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4 February 2016

Brands Update. January 2016

COUNTERFEIT. Complying with the procedure. Collecting evidences. Accommodating the existing practice

In the previous issues of Brands Update we brought the readers’ attention to the importance of collecting the proper evidentiary basis in counterfeiting cases. This is also confirmed by the recent verdict concerning the sale of fake herbicides under DuPont and Bayer brands. However, the new verdict described below addresses other essential aspects of both compiling of the evidentiary basis and opinions of the courts with respect to some possible indications of counterfeited goods (in particular, lower price and non-original packaging). Also, the above-mentioned verdict demonstrates the intricacies of proving the presence of elements of crime in illegal trademark exploitation solely in the seller’s actions and the reasonableness of determining the source of fake goods production.

As it was established by the court within the criminal proceedings, the individual entrepreneur active in selling of plant protection products (the “Criminal Defendant”) supplied herbicides produced by DuPont and Bayer to an agricultural enterprise (the “Agricultural Enterprise”). The Criminal Defendant purchased the herbicides from an unknown person. Shortly after delivery of the herbicides and in the process of their use it was revealed that they had no agrochemical effect. However, only two years after, when a dispute arose between the Criminal Defendant and the Agricultural Enterprise concerning payments for the supplied goods, they applied to law enforcement authorities regarding counterfeit of the herbicides. The prosecution brought charges against the Criminal Defend accusing him in taking actions that constituted a criminal offence on illegal trademark exploitation and caused significant damages.

After review of case files, the court passed the decision recognizing the Criminal Defendant not guilty because of the absence of elements of crime. The court pointed out the following:

  • The agrochemical effect of the supplied goods is visible 2 weeks after the use of herbicides; however, with lapse of the two-week period, the Agricultural Enterprise did not submit to the Criminal Defendant any complaints concerning the supply of goods of improper quality.
  • The packaging was utilized by workers of the Agricultural Enterprise in accordance with the respective instructions shortly after the use of herbicides, and the remainder of product, if any, was poured into other packaging.
  • According to the voluntary delivery protocols, the herbicides were seized from the Agricultural Enterprise in packaging, but during the court hearing only the empty packaging was examined. Moreover, the voluntary delivery protocols were executed prior to the date of initiation of the criminal proceeding, which is a breach of the procedural laws. Finally, case files contain packaging of other herbicides than supplied by the Criminal Defendant.
  • During the seizure of the herbicides on site, a policeman concluded that the holograms on the seized goods differed from the originals, though it was practically impossible to make such conclusion since, as the respective expert indicated, seized goods were confusingly similar to the original.
  • The crime set forth by Article 229 of the Criminal Code of Ukraine includes a wilful intent (malice) as the subjective side of a crime, therefore the pre-trial investigation is obligated to determine the Criminal Defendant’s awareness of both infringement of DuPont and Bayer trademarks and the fact that the amount of damages caused by the crime is significant.

It is worth mentioning that the court, with reference to a little known legal opinion of the Supreme Court of Ukraine, also stated that the mere fact that goods were sold in non-original packaging and at a lower price is not sufficient to make a conclusion about the presence of wilful intent (malice) in the crime covered by Article 229 of the Criminal Code of Ukraine.

TRADEMARKS. Administrative courts have far less competence

In June 2015, the Supreme Court of Ukraine passed an important decision establishing that if the respective authority makes a decision on registration of a trademark and, pursuant to such decision, the applicant obtains a Ukrainian trademark certificate, settlement of any further claims for the ownership of such trademark is within the competence of courts in accordance with the civil or commercial law since the matter of ownership is involved (for more information on this decision please refer to July 2015 Brands Update). However, as suggested by one of the most recent decisions of High Administrative Court of Ukraine (the “HACU”), the cassation instance of the administrative courts is of the opinion that disputes on the ownership of trademarks are not limited to the already existing practices of Ukrainian courts.

In particular, the HACU reversed the decision of the lower courts and closed administrative proceedings initiated by an individual against the State Intellectual Property Service of Ukraine and the Deputy Head of this Service regarding invalidation of the decision on refusal to register a trademark. The HACU stated that the lower courts assumed that the dispute in the case concerning the intellectual property rights is a matter of public law and, consequently, is within the jurisdiction of administrative courts. However, the HACU pointed out that such conclusion is not based on the proper application of substantive law. The HACU emphasized that the subject matter of dispute in the case regarding invalidation of the decision on refusal to register the trademark is intellectual property, i.e. the ownership, due to which it is not within the competence of administrative courts.

TRADEMARKS. Are we re-delegating from squatters in a new form?

The Ukrainian laws do not explicitly provide for forced re-delegation of domain names from squatters to rights holders upon infringement of rights of the latter. According to the court practice established since 2012, the rights holders may file to the court for protection of their infringed rights or interests and for the remedies that may differ from traditional, specifically as provided by Article 16 of the Civil Code of Ukraine, provided they are efficient, that is adequate in view of the content of the infringed right, nature of such infringement, and the consequences caused by it. However, the Solomyanskiy District Court of the city of Kyiv (commonly, this court passes decisions on re-delegation) pioneered one more approach to arguing in favour of re-delegation of domain names.

In a recent case initiated by Oleina S.A. against an individual the court established a trademark infringement and further noted that the procedure for delegation of domain names is not legislated in Ukraine; due to that reason the court concluded that it should be guided by international practices of resolving such disputes.

In particular, while passing the decision the court properly considered the decisions of the international organizations on settlement of domain disputes, namely the Asian Domain Name Dispute Resolution Centre, the National Arbitration Forum, the WIPO Arbitration and Mediation Center. Also, the court took into consideration the copies of the WIPO Arbitration and Mediation Center decisions on re-delegation of the respective domain names to persons whose intellectual property rights were infringed.

The court held that once current legislation of Ukraine does not provide for a specific remedy applicable in the trademark infringement case, it qualifies the claimant’s request to apply the most equitable and the most efficient remedy as substantiated. In opinion of the court, re-delegation of domain name to the claimant is a proper remedy preventing further registration of the domain name by the defendant.

On the one hand, the said court decision demonstrates that court is open to alternative forms of substantiating the re-delegation of domain names to rights holders. On the other hand, the above-mentioned new reasons for re-delegation, specifically a reference to the practices of the UDRP, seem arguable in terms of compliance with the Ukrainian laws. However, reasons by which the court substantiated the re-delegation of domain names in eBay and Asos cases (as summarised in the first paragraph above) looks more appropriate.

DESIGNATIONS OF ORIGIN. Protecting European Geographical Indications

On 04 January 2016, the State Intellectual Property Service of Ukraine issued an order according to which European geographical indications (“GIs”) protected under the EU-Ukraine Association Agreement are deemed registered with the State Register of Designations of Origin, Geographical Indications and Rights to Use Designations. 01 January 2016 shall be the date of the GIs registration in Ukraine. For more information about registered GIs please visit http://sips.gov.ua/ua/kzpt_Uk.

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