Uzbekistan: Anti-Counterfeiting Measures In Uzbekistan In The Absence Of Customs Recordation: Recommendations To Brand Owners

Last Updated: 9 August 2016
Article by Mukhammadali Makhmudov

Foreign manufacturers and brand owners as well as Uzbekistan-based official or exclusive importers of branded goods are facing pressing challenges in connection with promoting their proprietary products, protecting their reputation and image, and dealing with counterfeiting and pricing strategies of unscrupulous competitors.

Legal possibility of banning unauthorized importation of goods and products into the customs territory of the Republic of Uzbekistan is one of the most efficient tools that can be used to protect exclusive rights of a trademark owner or its official representative.

Unauthorized importation or use of a trademark means any importation of goods and products for commercial purposes, their storage, advertising, or offering for sale by individuals or organizations not permitted by the trademark owner or its representatives authorized under a power of attorney or a license agreement.

In most countries, unauthorized and illegal importation of goods is prevented by entering a product trademark into a special stop list, usually called a "customs registry". Customs recordation is provided by the laws of EU countries, the USA, Russia, Belarus, Kazakhstan, and many other countries, and has already proved its efficiency.

We, however, regret to note that, as at November 1, 2015 the laws of Uzbekistan do not provide legal frameworks for introduction or enforcement of customs protection measures in the form of customs recordation. Business community and foreign investors have been in anticipation of adoption by the Uzbekistan parliament of the revised customs code which, possibly, contemplates the customs recordation system (at least it appears to be so in the draft customs code promulgated by the Uzbekistan State Customs Committee); however, whether the respective section will actually be included into the final version of the code remains to be seen, and the timeline for the revised code adoption is unclear.

Does this mean that the law does not grant customs protection to exclusive rights of trademark owners? Thankfully, no. Evidence of this is the fact that Uzbekistan customs authorities have been monitoring the imports and denying customs clearance in relation to consumer goods and alcohol products under more than twenty internationally recognized trademarks that were attempted to be imported into the country without due notification to or permission of the respective brand owner and the original product manufacturer.

In most cases, official distributors or vendors import original goods or products into the country with the permission the brand owner. At the same time, however, same products under the same trademark may be imported by other companies without notification to or permission of the trademark owner. This process is called "parallel import".

One should note that businesses and trademark owners often fail to see the difference between the notions of "parallel import", "grey import", and "black import".

The same goes for the notions of "counterfeit goods", "fake goods", and "contraband goods" which all have very different legal meanings but are often used as interchangeable in day-to-day dealings.

The laws of Uzbekistan do not contain any legal instruments that can be used to legally define goods as non-original or to classify them as "counterfeit". This is due to the fact that the only legal definition of the term "counterfeit" is contained in Article 62 of the Law of the Republic of Uzbekistan "On Copyright and Allied Rights"; however, it is only applicable to copyrighted works used or reproduced in breach of copyright or allied rights. The law does not contain any other criteria or definitions which can be relied upon in classifying goods as being counterfeit. That presents a significant obstacle in forecasting legal risks associated with actions aimed at preventing infringement or protecting rights, or with interaction with governmental authorities.

Given the legal ambiguity of the term "counterfeit", in Uzbekistan the term "counterfeit products" usually refers to non-original or so-called fake goods usually marketed under trademarks of a certain (as a rule, well-known) owner.

The market presence of counterfeit goods has adverse implications for brand owners and bona fide manufacturers, on the one hand, and for such products and services consumers and public in general, on the other hand. Counterfeit products materially harm reputation of brand owners and their official representatives, push down product quality, and render impossible warranty servicing or replacement of goods. Moreover, in case of pharmaceuticals, foodstuffs, or products of adjacent industries, counterfeiting carries a potential risk to the consumers' life or health, and affects brand perception; counterfeit goods makers cannot be reached by consumers for feedback and do not bear any warranty obligations.

In terms of financial damage, counterfeiting not only results in lower sales by official importers and distributers; it also threatens the country's appeal for investors and undermines investments in domestic manufacturing as importation of identical goods that cannot be controlled by the brand owner inevitably affects the cost of domestically produced original products.

All that being said, what preventive measures and legal remedies are available to domestic and foreign brand owners to protect their trademark and patent rights? To answer this question, one should firstly note that national intellectual property (trademarks and patents) protection laws are based on the national principle of rights exhaustion. The current customs laws authorize the customs authorities to restrict importation or exportation of goods that potentially infringe intellectual property rights. The key challenge, however, is that neither the Customs Code, nor any other regulations contain any mechanisms for this authority exercise by the customs authorities.

Given the lack of a detailed regulation governing the relations between the brand owner and the customs authorities, and between the customs authorities and infringing importers, the only way for brand owners to have the customs authorities assume the obligation to monitor customs clearance of goods bearing certain brand names is to initiate a legal action to discontinue the trademark infringement. Thus, the court may oblige the customs authority to monitor customs clearance of goods bearing the brand owner's trademark.

As follows from the review of prior court decisions by the Supreme Business Court (dated between 2011 and November 1, 2015), all court disputes of this category were resolved in favor of brand owners; Legalmax lawyers and patent attorneys were involved in each case.

As the issue at hand is extremely important and urgent for the business community, and as some companies have already brought individual actions claiming customs protection, we believe it would be possible and necessary for us to issue certain recommendations regarding proper execution of such legal actions; since correct presentation of facts, determination of parties involved in the dispute, and elaboration of claims eventually underlie origination of legal precedents and, therefore, of guarantees of the brand owners' rights protection.

As regards parties to a court case and their status, one should note that customs authorities may not be defendants in such disputes as, under a general rule, a defendant can only be a person who infringed or may potentially infringe the claimant's legally protected right. However, as there is no institution of customs recordation in the country, today the customs authorities are under no obligation (i.e. ex officio) to initiate monitoring of any goods infringing rights of any brand owner. Hence, customs authorities are completely relieved from any fault or resulting liability if some infringers import into the country's customs territory any cargoes infringing a brand owner's intellectual property rights.

We believe it would be more appropriate to involve customs authorities in a legal case as a third-party intervener; the court, in turn, may oblige such third-party intervener to monitor customs clearance of the goods that may infringe intellectual property rights of the claimant (the brand owner) as provided by Article 9 of the Customs Code of the Republic of Uzbekistan.

Furthermore, the customs authority's status as a defendant entails its obligation to take procedural measures to challenge any court rulings against it. Given possible uneven "weight category" of the customs authority as a party to a court dispute, this may create unnecessary major difficulties and risks for the brand owner.

As favorable decisions passed in prior cases involving our firm demonstrate, the defendant must be the importer being the direct customer or recipient of the goods bearing marks infringing the brand owner's rights. The choice of the importer as the defendant is also due to the fact that, should the court issue an injunction against the exporter that shipped the goods, i.e. the company based outside of Uzbekistan, the enforcement of such decision will be in most cases very difficult, and sometimes impossible.

Moreover, infringers who are interested in "parallel" or "grey" import of goods tend to change their exporters based on a number of factors. Therefore, it will be easy for them not to comply with the court decision by simply switching to another channel of supply or changing the supplier which will render useless prior court decisions against an individual exporter.

Apparently, the above recommendations and analysis are not exhaustive in their nature and are not universally applicable; however, deeper insight in to the needs of the bona fide brand owners and their distributors brings us to the conclusion that the ultimate goal of initiating court action for customs protection is not to merely ban goods exportation by an individual foreign exporter; rather, it is to oblige customs authorities to monitor customs clearance, i.e. importation of goods by all prospective third party importers without limiting monitoring to an individual infringer (who can, in turn, engage various recipients or customers to handle the importation).

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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