2 January 2019

On The Road Towards Legalisation Of Parallel Imports



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At the end of October 2018, the Federal Antimonopoly Service of the FAS presented a draft law to the Ministry of Economic Development aimed at partially legalising parallel imports of goods in Russia.
Russian Federation Intellectual Property
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At the end of October 2018, the Federal Antimonopoly Service of the Russian Federation (FAS) presented a draft law to the Ministry of Economic Development aimed at partially legalising parallel imports of goods in Russia (imports of original goods without the trademark owner's consent).

Russia is currently one of the few countries that apply the so-called principle of national exhaustion of rights with regard to trademarks. Since the Customs Union of Belarus, Kazakhstan and Russia was launched in 2010 (joined later by more countries), the national exhaustion principle has been accompanied by the principle of regional exhaustion applicable within the boundaries of the Union.

According to the principles of national or regional exhaustion, the trademark owner's rights are considered exhausted for a particular country or region once goods bearing the trademark have been put on the market in that particular country or region by the trademark owner or with its consent. The exhaustion does not extend to other countries or regions, which allows the trademark owner to prevent unauthorised use of its trademark outside the home country or region, including prohibiting parallel imports.

Currently, national exhaustion is adopted in a minority of countries, giving cause to consider it as a sort of anachronism. However, in the debates about the pros and cons of both principles, national exhaustion usually wins among brand owners. Still some Russian authorities, including the FAS, have a different opinion.

Over recent years, the FAS has consistently advocated the idea of moving from the national to the international exhaustion principle on the grounds of benefits for competition and for consumers. Among the benefits are a decrease in prices and the development of non-price competition by offering services of higher quality and other advantages. Representatives of the business community disagree, referring to risks of worsening the investment climate and growth in the volume of counterfeit goods.

Nevertheless, the idea of the international exhaustion of rights already found support in the Russian government back in 2015. The government agreed to authorise parallel imports of some goods, for instance medical supplies, children's goods and automotive parts. The relevant regulations were never finalised though.

The recent initiative proposes amendments to the Russian Civil Code in the part related to trademark rights exhaustion, however, the FAS is refraining from radical steps and suggesting only a partial legalisation of parallel imports.

The draft law mentions specific cases when parallel imports of certain goods may be permitted by the government. These are the goods that are in short supply or not available in Russia (including goods under sanctions), or overcharged goods, or goods whose quality significantly differs from the quality of the same goods sold in other countries. Parallel imports of such goods may be permitted for a term of up to five years. Additionally, locally produced branded goods may be excluded from this permission.

At the same time, the new draft law cannot be implemented until the relevant amendments are made to the current regulations of the Eurasian Economic Union (EAEU) establishing the regional though of exhaustion of trademark rights for its members. In April 2017, the Eurasian Economic Commission proposed an amendment into the EAEU Agreement allowing the Eurasian Intergovernmental Council to set the international exhaustion rule for specific goods for a limited period of time. As of today, the document has not been adopted by all member states. However, according to the website of the Eurasian Economic Commission, the matter will be discussed at one of the next meetings of the Eurasian Intergovernmental Council. Most likely legalisation of parallel imports in Russia is just a matter of time.

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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