When the parallel import is a constitutional matter

Russian constitutional court has prohibited application of the similar sanctions for parallel import and for selling of counterfeits.  One Russian company PAG has concluded state contract for supply to medical institution a special paper under Sony mark for ultrasound scan. Such paper Russian company has acquired from Poland company and imported to Russia. The customs has seized the paper under the order of commercial court of Kaliningrad province.

Sony Corporation has filed a suit on protection of exclusive rights in Sony’s trademark and required to prohibit import, selling and retention the paper in Russia. The Russian company has been prohibited to retain, import or selling of Sony’s products. The Russian company also was ordered to pay 100 thousands Roubles compensation and the paper has been seized. The appeal and cassation has affirmed decision of commercial court. The Russian company has filed a suit to Russian constitutional court.

The Russian company believes if the trademark is placed on a good illegally, such good is counterfeited. But the paper for ultrasound scan is original and officially produced by the Sony; therefore there is no fact that the trademark has been placed on a good illegally. The application of the similar measures (seizure, destruction and seeking compensation) for counterfeited goods, illegally marked with trademark, as well as for original goods, legally put into the market of one country by right holder or its official distributor, but imported in Russia by other importer (parallel import), violates principles of legal certainty and justice and integrity of private property provided in Russian constitution.

The court considered the case of parallel import, when the original legal goods are imported into the Russian internal market from abroad without the right holder’s consent. In such cases the goods are imported not by right holder or its official distributor, but other legal entities – i.e. importers. Such system of distribution cause the conflict of interests – interests of right holders and importers. Right holders claim absolute authority to control a parallel import. According to the court’s position the global trade and economic sanctions against Russia urge the problem of exhaustion of rights in trademark, which is judicial restraining of the legal monopoly to exploit the exclusive right in trademark.

But the court believes that the right holder can unfairly exercise its exclusive right in trademark and intervene with the import in Russian internal market of certain goods or cause increasing of prices on its goods in Russian market. When the right holder abuses its exclusive rights in trademark, the court can deny the right holder’s claim partially or in its entirety if satisfaction of right holder’s requirements can threat to constitutional matters. When the court considers the question of compensation for parallel import, it must take into account all factual circumstances of the case at issue.

It is not admissible when the importer of original goods importing such goods into Russian internal market without right holder’s consent and the importer of counterfeited goods bear the same liability, excluding the cases when the damages from import of original goods without right holder’s consent are comparable with damages from import of counterfeited goods. Destruction of goods, imported in Russia without right holder’s consent, is admissible only if such goods are of inappropriate quality or in order to protect the life and health of people, nature and cultural values. Therefore, the case of Russian company is to be reconsidered de novo.