The debate behind Russia's introduction of parallel imports
In September the Russian government announced that its ban on parallel imports would be removed by 2020. Denis Khabarov and Alisa Fomina explain the background, and question whether the policy will ever become law
Russian legislation applies national exhaustion of trade mark rights. The use of a trade mark in any form, including import of a product bearing the mark or any other placing of such goods on the market is allowed only by the owner of a trade mark itself or with its prior express consent.
The arguments on both sides
The Federal Antimonopoly Service (FAS) has lobbied hard for parallel imports over the past two years. FAS insists that liberalisation of parallel imports will strengthen competition, while the ban is an abuse of the dominant position of the trade mark owner. It is currently preparing a detailed economic study on the pros and cons of liberalisation.
A group of parallel importers that has become quite active in recent years argues that liberalisation will mean more goods for lower prices, and that Russian legislation is contrary to the principles of modern, global markets.
Their opponents are producers, investors, authorised dealers, the Ministry of Economic Development, the Customs Service, the Ministry of Industry and Trade and the local academic community. They argue that parallel imports will reduce investment, consumer rights protection and local manufacturing, while increasing the flow of counterfeit goods. They also say that the liberalisation of parallel imports will allow independent importers to take advantage of IP owners, free riding on their investments.
The Association of European Businesses also commissioned an independent study of the financial and economic consequences for investors in Russia, which it presented to the government and other Russian bodies. AEB is trying to persuade the Russian government not to allow parallel imports, arguing it will drive investors away from the local online market.
The options for liberalisation
On August 26, Russia's Open Government, the analytical centre of the government, held a discussion on the matter. The meeting was designed to develop constructive ideas and analyse the financial risks and social and economic consequences of the liberalisation of parallel imports. After the meeting the government's Expert Council published an executive summary of the discussion, which outlined three different scenarios for parallel imports in Russia: (i) maintain the national principle of rights exhaustion; (ii) introduce the international principle of rights exhaustion; and (iii) introduce the international principle of rights exhaustion in pilot sectors and regions.
During the discussion it was agreed that the partial introduction of parallel imports is not realistic, as it would be hard to choose sectors and regions that are representative enough, and the imposition of different rules on different sectors would be discriminatory, contradicting the constitutional principles of legal equality and economic integrity. On the other hand the introduction of the international principle of rights exhaustion in pilot sectors and regions would require a lot of additional steps and amendments to legislation in order to safeguard the rights of trade mark owners, manufacturers and consumers.
The policy announcement
Despite this uncertainty, at the end of September Russia's First Deputy Prime Minister, Igor Shuvalov declared that the ban on parallel imports must be completely removed by 2020. According to Shuvalov, by 2018 parallel imports in Russia should be available for 90% of goods.
He added that it would be expedient to retain a ban on the parallel import of products similar to those produced by foreign companies at enterprises in the country. He also mentioned that as large investments had been made under the ban, on the presumption that it would not be recalled, the government is working on ways to minimise the loss of those investments - although this must also comply with Russia's obligations under WTO rules.
The debate is far from over. It is still uncertain whether these proposals will become law. But trade mark owners should be aware of the ongoing debate and be prepared for any eventual changes over parallel imports.
Denis Khabarov is the head of IP litigation and enforcement at Baker & McKenzie in Moscow. Alisa Fomina is a professional support lawyer in the firm's CIS IP group.
