Prohibition on Parallel Imports Does Not Contradict the Constitution
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The Constitutional Court of Russia has confirmed that the prohibition on parallel imports is constitutional and established criteria to be applied in the relevant disputes.
Russian legislation provides for the national principle of exhaustion of trademark rights implying that the import of genuine goods into Russia without the consent of the trademark owner is prohibited.
Position of the RF Constitutional Court
1. The prohibition on parallel imports and the provisions on liability for the import of gray goods do not contradict the Russian Constitution, and are in compliance with the international agreements to which Russia is a party (e.g. the Treaty on the Eurasian Economic Union).
2. When considering cases on parallel imports, courts may at their own discretion completely or partially refuse to grant the claims of the rights holder in those cases when the bad faith conduct of the rights holder itself results in a threat to the life or health of people or other publicly important interests.
3. The Constitutional Court confirmed that the legal remedies for import of counterfeit (fake) products can also be applied to import of gray goods. However, to keep the balance of rights, the severity of the sanctions in parallel imports cases should be significantly less compared to cases involving counterfeits.
The confiscation and destruction of gray goods is possible only if they are of improper quality or if their introduction to the market would create a risk to people's life or health, the environment or cultural interests.
The amount of trademark infringement compensation in cases involving parallel imports should be significantly less than in cases involving the import of counterfeit products, except in instances when the rights holder suffers significant losses, comparable to the losses resulting from use of trademarks on counterfeit products.
4. Under certain circumstances, the actions of the trademark owner aimed at the prohibition of parallel imports may be considered as bad faith actions violating the legislation on unfair competition.
In the Constitutional Court's view, such actions cannot be considered legitimate if they limit access to certain vitally important goods (certain categories of medicines, equipment which is necessary for life support, etc.) or are carried out as part of a sanctions regime against Russia.
Possible consequences for business
1. When considering cases on parallel imports the courts must take into account the position of the Constitutional Court that the confiscation and destruction of gray goods is possible only in exceptional instances (for example, if these goods are of improper quality) and the amount of trademark infringement compensation for the import of gray goods should generally be less than the compensation for bringing goods to market that are illegally marked with trademarks.
2. The actions of rights holders against parallel imports may potentially be considered as unfair competition by the anti-monopoly authorities (for instance, if they limit the import of certain categories of goods or if such actions are carried out in pursuance of a sanctions regime against Russia).
3. The question of whether a refusal to allow the import of genuine goods can be considered as bad faith can be reviewed separately by the anti-monopoly authorities and courts, where rights holders will be requested to prove that they are acting in good faith (for instance, by providing market research). The Constitutional Court did not provide any clear criteria for evaluating the good/bad faith of the rights holder.