In late September, Elena Berger, Head of the IP practice at Capital Legal Services, spoke at the IP Academy, a major Intellectual Property conference. In the regular column Intellectual Wednesdays, Elena Berger and Vladislav Scherbatykh explain in layman’s terms all the provisions on Elena’s presentation on parallel import issues.

Parallel import is the import of original branded goods into the territory of a state without the consent of the intellectual property owner or its representative.

For example, imagine that your company sells Apple smartphones. You decide to buy the phones in Europe at lower prices, import them into Russia and sell cheaper than official stores. You do not obtain any consent from the intellectual property owner or its representative in the Russian Federation for such import. The phones you import are original, but since they bear the Apple trademark, importing them into Russia without the consent of the IP owner would be parallel import. Parallel import into the Russian Federation is prohibited; therefore, we do not recommend implementing such a business idea.

You will agree that from the consumer’s viewpoint the situation is quite controversial (does it make any difference where the iPhone was imported from if it is original?). However, supporters of the ban on parallel import have their own serious arguments of various nature – from attracting investment in the country’s economy to protecting life and health of the public.

That is why the issue of parallel import has remained acute for many years and causes heated debate between supporters and opponents of its legalization. This struggle of opinions is reflected in the law enforcement practice. The most significant recent event in the confrontation around parallel import was Resolution No.8-P of the Constitutional Court dated February 13, 2018.

In this resolution, the Constitutional Court significantly changed the preexisting approach to parallel import. Before that, the liability for parallel import was the same as for import of counterfeit goods: goods were confiscated and destroyed, and significant compensation was imposed on importers. The Constitutional Court, however, drew attention to the fact that there is a significant difference between counterfeiting and parallel import.

Accordingly, original goods should be confiscated and destroyed only in exceptional circumstances (for example, if their quality is inadequate or they pose a health hazard). Compensation for import of original goods should be less than for counterfeit goods.

At the same time, the resolution of the Constitutional Court gave rise to a number of new questions. For example, the Constitutional Court said that in some cases, the actions of the IP owner to restrict parallel import may be deemed to be in bad faith, so the IP owner may be denied protection of its rights. How do you know whether the actions of the IP owner are in good faith or not? For example, if parallel importers apply to the IP owner for an import permit, and the IP owner refuses to grant a permit without any grounds, can such actions be considered bad faith?

There are also several positions on this issue - for example, the Intellectual Property Court in its practice tends to believe that prohibition of parallel import is the right of the IP owner. Therefore, actions to limit parallel import, of course, can be considered bad faith, but only in exceptional circumstances (when public interest is compromised). The refusal to permit parallel import itself cannot be recognized bad faith. On the other hand, Federal Antitrust Service is currently considering several cases regarding the recognition of such actions as unfair competition.