The Russian government legalizes parallel imports as a remedy to counter the stoppage of deliveries by foreign producers

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OOn March 30, 2022, the Prime Minister’s Office announced the legalization of parallel imports into Russia, following Russian Government Resolution no. 506 of March 29, 2022. The resolution is based on Federal Law No. 46-FZ of March 08, 2022, which grants the Russian government the power to suspend or terminate intellectual property rights under certain circumstances, and takes effect from from the date of its publication, namely March 30, 2022.

Specifically, the resolution provides that Part 6 of Article 1359 and Article 1487 of the Russian Civil Code will not apply to certain goods (or product groups) which are identified by the Ministry of Industry and trade.

The provision of Article 1359 permits the import and sale in Russia of products protected by a patent for invention, utility model or industrial design only by or with the consent of the right holder. Section 1487 contains an identical provision for trademarks.

This reflected the principle of national exhaustion of intellectual property rights, which is in fact already in place at the regional level for all states of the Eurasian Economic Union (EAEU: Russia, Belarus, Kazakhstan, Kyrgyzstan, Armenia). As a result, intellectual property rights (patents for inventions, utility models, industrial designs and trademarks) are exhausted once the goods enter one of the EAEU countries and then enjoy free circulation within the Union without the need for the additional consent of the owner of the intellectual property right each time a national border is crossed. The lifting of the aforementioned provisions of the Civil Code will instead introduce the so-called doctrine of international exhaustion. Once the relevant goods have been identified by the Ministry, their importers and dealers shall not be liable for the use of the inherent intellectual property right in Russia without the consent of the right holder upon the first legal sale of the goods, wherever it occur in the world.

The authorities noted that the doctrine of international exhaustion is applied in a number of jurisdictions, for example in Japan, and that the political objective is to support the Russian economy, no doubt in the exceptional context which arises from the Ukrainian crisis and international sanctions imposed by the European Union, the United States and other countries.

In March 2022, about 200 foreign companies announced that they had ceased operations in Russia, including famous brands such as Nike, Adidas, Lego, IKEA, Samsung, BMW, Chanel, INDITEX, Kering, LVMH, Prada, Cartier, Procter & Gamble , Nokia, Dell, IBM, Shell, Eni, Bosch, Xerox, Michelin, Bayer, Pfizer, Novartis, Merck, Lavazza, Starbucks. However, most companies have effectively only suspended their import and retail operations, but have maintained the availability of premises and employees on their payroll, and may resume operations in Russia.

On April 11, 2022, the Russian Patent and Trademark Office (Rospatent), in a press release to the Russian press, reported that the government had developed a general approach to the selection of goods admitted to the new import regime parallel, according to which the protection usually granted by the intellectual property right is, for practical purposes, reserved for goods whose importation and sale have been suspended or terminated by the owners of the right.

Later, on April 25, 2022, the Russian press reported that the list of products and brands was being prepared by the Ministry of Industry and Trade and submitted for approval to the Russian Ministry of Justice. Based on the information available, parallel imports will be legalized for a wide range of products. A government official indicated that the list will be adapted to any changes in the current situation, so that brands or products may be included or excluded from the list depending on whether the foreign companies concerned maintain an official presence and activities in Russia. .

The current list includes Tesla, Land Rover, Jaguar, Chrysler, Bentley, Cadillac cars, parts for Volvo, Hyundai, Nissan and Volkswagen cars, and Michelin, Goodyear, Continental, Bridgestone tires. Even though the list of brands included in the new parallel import regime for car parts can be considered mass market, the cars themselves are premium brands with a moderate market share.

The list also includes all goods produced by Apple, Hewlett Packard, Intel, Nokia, Sony, Panasonic, Samsung, Asus, including consumer goods and telecommunications and other equipment. Electrolux, Miele, Siemens and Dyson as brands of household appliances, Xbox, PlayStation and Nintendo as gaming devices are also included in the parallel import regime. It was not surprising that the list of goods included in the parallel import regime included all clothing and footwear, regardless of brand.

A ministry official previously informed the press that the list of brands included in the parallel import regime may include foreign companies that have voluntarily suspended their operations and imports into Russia following the Ukraine crisis, but not all. Thus, the criteria that will apply to the establishment of the list are not entirely clear and one can expect a certain political latitude.

Information available on the official government website indicates that all goods remain subject to all relevant import customs procedures and controls, as well as all inherent maintenance and service obligations. It has been observed that the new regime does not legalize counterfeit products, which remain illegal in Russia, although the discovery and fight against counterfeits may become less effective as a result.

The government has indicated that the legalization of parallel imports can help ensure sufficient supply of necessary goods and stabilize prices in the current context created by the Ukrainian crisis. However, industry representatives indicated that the legalization of parallel importation in the absence of additional control by foreign producers is likely to increase the volume of counterfeit goods, in particular counterfeit clothing and shoes are expected to increase by up to 50% in volume, as well as their prices.

On the other hand, the main consequence of the legalization of parallel imports on the basis of an unsophisticated criterion such as that of simple international exhaustion will be the deprivation of foreign right holders of their intellectual property rights resulting from a complex network of international treaties and conventions to which Russia has been a party for decades, if not centuries, cannot, by any reasonable standard, be seen as an incentive to continue their presence in the country in an already complex context. On the contrary, it could well contribute to the eventual decision of foreign companies to withdraw permanently from Russia.

An additional circumstance affecting the future presence of international brands and foreign companies in Russia is that imports under the current circumstances face significant logistical and payment hurdles, which may prove to be an additional deterrent to both existing foreign rights holders and potential new exporters.

One would be tempted to say that the Russian Federation’s intellectual property rights and long-standing participation in the global intellectual property system have fallen victim to the “friendly fire” of a geopolitical confrontation that is taking place on entirely different fronts. different.

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