importing, transporting or storing) lead to a violation of the exclusive rights of their right holders (for example, the original products imported into the EAEU without their right holders’ consent, and the faked products with an illegal use of the protected means of individualization of these products including the confusingly similar designations).

According to Paragraph 1 of Article 1248 of the C.C.R.F., the disputes related to the defence of the violated or disputed intellectual rights shall be considered and resolved by the court.

Thus, in order to bring a violator to civil responsibility, it is necessary to apply to the court with a statement of claim.

At the same time, in this category of disputes, the vast majority of cases are considered by arbitration courts, since the parties to such disputes are legal entities and/or individual entrepreneurs.

It should be noted that according to Paragraph 53 of Resolution of the Plenum of the Supreme Court of the Russian Federation of 23.04.2019 No. 10 “On the Application of the Fourth Part of the Civil Code of the Russian Federation” (hereinafter referred to as Resolution No. 10), the application to the person, who has violated the intellectual rights to the results of the intellectual activity or the means of individualization, of the measures of administrative or criminal responsibility does not exclude a possibility of the application to the same person of the measures of defence of the intellectual rights under a civil law procedure. It should be borne in mind that the very refusal to bring a person to administrative or criminal responsibility does not mean that it is impossible to apply the civil law defence measures.

This means that even if the violator has already been brought, for example, to administrative responsibility on the basis of the materials collected by the customs authority or the police, then the circumstances established in the court decision, according to which the violator has been brought to administrative responsibility, can be used as collateral estoppel, when applying to the court with a statement of claim on bringing to civil law responsibility.

In the case of the violation of the exclusive right, the right holder shall be entitled to defend the violated right by any of the methods listed in Article 12 and Paragraph 1 of Article 1252 of the C.C.R.F.

Paragraph 1 of Article 1252 of the C.C.R.F. states, that the defence of the exclusive rights to the results of the intellectual activity and to the means of individualization shall be carried out, in particular, by raising a claim pursuant to the procedure stipulated by the this Code:

1) on the recognition of the right – against the person, who denies or does not otherwise recognize the right, thereby violating the interests of the rights holder;

2) on suppressing the actions that violate the right or create a threat of its violation, – against the person, who is committing such actions or carrying out the necessary preparations for them, as well as against other persons, who can suppress such actions;

3) on recovering damages – against the person, who has used illegally a result of the intellectual activity or the means of individualization without concluding an agreement with the right holder (a non-contractual use) or who has otherwise violated his exclusive right and caused him damage, including who has violated his right to remuneration stipulated by Article 1245, Paragraph 3 of Article 1263 and Article 1326 of this Code;

4) on the seizure of a tangible medium in accordance with Paragraph 4 of this Article – against its manufacturer, importer, keeper, shipping carrier, seller, other distributor, unfair purchaser;

5) on the court decision publication on the violation committed with an indication of the actual right holder – against the violator of the exclusive right.

The claim on the recognition of the right, which is raised against the person, who denies or who does not otherwise recognize the right, thereby violating the interests of the right holder (Subparagraph 1 of Paragraph 1 of Article 1252 of the C.C.R.F.) is extremely rare, because, in my opinion, it is not based on a practical sense, the satisfaction of such claim does not actually entail negative consequences for the violator and it influence on a restriction of the receipt of the counterfeit products to the market. In addition, it is quite difficult to prove the circumstances in support of this claim, because it follows from the interpretation of this norm, that the person, who has applied to the court with a claim on the recognition of the right to a particular subject matter of the intellectual activity, has to prove that he has an exclusive right to the disputed subject matter and the fact of denying this right by another person entailing a subsequent violation of this right of the right holder. The cases, when the violators deny openly the existence of the right, are rare, on the contrary, they are trying in every way to take advantage of the reputation of a well-known right holder and pass off their products as the products originating from the right holder.

The claim on the court decision publication on the violation committed with the indication of the actual right holder – against the violator of the exclusive right (Subparagraph 5 of Paragraph 1 of Article 1252 of the C.C.R.F.) is also quite rare, because, in my opinion, this is not a real tool to fight against counterfeit.

As judicial practice shows, the following claims are usually raised against the persons engaged in introducing the counterfeit products into civil circulation:

• on prohibiting the defendant to use the disputed subject matters of intellectual property or the means of individualization (Subparagraph 2 of Paragraph 1 of Article 1252 of the C.C.R.F.);
• on recovering damages (Paragraph 3 of Article 1252 of the C.C.R.F.);
• on compelling the defendant to destruct the counterfeit products and/or tools, equipment or other means mainly used or intended for committing a violation of the exclusive rights to the results of intellectual activity and to the means of individualization (Subparagraph 4 of Paragraph 1 of Article 1252 of the C.C.R.F.).

The claim on prohibiting the use of the disputed subject matters of intellectual property is rather ambiguous, since a few years ago, it appeared in 90% of the statements of claim related to the illegal use of intellectual property, and in the majority of cases it was satisfied by the courts.

About 6 years ago, a trend started to manifest itself, according to which the courts began to refuse to satisfy such claims.

As an example, case No. A41-42379/2012 according to the statement of claim from the company Nissan Jidosha Kabushiki Kaisha to Limited Liability Company “AVTOlogistika” on defence of the exclusive rights to the trademarks. Among other things, the plaintiff raised a claim on prohibiting the defendant to carry out without the consent of the company Nissan Jidosha Kabushiki Kaisha the use of the trademarks with a word element “NISSAN” (according to certificates of the Russian Federation No. 86143, No. 319248), including to carry out importing into the territory of the Russian Federation the products marked with the above trademarks.

By the decision of the Arbitration Court of the Moscow Region of 13.03.2013, the statement of claim was satisfied partially, the First-Instance Court refused to satisfy the claims on prohibiting the use of the trademarks. The Court of Appeal cancelled the decision of the First-Instance Court as regards to the refusal to satisfy the statement of claim on prohibiting the company “AVTOlogistika” to carry out without the consent of the company Nissan Jidosha Kabushiki Kaisha the use of the trademarks “NISSAN” (according to certificates of the Russian Federation No. 86143, No. 319248). The Court of Cassation upheld the decision of the Court of Appeal.

At the same time, the courts currently have unambiguously changed their position regarding the claim on prohibiting and they refuse to satisfy this claim pointing out that the abstract claims on a general prohibition to a particular person to use the result of the intellectual activity or the means of individualization at any time in future shall not be satisfied by virtue of the law (for example, the decision of the Intellectual Property Court of 15.09.2016 in case No. A40-195776/2015).

In addition, the similar legal approach was supported by the Highest Court in Unnumbered Paragraph 3 of Paragraph 57 of Resolution No. 10, where it was stated that the claim on prohibiting the offer to sell or on prohibiting the sale of the counterfeit product, if such product belonging to the defendant had already been sold by him should not be satisfied. The claims on the general prohibition to the particular person to use the result of the intellectual activity or the means of individualization in future (for example, on prohibiting the placement of the information in information and telecommunication networks, including in the Internet) also shall not be satisfied. Such prohibition is established directly by the law (Unnumbered Paragraph 3 of Paragraph 1 of Article 1229 of the C.C.R.F.).

Thus, it can be concluded that currently it is inadvisable to raise the claim on prohibiting the defendant to use the subject matters of intellectual property, because the claim will be refused in 99% of the cases.

We proceed further to the claim on seizing from the circulation and destructing, without paying any damages, the tangible media, in which the result of the intellectual activity or the means of individualization are expressed, as well as the tools, equipment or other means mainly used or intended for committing the violation of the exclusive rights to the results of the intellectual activity and to the means of individualization.

I believe that this claim is one of the most effective methods to fight against counterfeit, but at the same time it is necessary to collect a large volume of evidence to satisfy it, what is sometimes impossible without the involvement of the law enforcement authorities.

The representative of the right holder, who does not possess the state-imperious authorities to safeguard law enforcement, it is difficult to penetrate the warehouse, where the counterfeit is being stored, to establish the information that identifies the product, its quantity and location. The said leads to the fact that the judicial act containing the claim on seizing and destructing the counterfeit product without the indication of the identifying features is impossible to be executed, and the further execution of the claim bearing a general reference to the fact that the product is counterfeit may lead to the violation of the rights of other persons, who are not the parties to these legal relations.

However, if the right holder has managed to collect all the necessary information and he is aware of the above circumstances, he shall be entitled to clam on undertaking by the court of the interim measures in respect of the disputed product in the form of arresting the product, which has the features of being counterfeit.

The judicial authority is entitled to undertake the interim measures inaudita altera parte, where appropriate, in particular in the cases, if there is a possibility that any delay will cause irreparable harm to the right holder, or if there is an arguable risk that the evidence will be destructed, in connection with which the interim measures may be applied by the court to ensure the execution of the court's decision according to the claim on seizing and destructing the product marked with the disputed means of individualization, what will allow ensuring the execution of the decision in the case of the satisfaction of the claims on seizing and destructing the counterfeit product.

At the same time, it should be taken into account that the products, on which the trademark is placed by the right holder himself or with his consent, that have been imported into the territory of the Russian Federation without the right holder’s consent (parallel imports), can be seized from the circulation and destructed pursuant to the application of the consequences of the violation of the exclusive right to the trademark only in the case of their inadequate quality and (or) in order to ensure security, defend the life and health of people, protect the nature and the cultural valuables. Essentially, this norm is a novel and it follows from the legal position of the Constitutional Court of the Russian Federation set out in Resolution of 13.02.2018 No. 8-P “In the Case on Checking the Constitutionality of the Provisions of Paragraph 4 of Article 1252, Article 1487 and Paragraphs 1, 2 and 4 of Article 1515 of the Civil Code of the Russian Federation in connection with the complaint of Limited Liability Company “PAG.”

In the last part of my article I shall describe briefly about perhaps the most common claim raised by the right holders – recovering damages.

By virtue of Paragraph 3 of Article 1252 of the C.C.R.F., in the cases stipulated by the C.C.R.F., the right holder shall be entitled to choose a method of defence at the violation of the exclusive right: he may claim paying damages from the violator for the violation of this right instead of recovering damages. Simultaneous recovering damages or paying damages shall not be allowed.

The damages shall be paid, if the fact of the violation is proved, and at the same time, the right holder shall not be obliged to prove the fact of the damages and their quantum.

When filing the claims on recovering damages, the right holder shall be entitled to choose one of the methods of calculating the quantum of the damages, which are specified in Subparagraphs 1, 2 and 3 of Article 1301, Subparagraphs 1, 2 and 3 of Article 1311, Subparagraphs 1 and 2 of Article 1406.1, Subparagraphs 1 and 2 of Paragraph 4 of Article 1515, Subparagraphs 1 and 2 of Paragraph 2 of Article 1537 of the C.C.R.F., as well as to change the method of calculating the quantum of the damages, which he has chosen, before the court makes a decision, because the subject and the grounds of the statement of claim filed shall be unchangeable.

The above norms stipulate several methods of calculating the quantum of damages, which can be divided nominally into three groups:

• recovering damages in the quantum from ten thousand roubles to five million roubles determined at the discretion of the court;
• recovering damages in double the quantum of the value of the right of the use of the result of the intellectual activity or the means of individualization;
• recovering damages in double the quantum of the value of the counterfeit copies (of the products).

Paragraph 61 of Resolution No. 10 describes in sufficient detail how the quantum of damages should be calculated and what evidence can support such calculation.

At the same time, when raising a claim on recovering damages, it is important to remember that, if the right holder and the violator of the exclusive right are legal entities and (or) individual entrepreneurs and the dispute is under the arbitration court jurisdiction, the right holder must raise the claim, before filing the statement of claim on recovering damages or on paying damages. The statement of claim on recovering damages or on paying damages may be filed in the case of a full or partial refusal to satisfy the claim or in the case of failure to receive a response to it within a thirty-day period from the date of sending the claim, unless a different period is stipulated by an agreement (Paragraph 5.1 of Article 1252 of the C.C.R.F.).