Parallel Imports

In early February 2009, the Presidium of the Supreme Arbitration Court of the Russian Federation made its final judgment in a case related to the seizure of a Porsche Cayenne S car imported by a limited liability company, Genesis, through a parallel import.

In accordance with the case file, Porsche Russland, the official dealer of the German company, requested that the Central Excise Customs Office of Russia recognize the import of the car by Genesis without an appropriate license, as illegal.

The dealer's position was based on article 27 of the Russian Federal Law "On Trademarks, Service Marks and Appellations of Origin," which stipulates that the right to use a trademark may be transferred by the right holder to another legal entity under a licensing agreement. However, no licensing agreements have been signed on the use of the Porsche and Cayenne trademarks between Porsche (Germany) and Genesis.

When considering the appeal by Genesis against the decision of the court of original jurisdiction to impose a fine of 30,000 rubles on Genesis and confiscate the item, which had illegally reproduced the trademark (Porsche), the court of appeal pointed out that article 4 of the aforementioned law, stipulates that the actual import of goods with a designated trademark into the Russian Federation without the license of the right holder, is one of the qualifying attributes of an objective side of infringement, liability for which is stipulated by article 14.10 of the Code of Administrative Offences of the Russian Federation.

While the court of appeal dismissed Genesis's appeal and affirmed the decision of the court of original jurisdiction, the Presidium of the Supreme Arbitration Court of the Russian Federation revoked the confiscation and fine imposed on the unofficial importer.

The Presidium judges resolved the main issue at to whether a car may be considered a counterfeit if imported into Russia for resale without the permission of the official dealer through a parallel import.

Parallel imports involve the import of goods outside the distribution channels agreed with a manufacturer. As the owner of the trademark has no contractual arrangements with the parallel importer, imported goods are sometimes called "gray market goods." The term is inaccurate as such goods are original and only the distribution channels are not controlled by the owner of the trademark. On the grounds of the right to import vested by the holder of the right to the brand, the latter may try to object to this "gray" import in order to separate the markets.

Parallel imports are performed in the interests of the public to ease discrimination on price and quality with respect to different countries, which is artificially created by rights holders or their authorized distributors. The discrimination may be performed through an overstatement of the price for some countries on some pretext or other, or the supply of better quality goods to certain countries. For example, a product is brought to market through supplies from abroad. As you like the product, you start to buy it regularly and discover some day that both taste and color differ from the initial product. There is a simple reason: the right holder lowered quality standards.

The decision of the Supreme Arbitration Court of the Russian Federation had the following impact: "gray" dealers received confirmation of the legitimacy of importing brand products without the consent of the manufacturer. This restores competition between "gray" and "white" importers. The customs authorities will not be able to appeal against the decision.

At the same time, the Supreme Arbitration Court and the Supreme Court of the Russian Federation are drafting a joint resolution concerning the unlicensed import of brand products for commercial use.

It is highly likely that the position expressed by the court will be reflected in a joint resolution of the court plenums, which will explain whether the import of goods without the permission of the brand owners constitutes a violation of law or not. This position of the plenums will be binding on subordinate courts when they consider such cases.