On February 13, 2018, the Russian Constitutional Court issued the Ruling in which it checked validity of the regime of parallel import and related legal remedies.
The constitutional review was initiated by the company PAG, a notorious importer of labeled medicine goods into Russia. Having acquired of importation of its branded goods without any consent, Sony addressed the customs post with a request to suspend importation of PAG’s goods. Afterwards, grey goods were arrested by the Kaliningrad Arbitrazh Court based on Sony’s injunction request. The Kaliningrad Arbitrazh Court ignored PAG’s arguments that goods were original and satisfied the claims: goods were banned for importation, confiscated and destroyed. The court also made the respondent compensate Sony 100,000 rubles for the infringement.
Under Art. 1484, 1487 of the Russian Civil Code parallel import is prohibited, since any third party is entitled to use trademarks when goods were brought into circulation within Russia or members of the Eurasian Union directly or consented by the trademark holder.
According to PAG’s opinion, the application of the same remedies (seizure and destruction of goods and recovery of compensation) against formally original and counterfeited goods is unfair and violates the Constitution.
Upon consideration of the case, the Constitutional Court recognized the provisions of Civil Code valid and complied with Constitution. However, Constitutional court interpreted and changed approach to parallel importers’ liability. According to the new Constitutional Court’s approach:
- The court may dismiss the claim of the trademark holder in whole or in part, reduce the amount of compensation if the holder acts in bad faith, i.e. restricts the import of particular goods into the territory of Russia, which results in selling goods at inflated prices The court may not impose the same civil liability on importers of original products and importer of counterfeit products
- Parallel imported original goods cannot be confiscated and destroyed, if only such goods bring inadequate quality or pose risk of negative influence to human health, nature preservation or cultural values
- Since Constitutional Court did not invalidate the provisions of the Civil Code, this interpretation cannot be a ground for reviewing other cases decided before PAG cases’ Ruling.
In fact, the Constitutional Court’s approach will overturn widespread case law used to purport the position that original goods imported without the trademark holder‘s consent could be destroyed as the counterfeited ones. The Constitutional court’s ratio decidendi in the Ruling will definitely deprive IP holder to seek the destruction of grey (but still original) goods.
In our opinion, the Constitutional Court’s interpretation of parallel import will substantially restrict IP holders’ authority to control importation of goods into Russia and put significant pressure on the current distribution schemes.