Supreme Commercial Court considers administrative and civil liability in parallel import cases

Russian Federation

In two recent decisions, the Supreme Commercial Court (the highest judicial body for commercial disputes in Russia) has confirmed its approach to administrative and civil liability in parallel import cases. 

In Sergei Chudov v Russian Vladivostok Customs Service (Decision 6813/12 of the Presidium of the Supreme Commercial Court, November 13 2012), the court reversed the decisions of the lower courts and confirmed that the Customs Service had the right to suspend the release of second-hand Yamaha motorcycles during the custom clearance procedure. The legal owner of the YAMAHA trademark is Yamaha Hatsudoki Kabushiki Kaisha (Yamaha Corp Japan).

Sergei Chudov, a sole trader, had purchased second-hand Yamaha motorcycles in Japan and tried to import and sell them in Russia. The goods were suspended by the Vladivostok Customs Service, but were subsequently returned to Chudov after he obtained consent to import and sell the goods from the certified importer of Yamaha goods in Russia (Yamaha Motor CIS LLC). 

Although the goods were returned to Chudov and he was not held liable for any offence, he filed a claim with the court of first instance arguing that the suspension was illegal. The court of first instance and the appellate court allowed the claim on the following grounds:

  • According to the principle of international exhaustion of trademark rights, the goods had been lawfully purchased in Japan and, therefore, could be freely imported into Russia; and
  • The Customs Service had failed to provide evidence that the YAMAHA trademark had been illegally placed on the goods by Chudov.

The Supreme Commercial Court reversed the decisions of the lower courts and upheld the suspension of the goods on the following grounds:

  • Russia adheres to the principle of national exhaustion of trademark rights under Article 1487 of the Civil Code of the Russian Federation (even if the goods were lawfully purchased outside Russia, the importation of such goods and other actions relating to the introduction of the goods on the Russian market are subject to the consent of the trademark holder).
  • The Vladivostok Customs Service had the right to suspend the goods due to the discovery of the following elements involving an IP-related offence:
  1. The motorcycles bore a YAMAHA mark which was identical to that registered in the Russian Customs Register of Trademarks;
  2. The register did not indicate that Chudov was a legal owner of the YAMAHA mark and/or a certified importer of the goods into Russia; and
  3. Chudov did not demonstrate to the Customs Service that it had obtained consent from Yamaha Motor CIS LLC to import and sell goods bearing the YAMAHA mark.

The Supreme Commercial Court further stressed that, when suspending the release of goods, the aim is to identify the elements of an IP-related offence within 10 days (Article 331(2) of the Customs Code of the Customs Union). Even if no such elements are found and the Customs Service returns the goods to the owner, this does not indicate that the suspension was illegal or that the Customs Service had abused its powers.

The Supreme Commercial Court concluded that, if the Customs Service finds elements of an IP-related offence, it has the right to suspend the goods for 10 days. During this period, it must send enquiries to the legal owner of the mark or to the certified importer. If the latter give consent to the importation of the goods into Russia, the suspension will be withdrawn and the goods will be returned to the importer. If they object to the importation of the goods, the Customs Service has the right to proceed with the suspension. If the Customs Service finds that the goods are counterfeit, it has the right to confiscate them and hold the importer liable under Article 14.10 of the Code of Administrative Offences. If the goods are not counterfeit, they will be returned to the owner.

This decision brings clarity to administrative trademark disputes in which the Customs Service and parallel importers are involved.

In the second decision, Longines Watch Co v LLC & Adelia LLC (Determination No 11599/12 of the Supreme Commercial Court regarding the refusal to refer the case to the Presidium of the Supreme Commercial Court dated November 13 2012), the Supreme Commercial Court confirmed the record amount of compensation awarded to famous Swiss watchmaker Longines (Swatch Group) in a civil lawsuit.

Claimant Longines asked the court of first instance to issue an order restraining two Russian companies from importing, possessing for the purpose of selling, offering for sale and selling watches bearing the LONGINES mark (which had been registered via the Madrid System for the international registration of trademarks) in Russia. Longines sought to recover Rb5,000,000 from LLC and Rb100,000 from Adelia LLC, respectively.  

The court issued an order restraining the respondents from engaging in the above activities, and awarded Longines Rb3,000,000 and Rb100,000 as compensation for the illegal use of the LONGINES mark. This was the highest amount ever awarded in such a case to date.

The decision was reversed by the appellate court. It was subsequently reviewed by the Supreme Commercial Court, which upheld the restraining order and the amount of compensation on the following grounds:

  • The court had correctly applied the principle of national exhaustion of trademark rights;
  • The respondents did not provide evidence of Longines' consent to the above actions;
  • Longines and its certified importer in Russia (Swatch Group Rus LLC) confirmed that they had not given consent to the respondents;
  • The certified importer also confirmed that the goods had not been intended to be sold in Russia; and
  • The fact that there was no illegal reproduction of the LONGINES mark (ie, the goods were not counterfeit and the LONGINES mark had been placed on the goods by the trademark holder itself) was not sufficient to release the respondents from civil liability.

This decision brings certainty in civil lawsuits between trademark holders and parallel importers. Importing and selling goods in Russia without the trademark holder's (especially if it did not intend to sell the goods in Russia) can result in liability to pay substantial compensation. 

Alexey Pashinskiy, Squire Sanders Moscow LLC, Moscow

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