Manufacturer liable for infringement even where third party provided counterfeit packaging

In the exercise of its supervisory powers, the Presidium of the Supreme Arbitration Court of the Russian Federation has reversed decisions by the Ninth Arbitration Court of Appeals and the Federal Arbitration Court of the Moscow Region in which the lower courts had dismissed a request to withdraw from circulation and destroy counterfeit goods and packaging.

The proceedings at issue were initiated by HAMÉ sro, Czechia, the owner of the trademark HAMÉ(International Registration 726510) for goods and services in Classes 5, 29, 30, 32, 33, 35, 36, 37, and 39 to 42, including meat products and pâté.

In 2009 HAMÉ sro became aware of the unlawful use by open joint stock company Ruzcom of a designation comprising the word element 'Nashe' in Cyrillic ('Наше'), which imitated the trademark HAMÉ and was confusingly similar to it, on tins for meat and liver pâté.

HAMÉ sro lodged a claim with the Arbitration Court (first instance) against Ruzcom and closed joint stock company Lytkarinsky Myasopererabatyvayushy Zavod (a meat processing factory), demanding that the court:

• order that Ruzcom and the factory withdraw from circulation and destroy at their own expense all counterfeit goods, labels and packaging bearing a mark comprising the word element 'Наше', which is confusingly similar to the trademark HAMÉ; and
• order that Ruzcom and the factory pay compensation in the amount of Rb4,299,339 (and 40 kopecks) for unlawful use of the combined mark.

On July 29 2010 the Arbitration Court dismissed the claims. On October 21 2010 the Ninth Arbitration Court of Appeals affirmed the decision of the court of first instance.

On February 14 2011 the Federal Arbitration Court of the Moscow Region reversed the decisions of the Arbitration Court and the Court of Appeals, and the case was remanded to the Arbitration Court for a new trial.

On June 24 2011 the Arbitration Court satisfied the claims. However, the Court of Appeals reversed the ruling of the court of first instance on the following grounds:

• The packaging for pâté manufactured by the factory was supplied by Ruzcom, which designed the labels and the packaging itself and at its own expense. Therefore, Ruzcom was solely liable for infringement of third-party rights in connection with the use of the designations placed on the labels and packaging of the goods.
• The case files contained no evidence confirming the independent use of the designation 'Наше' by the factory, as well as no evidence that the factory had introduced goods bearing such designation on the market.

The Presidium of the Supreme Arbitration Court of the Russian Federation reversed the decision of the Court of Appeals, emphasizing that the lower court had not taken into consideration the following facts:

• Under Clauses 2 and 3 of Article 1484 of the Russian Civil Code, the owner’s exclusive rights to its trademark will be infringed by the use, without the owner's permission, of designations that are confusingly similar to the trademark in respect of goods similar to those for which the trademark is registered if, as a result of such use, a possibility of confusion arises through, among other things, the placement of such designations on packaging for goods that are produced, offered to sale, sold or otherwise put on the market in the territory of the Russian Federation.
• The case files confirmed that, by virtue of a supply agreement, the factory packed its products in the counterfeit packaging provided by Ruzcom. The factory was specifically indicated as being the manufacturer of products.
• These facts showed that the factory infringed the exclusive rights of HAMÉ sro under Article 1484(3) of the Civil Code.
• If a party packs its own products in packaging bearing a trademark that was unlawfully placed on it by another party, the first party can be considered as having created counterfeit goods, put them on the market and infringed the exclusive rights of the trademark owner.
• Therefore, it was lawful to impose civil penalties on the factory under Article 1515(2) of the Civil Code.  The Court of Appeal should not have reversed the decision of the court of first instance dated June 24 2011.

Tamara Istomina, Gowlings International Inc, Moscow