What next for the BRICS group?

In the beginning, it was simply felt that the member countries had bigger growth rates than other industrialised countries. It was never planned that they would form a kind of economic union or a trade association.

But as time went on, it became clear that those countries were beginning to be characterised by more common interests. There are now signs that the BRIC countries are becoming aware that their growing economic power may be translated into political influence.

There have already been a number of meetings of the BRIC countries, the last one being in Beijing, China, where it was officially announced that the Republic of South Africa would join the club, making it the BRICS group.

Indeed, taken as a whole, the BRICS countries can boast a unique combination of all the prerequisites needed to take the lead in the world. Russia and South Africa have the richest natural resources, Brazil is famous for its agricultural products, and China and India have cheap labour forces and manufacturing capabilities.

All that taken together may create powerful economic and political clout. Besides, there are discussions about other countries as potential members of BRICS. It cannot be ruled out that the BRICS acronym may soon become obsolete and analysts will have to coin a different designation to characterise the growing group of countries gaining more weight in the world.

Given the new situation, more and more investors are beginning to look in the direction of the BRICS countries. Indeed, the BRICS countries contain half the world’s population and that number is growing. The markets are enormous. That is why one may expect a proportionate growth in IP activities in these countries.

In Russia, the number of trademark and patent applications has steadily grown over the years, notwithstanding the crisis several years ago. There were 47,000 trademark applications filed in Russia in 2005, and almost 57,000 in 2010. Likewise, the number of patent applications grew in that period. This demonstrates investors’ growing interest in Russia.

Along with the growing number of filings comes an increased number of disputes of various kinds. The solutions for these are varied. The most conventional way is to initiate a court action, be it administrative, civil or criminal. A method of retaliation that is becoming more popular is to seek ways to invalidate the IP (a trademark, for example) and thus take away the weapon from the attacker.

Because of that, before making claims against the infringer, a trademark owner should always check whether their ownership of the trademark is secure. The most popular cancellation action is related to non-use. According to the law, if a trademark is not used during three consecutive years, it can be cancelled by an interested person.

Two questions arise in this connection: what is the correct use and who is an interested person? Very often trademark owners do not use trademarks in Russia themselves, but grant licences to other persons or sign distribution agreements with their dealers in Russia. Also, the goods bearing their trademark may come to Russia through a chain of intermediaries.

The traps here are such that even if a licence is concluded and properly registered with the patent office, the licensee may not use the trademark according to the licence. Hence, it will be impossible to prove the use of the trademark even if there is a licence.

A distribution agreement may have provisions on the goods and related terms, but fail to mention the trademark. Again, it becomes vulnerable for a cancellation action. The trickiest case is where supplies come through several go-betweens.

"In disputes of this kind, the trademark owner should prove the infringing use of the trademark in Russia, while the importer should prove that they have the permission of the trademark owner to use the trademark."

Often, the traces of ownership of the trademark are lost on the way. Unfortunately, this is a rather frequent occurrence. Hence, it is necessary not only to properly draft buy and sell documents, but also see to it that the trademark is mentioned in every document, so that the chain of ownership can be easily traced from the owner to the end distributor in Russia.

All the documents that testify to the use of the trademark should be carefully kept. The documents may be contracts, invoices, customs declarations, advertisements, publications in the media, and others. A related problem is defining an interested person who may file a cancellation action.

This problem stems from past practice, when the interested person was very often a trademark pirate who monitored the use of the trademarks and filed cancellation actions together with a letter to the trademark owner proposing to recall the cancellation action in exchange for the payment of a certain amount of money. The amount differed depending on the value of the victim trademark.

The cancellation action was often accompanied by the pirate filing an application for the same trademark, complicating the situation of the trademark owner even more.

Finally, this matter went to the Supreme Arbitration Court, which ruled that an interested person in connection with a cancellation action may be any person having lawful interest in the invalidation of a trademark. Persons with lawful interest are those who produce similar goods or render services, who have a real intention to use the disputed designation and who have made the necessary preparation for such use.

This significantly limits the number of persons eligible to cancel trademarks due to non-use. Some points need to be mentioned with regard to international trademarks.

A trademark may be cancelled on relative grounds in the five years after registration. If the trademark is international, its date of registration is important. It may be either the date of publication by WIPO’s International Bureau when territorial extension is made or the date of publication by WIPO to the effect that protection is granted in Russian territory.

This matter is not regulated by Russian law, which was the reason for much misunderstanding. Finally, this issue was considered by the Supreme Arbitration Court, which ruled that calculation of the date should be made from the date that WIPO publishes a statement to the effect that the international mark has obtained protection in the Russian territory.

This introduces clarity to the situation and sounds reasonable. Indeed, when the territorial extension is made, the status of the mark is not clear in that the patent office may still issue a preliminary refusal of protection, which may in some cases become permanent.

Another controversial issue in connection with trademarks is parallel import. Parallel import has had a difficult fate in Russia. Ambiguous understanding of the relevant provision of the Russian law led to a situation where people on both sides (trademark owners and parallel importers) interpreted the law in their own interest.

There was a relatively short period of time when administrative cases were initiated by customs and different courts issued opposite judgments. That uncertainty was put to an end by the Supreme Arbitration Court, which stated that the provisions of the Code on Administrative Offences should not be applied to parallel import cases. After that, the number of civil procedure cases grew, again with the opposite results.

In this case again, some of the cases went up to the Supreme Arbitration Court, which has confirmed (so far in several individual disputes) that import of a product without permission of the trademark owner shall be considered as infringement of the exclusive rights of the trademark owner even though the importer himself did not label the relevant product with a trademark and the product was original.

The judgments of the Supreme Arbitration Court set forth a very simple rationale: in disputes of this kind, the trademark owner should prove the (infringing) use of the trademark in Russia, while the importer should prove that they have the permission of the trademark owner to use the trademark.

The trademark owner can always prove their part, while the parallel importer can never prove theirs. Hence, the Supreme Arbitration Court made clear its attitude, which will be taken into account by other courts in future cases.

For the sake of completeness, it should be mentioned that the Russian Antimonopoly Service came up with an initiative to amend the law to make the exhaustion of rights international instead of national. It is not possible to predict how this initiative will develop; however, this attitude has supporters, who argue that the ban on parallel import curbs competition.

Though there are more of these problems in Russian IP, they are being solved, and this trend puts Russia on an equal footing with other BRICS countries, which each have their own problems that they are working on.

Vladimir Biriulin is a partner and chief of the legal department at Gorodissky & Partners. He can be contacted at: biriulinv@gorodissky.ru