Confusingly similar trademarks cannot be placed on customs documentation

In Russian Baltic Customs Service v Kargo Optimum LLC (Decision of the Presidium of the Supreme Commercial Court N 17769/11, June 27 2012; full judgment published on August 16 2012), the Supreme Commercial Court (the highest judicial body for commercial disputes in Russia) has considered a dispute involving the use on customs documentation of a sign that was confusingly similar to a registered trademark.

The plaintiff, the Russian Baltic Customs Service, sought to fine a Russian company which had illegally marked its customs documentation for chainsaws with the mark HUSHCVANA, which is similar to the mark HUSQVARNA, owned by the well-known Swedish manufacturer of garden power products Husqvarna AB.

Husqvarna joined the dispute as an interested party only when the case was heard by the Supreme Commercial Court. The latter reversed the decisions of the lower courts.

Although the Supreme Commercial Court ruled against Husqvarna on the grounds that the period of limitation (one year) had expired under the Code of Administrative Offences, this decision is significant for two reasons:

• It is binding for future disputes and may serve as a ground for review of previously decided cases involving similar facts; and
• It allows Russia’s Federal Customs Service to restrict the circulation of goods if similar trademarks are placed on customs documentation.

The facts of the case are as follows. The respondent filed an import customs declaration and other customs documentation with the plaintiff for customs clearance of goods (chainsaws) within the context of a contract between the respondent and Chinese company Ningbo Future Import & Export Co Ltd.

During the clearance procedure, Federal Customs Service officers found that the declaration and other customs documentation (ie, invoices, certificates of compliance, manuals and packing lists) contained the mark HUSHCVANA, which they found to be confusingly similar to the HUSQVARNA mark. The officers decided to suspend the release of those goods which had already passed clearance and stop the clearance procedure. The plaintiff requested that the respondent provide Husqvarna's consent for the use of the HUSQVARNA mark, and asked Husqvarna whether it had given consent to the respondent to use its trademark.

After receiving no answer from the respondent and a negative answer from Husqvarna, the plaintiff initiated administrative proceedings against the respondent under Article 14.10 of the Code of Administrative Offences, which concerns the illegal use of trademarks (Article 14.10 provides for the confiscation of goods or other items containing illegal reproductions of trademarks, service marks, appellations of origin, and for the imposition of an administrative fine: up to Rb2,000 ($70) for citizens, up to Rb20,000 ($700) for officials and up to Rb40,000 ($1,400) for legal entities). After conducting an investigation and requesting an expert examination (which concluded that the marks were confusingly similar), the plaintiff filed an action in the court of first instance asking that the latter hold the respondent liable under Article 14.10.

However, the court of first instance and the appellate court found in favour of the respondent on the following grounds:

• Placing a confusingly similar trademark on customs documents does not amount to an administrative offence under Article 14.10;
• Article 14.10 applies only when a confusingly similar trademark is placed on goods, labels and packaging, as only these items can be held to be infringing under Article 1515(1) of the Civil Code of the Russian Federation, Part IV;
• It was not permissible to interpret the term 'customs documents' loosely so that it fell within the scope of Article 1515(1); and
• There was no likelihood of confusion among consumers, as the HUSHCVANA mark appeared only on the customs documentation, and not on the goods themselves.

Husqvarna applied to the Supreme Commercial Court, seeking to have the lower courts’ decisions reversed. Although the Supreme Court ruled against Husqvarna, it overturned the lower courts’ decisions on the following grounds:

• A trademark holder has exclusive rights to use its trademark, which can be exercised, among other ways, by placing the trademark on the documentation relating to putting the goods into circulation in Russia (which includes customs documentation) under Article 1484(2) of the Civil Code of the Russian Federation, Part IV;
• Thus, it was permissible to interpret the term 'customs documents' loosely so that it fell within the scope of Article 1515(1); and
• Article 14.10 of the Code of Administrative Offences also had to be interpreted broadly to include the illegal reproduction of trademarks on customs documentation.

The Supreme Court also pointed out that the court of first instance had erred in not including the interested party - Husqvarna - in the proceedings. This is why Husqvarna was not permitted to hold the respondent liable under Article 14.10 of the code due to the expiry of the period of limitation, which could not be restored. Nevertheless, Husqvarna still had the right to file a civil lawsuit against Kargo Optimum LLC.

This decision represents a victory against companies which try to put Chinese copies of goods into circulation by placing confusingly similar brands on the customs documentation. The impact of this decision is that the protection of trademarks at the stage of customs clearance will be substantially improved.

Alexey Pashinskiy, Squire Sanders Moscow LLC, Moscow