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15 January 2015

Brands Update. January 2015

Different Mineral Water Sources

Although such practice is not common yet, the recent decision of the Antimonopoly Committee of Ukraine ("AMC") (as discussed below) confirms the opportunity to successfully protect rights in the trade dress of a product, in particular, a label rather than only specific intellectual property objects or their combination.

Specifically, when labeling mineral water of its own production, "AVIS AQUA" LLC ("Respondent") implemented the design (the  below of two labels shown above) that is confusingly similar to the label (the upper of two labels shown above) used by "DRINKS PLUS" LLC (“Applicant”) for its mineral water since 2010. The Applicant claimed that the Respondent took unfair advantage on the mineral water market, given also the fact of significant investments of the Applicant in the advertising of its own mineral water.

Having analyzed the trade dress of both the Applicant’s and the Respondent’s product, the AMC came to conclusion that the labels are similar by their general composition, colors, location of signs on labels and the signs themselves, as well as the fonts used. Also, the AMC conducted a consumer survey to investigate the likelihood of confusion of mineral water produced by both the Applicant and the Respondent. The said survey confirmed the similarity of mineral water labels used by the Applicant and the Respondent and, thus, the likelihood of their confusion.

Upon examination of the case the AMC held that the Respondent violated unfair competition laws by copying the trade dress of the Applicant’s product and imposed a fine on the Respondent in the amount of UAH 300k. Reportedly, the Respondent did not admit the fact of violation but changed the label design. Virtually, this means that the AMC will have to recover the imposed fine through the court.

Buy for USD 1 but reimburse a million or whether the amount of compensation for copyright infringement is fair?

At the end of December 2014, the Highest Commercial Court of Ukraine ("HCCU") upheld the rulings of the courts of both the first and appellate instances regarding absence of grounds for the recovery of compensation for copyright infringement (famous animated film hero). On the basis of this HCCU ruling, we can say that proving the fact of copyright infringement (as it was before in practice) is not enough to recover the compensation and for this to happen an applicant must also prove that the amount of compensation adheres to the general civil law principles concerning fairness, good faith and reasonableness.

So the company "Masha i Medved" ("Applicant") filed a claim against private entrepreneur ("Respondent") for the recovery of the minimum compensation in the amount of 10 minimum wages (currently it is UAH 12,180) for copyright infringement (SK: current maximum amount of the compensation is UAH 60,900,000). The Applicant argued that his copyright has been infringed by the sale of four units of corn sticks in packaging depicting the character "Masha". The Applicant further argued that the establishment of this fact of sale is sufficient for recovery of the minimum amount of compensation. The Applicant also claimed that the aim of recovery of the compensation in the specified amount is to prevent the redistribution of counterfeit goods in order to achieve the preventive nature of the compensation, which would be significant for the Respondent.

The Respondent objected to the claim, asserting that the cost of one unit of the good is UAH 2.70 (SK: less than USD 1), and the Applicant has not provided valid evidence to support the reasonableness of the recovery of the compensation in the minimum amount.

The courts of both the first and appellate instances rejected the Applicant’s claim. HCCU, supporting position of the lower courts, pointed out that the courts rightfully, in accordance with the principles of fairness, good faith and reasonableness defined in the Civil Code of Ukraine, refused to recover the compensation. HCCU pointed out that the recovery of the compensation in the minimum amount (UAH 12,180) would be inadequate with damages incurred by the Applicant or the amount of profit (UAH 10.80), as well as Ukrainian laws do not provide for recovery of compensation in the amount that is smaller than the minimum compensation.

It worth noting that Sayenko Kharenko IP practise is currently participating in the litigation where the issue of proving the fault of distributor (seller) of counterfeit goods, who is not their manufacturer or ordering customer, is actively debated.

No Delay in Preventing Patent Trolling

The newly formed Government focused its attention on the need of taking actions to combat patent trolling. In particular, according to the letter dated 9 December 2014 and addressed to both the Ministry of Economy of Ukraine and the State Intellectual Property Service of Ukraine, Mr. Vyacheslav Kirilenko, the Vice Prime Minister of Ukraine demands that these institutions promptly submit the relevant draft law on amendments to the Laws of Ukraine "On Protection of Rights for Inventions and Utility Models" and "On Protection of Industrial Designs" (for more information please see also our July 2014 Brands Update for the consideration by the Government. According to the Letter, the settlement of this issue can no longer be delayed.

Further, the Ministry of Internal Affairs of Ukraine, the Ministry of Economy of Ukraine, the State Intellectual Property Service of Ukraine and the State Fiscal Service of Ukraine ("SFS") were instructed to analyze the practice of issuing IP rights protection documents and their use in order to impede legal business activity, and if fraud is found – to take proper actions.

It worth noting that the Letter was issued in response to the SFS request addressed to the Cabinet of Ministers of Ukraine in connection with the need to take actions to combat "patent trolling". SFS drew the Government's attention to the fact that now the Customs Register of IP Rights contains information on a number of patents for industrial designs the patentability of which is questionable (e.g., "hanger", "ball pen", "toothpick", and "lighter"). However, despite the obvious lack of novelty of such industrial designs, SFS has no formal reasons to reject registration of such IP objects with the said Register. In this connection SFS supported the idea of amending the Ukrainian legislation as soon as practicable, including within the implementation of the EU-Ukraine Association Agreement.

Mobile Counterfeit on the Internet Terminated

While conducting the operational search actions the officers of the Cybercrime Department of the Ministry of Internal Affairs in Odessa Region detected the criminal activity of an individual who has organized a network of e-shops selling counterfeit mobile phones.

Reportedly, the individual created e-shops that were working for maximum 2-3 months, then were closed and new e-shops for sale of similar products were created. Payments were made via e-payment systems and courier services were used for delivery of goods to the customers. A number of counterfeit phones purchased by police officers from the ‘businessman’ in the course of test purchase are an evident proof of the committed crime.

According to the result of complex of investigative and operational measures the individual was served with a notification on suspicion of committing a crime specified in Article 229 of the Criminal Code of Ukraine (illegal use of a trademark).

The rights holder applied to the agency in charge of the investigation for the recovery of damages. The investigation is going on.

Brand protection publications

Brand Protection Practice: Results of 2014 (in Russian)

For more information, please contact Oleksandr Padalka or Oleg Klymchuk, or e-mail us at Brand-protection-team@sk.ua.

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