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. Last Updated: 07/27/2016

Customs vs. Courts in IP

Anna Shmalyuk
Intellectual Property Specialist
Capital Legal Services

Russian customs legislation is currently being improved step by step, including within the context of Russia preparing to join the WTO as a party to the Unified Customs Union along with the Republic of Belarus and Kazakhstan. On October 1, 2009 the Federal Law “On introducing amendments to the Customs Code of the Russian Federation” entered into effect. The amendments mostly relate to issues effecting customs payments. In particular, it was determined that now all settlements shall be made in Russian currency only. In addition, measures are taken to implement the concept of customs clearance and control over goods in places proximate to the state border of the Russian Federation and implementation of a new technology for declaring goods in electronic form via the Internet.

In 2008, customs authorities procured more than 50% of the federal budget revenues and following the results of a competition between national administrations in combating counterfeit goods, the Federal Customs Service was declared the best among other services of 174 states constituting members of the World Customs Organization.

The Customs Register of Intellectual Property, where approximately 1,500 trademarks are currently registered, is an efficient means against counterfeit goods. In the event of importation of goods marked with designations identical or confusingly similar to the trademarks included in the Customs Register of Intellectual Property, customs officers give notice of this to the owner of the relevant trademark, and the owner may then apply for the release of such goods to be suspended for a period of up to 20 business days and initiate administrative or civil proceedings on infringement of its exclusive rights. In order to include a trademark in the register, it is necessary, in particular, to provide a written bond of indemnity against material damage associated with impoundment of non-infringing goods and a performance security, e.g. in the form of a bank guarantee of at least 500,000 rubles.

Customs authorities also have powers to take measures against goods containing subjects of copyright and related rights (generally these are CDs and DVDs) and referring to the appellations of the origin of the goods. Their powers do not include suspension of the release of goods using the object of patent rights. The case where a shipment from China containing musical toys performing famous children’s songs was impounded on grounds that there was no author’s permit to use this piece of music, may serve as an example of the diligence and care of customs officers in regards to intellectual property rights.

Unauthorized use of the Olympic symbols in goods may also entail seizure of such goods and an administrative fine. In 2008, 2 million out of the total of 10 million counterfeit goods discovered were marked with Olympic symbols.

The Customs Code contains no provisions allowing customs offices to impound counterfeit goods at the border without a right holder’s application (the ex officio principle). In practice, they perform such impoundments based on the information from the databases of Rospatent and simultaneously notify the trademark holders about the fact of impoundment. However, rights holders are rarely able to submit the necessary documents within the established time frames, and the goods become subject to release. Therefore, this measure is more of an informative one. Customs offices have repeatedly proposed to establish legal grounds for the ex officio principle; however, this gives rise to a number of arguments: e.g. importers are concerned that in such a case even lawful products will be impounded.

Nevertheless, despite the activity of customs officers pursuing the protection of exclusive rights, courts often dismiss claims from customs offices.

One of the functions of customs is exercising control over the goods following their release into free circulation, and this control may be exercised within one year following the date of release. The customs services widely use this opportunity to initiate cases based on the provisions of the law providing for administrative liability for infringement of intellectual property rights. In some cases the court refused to hold companies liable, as the customs failed to prove that the goods had crossed the Russian border or due to expiration of the mentioned term.

Likewise, it often happens that courts dismiss the claims of the customs service pertaining to goods that have not cleared customs, due to the absence of a fact of an administrative offence, namely, the import of goods.

The most relevant problem at present is “parallel” importing. Although the Presidium of the Supreme State Arbitration Court resolved on a high-profile case regarding the import of Porsche automobiles, that it is unlawful to hold “parallel” importers liable for an administrative offence, customs continue to initiate such cases, referring to the national concept of exhaustion of exclusive rights established by Article 1487 of the Civil Code. Based on the direct interpretation of the norms of the administrative law and taking into account the established court practice, it appears that the proper approach to protecting the rights of owners of trademarks against infringement by “parallel” importers is through filing civil law claims. In that regard, the decision of the Moscow Arbitration Court to dismiss the civil claim of the Japan-based company Kayaba against a parallel importer gave rise to much criticism from lawyers and caused deep concern for manufacturers.

Though courts decide a lot of administrative cases in favor of the owners of imported goods, there is a consensus of opinions between courts and customs to the extent that if an importer does not have any information on the existence of exclusive rights of third parties to intellectual property on the territory of the Russian Federation, this does not release the importer from liability. Therefore, companies that import goods incorporating items of intellectual property are recommended to make sure that there are no potential impediments for this importing, and the authorized importers are required to duly prepare a set of documents confirming the powers granted by the holders of exclusive rights.