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Incredible adventures of parallel import in Russia

I am sure that only a few months ago few people heard about parallel imports, and even fewer people knew what it was. Today, we constantly hear about him, and many believe that in the foreseeable future, thanks to him, we will return goods that many global brands now do not want to sell to Russians. The Union of Consumers of Russia for many years sought to lift its ban in our country, so I can now speak with a clear conscience about the meaning of these words, which you will not find in any legal act, and about the new law.

Parallel import is a short term for the importation into the country of goods marked with trademarks (brands) recognized in the given country, without obtaining permission for this from the right holder, the owner of the trademark. Our Civil Code has Article 1487 titled “Exhaustion of the Exclusive Right to a Trademark”, which establishes that “the use of this trademark by other persons in relation to goods that have been introduced into civil circulation on the territory of the Russian Federation is not a violation of the exclusive right to a trademark. Federation directly by the right holder or with his consent. Consequently, if the right holder did not import into Russia himself and did not give his consent to the import here of products protected by his trademark, then such import (parallel import) is recognized as a violation and should be suppressed by the authorities, and those responsible for it should be punished. As for imported goods, according to Article 1252 of the Civil Code of the Russian Federation, they “are considered counterfeit and, by a court decision, are subject to withdrawal from circulation and destruction without any compensation, unless other consequences are provided for by this Code.”

Here it should be noted that the fourth part of the Civil Code of the Russian Federation, where these articles are located, was adopted only in 2006, and before that such issues were regulated by the Federal Law “On Trademarks, Service Marks and Places of Origin of Goods”, canceled after its main norms were transferred to the Civil Code. Including this rule, formulated differently, but in meaning it is exactly this: the right holder has the “right of the first night” with the merchants of the country where they want to buy products under his trademark. In the language of lawyers, this is called the “national principle of the exhaustion of the exclusive right to a trademark”, in contrast to the international principle according to which the exclusive right of the right holder is exhausted at the moment when his goods have been legally imported into any country in the world. And then there is the regional principle. When exhaustion occurs at the time of the legal import of such a product into the territory of any country in a given region, for example, the European Union with its 27 members.

One should not think that the national principle of exhaustion of the exclusive right to a trademark was inherited by the Russian Federation from the USSR or was established in our legal system from the very beginning. The Soviet Union had a monopoly on foreign trade, the legal import of goods was carried out exclusively under agreements between state-authorized organizations with exporters who were guided by their national laws, so there was no need for legal regulation of this issue at all. In the Russian Federation, in 1992, the above-mentioned law “On Trademarks” was adopted, which established the international principle of exhaustion of the exclusive right to a trademark, just like in the USA, China, Japan, India, Canada and many other countries. Of the 15 largest economies in the world in terms of GDP, the international principle applies everywhere, except for the four countries of the European Union, where the regional principle is established, Russia, and Brazil, where the national principle applies only to right holders from countries with which there are no agreements on the application of the international principle.

The international principle that allows parallel imports greatly stimulates competition, preventing foreign right holders from dictating prices and terms of sale, as well as after-sales service and repair, to Russian importers and sellers of their products, which hinders competition between them and artificially limits the ability of consumers to choose sellers and services. That is why the owners of world brands, whom our authorities actively urged in the early 2000s to locate their production facilities in Russia, at least for the assembly line of final products, made the rejection of the international principle a condition of their investments in our country. And they achieved their goal: at the end of 2002, such an amendment was introduced into the law “On Trademarks”, and in 2006 it migrated to the new fourth part of the Civil Code of the Russian Federation.

In those years, I was a deputy of the State Duma and, together with my colleagues, voted for these changes, alas, without understanding their meaning and consequences. But soon I realized, having learned that foreign car models are sold in our country more expensive than in many other countries, and their owners, in need of repair or maintenance, are now forced to choose between official dealers of auto concerns, where it is very expensive, and “garage” workshops, where many times cheaper, but they do not have legal access to spare parts authorized by the manufacturer, or to technical documentation. And at the same time, 80 percent of post-warranty cars were serviced by “craftsmen”. That was the first time we appealed to the FAS with a call to return to the previous norm and found out that the antimonopoly agency was also concerned about this and was in favor of returning to the international principle. But neither then nor later did the government listen to either the opinion of the department or the opinion of consumer representatives.

We now often recall the saying “If there were no happiness, but misfortune helped.” This is exactly what happened with parallel imports – they remembered it when the import to Russia of many goods urgently needed both for final consumption and for the production of other necessary products was under threat. And already on March 8, a law was adopted giving the government the right to make certain decisions during 2022 that run counter to the norms of laws, including on the list of “goods (groups of goods) for which certain provisions of the Civil Code of the Russian Federation on protection of exclusive rights to the results of intellectual activity expressed in such goods, and the means of individualization with which such goods are marked. And on March 29, a government decree was issued instructing the Ministry of Industry and Trade to approve such a list at the proposals of the federal executive authorities, subject to the legal introduction of the goods included in the list into circulation outside the territory of the Russian Federation by the right holders or with their consent (it is assumed that this condition will exclude the legal importation of fakes into Russia brands). Such a list was approved by the Ministry of Industry and Trade by order of April 19, it contains more than fifty groups of goods, from toys to nuclear reactors, and since May 6, when this order was registered by the Ministry of Justice, all goods from this list can be legally imported into Russia by purchasing them in any country where they are legally sold.

Why, then, did the government need to introduce, and the Duma to adopt, a new law on the same thing? To me, I confess, this is incomprehensible, and there is no explanation in the explanatory note to it. Perhaps for those reasons that the norm of the Civil Code should not be replaced by the chain “law – government decree – order of the ministry”, but directly by the norm of the law. However, in the Civil Code of the Russian Federation, the national principle of exhaustion of the exclusive right to a trademark has not yet been replaced by an international one, its action is only temporarily suspended until better times for the return of departed brands to Russia. Therefore, from the point of view of responsible businessmen, it is risky to seriously invest in the organization of parallel imports: at any moment it may again be banned. I think that such a fear will significantly reduce the effect of the decisions taken by the authorities.

Consumers need to understand that as long as the Civil Code maintains such a rule, manufacturers of goods imported in parallel will not recognize their warranty obligations and obligations to ensure the possibility of their repair and maintenance. This means that claims can really be addressed only to domestic sellers and importers, who, being unable to repair and often replace low-quality goods, will have to return the cost to the consumer. And the manufacturer of low-quality products will not reimburse them for these costs, as before, when he himself was a supplier, so they will have to be included in retail prices, which are likely to rise.

As for the state, I can’t understand how it can, defining its main task to protect the sovereignty of the country, voluntarily preserve the unique dependence of the economy and consumers on the permission of foreign manufacturers of goods sold around the world to sell them also in Russia.

Source From: MK

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