How the Constitutional Court has tried to shine light on parallel imports and exhaustion

As discussed in last week’s article, when it comes to trademark exhaustion, every case has its own nuances. This is clearly demonstrated in matters involving parallel imports, which refer to "the importation from abroad to the countries of the EAEU [Eurasian Economic Union] by importing the original goods, marked a trademark of the copyright holder, but without his permission, [that] creates a conflict of interests of importers and copyright holders claim to absolute authority to control parallel imports".

In response to confusion, one of the highest courts in Russia - the Constitutional Court - has attempted to provide clarification on issues of exhaustion and parallel imports. According to Resolution 

8-P (13.02.2018) the same civil liability measures do not apply to parallel imports as apply to the import of counterfeit goods (where the trademark is not placed by the rights holder, or without their consent).

The Constitutional Court pointed out the need to assess the proportionality of the application of liability measures in each case by the criterion of losses for the rights holder. At the same time, it stressed that goods imported into the Russian Federation as parallel imports can be withdrawn from circulation and destroyed only if they are found to be of poor quality or to ensure safety, protect people's lives and health, and protect nature and cultural values. So, for example, in the case of the trademarks VOLKSWAGEN, VW and VAG, the court rejected the claim for the seizure and destruction of goods, recognising as proven the ownership of the exclusive right to the trademark by the plaintiff and the illegal use by the defendant, but not establishing the illegality of the goods’ origin. At the same time, the quality of auto parts was confirmed by a certificate of conformity issued by Customs.

Similarly, in a trademark case concerning the PHILIPS mark, the plaintiff could not prove the poor quality of the products at issue, nor the defendant's replacement of the trademark with another designation, nor the lack of regular maintenance of the disputed equipment. While the ban on parallel imports is designed to protect trademark owners, where this protection is abused it can lead to restrictions on competition and/or higher prices.

It can be assumed that the existence of parallel imports should not entail significant negative consequences. While they do directly affect the interests of foreign rights holders, they also favour consumers – there is no risk of an outflow of foreign investors (since foreign markets are usually more competitive), neither is there a risk of reducing investment (since the quality of goods produced in Russia and abroad differs, and investments are not made in all sectors of the economy). The risk of an increase in the amount of counterfeit goods due to parallel imports is also minimal, since obvious counterfeits differ from the original and the rights holder still has the legal right to enter a trademark in the customs register, which protects their interests.