Courts strengthen position re international trademark exhaustion principle in Ukraine

The Kyiv City Commercial Court (the "Court") has recently ruled that using a trademark in promotional materials and by placing it on a web-site (SK note: e-shop) with the purpose of indentifying the genuine products labelled with such trademark cannot be treated as infringement of rights of a trademark holder. The Court also pointed out that the respondent does not use the trademark for labelling its own products, but only for promotion and sale of genuine products.

This decision is currently perceived as an additional reason to believe that there is international exhaustion of trademark rights in Ukraine. It should be emphasized that the Ukrainian Trademark Law is not certain with respect to the trademark exhaustion principle in Ukraine. Thus, this legal gap is currently filled by court practice.

The Ministry of Revenue and Duties holds Round Table Dedicated to "Grey" Import Counteraction

In late May 2014, the Ministry of Revenue and Duties of Ukraine held the round table with business people (mostly right holders) regarding "grey" import counteraction. During the round table mainly the following issues have been discussed:

  1. Currently it is not mandatory to fill in the relevant graph in the customs declaration with respect to availability of a trademark provided that the trademark availability is not indicated in the shipping documents. Business community claims that such state of play undermines the effectiveness of the State Customs Register of Intellectual Property Rights. Also, to circumvent the Register mentioned above some applicants change nomenclature of the goods supplied or use the so-called disguise goods. Thus, right holders ask the Ministry to take actions to make a trademark declaration mandatory and to more actively combat against smuggling.

    In response to the above, the Ministry representatives informed that they do not welcome (i) strengthening the requirements on indication of trademark availability and (ii) granting more powers to customs officers to identify trademarks, because it sophisticates customs clearance of the goods.
  2. The doctrine of exhaustion of trademark rights is not well defined in Ukrainian law that diminishes a chance of trademark holders to protect their rights in the Ukrainian courts where unauthorized delivery of goods is detected by the customs office. Although best practice speaks for international exhaustion, the business community suggests implementing the national exhaustion of rights. The Ministry supports the business in this regard and hopes that the Ukrainian Trademark Law will be amended accordingly.
  3. A representative of a producer of household appliances suggested that all producers of household appliances should have warehouses in Ukraine to ship the goods located in the Ukrainian territory. They believe that using warehouses in neighbouring countries results in minimization of public duties to be charged on the Ukrainian territory. The Ministry representatives pointed out that they are well aware of this issue and are working on its resolution.
  4. The Ministry representatives voiced their position to restore criminal liability for smuggling of goods (SK: today there is criminal liability for smuggling drugs and weapon). They believe that it should improve the situation with respect to combating "grey" import. So far, due to the absence of criminal liability for smuggling, they only investigate and prosecute for tax evasion.

Upcoming Long-Awaited Improvement of Trademark Protection

Members of parliament initiate long-expected amendments to the Ukrainian Trademark Law pertaining to improvement of protection of rights of trademark holders.

Specifically, it is suggested to set up a legal instrument for trademark holders to recover statutory damages (one-time penalty) instead of actual damages. The amount of the statutory damages is expected to range from 10 to 50,000 minimum statutory salaries (currently minimum salary is UAH 1,218 which is about USD 100). The key qualifications for judges to consider a particular amount of statutory damages are suggested to be (i) the scope of infringement; and/or (ii) intentions of a defendant. The relevant Draft Law on Amendments to the Ukrainian Trademark Law (the "Draft Law") does not suggest specific qualifications and specific ranging of the statutory damages for domain disputes or other regulations to facilitate defining the damages (e.g., calculation per counterfeit mark per type of goods or services sold, offered for sale, or distributed).

The Draft Law has been registered by the Ukrainian Parliament and is expected to be considered as soon as it is put into the agenda of the latter. The Draft Law has been already supported by the Community Council at the Ukrainian Trademark and Patent Office. Sayenko Kharenko initiated further support of the Draft Law through the American Chamber of Commerce in Ukraine to have it finally adopted by the Parliament.

We believe that the introduction of the said amendments to the Ukrainian Trademark Law can become a powerful instrument for more efficient protection of IP rights.

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