Comments on the Intellectual Property Rights Practices
of the Russian Federation

This statement is filed on behalf of the Coalition for Intellectual Property Rights (CIPR) in response to a request by the Office of the U.S. Trade Representative (USTR) for comment as required by Section 182 of the Trade Act of 1974. CIPR’s comments are focused on the Russian Federation.

PETITIONER AND ITS INTEREST: THE COALITION FOR INTELLECTUAL PROPERTY RIGHTS

The Coalition for Intellectual Property Rights (CIPR) is a private-public partnership dedicated solely to advancing intellectual property rights (IPR) protection and reform in Russia and other countries of the former Soviet Union. Through research, education, legislative initiatives, coalition building and legal, judicial and regulatory reforms, CIPR assists governments and businesses in the region to establish transparent and non-discriminatory IPR regimes and to adhere to international IPR standards.

CIPR represents a select group of major international companies as well as business and professional associations concerned with the protection and enforcement of industrial property protection. CIPR monitors the IP regimes in Russia and other countries through our on-the-ground representatives in those countries and maintains ongoing relationships with relevant government decision-makers and representatives of the business community.

For additional information on CIPR, please visit www.cipr.org.

SPECIFIC CONCERNS

Russia's mixed record of IPR protection and enforcement remains the most significant obstacle in its negotiations to join the WTO. In light of this, we have seen the RF Government take steps to improve IP protection and enforcement. Recently, Minister of Economic Development and Trade German Gref has publicly stated on several occasions that IPR is a priority for the Russian government.

Copyright protection, particularly for optical disks, and counterfeit pharmaceuticals were a major focus of the US-Russia bilateral negotiations. As mentioned above, however, trademark owners operating on the Russian market are still experiencing problems with their trademarks, including uncertain requirements for attaining well-known trademark status, numerous cases of bad faith trademark registrations, as well as a lack of formal opposition procedures. In addition, Russia has yet to comply with the WTO decision concerning the "first in time, first in right" principle.

Application of Law

Well-known trademarks.
Decisions to grant well-known trademark protection are not consistently applied to IP rights holders. Russian officials have publicly expressed disappointment at the small number of foreign companies that have applied for well-known trademark status. However, the criteria in the approval process of applications for well-known trademark status has been criticized for its inconsistent application and its failure to meet international standards set by the World Intellectual Property Organization (WIPO) and the International Trademark Association (INTA).

The Russian Federation Federal Service for Intellectual Property, Patents and Trademarks (Rospatent) continued refusal to approve two unanimous Chamber for Patent Disputes’ decisions in favor of recognizing one company’s trademarks as well-known, for example, demonstrates an unfair application of the requirements for well-known trademark status. The company has a reputation extending back many decades in Russia, and has had a major presence in the Russian market for nearly ten consecutive years.

We urge the US government to encourage Rospatent to take immediate action to consider trademark applications for well-known status, and to work closely with the Ministry of Justice, Supreme Court of Russia, and the State Procurator’s office to review judicial procedures and practices to prevent frivolous lawsuits which deny American and Russian companies due consideration of applications for well-known trademark status and therefore deny them the ability to conduct business in Russia.

Formal Opposition Procedures.
It is in Russia’s best interests to close the loopholes in its legislation to protect trademark owners from trademark pirates and infringers and provide incentives for domestic and foreign IP owners to expand their businesses in Russia. The Russian government needs to be encouraged to remedy existing legislative and implementation deficiencies in order to bring Russia’s IPR regime into compliance with TRIPS to include greater transparency in the trademark registration process.

Rospatent should be encouraged to introduce more transparency through implementing formal opposition procedures and establishing a comprehensive and accessible database of registered trademarks and trademark applications. Trademark pirates take advantage of these gaps and file applications for derivative trademarks while the legitimate trademark owners remain almost totally unaware of the problem until the derivative trademark has successfully been registered.

This belated notice, combined with the fact that there are no formal opposition procedures, prevents trademark owners from discovering objectionable trademarks at a point when something can still be done to address the problem. Currently, the only way to challenge a registered derivative trademark is through lengthy cancellation proceedings before the Chamber for Patent Disputes of Rospatent. Rospatent, however, has been unwilling to reverse itself in several cases initiated by trademark owners.

Rospatent has taken some positive steps to address this problem and now publishes all new trademark applications on its website. This, however, does not go far enough to achieve the level of transparency that is standard in trademark offices around the world.

CIPR urges the US government to encourage the Russian government to adopt measures to increase the transparency in the trademark registration process to stop trademark piracy that impacts both American and Russian companies.

Geographic Indications.
Russia’s legislation on geographic indications (GIs) also needs revision to meet international standards. On March 15, 2005 the WTO published the Panel Report on the dispute between the USA and Australia on the one hand and the European Community on the other over the TRIPS and GATT compatibility of various aspects of EC Regulation 2081/92 on the protection of designations of origin and geographical indications for agricultural products and foodstuffs. The Panel concluded that under Art. 16.1 of TRIPS, WTO Members are required to make available to trademark owners a right to prevent the use of geographical indications if they were to conflict with a prior existing trademark. Further, the trademark owner is not required to show that the mark is famous, in use or has renown in order to obtain relief in this respect. If use and registration of the geographic indication would give rise to a relatively high likelihood of confusion, the geographic indication must be refused protection.

In light of this decision, in order for Russia to in compliance with its anticipated obligations under the TRIPS Agreement, the Russian Intellectual Property Law must be amended to provide for the refusal of a geographic indication if it conflicts with a prior trademark. Currently, no such protection is provided to trademark owners as required by the TRIPS Agreement. While some of Russia's legal deficiencies are due to ineffective enforcement or implementation of its laws, this particular legislative deficiency is a clear violation of the TRIPS Agreement on its face, particularly in light of the Panel Report.

ENFORCEMENT

The Russian market is still flooded with counterfeit consumer products, including, but not limited to software, audio and video goods. Fake food and beverage products, pharmaceuticals, auto parts and less dangerous products, such as clothing, and personal care products are prevalent in the marketplace.

Counterfeit goods from Asia bound for the Russian, European and North American markets are omnipresent in the open markets and have penetrated legitimate retail outlets. Russia is also a major producer of fake products, including pharmaceuticals and other foods, clothing, and, of course, copyrighted goods.

The lack of effective and proactive enforcement remains a problem. The political will from the highest levels of government has neither been consistent nor effectively transmitted to the lower levels of the law enforcement community. Without this, Russia’s counterfeiting problems will remain acute.

To address the counterfeiting problem, CIPR recommends the following:

• Russia must enact legislation to mandate the physical destruction of equipment used for producing counterfeit (and contraband) products. In many instances, machinery has been returned to counterfeiters following their seizure, despite assurances from authorities that such cases would be pursued.
• Russia should enact an "ex officio" provision in its Customs Code. Such a provision would permit officials to halt the release of goods on site and even seize or destroy counterfeit property if its illegality could be proven.

JUDICIARY

The Russian court system has improved its abilities to handle IP litigation and to rule on cases based on existing law and international standards. The recent court ruling to support US-based Starbucks’ challenge to a trademark pirates’ theft of its trademark is an important example. However, IP owners still face a Russian judicial system that is plagued by judges without training or awareness of IP law, inconsistent treatment of cases at the federal and regional courts, and corruption.

A lack of training in IP law and poor compensation are just two problems in the Russian judicial community. Pressure from public authorities and private companies on judges to influence decisions is still an unfortunate reality in Russia.

CIPR recommends a continuation of technical assistance programs to train judges, prosecutors and attorneys in IP law and international standards.

CUSTOMS

Border controls must be improved to stem the flow of fake goods in transit or bound for the Russian marketplace from Asia, Middle East and South Asia.

The RF Customs Committee is closely cooperating with foreign governments to improve legislation and enforcement regimes. In addition, Customs authorities regularly participate in training programs organized by private companies and associations. However, customs officials need additional resources to interdict counterfeit goods at the borders, including computer systems, more training and better compensation. Corruption among Russian customs authorities continues to be a major problem nationwide.

However, a recent development holds promise for slowing the flow of counterfeit goods into and out of Russia. The Federal Customs Service, which had previously opposed adding a provision for "ex officio" to the RF Customs Code, has altered its official position. It is now in favor of the amendment, which provides customs agencies with the power to act on their own initiative (ex officio) and suspends the release of goods if IPR is violated. CIPR has advocated for enactment of this legislative initiative for the past three years. The U.S. Government’s support of the passage of the draft "ex officio" amendment would help in getting the provision adopted in 2006.

PROPOSED IP LEGISLATION

In December 2004, CIPR, along with other key IP and consumer associations and rightsholders, presented recommendations at the parliamentary hearing for IP legislation, enforcement measures, and public education to strengthen protection for consumers. The recommendations were well received by the government, as well as by rightsholders and business and trade organizations.

On Thursday 20 January 2005, the final recommendations were approved by the State Duma Committee on Civil, Criminal, Arbitrary and Procedural Legislation, and were submitted to the Presidential Administration and all relevant Federal Agencies. These recommendations would resolve many of the legislative inconsistencies that exist in Russia’s IP regime, as well as increase penalties for violations.

CIPR recommends the US government urge the Russian government to expedite passage of the following draft laws accepted for consideration:

"On Amendments and Addenda to Specific Legislative Acts of the Russian Federation Following the Adoption of the Federal Law ‘On Amendments and Addenda to the RF Law "On Trademarks, Service Marks and Appellations of Origin," which entails amendments and addenda to the following provisions:

• Article 180 of the Criminal Code of the Russian Federation, which would modify the requirements for a trademark owner to win a conviction against a counterfeiter. The current language in Article 180 requires proof that a counterfeiter has repeatedly committed the violation and has caused substantial financial damage to the plaintiff. The proposed amendments would remove the requirement to prove a counterfeiter is a repeat offender and sets a minimum value for the financial damages suffered by the trademark owner, an amount that has yet to be determined.
• Article 14.10 of the RF Code on Administrative Law Violations (which calls an increase in administrative fines, and the seizure of counterfeit goods, materials and equipment used for their production).

Expedite the drafting and introduction to the State Duma of the draft law "On Company Names," which prescribes registration of company names simultaneously with registration of a legal entity.

Draw up legislative proposals on amendments and addenda to the RF Code on Administrative Law Violations, which entail the following:

• Introduction of administrative responsibility for the production, transport, storage and distribution of counterfeit goods, including medicines;
• Establishment of a one-year limitation period for bringing to administrative responsibility for the illegal use of a trademark, violation of copyright or related rights, as well as invention and patent rights (article 4.5);
• Destruction of confiscated materials and equipment used for the production of counterfeit goods containing illegal reproductions of trademarks, service marks, appellations of origin of goods (article 14.10);
• Administrative investigation following the detection of an administrative law violation with respect to legislation on trademarks, legislation on copyright and related rights (article 28.7);
• Destruction of confiscated tools for committing an administrative law violation with respect to intellectual property legislation (article 32.4).

CONCLUSION

We thank you for the opportunity to comment on the intellectual property rights practices of the Russian Federation. Please contact CIPR’s U.S. Representative, Paul Nathanson, at 202-466-6210 ( ) if you have any question or need additional information.