Parallel import legalization in Russia

Recent Regulation of the Russian Government (No 506 as of March 29, 2022) establishes that the Ministry of Trade, upon receiving proposals from federal authorities, approves a list of products (groups of goods) in respect of which the provisions of subparagraph 6 Article 1359 and Article 1487 of the Civil Code of Russia do not apply, provided that such products were legally distributed outside of Russia by rightsholders and (or) with their consent. 

What do these amendments mean from practical point of view?

Articles 1359 and 1487 of the Civil Code of Russia stipulate certain limitations to intellectual property rights statute (such as trademarked products and products which use inventions, utility models or industrial designs). This means that if the product was first sold or imported by the right holder himself or by official distributer with the consent of the right holder, the subsequent distribution and sale of such product does not require any permission of the right holder. 

It is important to note that when we talk about parallel importation, we mean the original product, not counterfeit. The Regulation of Russian Government does not legalize counterfeit products in any form, its manufacture and sale remain illegal and entails liability. 

Practically speaking, the Regulation is aimed at legalizing importation of original products into Russia from any countries, regardless of whether such import is carried out by the right holder or with his permission. 

How radically the Regulation changes the market?

Prior to this Regulation article 16 of the appendix No. 26 to the Treaty on the Eurasian Economic Union (Protocol of the Protection of Intellectual Property Rights) had remained in force. According to this rule, the regional trademark rights exhaustion principle applies only within the trade Union. If a product is first sold on the territory of any member state by the right holder or with his permission, the subsequent distribution of a product within the Union does not require right holder’s permission. The current Regulation is broader – it legalizes import of trademarked products from any country whatsoever. 

It is important to highlight that in February 2018 the Constitutional Court of Russia already addressed the issue of parallel import legalization and developed several positions about parallel imports: 

• Courts have the right to dismiss right holders claim to prohibit the importation of products without permission of a specific batch of products which were legally first sold outside Russia, in cases when the application of such remedies will pose a threat to welfare, life and public interests of citizens (if the right holder acts in bad faith).  “Bad faith” includes situation when the right holder adheres to the sanction regime against Russia or its business entities, adopted by any states in contradiction with international treaties to which Russia is a party or due international legal procedures. 
• Liability for illegal importation of original (non-counterfeit) products into Russia cannot be identical in terms of severity to liability rules for importation of counterfeit products. 
• Original products imported to Russia without right holder’s permission cannot be seized and destroyed, except for cases when such products are of poor quality, or for purposes of national security, welfare, ecology, cultural significance. 

In fact, the resolution of the Constitutional Court of Russia allows, under certain circumstances, parallel imports, although limited as compared to the recent Regulation of Government. The Resolution of the Constitutional Court is exhaustive as it only covers trademarks, whereas the Government Regulation applies to a broader specter of IP goods: trademarks, inventions, utility models and industrial designs. However, it is certainly broader than the Regulation of Government since the proposed algorithm is not limited to a specific list of products.  

At the moment product lists have not been determined yet, so it is very hard to predict which products can be legally imported to Russia. In any event, the format of parallel imports picked by the Government implies a certain selection. In other words, the Regulation does not legalize parallel importation per se, we would still need to rely on those lists of products established by the Ministry of Trade. Basically, any importation of non-listed product shall be deemed illegal.  

The Regulation of Government was adopted in connection with the Federal Law as of March 8, 2022 No. 46-FZ “On amendments to separate legislative acts of the Russian Federation”. According to this Regulation, the Russian Government is authorized to establish lists of products in respect of which separate intellectual property rights rules of the Russian Civil Code do not apply (for example, products which were labelled only this year). Our assumption is that the parallel importation legalization is temporary, though the term of this Regulation is not specified. 

Overall, from legal perspective this Regulation is controversial. The Regulation selectively suspends subparagraph 6 Article 1359 and Article 1487 of the Civil Code per group of products, since these rules are limitations to the intellectual property rights statute. Several experts believe that the text of the commented regulation does not actually legalize parallel import, but, on the contrary, prohibits any resale of products without the consent of the right holder within Russia. Such an interpretation has its specific logic since the import is a separate form of intellectual property rights exploitation statute. Even though the subparagraph 6 Article 1359 and Article 1487 of the Civil Code limited right holders in a certain way, their abolishment significantly strengthens exclusive rights. Most likely, the imperfection of the legal techniques of the Regulation will be compensated either by case law, or by virtue of subsequent amendments since the original purpose of the Regulation was precisely to legalize parallel importation (selectively). 

Finally, this Regulation does not cover copyright and neighboring rights. From practical point of view this is a very important aspect since both copyright and trademark law statutes may apply to one singly product. For example, an item of clothing may contain copyrighted work as well and such import may impose liability due to copyright infringement (what is more, each pattern may be assessed separately). Moreover, Article 1272 of the Civil Code also provides that the first sale of copyrighted work without permission of the right holder constitute the infringement of copyright, even if the product itself is original. 

Author: Roman Lukyanov, Managing partner