Ukraine: Brands & Trends 2017. Issue II

Last Updated: 28 March 2017
Article by Oleksandr Padalka and Oleg Klymchuk

GEOGRAPHICAL INDICATIONS: Great 15 Geographical Indications Enforced First

The EU-Ukraine Association Agreement (the "Association Agreement") has taken effect on 1 January 2016. Since that long-awaited date, thousands of the European geographical indications enjoy protection under the Association Agreement. Article 208 of the Association Agreement also provides for 10-year and 7-year transitional periods for specific brand names of beverages and cheeses, respectively; Ukrainian producers still may use them during such transitional periods and until stocks run out. In particular, a 10-year transitional period is applicable, for example, to Champagne, Cognac and Tokaj (12 brand names in total), while a 7-year transitional period is applicable to Parmigiano Reggiano, Roquefort, and Feta cheeses (let's call them "Great 15" or "G15"). There were some reasons to expect that G15 brands will be enforced first by the rights holders. However, to everyone's great surprise G15 brands were first enforced ex officio by the Territorial Offices of the Antimonopoly Committee of Ukraine (the "AMC"). In this newsletter, we are highlighting two cases with different outcome for Great 15 brands.

Final Countdown for Ukrainian Parmigiano Reggiano, Roquefort, and Feta Cheeses

As far back as in mid-2013, the AMC Kyiv Territorial Office launched ex officio unfair competition investigation in the Milkiland-Ukraine (the "Producer") case. The AMC argued that the Producer was distributing misleading information about consumption characteristics of cheese produced by it and bearing Cyrillic transliteration of the "Roquefort" designation (the "Cheese"). The AMC further argued that the Cheese was produced in Ukraine according to Ukrainian local requirements, although genuine Roquefort cheese originates from a territory in France and enjoys appellation of origin status. The AMC found the Cheese in one of the Kyiv-based stores.

For some reasons, the investigation was delayed until the effective date of the Association Agreement (i.e. until 1 January 2016). As we understand, this is mainly due to the circumstances of execution of the Association Agreement in 2014 and further geo-political developments. Finally, on 1 January 2016, the Association Agreement entered into effect, including Article 208.

The AMC decided to apply Article 208 of the Association Agreement that provides a 7-year transitional period for Roquefort cheese and... closed investigation against the Producer on that ground.

Three days after such decision, the AMC published an official notice on its web site informing the Ukrainian cheese producers that they may use Parmigiano Reggiano, Roquefort, and Feta designations for their products during the 7-year transitional period.

Apparently, the AMC instinctively applied Article 58 of the Ukrainian Constitution rather than Article 208 of the Association Agreement retroactively, as geographical indications provisions of the Association Agreement do not have retroactive effect (NB: Article 58 of the Ukrainian Constitution stipulates that laws and other legal acts do not have retroactive effect unless they commute or cancel a personal liability).

To some extent, it may be a sad scenario for G15 brands. However, good news for EU is that this is final countdown for placing G15 brands at Ukrainian products. Less than six years remain to ending the transitional (safe harbour) period...

TOKAJ / TOKAJI Protected Designation of Origin Protection: Most Favorable Treatment

In July 2016, another westernmost AMC Territorial Office declared local production of wine bearing "Tokaji" designation as unfair competition, namely, distribution of misleading information (Article 151 of the Law of Ukraine "On Protection Against Unfair Competition"). The AMC imposed a fine and prohibited using "Tokaji" designation for labelling the products of the Ukrainian winemaker. In this case, the AMC also acted ex officio.

In its decision, the AMC pointed out that Tokaji is the name of wines from the Tokaji wine region in Hungary or the adjoining Tokaji wine region in Slovakia (since 2006, TOKAJ and TOKAJI are registered as PDOs in EU). Interestingly, the AMC relied on information about TOKAJ / TOKAJI protected designation of origin (the "PDO") that may be found in the E-Bacchus database, without applying either the TRIPS Agreement or the Association Agreement ("Tokaji" PDO is protected under the Association Agreement and, with effect from 1 January 2016, a ten-year transitional period applies to using "Tokaji" designation for labelling of Ukrainian wines). Information from the E-Bacchus database was generally sufficient for the AMC to get convinced that using "Tokaji" designation by Ukrainian winemaker misleads consumers regarding geographical origin of the wine.

The Ukrainian winemaker challenged the AMC decision to the court. The winemaker argued that the AMC decision is meritless because it produces COTNAR TOKAJI muskat semisweet wine according to the respective production specification duly approved by Ukrainian authorities, and it owns trademarks that also bear Cyrillic transliteration of "TOKAJI" designation. The winemaker also argued that labels of its products specify the producer's details and the place of production, local state standards applied, and information about grapes used for production of wine. According to the winemaker, all the foregoing information disproves that placing "Tokaji" designation on the labels of its products misleads consumers with respect to the geographical origin of the wine.

Having considered the case, the court of first instance agreed with the position of the AMC and left the AMC decision standing. The court of appeal further upheld the decision of the court of first instance.

Perhaps, the decision of the court of appeal is not a final one in this dispute; we are monitoring the case to see whether it will be further appealed to the cassation court. However, from current perspective, this case perfectly demonstrates that a mere fact of using the PDOs registered in EU may suffice for the AMC to declare such use as unfair competition, namely, dissemination of misleading information. It is especially true for the AMC territorial offices located in the West of Ukraine, where locals have closer relations with EU countries neighbouring Ukraine.

Actually, the AMC, the court of first instance, and the court of appeal acted proactively in the case and took position favourable to the European PDO. It is not clear yet whether the cassation court will have an opportunity to say its decisive word in the case. So far, the score is ″3 :0″in favour of "Made in Europe".

UNFAIR COMPETITION: REHAU Opens Window to Resolving Domain Disputes Through AMC

Exploitation of famous brands in URL strings has been a pain in the neck for a huge number of the rights holders. Despite strong efficiency of UDRP, URS proceedings are enabling the rights holders to immediately respond to the infringements in (g)TLDs, the latter are not applicable to SLDs. Whilst some jurisdictions introduced the rules to handle disputes over particular SLDs, Ukraine is not an active player in this field. In such a case, the business strives to find efficient alternative solutions to the court case scenario. In the case below, the affected business managed to resolve SLD dispute by invoking the unfair competition laws.

Late in 2015, REHAU LLC, a Ukrainian subsidiary of a well-known world producer of window systems and a licensee of REHAU trademark in Ukraine (the "Applicant"), filed an unfair competition claim (the "Defendant") with the Kyiv Territorial Office of the AMC. The application was filed against "REHAU PRODUCTION COMPANY" LLC. The Applicant argued that the Defendant unlawfully exploits REHAU trademark in its corporate name, domain name, and at the web site hosted at that domain without the Applicant's consent. According to the Applicant, this may cause confusion with the Applicant's business. The Applicant also argued that it has started using REHAU trademark earlier than the Defendant. According to the Applicant, the Defendant neither affiliated with the Rehau group of companies, nor is a part of the authorized distribution network.

The position of defence was weak. Obviously, a mere reference to the name of a German city does not suffice to justify the use of REHAU brand in such evidently parasitic copying case. Therefore, it would have been quite natural for the AMC to declare the Defendant's activity as unfair competition and impose a fine.

However, what was a surprise is that the AMC issued a binding order to remove REHAU trademark from domain name and from the Defendant's corporate name.

The above case is a positive signal for brand owners that in some cases unfair competition action may be a good alternative to trademark infringement court scenario. However, the enforcement of such AMC's binding orders does not seem to be a straightforward procedure, as there is no specific liability for a failure to comply with binding orders of the AMC. If a defendant is reluctant to remove a trademark from a domain name or a corporate name voluntary, the AMC will have no other alternative than to bring an action to the court. A failure to comply with the court judgment may result in criminal liability for Defendant's officials. The latter should be a convincing argument to cease dishonest practicе.

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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