Ukraine: Brands Update. January 2015

Last Updated: 26 January 2015
Article by Oleksandr Padalka and Oleg Klymchuk

Although such practice is still rare, the recent decision of the Antimonopoly Committee of Ukraine ("AMC") (as discussed below) confirms the opportunity to succeed in protection of rights in the trade dress of a product, in particular, a label but not only a specific intellectual property object or their combination.

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

After having analyzed the trade dress of both Applicant's and Respondent's product, the AMC arrived at the conclusion that the labels are similar in terms of general composition, colors, placement of signs on labels and signs as they are, as well as fonts used. The AMC also conducted consumer survey to study 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 trade dress of the Applicant's product. The Respondent was fined at the amount of UAH 300k. Reportedly, the Respondent did not admit the fact of violation but changed label design for the mineral water. The latter virtually means that the AMC has still to claim payment of 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 to Prevent Patent Trolling

The newly formed Government pays particular attention to the need of implementing measures 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 prompt submission of 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" (one draft law was discussed in the July 2014 Brands Update for the Government consideration. According to the Letter, no further delay to resolve the issue can be tolerated.

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 examine the practice of issuing IP rights protection documents and their use in order to impede business activity, and if there is fraud – to take adequate measures.

It worth noting that the Letter was issued in response to SFS request addressed to the Cabinet of Ministers of Ukraine on the need to take measures 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 which patentability 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 Register in question. Therefore, SFS seeks early amending the Ukrainian legislation, including within the implementation of the EU-Ukraine Association Agreement.

Stopped Mobile Counterfeit In The Internet

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

Reportedly, the individual created e-shops working no more than 2-3 months, after which they were closed and new e-shops for the sale of similar products were created. The payments were done using e-payment systems and courier services were used for delivery of the goods to the customers. Further, several counterfeit phones obtained during test purchase done by police officers are well evidence of the committed crime.

As a 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 for recovery of damages. The investigation is still underway.

Brand protection publications

Brand Protection Practice: Results of 2014 (in Russian)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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