27 September 2017
Gowling WLG's Global Unauthorised Goods & Brand Enforcement Task Force have launched an autumn webinar series that examines a number of key topics - all with a focus on helping you better protect your brand.
During the first webinar in this series, we look at grey market goods in the EU, Russia and the UAE, and offer practical insight on:
- The current legal landscape in these jurisdictions
- Options available to rights holders to combat grey goods
- Remedies available including criminal liability
- Emerging enforcement trends given: the Eurasian Economic Union, the new Common Economic Space Trademark System, Brexit and GCC Trademark Law.
Martha Savoy: Hello everyone. On behalf of Gowling WLG's Unauthorised Goods and Brand Enforcement Group, I would like to welcome you to the first webinar in our Autumn Anti-Counterfeiting Webinar Series. My name is Martha Savoy and I sit in Gowling WLG's Ottawa office in Canada and I will be moderating this session which will cover the issue of grey market goods in the EU, Russian and the UAE enforcement options for rights holders.
This is the first of three webinars which will be available on demand this Fall and we hope that you will have the opportunity to join us for all of them. I have with me my colleagues from Gowling WLG's offices around the globe, all of whom are seasoned intellectual property (IP) lawyers with extensive experience in unauthorised goods and with addressing the issue of grey goods specifically.
First with me is Jon Parker, who is the Head of IP at Gowling WLG's Dubai office in the UAE and who has practised in the Middle East for over a decade. We also have George Sevier who is a Principal Associate from our London office and finally we have David Aylen who is the Head of the Gowling WLG Moscow office in Russia. Our speakers will be providing us with some insight on enforcement options in their respective jurisdiction. Over the course of the next hour we will discuss the current legal landscape in these regions, options available to rights holders to combat grey goods, remedies available including criminal liability and emerging enforcement trends.
We will start first with framing the issue a little bit. We all know what grey goods, sometimes known as parallel imports are, but to refresh everyone's memory, many companies face the issue of genuine goods being imported for sale into a particular market without their consent. A company may have had a product manufactured specifically for sale in the United States, it has been labelled for sale in the United States and the company may have contracts with various distributors of the goods in the US such that that the goods are only to be sold there. But what happens when a third party in Russia or the EU or the UAE buys those US bound goods and then imports them for sale locally without the authorisation of the brand owner. The goods weren't intended by the brand owner to be sold in that jurisdiction, it may not labelled appropriately for that jurisdiction, they may differ from the product that the brand owner specifically intends to be sold in that jurisdiction.
I practice in Canada and grey goods can be a tricky issue here. Where the brand owner in both Canada and the particular foreign jurisdiction is the same, international exhaustion will generally apply and the foreign trademarked goods of the owner can enter Canada without restriction. Parallel importation is generally permitted unless there are other reasons why the product should be barred from import. For example on the basis of health or safety concerns. Our panel will give us some insight into the situation with grey goods and their respective jurisdiction.
Jon would you lead us off and give us some background on the current legal landscape in the UAE when it comes to grey goods?
Jon Parker: Thank you ever so much Martha. I am more than happy to. So with the UAE it sounds very similar to what you have just described for Canada. Grey market goods are very much a tricky issue here and as we will touch on over the next hour they are permitted, but I suppose just taking a step back, let us look at the UAE.
Relatively speaking it's a small country but I think we can say it punches above its weight in terms of IP issues. There are a lot of IP issues here. Why is that? I think there's a number of reasons. Historically the UAE has always been a commercial hub. I think you know if you go back to the spice traders in years gone by, or pearl divers, it was a commercial hub then and I think very much over the last ten years, the Government in the UAE have been pushing for the UAE to be the commercial hub for the Middle East, very much as a conduit between east and west.
In terms of IP as you will see from the screen we have a number of various ways in which grey market products and genuine products come into the market and enter the country here whether it is through Jebel Ali, which is one of the largest ports in the world, or one of the other larger ports that they have started trading over the last few years here. We also have three extremely large international airports within 120 kilometres of one another and of course something we'll touch on next month in the talks will be the numerous free trade zones that exist here in the UAE. All of which create issues for rights holders, and I think the other thing to make clear is it is a federation of seven Emirates so it is like seven states that you are perhaps familiar with. Unfortunately each of those States have separate customs and enforcement authorities and so this again creates issues in dealing both with counterfeits in grey market goods coming into the market, who can you go and speak to try and sort the problem out. The other complicating factor is the Gulf Co-operation Council (GCC), so the UAE is a member of the Gulf Co-operation Council which is a trade block similar to the EU and what this means is once products enter the market in say the UAE and the duty is paid on those products, they can move freely around the other five member states and so again this is something that can cause issues and does mean that brand owners have to police the importation of products in and around the UAE.
I think the other thing I would say about the UAE generally is almost it's a country built for parallel imports in terms of it is a hot spot here. There is a very high expat population. I have been here 11 years and over that time the ex-pat population has always hovered around the 90% mark and so what this means is that people want a piece of home and one of the ways that that often happens are companies exploiting bringing in grey market goods that perhaps aren't officially sold here because there is a market looking to buy those products. I think one of the examples I can give on this is recently in preparing for this talk I came across a job advert for a parallel import co-ordinator from one of the local companies. Now this isn't a role to co-ordinate the sale and importation of parallel imports but the very opposite, so it is a slight misnomer, but it is a role which is intended to help trace/stop parallel imports coming into the market on behalf of one of the official distributors for an international brand.
So generally like Canada, the UAE and the wider region has international exhaustion of rights which means that parallel imports are permitted. You know there is nothing really in the trademark laws as much which allow brand owners to prevent importation and distribution of grey goods and when you do go to speak to the officials of course one of the things they will often ask is are these products genuine and yes they are grey imports but of course you have to be truthful and yes these are genuine products, and so what you can often be met with then is well if they are genuine why should we stop them. Surely it is in the consumer's interest to be able to purchase these products once they enter the UAE so there are a number of challenges to brand owners here and I think we'll touch on later how brand owners can perhaps face those challenges head on.
Martha: Thanks Jon. George, what about the EU, what is the situation there?
George Sevier: So one of the fundamental tenets of EU membership is that there is freedom of movement of goods, so products can be taken across national borders without the intervention of border controls. In fact, freedom of movement extends beyond the EU to countries which are members of the European Economic Area (EEA), so the EEA. So that is the EU member states as well as Norway, Lichtenstein and Iceland, so that's the green countries on the map there. The red country is Switzerland and that is not a member of the EU or EEA.
As a result of this freedom of movement of goods there is EEA wide exhaustion, so if a brand owner has consented to goods being put on the market anywhere in the EEA, their rights are exhausted and they will not be able to prevent the importation or sales of trademark goods in other member states. Trademark law is largely harmonised across the EEA, so the position is the same in any EEA state. Consent though is assessed by considering the particular goods in issue, so brand owners can take action even if they have previously consented to the sale of apparently genuine identical goods, maybe in a different batch, being marketed in the EEA. All of this will change in light of Brexit because the UK will cease to be a member of the EU and probably the EEA and I will come back to that a little bit later on.
Martha: Thanks George, interesting times, we'll stay tuned.
David what does the legal landscape look like in Russia?
David Aylen: Thank you Martha. Well the short answer is that parallel importation is not permitted in Russia at the moment. It is a national exhaustion of rights country and therefore in terms of controlling parallel importation, it's illegal parallel importation is a form of trademark infringement under article 14.87 of part 4 of the Civil Code. Civil Code part 4 covers intellectual property. Only the owner of a trademark has the right to introduce branded goods into circulation, so anyone who brings branded goods into circulation who is not the owner is the trademark infringer.
Now I told you that it is a national exhaustion of rights country and it is under the Civil Code but in view of a recent treaty with the Eurasian Economic Union, sometimes referred to as the EAEU established in about 2015, Russia is now part of a regional exhaustion of rights regime much like the EU situation. Now the member states of the EAEU at the moment are Russia, Kazakhstan, Belarus, Armenia and Kurdistan. The population of Russia is about 140 million, Kazakhstan is about 15 million and so you can see that the majority of the population is in these countries. Here is the map showing the Eurasian Economic Union and their regional exhaustion of rights within that region.
So what are the implications associated with the new regional exhaustion of rights concept. Well it is again much like the EU, it's the free flow of goods between member states that is now allowed and this causes some problems with regulating parallel importation because the countries with weaker border controls allow goods that are not otherwise permitted into the country, into the region and the it is very difficult to control. So while Russia has very tight border controls, the effectiveness of those border controls have at least temporarily been weakened with the Eurasian Economic Union because the goods can come in through from China and other countries into the countries with less sophisticated border controls, but there are more changes coming with respect to the development of the EAEU and we will talk about those a little bit later.
Martha: Thanks David. Given some of the challenges that each of you have outlined, let's talk a bit about what a brand owner can do to deal with grey goods. In Canada, for example, we can sometimes rely on packaging and labelling regulations which have certain language requirements concerning the French language or ingredient listing requirements. Jon, can you fill us in on options available to brand owners when faced with grey goods in the UAE?
Jon: Yes sure. Again it sounds a very similar position here in the UAE to Canada in that some of the areas you can rely on such as packaging and labelling requirements are things we also look at here. There's also perhaps another more powerful right that could be open which is a registered commercial agent. That is something that I will touch on shortly and as with everything, it comes with both good and bad, so we will run through that very quickly. The other thing which is on the horizon is the GCC Trademark Law which enforced in a number of countries, not yet here in the UAE, and as I will touch on shortly that also gives a possible opening for prevention of grey goods in limited circumstances in GCC countries including the UAE.
So the registered commercial agent, this is something of a double-edged sword, in that a registered commercial agent is a UAE entity normally owed 100% by an Emirati individual or by a 100% controlled Emirati company and effectively that is your commercial agent that has exclusivity for your products in this market. In some products this is not mandatory so it's between the parties to decide whether or not the local partner should be a registered commercial agent but for some product areas it is a mandatory requirement, particularly where there is perhaps a need for public safety or product recall further down the line, so you normally find some of the mandatory areas such as automotive or fire related, fire prevention equipment. So I mentioned it's a double-edged sword. The reason it's a good thing is that the commercial agent has exclusivity for the market which means that the commercial agent and only the commercial agent will be able to stop parallel imports that are coming into the UAE through channels other than the registered commercial agent. But what this means is not only can the registered commercial agent stop third parties bringing grey market goods into the country, if the principal was also looking to bring products into the market by means other than through the registered commercial agent, the registered commercial agent could also stop the genuine products from the brand owner coming in, unless they've got a side agreement between the parties. So what this can mean is that if there's dispute between the commercial agent and the principal, the commercial agent can have exclusivity for the market until or unless the registration is removed. There have been some very high profile cases here, for example one involving a leading car manufacturer where that car manufacturer was unable to sell its products or import branded spare parts for a number of years due to a dispute with its registered commercial agent. So the market says that this was resolved with compensation being paid in the tens of millions of dollars in order to remove that commercial agent which allowed the car manufacturer to then appoint somebody else so that it could then sell its product.
So as you said this is very much a double-edged sword, it's a way of stopping parallel imports, but it can also backfire if there is ever a falling out or dispute between the principal and the commercial agent.
The other thing the commercial agent is able to do once they are registered is go to customs make customs aware that they're the commercial agent for particular products and so customs will stop imported products, genuine, counterfeit or suspected counterfeit if they come in through entities other than the commercial agent and the information the commercial agent has provided to customs.
In terms of some of the alternatives because for example when international companies first approach us, one of the first things we will say to them is to try and avoid a commercial agent if at all possible because of the difficulties if there is a dispute. So some of the other alternatives for looking at dealing with grey import products could be through regulatory. So as you touched on with Canada and the requirements for French language, we have similar requirements here for Arabic. The only thing I would say is that these can be relatively easy to work around. So what we sometimes find is that products that are being brought in other than through official channels will normally meet the regulatory requirements through over-labelling. So you'll normally find a sticker on the back of the packaging which will have the relevant information in Arabic to meet with the basic requirements.
The other thing perhaps to look at though is depending on the type of product are there other routes to help try and stop the importation by somebody other than the official distributor. So for example if it's a pharmaceutical or medical product, if the company bringing those products in only has their general trading licence, it may well be you can raise the licence issues to stop the distribution of products because that entity isn't actually licensed to bring those products in here, in terms of their trading.
The other thing to look at is whilst I said the law doesn't really provide for a brand owner to stop grey market goods, if you have customs recordals, which we'll touch on a little later, that is something to explore, we have had cases where customs have stopped parallel imports. Often, they are then released when customs realise they are genuine, but if you let them know that these are not authorised we have had cases where customs have re-exported back to the market the products came from.
Something that is yet to be tested in the UAE to my knowledge are products that have been materially altered from how they were originally put on the market and so I think this is also an option to explore in certain circumstances where the grey market goods coming into the country have been somehow changed from what was placed elsewhere. For example, they may have been sold as a multi-pack in the UK but come to the UAE market being sold as single piece items and so perhaps that is something that you may be able to explore, bringing an infringement action through the Courts to try and stop those products due to the fact that they've changed from what was originally put on sale and we'll look at some other options a little later as well.
Martha: Thanks Jon, certainly lots of options to look at. George how about in the EU, what options are available there?
George: So, there are several proceedings for trademark infringement and they are pretty straight forward and they're common and they're usually settled quite quickly as well because the law is clear and those dealing with greys tend to be banged to rights. I've noted on the slide here, criminal proceedings and customs as well. I won't say more about those for the moment, other than to say that they are options that one can consider and we'll come back to both of those topics a little bit more later.
There are particular laws around certain types of products so for example the EU cosmetics regulations requires details of a responsible person located in the EU to be listed on packs and in other fields there are mandatory product safety and testing requirements, so those are options to explore as well. In the UK at least though enforcement of these matters falls to Trading Standards which is an agency funded by local government and they have a very broad remit and they are fairly under resourced, so it's difficult to get them excited about taking action in respect of greys, unless there's a public safety angle. So for example, I once dealt with a facial cleanser which had been over stickered with incorrect usage instructions. In the original language it had said to rinse off whereas the over stickered instructions said apply with cotton wool and this resulted in cases of skin irritation and in that case Trading Standards were very helpful, even though the breach, so not providing EU contact details, was on its own pretty small.
In theory even if consent has been given for sale in the EEA rights are not exhausted if there are legitimate reasons for the proprietor to oppose further commercialisation of the goods. So particularly where the condition of the goods is changed once they have been put on the market. In practice though, that is considered very narrowly. The goods need to have been materially altered by repackaging for example and that might be the case with pharmaceuticals where repackaging is necessary to comply with local laws. However, even if goods have been materially altered the trademark owner can only take action in very limited circumstances. Provided the importer has satisfied certain conditions such as the repackaging being necessary and giving notice to the trademark owner of the proposal to bring the goods into the country then the trademark owner's right continue to be exhausted.
Martha: Thanks George. David, what can a brand owner do about grey goods in Russia?
David: Well the core method for stopping grey goods is a Court action for trademark infringement by reason of the unauthorised importation of the parallel imported goods. There are challenges associated with that, for example, under the Civil Code there is no pre-trial discovery and it is hard to get information with respect to how the goods were imported into Russia by whom and so on and so we usually recommend a strategy to combine the possibility of Court actions for trademark infringement with the customs recordals. Now while the customs officials can't permanently seize the goods they will detain the goods for up to ten days on the basis that they might be counterfeit and this allows the brand owner to identify the potential counterfeits and if they are grey goods they can be detained for up to ten days in order to investigate that and this allows the brand owner to obtain information with respect to the types of goods that are being imported, by whom and their destination. So this is a useful way to get information to fuel the Court action, so we recommend both at the same time. I might add to what Jon and George also mentioned, there is a possibility to make complaints with respect to non-compliance with regulatory requirements such as packaging and labelling in Russia because if the products don't have the Russian language on them and of course this is easily satisfied if the over sticker with the Cyrillic language materials which you often see. So there are a few ways to prevent parallel imports in Russia.
Martha: Thanks David. Certainly lots of options available to look at.
Let's talk about remedies. What remedies are available to a brand owner regarding unauthorised importation of grey goods? Are criminal sanctions available, for example? Can the brand owner go to local authorities and have this activity prosecuted criminally? David?
David: Well let's start off with the basic proposition that parallel importation in Russia is not a crime. It's not forbidden in a criminal provision, the only way that parallel importation could be considered a crime is if there were repeated offences that amounted to effectively contempt of Court for example, but the fact is that to my knowledge criminal liability has never been found in a parallel import case, so I don't think that's really a reliable means for protection against parallel imports. As I mentioned just a few minutes ago, the better way to go is with the civil cause of action and the detention by customs hopefully that will alert the brand owner to the presence of the goods at the border, because of a civil cause of action for trademark infringement the basic remedies available for trademark infringement apply here. So the first thing in would say and a question that is often is asked is whether preliminary injunctions are available and theoretically they are available under the Civil Code, but the fact of the matter is in IP cases including trademark cases, preliminary injunctions are seldom granted. So what you're looking at is a claim for trademark infringement that is pursuing the Defendant for damages or statutory compensation under the Code as well as seizure and destruction of the goods and most importantly permanent injunction. So effectively what we tell clients what you should really expect is getting the permanent injunction to block the further importation and sale of the goods, this is the real remedy that is available to you in Russia.
Martha: Thanks David.
George, what about in the EU?
George: So in the EU, in civil proceedings for trademark infringement the normal IP infringement remedies apply and this should be the same across Europe. So injunctions including interim injunctions are available, you can get delivery up or destruction of goods, damages resulting from the infringement for example in respect of lost sales of infringing goods or alternatively, the infringer may have to hand over the profits that it has made from its dealings. In theory there are other remedies such as publication orders, but those are quite rare in practice. Criminal proceedings are definitely possible provided that the infringer had dealt with the grey goods with the intention of making money or causing loss to another and that was confirmed by the UK Supreme Court in August this year. The position is the same in Germany, so criminal action is available and in France, whilst criminal proceedings for trademark infringement are theoretically available in practice they are not brought in respect of grey imports.
So going back to the UK, whilst criminal prosecutions are certainly possible they are brought by Trading Standards who, as I mentioned, are under resourced so getting them to take action in respect of greys is difficult, unless there is a public safety angle or maybe the dealing is part of something bigger. About ten years ago or so some companies tried bringing private prosecutions in respect of counterfeits to get round the issue of Trading Standards not having the resources and in theory private prosecutions could be brought in respect of grey products as well but I've never known it. This may be because civil proceedings provide a much easier and quicker remedy and with some tangible results to the rights owner as well in terms of damages perhaps. But it may also be because of the potential of negative press, if you were to bring criminal prosecutions against someone that is dealing in genuine goods, albeit grey imported goods.
Martha: Thanks George, yes, lots to consider.
Jon, any comments on remedies for the UAE before we move on to the next topic.
Jon: That depends, Martha, I think as touched on as in my earlier comments, unfortunately for the brand owner itself there is little they can do, there are no remedies as such. Any remedies that exist will be with the registered commercial agent, assuming there is one and one is registered in relation to the products. I guess the one thing we don't know yet, because it's untested as I've touched on, is whether for any products that have been materially altered if the brand owner does bring action against such products and succeeds is whether they can look at the remedies either through civil action or the criminal remedies that may apply then through trademark infringement but as I said that's something to my knowledge which is untested.
Martha: Right, OK. Thanks Jon.
David you spoke briefly about this already, how about customs recordals where the rights holder records their trademarks for copyright with the local customs authorities. Is that option available and does it help? What's the situation in Russia on that front David?
David: Well you've heard me mention this a few times - customs recordals are available in Russia and they do provide an effective border control regime, especially for counterfeits, and so we recommended as I mentioned earlier, coupled with the civil cause of action. The customs recordal regime is not so developed in the other member countries of the EAEU at the moment. However, there is a move afoot to introduce a unified customs register for the entire region which, optimistically, they say will be introduced in 2018 and we hope it will but it will be difficult to implement that quickly and that will provide for a regional register for customs recordals which will be much more effective than the present regime and would allow for a single submission for a recordal for customs purposes.
Martha: Thanks David.
Jon, how about in the UAE?
Jon: So yes, customs recordals are available but unfortunately only in five of the seven Emirates. So as I touched on earlier, each of the Emirates has its own customs authority and enforcement authorities, and so if you're looking to record your registered trademark, and it has to be a UAE registered trademark, you will have to file separate applications for each mark in each of the Emirates which allow for custom recordals, so that's Abu Dhabi, Dubai, Sharjah, Ajman, and Ras al-Khaimah. I think fortunately they are the Emirates that have the main ports and the main airports, which is good news for brand owners. Unfortunately, there is no central database so it literally does mean having to recreate the various custom recordal processes to go to each Emirate, to physically record that registration with the relevant customs authority. I think whilst there's no central database and from what we can gather it is unlikely in the short term, where customs authorities do look to work together here is in relation to training which is something that we strongly recommend for brand owners that record with customs because I think it just helps with the customs, they have the buy into the product. If you go and train them, so they have a number of sessions through the year where you can offer training to the customers to help them see and tell genuine products from suspects or counterfeits. What we often find is Dubai will run training sessions a few times a year but they will invite customs authorities, not just from elsewhere in the UAE, but also in the wider region, so it does give you an opportunity to connect with Saudi customs or Bahraini customs at the same time as the UAE customs officials. But as I touched on earlier the customs officials here are reluctant to stop the importation of products where those products are genuine, so where they are grey market or parallel imports. There have been some cases where, and its relatively few, where by saying to customs these products have not been authorised by the brand owner for sale in the market, that customs has re-exported those products back to the original ports that they were sent from but unfortunately it can sometimes be the case here that it's catching the right person on the right day as to whether they are willing to stop the importation of unauthorised products, even though they are genuine, to the grey market goods into the country here.
Martha: Thanks Jon.
George what about the EU, are customs recordals available and are they effective?
George: So they're certainly available and in many ways they're more straightforward than those in the UAE region because you can get a single application for customs recordal to cover all of the EU. Where goods are stopped, the imported rights owner are notified and they have a deadline of two weeks to object to the seizure and if there is no objection then the goods will be destroyed, albeit that the cost of destruction is billed back to the rights owner. If the importer or owner of the goods objects to the destruction then the rights owner must start proceedings in Court within a further two weeks or the good will be released. But our experience is that you can usually persuade the importer during that time that they don't want that to happen because otherwise they would tend to be responsible for the legal costs in the Court proceedings when they eventually lose. The EU customs recordal includes details such as the trademarks concerned of course and the normal trade routes for the genuine products. Whilst it ought to be possible to use this kind of information to stop greys, in practice grey goods are not normally stopped unless customs mistake the goods for counterfeits. Even if customs is not 100% effective we would usually recommend having recordals in place. It doesn't cost very much and as David was talking about earlier on it can provide really useful intelligence about the people that are dealing in the product allowing you to bring proceedings against them at a later date even if customs don't actually stop the goods and it's much easier using customs to get that kind of intelligence than it would be to use investigators which would otherwise cost a lot of money. As well as the EU customs recordal you can also in some countries have national applications and they can be worthwhile.
So for example in Germany a national customs application can cause parallel imports and overrun products to be seized by customs even though they would usually be ignored under the EU customs recordal and our team in Germany finds this to be a really useful tool. They do note though that unlike the EU customs recordal a German national recordal must be in place before the goods are seized, there's no chance of doing it after the event.
In France having national customs recordal allows the French customs office to intercept goods in transit even once they have been released from border control, however following a change by the French Minister of Finance in June last year it seems that they will no longer stop grey goods through this method, only counterfeits which is a shame.
The Czech Republic is similar to France. So typically we recommend filing an EU customs recordal as well as Germany, France and the Czech Republic as national recordals.
Martha: Thanks George, that's helpful.
Are there any emerging trends regarding grey goods in your jurisdiction that we should know about? David do you want to start us off there?
David: Thank you Martha.
There's a lot going on in Russia right now with respect to parallel importation and emerging trends and if you pay attention in the next year or so to the intellectual property publications you will see a lot of mention of that and you might be a little bit confused by everything that's happening. But both of the changes are tied to the Eurasian Economic Union and the reason that's been created and everything within that region is under review now by the Eurasian Economic Commission and so you've heard already that there's going to be a unified customs register which of course makes sense and there will also be a new trademark system called the CES Trademark or Common Economic Space. This is a regional trademark much like the European Union trademarks in this case there will be a single registration that will cover all five territories of the member states and this register will co-exist with the trademark registers that already exist. This is promised by the end of 2017 but realistically I think that we're looking at the end of 2018 but the provisions are very exciting and will provide brand owners with a higher level protection for the entire region.
There is also something else going on at the moment that might be an interim thing but the whole parallel importation restriction policy is under review by the EAEU and they are considering the implementation in the very near future of temporary industry exceptions where parallel importation will be allowed for certain goods on an indefinite but so called temporary basis and the sectors that have been targeted at the moment are automotive, pharmaceutical and medical devices and the explanation for it is that these exceptions would better serve the socioeconomic interests and public welfare, particularly to make goods more available in Russia if there is a short supply and there is a short supply in some cases of pharmaceuticals for example and to provide better pricing options for consumers. So this is highly controversial and again it's promised for the end of 2017 but reliable sources say that's probably a year and half to two years away.
The final thing that happened this summer in August of 2017 is the unfair competition allegations that are being put forward by the Federal Anti-Monopoly Service known as the FAS and while parallel importation is not permitted in Russia, it is a form of trademark infringement as we earlier mentioned, the FAS has developed a theory that they are trying on at the moment to the effect that it might be unfair competition to unreasonably permit parallel imported goods into Russia if the greater good is not served by it. So let me explain what I mean by that. So the FAS has targeted certain companies in the automotive, pharmaceutical and medical devices industries and they are currently threatening to charge them with unfair competition for imposing unreasonable restrictions on parallel imports into Russia. So how does that work? Well when the goods reached the borders we've already heard with respect to customs controls, these companies, the brand owners will often receive third party permission requests, people writing to the brand owners to say may I import your goods from Germany for example into Russia and may have a permission, may I have your consent. These brand owners are accused of either ignoring the requests or denying them and so what the FAS has done is issued warning letters to these brand owners and they have published this on their own website to make the point that a refusal could permit third party imports on a case by case basis by brand owners without a valid cause is in fact a form of unfair competition. The FAS says well if you are refusing the import of legitimate goods for no good reason then that must be a form of unfair competition and the only reason that you should be able to prevent the importation of the goods are if either they are counterfeits or if you have localised manufacturing facilities in Russia that you are trying to protect so that grey goods might undermine that and you have right to protect those developing industries, otherwise the FAS says that this is a form of unfair competition.
Now my last point would be that's not really a surprise in terms of what the FAS is doing because in the recent years Russia has implemented a policy of localisation, as they call it, that is to develop and protect industries in Russia if companies are investing in manufacturing facilities to Russia so if they are not then the FAS is saying well if you're not doing that, you're not localising industry then you are unreasonably withholding permission if you don't allow the parallel imports to come into Russia. This is in the early stages and these brand owners have been provided with an opportunity to respond to this, so we will be watching out for this over the next couple of months and we will be posting messages on IP reports as time goes by.
Thank you Martha.
Martha: Thanks David, it sounds like there's many developments in Russia.
George any emerging trends in the EU, Brexit I expect may be one to watch?
George: Yeah I do have a little bit to say about Brexit.
So earlier I mentioned that we have EEA wide exhaustion of rights and it currently isn't clear what will happen with the UK post-Brexit in March 2019 but we do know that the UK will leave its EU membership, that bit is certain. It's possible that the UK could remain a member of the EEA, even though it's leaving the EU, in that case very little would change regarding exhaustion and that would be an attractive option for the UK, but it seems quite unlikely. The UK Government has said that the UK will have control of its borders and it's laws because that's what the nation voted for. EEA membership is incompatible with that view because EEA membership requires the UK to accede to EU law to some extent and would require free movement of goods. So assuming that we don't continue as a member of the EEA, international exhaustion is likely to apply in the UK. This is the historic position prior to EU membership and it is likely to be what we revert to. That leaves us in a less good position to take action in respect of grey goods, it would be much harder.
So what if the UK does leave the EEA, what happens to goods where the trademark owner has consented to sell in the UK? Are rights exhausted in the EEA or could a trademark owner take action to prevent dealings in the goods in France for example? Well where consent has first been given for sale in the UK after Brexit day the answer is simple, the UK is no longer part of the EEA and consent to market the goods in the UK will not exhaust rights in the EEA.
But what about where consent was given pre March 2019? Well in a position paper published by the EU in September this year, the EU said that where rights were exhausted prior to March 2019 they should remain exhausted in the UK and in the EU. So that would mean that the date of consent could be critical. If you allow goods to be marketed in the UK on 28 March 2019 then those goods could be freely sold across the EU but if brand owners consent for goods to be sold in the UK after 29 March 2019 then you may be able to prevent sales in the EU so a lot is going to turn on just that one day possibly.
Martha: Thanks George, interesting.
Jon any emerging trends regarding grey goods in the UAE?
Jon: Thanks Martha.
I think for most brand owners looking to the UAE they will say the emerging trend for them is the fact that grey market goods are starting to impact them here. I think it is a growing problem and earlier today in a meeting again we were told about brand owners suffering quite considerably with grey market goods coming into the UAE.
In terms of emerging issues I think the one thing on the horizon for the UAE is the GCC trademark law. So this is the unifying law which harmonises the laws amongst the six GCC countries that is slowly coming into force. Unfortunately it's not yet in force in the UAE, Qatar or Oman although it was published in Oman in recent weeks but it will only come into force there when the implementing regulations are also published. However it is already enforced in Bahrain, Kuwait and Saudi and from reading through the law I think the one possibility brand owners may have going forward for grey market goods are where the products are entering the UAE from a country where the brand owner does not sell the product. So again it's going back to George's consent point. So for example if you are a brand owner sitting in Germany and your products are sold in the EU only but then your products come into the UAE from Nigeria where the products are not sold then looking at the wording of the GCC law it looks as though there will be an opportunity for you to work with customs to try and stop the importation and distribution of such products because the law does say that the provisions do not apply where the products were put on the market in the exporting country by somebody without the consent of the rights holder. I think you, you know it's something we've yet to see and whether the customs authorities will be willing to stop unauthorised products on that basis. I suspect it will take a number of years and many many meetings before we can persuade customs as well as evidence from the brand owner that these products are coming from a country where they weren't permitted to be sold before customs may actually take action.
I think the other thing I would just flag here on the screen as well which has come out of the GCC law is the fact that under this new law where small quantity goods of a non-commercial nature are in traveller's personal luggage or sent in small consignments, again the customs provisions do not apply. So we could see over time that this becomes a loophole for counterfeiters or infringers. Just in the last week I think it was the UK Intellectual Property Office (IPO) issued a study or a report on a study which showed that there's a growing link between social media and sales of counterfeit goods. Of course if you are buying products through social media the chances are these will be small consignments that will come into the region and come into the UAE through this very loophole that we've mentioned here.
So unfortunately it's not all good news but it looks as though we may have at least some other weapon in our armoury soon that we don't currently have through the GCC law when it comes into force here.
Martha: Thanks very much Jon.
Alright I will give each of you a last word. What should brand owners remember about grey goods in your jurisdiction?
George do you want to start us off there?
George: Sure so a few points here and I will keep it short.
But in the EU we talked about EEA wide exhaustion and it's really important that brand owners are able to say confidently that they haven't given consent for sale in the EU. So my first point is to try and make it easier for yourself, to track goods and consents. Keep central records of this so that you know confidently whether or not you've given consent for the sale of particular products in the EU. Tied in with that, make it clear on product packaging the intended countries for sale. So I'm not saying list on the side of the pack, the countries where a particular product can be sold but one client never puts an EU consumer contact address on the pack unless those products will be sold in the EU and that means that in the market there can be very quick identification of grey goods and confidence that there has not been consent to goods being put on the market in the EU if it doesn't have that EU address on there, we can say that for sure.
Lastly, Brexit is coming and it's mostly likely that you won't be able to take action in respect of grey imports in the UK if we are adopting international exhaustion or certainly not as easily. You've got a chance to clear up the market now whilst you still can, so take action now is my last word.
Martha: Thanks George.
Jon any take home points?
Jon: Thank you yeah.
I think the first thing is when you come across or are affected by grey market goods, think about the non-IP options as we touched on early whether it's labelling requirements or other regulatory requirements. But bear in mind in some cases these can be relatively easily worked around and almost by bringing the action on that basis you are actually telling the importer what they need to do to circumvent your complaint the next time.
I think the other thing generally for UAE and the wider Middle East registered rights are key. Without the registrations here you have no real opportunity to do anything to stop importation of products bearing your marks. Yes as we've touched on today even with those registrations it's going to be difficult for grey market goods but by having the registrations there at least it gives you something that you can start working round with customs and the registration does actually give you that opportunity to record your registrations with customs in key Emirates or key countries where it's available to do so. I think that's very much something to keep in mind and I think with customs, support those recordals through training, make sure you give the training to the customs officials so that they are looking out for you and looking out for your products and bringing things to your attention.
On the subject of the control and consent. Controlling the distributing chain outlining where they are allowed to sell and I suppose touching on George's comment around this is with the product packaging taking steps to try and allow you to easily identify your own products coming into the country without your permission.
I think the very last point is going back to the registered commercial agents. Yes these have a lot of power and the ability to stop grey market goods and so they could be a very good option for you but before you start looking at the registered commercial agent seek local advice because as I touched on earlier it is a very powerful, they have a lot of power which could be used against you as well as grey marketers.
Martha: Thanks Jon.
David last word. What should we remember about grey goods in Russia?
David: Thank you Martha.
I would just like to follow up on Jon's point where he said customs trainings. We found these to be very effective in Russia as well and so we highly encourage our clients to engage in customs trainings in Russia. They are very receptive to this and we have found that it provides good results. As you've heard from me already I remember that parallel import policies in Russia are currently under review as well there are many changes underway. The industry exceptions approach to parallel importation which I mentioned earlier. The regional customs register which we hope to see in early 2018 as well as the regional CDF's trademark registration system and the burning issue right now with respect to the FAS allegations of unreasonable withholding of consent and unfair competition which I'm sure we'll hear more about in the next few months.
Thank you Martha.
Martha: Thanks David. Thank you to each of you. This certainly gives us lots to think about and lots of good options and thank you to our audience for listening.
We've included contact information for each of our speakers in the slide decks. So if you have any questions please don't hesitate to reach out to any one of us directly. I will note that David spoke a little bit about the Eurasian Economic Union that affects Russia. We have a specific webinar devoted to free trade zones and their role in counterfeiting which will be released in October. Details of that webinar are included in the slide deck. If you are facing issues of counterfeit products I would encourage you to sign up for that webinar since we will have our regional experts in China, the UAE and Singapore discussing that issue specifically.
Our Gowling WLGs Unauthorised Goods And Brand Enforcement Group also have a webinar which will be released in November addressing counterfeits in the food and beverage industry. I would encourage you to sign up for both.
Thank you for joining us today and again should you have any questions about any of these topics do feel free to reach out to any one of us.
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