Brands Update. May-June 2015

Upcoming criminal liability for smuggling of excise and counterfeit goods

On 14 May 2015, draft law No. 2840 (Draft Law) on establishing the criminal liability for smuggling of excise and counterfeit goods was registered with the Ukrainian Parliament. It is worth noting that in 2011 the smuggling of excisable goods was decriminalized. In its turn, the initiative to establish criminal liability for smuggling of counterfeit goods is new for Ukraine.

The Draft Law suggests that a smuggler will bear criminal liability for smuggling of counterfeit or excisable goods in large amounts. Within the context of the Draft Law the large amount means smuggling of counterfeit or excisable goods the value of which exceeds 250 minimum individual incomes, which is currently equal to about UAH 150K (about EUR 6,500).

Section 201 of the Criminal Code of Ukraine, which is expected to be amended by the Draft Law, provides for the imprisonment for the term from three up to seven years coupled with the seizure of the contraband articles. Currently, the Draft Law does not suggest any amendments to the sanction of this section that would provide for both seizure and destruction of the counterfeit or excisable goods, as prescribed in other sections of the Criminal Code of Ukraine addressing the infringement of the copyright (sec. 176) or trademarks, geographical indications, and trade names (sec. 229). Such an amendment to the sanction of section 201 of the Criminal Code is being discussed and apparently will be submitted for consideration of the Parliament by the relevant business associations.

According to the opinion of authors of the Draft Law, infringements of the copyright and related rights in the goods and products of famous brands adversely affect the relations between Ukraine and other states, and establishing criminal liability for such infringements will raise credibility to Ukraine in the international arena.

The authors of the Draft Law also point out that one of the important reasons to criminalize the smuggling of excise and counterfeit goods is continuous assistance requests of foreign law enforcement authorities (European AntiFraud Office (OLAF), European Union Border Assistance Mission (EUBAM), Customs Criminal Office of Germany, French Customs, Immigration and Customs Service of the US Department of Homeland Security) addressed to Ukrainian law enforcement authorities with respect to elimination of criminal groups involved in operation of established channels of smuggling of counterfeit and excisable goods.

The math of estimation of the statutory damages for copyright infringements

The most recent decision of the High Commercial Court of Ukraine (HCCU) on infringement of intellectual property rights in the copyright has provided an essential explanation on the mechanism of estimation of statutory damages for the copyright infringement as an alternative to recovery of damages or levying a profit gained by an infringer due to copyright infringement. 

When changing the decisions of the lower courts, the HCCU emphasized that the latter instances misapplied provisions of both the Civil Code of Ukraine and the Law of Ukraine “On Copyright and Related Rights”. In particular, these laws do not qualify the amount of statutory damages as contingent on a number of documented copyright infringement events but merely establish the right for statutory damages based on the fact of copyright infringement. The HCCU further explained that certain circumstances (i.e., a recurrent, volume of infringement, a number of copyright objects used unlawfully, etc.) should be considered by the court for the purpose of determining the amount of statutory damages in each particular case, given also statutory limits stipulated in the respective laws (varying from 10 to 50,000 minimum salaries).

In view of the above, the HCCU changed the decisions of the lower courts and ordered to recover statutory damages from the defendant in the minimum amount (i.e., 10 minimum salaries) for the unlawful public showing of three cartoon series. The adjudicated amount of statutory damages replaced the previously adjudicated amount of 30 minimum salaries, i.e. 10 minimum salaries for public showing of each of the cartoon series.

A day when Hemingway's notebook is known better than its owner

One of the local courts rendered the decision recognizing the Moleskine trademark (TM) a well-known trademark for “notebooks and notepads”. As it appears from the decision of the court, the TM was recognized as well-known within a domain dispute initiated by the Italian notebook producer Moleskine (Claimant) against the Ukrainian domain name registrar (Registrar) and an individual – owner of the domain name (Defendant) that is confusingly similar to the TM.

Despite the fact that such domain disputes have become quite typical, the decision covers a number of aspects which should be taken into account for both recognition of a trademark as well-known on the basis of a court decision and in domain disputes:

(i)   The court disregarded the Claimant's arguments that the TM is well-known in Ukraine for all "office supplies" due to the fact that as of the declared date the well-known mark status is proved only for "notebooks and notepads" goods in class 16 of the Nice classification.

(ii)  The court found justified the claim for termination of delegation of the domain name, given the fact that the disputed domain name infringes the rights of the Claimant in the well-known TM. Although the Registrar, while registering the domain name, was not obliged to verify the lawfulness of use of the TM by the Defendant, such domain name registration ultimately led to the infringement of IP rights in the well-known TM.

(iii)  The court granted the Claimant’s claim in relation to forbidding the use of the TM in the domain name by the Defendant. However, the court disagreed with the Claimant’s arguments on the need to forbid the use of the TM by the Defendant in all manners prescribed be the Law of Ukraine “On Protection of Trademarks”. The court pointed out that the materials in the case do not contain sufficient evidences that the TM is exploited by the Defendant other than in the domain name and on Internet.

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