Russian Supreme Court revokes catch-22 roadblock for customs recordals
For several years, brand owners seeking to record their trademarks or copyrighted works with Russian Customs have faced a frustrating catch-22 dilemma. A customs recordal is necessary in order to block counterfeits from crossing the border and entering the market, but at the same time, Russian Customs does not accept requests for recordal unless the party can show that counterfeits have already appeared on the internal market from abroad. As a result, it is impossible to obtain a customs recordal without submitting information about actual counterfeits. On the other hand, evidence of the cross-border import of fakes can often be obtained by seizure at the border, which can be done with a customs recordal. However, a recent Supreme Court ruling in Trivium-XXI LLC v Federal Customs Service may end this situation.
The Law on Customs Regulation in the Russian Federation and Amendment of Specific Regulations of the Russian Federation 2018 state that:
The rights holder having reasonable grounds to believe that there may be an infringement of its exclusive rights for IP objects during import, export or other operations with the goods under customs control is entitled to… apply for inclusion in the Customs IP Register. (Emphasis added).
There are at least two policy reasons behind this mandatory rule: Customs must ensure that the counterfeiting problems with the particular brand are real and be satisfied that the brand owner is not trying to take advantage of the customs recordal mechanism as a means to control the flow of legitimate goods in the market.
It is therefore mandatory for brand owners requesting recordal to provide evidence that the counterfeit goods were inbound or outbound from Russia. Applications that lack this information are denied.
Requirement to provide evidence of infringement
The ‘reasonable grounds to believe’ requirement has never had a formal customs guideline. In practice, the following materials are usually accepted by the Department for Trade Restraints, Currency and Export Control of the Federal Customs Service, which is responsible for reviewing customs recordal applications:
- notifications from various customs points on the detection of alleged counterfeit goods and the brand owners’ applications to launch administrative or criminal cases;
- evidence of legal proceedings run by:
- customs authorities;
- the police;
- the Federal Service for the Surveillance of Consumer Rights; or
- brand owners with regard to the import of counterfeits;
- supporting materials for test purchases featuring information about fake imported goods;
- cease and desist letters to infringers; and
- examples of online offers of counterfeits available in Russia (as additional, although less convincing evidence).
The time and effort needed to assemble such a comprehensive set of documents is daunting, especially if the brand owner has just begun doing business in Russia or has chosen customs recordal as the first step of an anti-counterfeiting programme. For many brand owners, it has proven impossible to provide evidence of infringement prior to recording their IP rights at Customs. It is reasonable to expect to receive information about interceptions (ie, evidence of infringements) from Customs only after a recordal is in place.
Trivium-XXI LLC v Federal Customs Service
This new ruling may trigger a relaxation of the customs recordal process. In April 2018 Russian company Trivium-XXI LLC, the owner of the TRIVIUM mark, filed a customs recordal request, which was denied by the Federal Customs Service on the grounds that there was insufficient evidence as to the import of counterfeit goods.
Trivium-XXI LLC appealed. The case made its way through several court instances and finally reached the Judicial Chamber on Economic Disputes of the Supreme Court. In January 2020 this chamber of the court dismissed the decisions of the lower instances and returned the case to the first-instance court for a new hearing. In so doing, the Supreme Court ruled that the practice of requesting evidence of actual infringements was in error.
It found that the Customs Administrative Regulations had set out a declaratory procedure for applying for customs recordal in order to enable the prompt interception of counterfeit goods. The customs legislation was focused not only on punishment for infringement, but also on prevention. The Supreme Court ruling noted that the practice requirement to provide evidence of actual infringement as a mandatory prerequisite for customs recordal was counter-intuitive for the following reasons:
- It contradicted the general provisions of the customs legislation.
- It prevented action in respect to potential infringements, as Customs would combat actual infringements only.
- It likely rendered the customs recordal process ineffectual as a mechanism for the prompt detection and interception of counterfeits.
Practical implications of Trivium
The Supreme Court has returned the case to the Moscow City Arbitration Court for re-consideration, taking into account the reasoning set out in the ruling of 22 January 2020.
The Moscow City Arbitration Court has been instructed to check whether the applicant brand owner meets all other formalities (eg, correct information as to the trademark rights and examples of actual trademark use).
The Supreme Court’s decision likely marks a significant breakthrough towards the simplification of the customs recordal process. The second round of hearings in Trivium will hopefully confirm a simpler practice for recording IP rights on the Customs Register. Thereafter, many brand owners, including those that have no evidence of actual infringement, will be able to resort to the customs recordal process as an additional means of brand protection.
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