Procedures and strategies for anti-counterfeiting: Ukraine

Legal framework

Provisions on remedies against counterfeiters are set out in:

• the Civil Code;
• the Commercial Code;
• the Criminal Code;
• the Code on Administrative Infringements; and
• the Customs Code.

The relevant procedures are set out in:

• the Civil Procedure Code;
• the Commercial Procedure Code;
• the Criminal Procedure Code; and
• the Code on Administrative Jurisdiction.

No laws or regulations deal specifically with counterfeiting in Ukraine. Thus, this type of infringement is dealt with under the Trademark Law. Although that statute contains no definition of ‘counterfeit goods’, the relevant civil and criminal laws contain blanket provisions referring to the Trademark Law, particularly the definition of ‘use of a trademark’.

The Law on Pharmaceuticals contains a definition of ‘counterfeit pharmaceuticals’. Further, the Criminal Code (in Article 321-1) provides for the imposition of fines, the confiscation of counterfeit pharmaceuticals, materials and equipment used for their manufacture and imprisonment (in case of death or other severe consequences, a life sentence may be applied).

The Law on the Protection of Consumer Rights also sets out efficient provisions regarding ‘fake goods’. According to Article 6 of the law, the marketing of fake goods is prohibited. Thus, once counterfeiting has been established, if no criminal charges are brought against the infringer, the goods cannot be released and are subject to destruction.

Border measures

The Customs Code provides for border measures against IP infringements, including counterfeiting. These measures extend to both imports and exports, but do not cover goods in transit.

Control by Customs also extends to goods brought into Ukraine by individuals or shipped to them in consignments. Under the regulations implemented under the Customs Order (1527/2010), all goods brought into Ukraine by individuals may be inspected for infringement. The regulations may be applied even if the goods are intended for personal use or as a gift.

In order to benefit from the border provisions, a rights holder can file a formal application for customs surveillance. Registration with Customs is valid for six months or one year and can be further renewed at the rights holder’s request. Customs also has the right to act ex officio, provided that it has sufficient information on the rights holder and the relevant merchandise.

The provisions on border measures under the current Customs Code, which entered into force on 1 June 2012, also extend to industrial designs and patents of inventions, utility models and plant varieties.

The term for which Customs may detain goods that are suspected of infringing IP rights is 10 business days, which may be extended for a further 20 business days. For perishable goods, this term is three business days and no extension is provided. The rights holder bears the costs of storage of the detained goods.

Thus, the rights holder has 10 business days either to apply to the court or, if there are valid grounds for being unable to take action within this timeframe, to submit a written request to Customs for a 10-day extension. Failure to take action within the time limit without notifying Customs results in the release of the suspended goods.

Once the court has issued an injunction, the rights holder must submit a copy of the respective court ruling to Customs in order to secure an extension of the term of suspension. If no injunction is issued, Customs will release the goods.

In ex officio actions, Customs must notify the rights holder of the seizure of the suspect goods on the day that the seizure takes place. The rights holder then has three days to submit a written request regarding the protection of its IP rights. If the rights holder does so within this timeframe, Customs will suspend clearance of the goods for 10 days, with an option to extend this term for a further 10 days.

If infringement is not established, the detained goods must be cleared and the rights holder must compensate the declarant of the goods for the expenses and damages caused by such wrongful seizure (Articles 399 and 400 of the Customs Code).

As an alternative to litigation, Article 476 of the Customs Code provides for administrative proceedings.

If the rights holder submits to Customs an independent certified expert’s report establishing unauthorised use of a trademark for goods, Customs will draft a protocol on the violation of the customs rules which will result in seizure of the goods. This mechanism is usually used as an additional measure to guarantee the seizure, since Article 476 does not provide for the destruction of counterfeit goods.

The Customs Code also provides a simplified procedure for the destruction of counterfeit goods, which is possible with the consent of the owner of the goods. Although this procedure has been used positively in a number of cases – in which rights holders have entered into settlement agreements with importers of infringing goods, with the importers agreeing to cover the costs of destruction – it requires improvement to become an efficient tool against counterfeit goods entering the internal market. In particular, under the existing provisions, even small consignments of counterfeit goods may be destroyed only with the owner’s consent. It must be emphasised that only the owner of the goods has to put the counterfeit goods under the regime of destruction. If the owner fails to do so, Customs will be unable to destroy the goods and the goods will be stored at the customs warehouse.

Registration

To apply for customs surveillance, the rights holder files a formal application providing Customs with relevant information on:

• the merchandise to which the trademark applies;
• any manufacturers of authentic products;
• details of importers and exporters;
• delivery routes and means of transportation;
• useful tips on identifying counterfeit goods; and
• any available information on potential sources of counterfeits.

The requirements for a formal application appear extensive, but the rights holder need only provide available information. An update may be submitted to Customs at any time within the duration of the registration, at no extra cost.

If Customs suspends clearance, the rights holder can initiate one of two proceedings:

• Civil proceedings – a civil lawsuit is filed against the owner of the infringing goods. Here, the burden of proof is borne by the rights holder.
• Administrative proceedings – these are initiated by Customs. The burden of proof is borne by Customs and the rights holder. The action is initiated by Customs based on an opinion from a competent expert body confirming that the detained goods infringe IP rights. In this case the detained goods are subject to confiscation. A ‘competent expert body’ is a specialised state institution which is authorised to perform court examinations.

Border measures are not covered by the Criminal Code.

Under the Customs Code, a simplified procedure for the destruction of counterfeit goods detained by Customs may be followed, provided that the consent of the owner of the goods has been secured. The law also offers the option to alter or remove identification signs or trademarks on counterfeit goods, subject to approval by the rights holder.

Criminal prosecution

Under the Criminal Code, an IP rights infringement constitutes a crime if it has caused considerable damage. Criminal proceedings can be initiated where a specific threshold of damages is met. Damage is considered to be considerable if it amounts to 20 times the non-taxable minimum income. At the beginning of 2019 this amount was UAH19,210 (approximately €600). The amount of damage (considerable, extensive or particularly extensive) determines the penalties imposed on infringers.

Under the Criminal Procedure Code 2012, IP rights infringement cases qualify as private prosecutions and can be initiated only based on an application from a rights holder or its legal representative in Ukraine that has information on the criminal offence, or by the victim of a crime committed through the infringing activities.

The police cannot act ex officio in cases involving trademark infringement. However, the police can carry out raids based on the rights holder’s complaint and documents collected during the pre-trial investigation. In order to conduct a raid or specific investigative action, an order must be issued by the court.

Thus, evidence can be secured only through the police. A criminal prosecution involves the following steps:

• The rights holder files an application for trademark infringement with the police to register the case in the Unified Register of Pre-trial Investigations (the Criminal Procedure Code provides that such registration must take place within 24 hours of submission of an application) in order to initiate criminal proceedings and a pre-trial investigation.
• The police interview the rights holder’s representative to ensure that it provides relevant information on the infringement.
• Third parties or police officers make repeat (controlled) purchases in order to establish the facts of the sales. Further (or simultaneous) action is taken to locate manufacturing facilities, warehouses and offices, which may then be searched by the police.
• The police secure a court order in order to search the relevant premises and seize counterfeit goods, materials, equipment and relevant financial and other documents.
• Once the relevant evidence (including information about the quantity of counterfeits) has been secured, the rights holder files an application with an investigator for trademark infringement, including a damages calculation.
• The court orders an expert to establish the amount of damages and unauthorised trademark use.
• The rights holder submits a civil claim for damages (based on the expert’s report).
• The police interview witnesses and other parties related to the criminal proceedings.
• The police issue a notice of suspicion and an indictment.
• The criminal records are disclosed by an investigator to the parties, which then familiarise themselves with the materials of the finalised pre-trial investigation and sign the respective procedural document.
• The case is transferred to the court and the trial takes place.
• The verdict is issued and executed (eg, payment of a fine to the state revenue, destruction of counterfeit goods, compensation for damages).

On 2 June 2016 the Law on Enforcement Proceedings was adopted, which came into force on 5 October 2016 and is intended to increase the effectiveness of bodies and persons involved in the enforcement of court decisions and decisions of other authorities. According to Article 14 of this law, rights holders (ie, holders of infringed IP rights) are authorised to participate in the enforcement proceedings (in particular, destruction of confiscated counterfeit goods based on the court decision).

Remedies

The illegal use of a trademark resulting in considerable damage is punishable by a fine of 1,000 to 2,000 times the non-taxable minimum income (approximately €550 to €1,100, as of 1 January 2019).

The same actions, if committed repeatedly or by a group of persons in conspiracy, or if resulting in extensive damage, are punished by fines of 3,000 to 10,000 times the non-taxable minimum income (approximately €1,650 to €5,500).

The severest penalties are provided for crimes committed by organised groups and officials abusing their status, if their actions have resulted in particularly extensive damage. These actions are punished by fines of 10,000 to 15,000 times the non-taxable minimum income (approximately €5,500 to €8,300), with the option to remove the right to hold a position or to be involved in a certain activity for up to three years.

Unlike Articles 176 and 177 (covering infringement of rights to invention, utility models and copyright), Article 229 of the Criminal Code no longer provides for imprisonment as a remedy against trademark infringement. However, reintroduction of this remedy into the trademark infringement provisions of the Criminal Code has been widely discussed and recommended by non-government organisations and government agencies.

As of 28 February 2016, the penalty of confiscation and destruction of counterfeit goods and equipment and materials used for their production was removed from Article 229 of the Criminal Code. However, the need for such a penalty is provided for in numerous international treaties signed by Ukraine in relation to the destruction of counterfeit or falsified products (eg, Articles 46 and 61 of the Agreement on Trade-Related Aspects of Intellectual Property Rights and Article 237 of the EU-Ukraine Association Agreement).

The Draft Law on Amendments to Certain Legislative Acts Concerning Strengthening the Responsibility in the Field of Intellectual Property has also been introduced, by which the norms of the respective codes are planned to be brought into compliance with Ukraine’s obligations to the World Trade Organisation and the European Union in the field of IP rights protection, particularly with regard to the observation of international treaties on the destruction of counterfeit goods.

Civil enforcement

Infringers may be liable under civil laws regardless of whether criminal or administrative penalties have been applied against them. The general limitation period for a civil action is three years from the date on which the rights holder became aware or should have become aware of the infringement of its IP rights.

Preliminary injunctions may be sought in cases where there is a risk that the execution of court orders and judgments may become complicated or impossible. Such a request may be filed either upon filing a claim or at any stage of the legal proceedings in a court of first instance or court of appeal.

Preliminary injunctions may be sought to:

• seize property and funds which are in the infringer’s possession;
• limit the infringer’s activities (including disposal of funds); and
• prohibit other persons from carrying out activities pertaining to the claim.

Interlocutory injunctions are also available by means of provisional measures applied before filing a claim with a court.

The procedural laws provide for court expertise in cases which require special knowledge. Most IP cases fall under this category. Thus, a court expert is an integral part of every type of legal proceeding, whether administrative, civil or criminal.

If the infringer requests the appointment of an expert, it bears all expenses arising therefrom. Expenses arising from court proceedings are borne by the losing party.

Remedies

In civil proceedings, the rights holder is first entitled to claim payment of indemnity for property, including lost profits and moral damages (available through courts of general jurisdiction and commercial courts). These are the so-called ‘general remedies’.

Under Ukrainian civil laws, the rights holder can also seek the following special remedies set forth in Article 432 of the Civil Code:

• immediate action to prevent an IP rights infringement and secure relevant evidence;
• suspension of customs clearance of infringing goods being imported into Ukraine;
• seizure and destruction of infringing goods;
• seizure, confiscation or destruction of materials and equipment used for the manufacture of infringing goods;
• compensation instead of damages for infringements; and
• publication in national newspapers and other media of details relating to the infringement and the decision of the court.

Anti-counterfeiting online

Search engines and the WHOIS database have always been valuable sources of information about possible sources of counterfeiting. Advanced webcrawling technologies are also useful for detecting fraudulent businesses.

Rights holders should focus on domain names, online shopping sites, auction sites – which are becoming increasingly popular – and illicit spam communications. For instance, while only the registered owner of a trademark may register the corresponding ‘.ua’ top-level domain (TLD) name, no such restriction exists for second-level ‘.ua’ domain names.

In case of trademark infringement through a domain name, it is in most cases impossible to rely on WHOIS records to determine the actual holder of a domain in Ukraine, in view of the Law on the Protection of Personal Data. The national registrar administering the ‘.ua’ TLD may not provide information on individual domain name holders at the request of a third party, as disclosure of such information falls under the restrictions set out in the law. Internet service providers (ISPs) which act as registrars of hosting providers also may not disclose this information. In practice, if the actual domain name holder is unknown, the rights holder will contact the registrar with a request to send the infringer a warning letter.

Although the national administrator of the ‘.ua’ TLD is working towards the adoption of the Uniform Domain Name Dispute Resolution Policy, as yet there is no administrative procedure for domain name dispute resolution. Thus, fraudulent domain name registrations can be revoked only by the courts. In cases of fraudulently registered ‘.ua’ TLD names (which are registered only on the basis of a trademark valid in Ukraine), along with the revocation of such registration, cancellation of the respective trademark registration should also be considered.

Warning letters may be used as a form of pre-court dispute resolution.

In the course of internet monitoring, once the rights holder has established who is operating relevant websites and has analysed the relevant information (eg, metadata, internet history and domain information) to detect the location of the counterfeiter’s operations, it is possible to make a trap purchase to:

• determine the return address; and
• obtain payment receipts, which may then be used as evidence in court.

According to the Law on E-commerce, the vendor is obliged to provide simple, direct and permanent access on its website to its:

• full title (if a legal person) or full name (if an individual entrepreneur);
• address;
• physical address of the shop and contact details (eg, telephone number and email);
• taxpayer number; and
• licence (if required).

Existing legislation does not stipulate the consequences for not meeting these requirements. As such, owners of fraudulent websites and e-shops where counterfeits are sold usually provide no other information aside from their contact details.

In view of the popularity of online marketplaces in Ukraine, requesting such information on the owner of a particular website or e-shop from e-platforms may be an option, particularly if there are concerns about the originality of products (platform operators include sections on respecting third-party IP rights in their terms of use).

Once evidence has been collected, rights holders can choose between administrative, civil or criminal actions (with the involvement of the law enforcement agencies in the latter case).

Under existing law, an ISP cannot be held liable for contributory infringement.

Most counterfeiting issues are settled at the pre-court stage. Having received complaints from rights holders, most infringers try to resolve the matter amicably or meet the claimed demands. However, in some cases infringers remain unresponsive or oppose the rights holder’s actions and continue their trade in counterfeits. In particular, infringers may re-launch the closed website at a new address. To secure unhampered operation of the website, infringers may also transfer the hosting of the website or transfer the website to a jurisdiction where enforcement is more difficult.

Preventive measures/strategies

Rights holders should consider using:

• financial tools (eg, market monitoring, checks and test purchases);
• technical tools (eg, use of protective elements); and
• information tools (eg, use of mass media to raise public awareness).

The most important steps to prevent counterfeiting are:

• registration with Customs;
• close cooperation with the enforcement agencies (including information exchange and training); and
• initiatives to raise awareness among consumers.

Government agencies, enforcement agencies and consumers must ensure that rights holders are proactive in defending their rights and must show zero tolerance for infringements, particularly counterfeiting.

The enforcement agencies often seek to cooperate with the private sector, in particular with rights holders, as this can help to compensate for a lack of technical equipment and insufficient expertise in IP matters. It is also imperative that the public view counterfeiting as a crime.

Regulatory agencies are banned from monitoring businesses; controls and checks can be conducted only on the basis of a court decision. However, there have been ongoing discussions to lift this ban.