Trademark infringements and counterfeitingcontinue to plague businesses working here, and reportedly cost companiesmillions and millions of dollars each year.

What’s in a name? For many companies,pretty much everything: their reputation, consumer confidence in theirproducts, the profitability of their brands, and years and millions of dollarssunk into careful promotion, advertising and marketing of the name.

“We’ve been building up our brand identityfor decades, and now someone is trying to illegally piggyback on the name wehave built up for ourselves,” said Yury Vatskovsky, the in-house lawyer forEastman Kodak, which has for close to a year been fighting to dislodge a smallRussian company, Spectre Service, from the kodak.ru domain site.

Though Spectre was quicker to register thename with the Russian Institute of Public Works, the agency that overseesdomain registration, such usurpation of the Kodak name is in clear violation ofnot only the Russian law on trademarks, but also the laws governing companynames and fair competition, Vatskovsky said.

Kodak discovered kodak.ru only afterpartners and clients began to call the company to complain of the site’s poorquality, the lawyer said.

The incidence of cyber-squatters is indeedon the rise, experts say, and trademark piracy in the realm of Internet domainnames is quickly becoming a major source of concern for companies, both foreignand domestic.

According to Tom Thomson, the RussianFederation representative for the Coalition of Intellectual Property Rights,which has recently conducted a survey on intellectual property protection andenforcement in Russia, domain-grabbing is a new area of trademark infringement,and conflicts here are difficult to resolve as Russia lacks any legislationspecifically regarding trademark protection on the Internet.

Vatskovsky, however, said the problem liesless with the laws than with their enforcement and interpretation by courts.

“We feel that the existing laws are enoughto prove that such [brand name] usurpation is unlawful,” Vatskovsky said. Thecurrent laws on trademarks and intellectual property in general do notspecifically cover the Internet, though neither do they specifically excludeit.

Vatskovsky added that the main problem hasbeen with the courts, which, according to the lawyer still do not understandhow to handle intellectual property rights - and at times adopt a hostileposition when it comes to suits lodged by foreign firms.

While Kodak’s claims have been repeatedlyturned down, Russian cinematic giant Mosfilm won the fight to return themosfilm.ru site from a cyber-squatter in the same court to which Kodak hadapplied with “absolutely identical claims,” Vatskovsky said.

“The laws are there, only they don’t alwayswork,” he said, adding that Kodak, out of principle, will not buy “what’salready ours,” though the company was given the opportunity - with is a heavyprice tag attached.

RIPW, the body that registers domain names,states it is not responsible for checking for trademark registration withRospatent before allocating domain names, instead of giving out names on afirst come, first serve basis.

Stealing identities

However, while the advent of the Internethas opened up a new sphere of potential dangers, traditional trademark andintellectual property rights, or IRP, problems remain to challenge brandhouseholders and trademark owners in Russia, with the CIPR survey showing thatbusinesses consider weak protection of IRP to be among the top three obstaclesto working in Russia.

“The recent survey found that the losses totrademark and brand holders, as well as to the state, are pretty significant,”Thomson said. “It has also shown that concern over IRP violations has increasedsubstantially, and has almost reached the same level as customs and taxes asbarriers to doing business in [Russia].”

Fifty-two percent of the surveyparticipants cited intellectual-property protection as a primary challenge todoing business in Russia, while customs and taxes received 54 percent and 52percent, respectively.

Of those companies that were willing todisclose financial information, half placed their yearly losses caused by IRPviolations (mostly trademark infringement and counterfeiting) at about $1million, while another third said losses totaled between $5 million and $59million or more.

“The legal foundation is there,” saidEvgeny Ariyevich, international partner with the law firm Baker & McKenzie,“though it needs improvement.” He said several amendments that would strengthentrademark protection have been stuck in the State Duma since last year.

Among the area that need to be strengthenedis Rospatent’s ability to annul registration, Ariyevich said. According to thelawyer, at present Rospatent’s authority to annual is limited, and “there is nodirect relation between court decisions, the decisions of the Anti-MonopolyMinistry  and Rospatent’s ability toannul.”

He added that in several instances,Rospatent has annulled a trademark registration, citing a case where a Russiancompany registered “Jurassic Park” as a trademark. However, the registrationwas revoked after Universal Studios proved the name Jurassic Park had already becomewell known in Russia before the local firm had filed for registration.

According to Thomson, another key issuethat still needs to be codified into Russian law is the principle of“well-knowness,” that is, when a trademark, for instance the name Coca-Cola, isrecognized as being so widespread that it has precedence over others in termsof registration. International IRP standards, such as those set by the WorldTrade Organization, an organization which Russia hopes to join, have clearlyestablished the principle, he said.

According to Rospatent, Russia is alsonearing such acceptance, and Rospatent is working on draft procedures  for the registration of so-called well-knownbrand names. However, though Vatskovsky heralded this as a welcome addition, hesaid that it could lead to paradoxical situations in which such “obviouslyfamous names like Coca-Cola or Mercedes Benz” will have to submit documentsproviding that their names are known.

“But though there are still a number ofimportant gaps that need to be filled, overall, the legislative regime here ispretty good,” Thomson said. “The biggest issue here is with enforcement [of thelaws].”

Legal experts agree that one of thecardinal problems in terms of enforcement is that many lower courts lack theexpertise and the sophistication to rule on complex trademark cases, not beingall too familiar with legal precedents and standards set out in internationaltreaties, or even existing Russian legislation. Some have also cited thepotential corruptibility of the courts, and inherent bias toward Russian firmsand brands.

Another problem is that the criminalpenalties that apply to IRP violations, as set out in the Criminal Code, arenot strong enough to act as deterrents, Ariyevich said.

According to statue 180 of the CriminalCode, a company can be fined for trademark infringement no more than 400minimum salaries ($1,180) - and only if it was proven that there was criminalintent.

According to Alexander Korchagin, directorof Rospatent, there have been several court cases that are beginning to shapetrademark law. He cited a 1999 case where a Russian firm registered “MeterInch”as a trademark, though it was already held by a U.S. firm. After a Russiancourt ruled against the Russian company, Rospatent annulled the Russiantrademark.

However, luck and verdicts have swung inother directions for some other foreign firms. Another much talked about caseinvolved tobacco giant Philip Morris, and its Soyuz Appolo and Bond Streetcigarette brands. According to Philips Morris, two local brands put out byMoscow-based Invest Trust, Soyuz Planeta and Evro Street, are so similar to inpackaging to their more famous foreign counterparts that they are misleading tocustomers, and thereby violate Philip Morris’ trademarks in Russia.

However, thus far courts of law haverepeatedly ruled in favor of Invest Trust.

“We filed twice, we lost twice,” said KarenMoore, Philip Morris’ corporate council for Russia. 

“In all three hearings, the judges were outfor about the time it takes to smoke a cigarette, or less,” Moore said. “When adecision is handed down in a minute and a half, it doesn’t seem to me that itcould have been a professional review of [of the evidence].”

FakeProducts Cause Genuine Problems

Another major trademark-related issue iscounterfeiting - which is outright trademark piracy, Thomson said. He addedthat counterfeiting seems to have grown in the post-crisis economy, as both themethods of counterfeiting and channels of distribution have become moresophisticated.

“For us, the most worrisome problem now iscounterfeiting, though we keep an eye on trademark violations as well,” saidJennifer Galenkamp, head of external corporate affairs at Nestle. “There issome legislation on the books, but it needs to be strengthened, as does theactual law enforcement. But for now it doesn’t seem that IRP violations are atop priority for the government.”

When asked what proportion of theircompanies’ products sold in Russia are counterfeited, 8 percent of the CIPRsurvey respondents said none, 64 percent said less than 10 percent, while 28percent of the companies indicated that more than 10 percent are counterfeitand 12 percent said more than 25 percent are.

“A lot has to do with Russia’s lack offinancial resources and technology to be able to address the issue,” Thomsonsaid, citing customs as an example. In some countries, customs have totallycomputerized systems that allow them to verify product authenticity when goodsenter the country.

Law enforcement agencies that police suchas things as kiosks also did not receive glowing marks, according to thesurvey.

Though survey participants gave Rospatentrelatively high marks in terms of protecting intellectual property rights, somecompanies have voiced complaints that at times Rospatent experts are all toohuman, subject to outside influences, and at times reach erratic decisions,giving some what they deny to others.

“It’s both a question of educating judgesand getting Rospatent to make an effort to clarify legislation,” Philip Morris’Moore said. “What’s more, there should be greater coordination betweenRospatent decisions and court decisions.”

But while most agree the level ofprotection is offered in Russia is less than desirable, some firms alsoacknowledged  that they themselves havenot done enough to protect their brands and names. According to the survey,only 60 percent of the polled companies registered trademarks in the last year.

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