Procedures and strategies for pharmaceutical brands: Russia
In 2018 the top development strategy of companies involved in the Russian pharmaceutical market was ‘aggressive marketing’ (Russian Pharmaceutical Market Trends in 2018 by Deloitte CIS Research Centre). In such circumstances, trademark registration takes on considerable importance as it provides an effective measure to secure exclusive rights over a product’s unique identity. This chapter addresses the peculiarities of trademark registration in Russia and other trademark-related topics encountered when navigating the Russian pharma market, including anti-counterfeiting developments, advertising and the online sale of drugs, as well as the never-ending debate regarding parallel imports.
Selection, clearance and registration
In Russia, trademarks can be acquired through national registration by filing a national application with the Federal Service for Intellectual Property or through international registration by filing an application under the Madrid System. In addition, as per the recently adopted agreement, after 2020 a unified system will be launched providing trademark protection in the territory of the Eurasian Economic Union.
National requirements for trademark registration are set out in Part IV of the Russian Civil Code. The requirements are universal for all trademarks regardless of the category of goods. In Russia, trademarks can be verbal, pictorial, three-dimensional or of other types, as well as combinations thereof (Article 1482 of the Civil Code). The ‘other types’ are further uncovered in Section 32 of the Guidelines for Drafting, Filing and Examining Documents for the State Registration of Trademarks. They include sound, luminous, transformative, holographic, tactile, position, scent and taste marks, as well as marks that consist entirely of a single colour or colour combinations. Although permitted, non-traditional trademarks are often considered non-distinctive and are rarely registered in practice. To prove distinctiveness, it is necessary to provide evidence of extensive prior use of the mark in Russia, as well as its established association with the product. Registration of non-traditional trademarks may last considerably longer in comparison to traditional trademarks.
Absolute and relative grounds for refusal of trademark registration are provided in Article 1483 of the Civil Code. Under absolute grounds, marks are rejected if they lack distinctiveness, contradict public interests or have a misleading character. Under relative grounds, registration is refused for marks that are identical or confusingly similar to trademarks registered for the same category of goods, marks in pending applications, well-known trademarks, industrial designs, appellations of origin or business names. No specific provisions are enshrined legislatively with respect to pharmaceutical trademarks resembling international non-proprietary names (INNs). To some extent, the lack of direct provisions is balanced by case law. In 2012 the Supreme Arbitration Court rendered a landmark decision against the trademark KARNITON, demanding the Russian Patent Office cancel the trademark registration on the grounds that the mark was a derivative of the INN ‘Kanrnitin’, and similar enough to cause confusion based on phonetic and visual criteria. The court concluded that the confusing similarity of the trademark, registered for a wide range of classes, with the INN, deceptively forced consumers to associate the products carrying the trademark with pharmaceuticals. The court further ruled that the confusing similarity was contrary to the public interest, as it could prevent other drugs of the same pharmacological class as Karnitin from entering the Russian market.
In accordance with the Law on the Circulation of Medicines, to be placed on the Russian market a new drug must go through the state registration procedure and have its name approved and registered by the Ministry of Health. In the assessment of drug names, the health authorities follow the Rules for the Rational Choice of Names of Medicines, effective from 2016. With respect to INNs, the rules forbid the use of INNs as drug trade names, except when an INN constitutes a part of a drug trade name or when it is followed by the name of the company registering the drug.
The process of drug name registration is distinct from the process of trademark registration. Approval of a drug name by the health authorities does not ensure its successful registration as a trademark, and vice versa. Although the registration processes are fully autonomous, recent years have shown a tendency of the Chamber of Patent Disputes (a division of the Federal Service for Intellectual Property responsible for handling the appeals against final rejections of trademark applications and cancellation actions) to use the linguistic principles laid down by the Ministry of Health in the Guidelines for the Rational Choice of Names of Medicines, when making decisions on confusingly similar trademarks. Unlike the rules, the guidelines are not legally binding for the health authorities and are oriented towards providing registrants with practical information on how to choose the most effective drug name in the first place.
For better strategic planning it is worth keeping in mind that Russia has a first-to-file priority system, which does not require a mark’s use on the market prior to its registration. However, if a trademark is not used for a consecutive three-year period following registration, it risks cancellation. Trademark rights are valid for 10 years from the filing date, with the possibility of renewal for consecutive 10-year periods at the rights holder’s request.
Parallel imports and repackaging
Article 1487 of the Civil Code establishes the national principle of exhaustion of IP rights, which essentially makes parallel imports illegal. Meanwhile, the Eurasian Economic Union, of which Russia is a member, follows the principle of regional exhaustion, allowing parallel imports within the union. For several years the Board of the Eurasian Economic Commission has discussed the possibilities of extending parallel imports even further, by temporarily applying the international principle of exhaustion to certain categories of goods. In April 2017 the board adopted a draft protocol on introducing corresponding amendments to the Treaty on the Eurasian Economic Union. However, it failed to go through due to Belarus’s unwillingness to sign it.
In Russia, similar initiatives on the legalisation of parallel imports of certain products have been under serious consideration by the Federal Anti-monopoly Service (FAS) since 2012. In February 2018 the issue of parallel imports was moved forward by a Constitutional Court ruling. Having confirmed the constitutionality of the Civil Code’s provisions prohibiting parallel imports, the court elaborated further on the issue by concluding that:
- parallel imports should not be penalised if the rights holder’s actions contradict the principle of good faith and thus pose a threat to life and public health or interests;
- parallel imports and counterfeiting should be addressed differently, unless the revenues lost by the rights holder are comparable; and
- goods involved in parallel imports may be subject to destruction only in case of their insufficient quality or if they pose a threat to health, life or security of the public, environment or cultural heritage.
Anti-counterfeiting and enforcement
Under Article 1515 of the Civil Code, goods, label tags or packages with an illegally allocated trademark or a mark confusingly similar to a registered trademark are regarded as counterfeit. The code entitles the trademark owner to claim the withdrawal and destruction of the counterfeit goods. The trademark owner has the right to choose the form of reparation: apart from restitution, the rights holder may opt for compensation of between Rb10,000 and Rb5 million (approximately €140 to €70,000), depending on the scope of the violation. The rights holder may also choose to claim double the cost of the counterfeit goods or double the cost of the right to use the trademark legally.
The liability for illegal use of trademarks is laid down in Article 14.10 of the Code of Administrative Offences. If the illegal use of a trademark occurs repeatedly or causes substantial damage (exceeding Rb250,000 (approximately €3,500)), the crime attracts criminal liability under Article 180 of the Criminal Code, which, depending on the number of participants involved, may amount to a Rb1 million fine (approximately €14,000) or up to six years’ imprisonment with a Rb500,000 fine (approximately €7,000).
In accordance with the Federal Service for Surveillance in Healthcare and Social Development – the executive body supervising the circulation of medicines in Russia – pharmaceutical counterfeiting has experienced a noticeable decline in recent years. Experts relate the decline to the 2015 upgrade of administrative and criminal penalties. Before 2015 the distribution of falsified and counterfeit medicines (distinguished from one another by the Law on the Circulation of Medicines) was liable to the same punishment as luxury goods. In 2015 the Criminal Code and the Code of Administrative Offences were amended to make misconducts performed on the pharmaceuticals market subject to more stringent penalties.
Under Article 6.33 of the amended Code of Administrative Offences, production, sale or import of falsified, counterfeit, poor quality or unregistered medicines are subject to administrative penalties, which for legal entities amounts to a fine of between Rb1 million and Rb5 million (approximately €14,000 to €70,000) or administrative suspension of activities for up to 90 days. If the scope of the violation exceeds Rb100,000 (approximately €1,400) the crime starts carrying criminal liability, which, depending on the number of participants involved and the exact scope, may amount to up to 12 years’ imprisonment with a Rb5 million fine (approximately €70,000) (Article 238 of the Criminal Code). Apart from that, criminal liability is carried by unlicensed production of medicines and forgery of documents or production of forged packaging (Article 327 of the Criminal Code).
Experts expect to see a further decline in counterfeiting in the coming years as a result of introducing the national track-and-trace system. The system is designed to monitor the entire journey of medicinal products from manufacturer to end user, by tracking special identification marks placed on product packages. The tracking system will apply to all medicinal products except for the drugs produced for export or clinical studies, pharmaceutical substances, life-saving drugs imported for individual patients, recipe-based drugs made by pharmacies and drugs brought from abroad for personal use. The pilot version of the system is currently being tested by more than 30 leading pharmaceutical producers.
In accordance with the programme’s timeframe, pharmacies and medical institutions began registering with the system on 1 July 2019. The first in line were the pharmacies and medical institutions working with medications which fall into the high-cost nosological group. For this group, marking will become mandatory on 1 October 2019. For all other medicinal products, marking will become mandatory on 1 January 2020. Failure to allocate identification marks on products creates administrative or criminal liability, depending on the scope of the violation (see Article 15.12 of the Code of Administrative Offences and Article 171.1 of the Criminal Code). In addition, under the recently signed Federal Law on amending the Code of Administrative Offences (Federal Law N58, 15 April 2019) administrative liability will also be created by undue submission or submission of false data to the national track-and-trace system, which for legal entities will be between Rb50,000 and Rb1000,000 (approximately €700 to €1,400).
In Russia, pharmaceutical advertising is regulated by the Law on Advertising. Under Article 14.3 of the Code of Administrative Offences, violation of the Law on Advertising with respect to medicines is punishable by an administrative fine, which for legal entities is between Rb200,000 and Rb500,000 (approximately €2,800 to €7,000). Pharmaceutical advertisements may also be punished through administrative fines for breaching more universal rules set forth for broadcast and text advertising, among other things. The body authorised by the Law on Advertising to enforce the advertising regulations with respect to all categories of industry and goods (including pharmaceuticals) is the FAS. A large number of cases initiated by the FAS with respect to drug advertisements in recent years reflected the ambiguity of current legislation and motivated pharmaceutical market members to issue industry-specific recommendations on drug advertising. The recommendations, drafted in close cooperation with the FAS, were signed in November 2018. Due to the fact that Article 24 of the Law on Advertising prohibits advertising of prescription drugs, except when intended for medical and pharmaceutical professionals, the recommendations pertain to over-the-counter medicines only. Although not legally binding, the recommendations are worth referring to as they elaborate on the legislative norms in view of the most common violations and offer practical examples. The recommendations cover 10 topics:
- providing inaccurate information on drug characteristics;
- using incorrect comparisons;
- guaranteeing effectiveness;
- skipping substantial information on the advertised drug;
- creating an impression of the need to use the advertised medicine;
- making an assumption of illness;
- using images of medical professionals;
- exploiting surrogate advertising;
- providing a warning on the need to consult a specialist; and
- using insulting phrases.
In accordance with the established procedure for prescribing medicines, medical professionals in Russia are obliged to prescribe drugs based on INNs, and in the absence of INNs, based on generic or chemical names. Only when none of the above is available, or in case of certain medical conditions, such as a specific patient’s drug intolerances or life-threatening conditions, prescriptions may be based on drug trade names. Such practice gives patients an opportunity to make an informed choice from all available substitutable drugs on the market.
To ensure that the choice is unaffected at pharmacy level, the Good Pharmacy Practice Guidelines may soon be amended to make it obligatory for pharmacists to inform customers on the range of prices (starting from the cheapest) of available substitutable drugs carrying the same INN as the requested drug. At present, the guidelines merely forbid pharmacists from hiding information on available drugs carrying the same INN. The amendments are drafted based on the roadmap ‘On the Development of Competition in Healthcare’ developed by the FAS and approved by the government in January 2018. Part of the pharmaceutical community remains sceptical to the initiative, as it is difficult to control. Other doubts about the proposed amendments are related to as yet unsettled practice on determining the substitutability of medicines. Improvements in current legislation with respect to drug substitutability are under discussion.
Although the sale of drugs online is illegal in Russia, in accordance with the Association of Online Retailers, about 5% of the sales on the Russian pharmaceutical market are nonetheless conducted online. Online retailers find ways to bypass the laws, which forbid the distance sale of drugs, by organising the delivery of medicines in a such way that the courier acts on behalf of the patient when picking up the medicine at the pharmacy, instead of performing the delivery on behalf of the retailer.
Legalisation of the online sale of drugs has been under discussion for a couple of years. In December 2017 a bill passed the first reading at the State Duma, the lower chamber of the Russian parliament. Since then the second reading has been repeatedly postponed. Informed sources claim that an amended version of the bill is currently underway. The amendments are said to have specific education requirements imposed on couriers.
In addition, in early 2019 the bills on amending the Code of Administrative Offences and the Criminal Code to include provisions on liability for online counterfeiting passed their first readings at the State Duma. The bills bring Russian legal practice into compliance with the requirements established by the Medicrime Convention.
The use of a trademark in a domain name without the rights holder’s consent constitutes IP infringement in Russia. The procedure for enforcing trademark rights with respect to domain names is no different than for other trademark infringement cases, apart from a special pre-trial procedure, which allows the claimant to ensure that no cancellation or change of the user will take place with respect to the illicit domain name within 14 days – the period reserved for filing a claim with the court. Once the court case is initiated the trademark owner contacts the domain registrar to place restrictions on operations with respect to the illicit domain name. Once a successful outcome is achieved through litigation, the trademark owner must register the domain name under its own name within 30 days of the date when the court’s decision enters into effect.