- Covid-19 Guidance New
- Editor's Preface
- League Tables New
- Ukrainian Legal Market
Practice Areas and Industries Review
- Aircraft and Airports Finance
- Alternative Dispute Resolution
- Anti-Money Laundering
- Banking Disputes
- Business Crime
- Business Immigration
- Business Protection
- Capital Markets
- Commodities Arbitration
- Competition Investigations
- Contract Law
- Corporate Disputes
- Corporate Governance
- Corporate Intelligence
- Counterfeiting and Piracy
- Criminal Process
- Cross-Border Debt Restructuring
- Currency Regulation
- Due Diligence
- Energy Efficiency
- Enforcement of Foreign Awards
- Family Law
- Financial Restructuring
- Financial Services
- Free Trade Agreements
- Government Relations
- International Arbitration
- International Civil Procedure
- International Tax
- IT Law
- Jurisdiction Issues in Commercial Procedure
- Labor & Employment
- Medicine & Healthcare
- Mergers & Acquisitions
- Non-Performing Loans
- Political Prosecution
- Private Clients
- Procedural Actions
- Project Finance
- Public-Private Partnerships
- Real Estate
- Renewable Energy
- Role of Experts in International Arbitration
- Secured Transactions
- State Aid
- Tax Controversy
- Trade Remedies
- Transfer Pricing
- Unfair Competition
- World Trade Organization
Who Is Who Rankings
- Antitrust and Competition
- Banking & Finance, Debt Restructuring
- Capital Markets
- Corporate and M&A
- Criminal Law/ White-Collar Crime
- Energy & Natural Resources
- Information Technologies, Telecommunications & Media
- Intellectual Property
- International Arbitration
- International Trade: Trade Remedies/WTO, Commodities, Commercial Contracts
- Labor & Employment
- Pharmaceuticals & Healthcare
- Private Clients: Wealth Management, Family Law
- Real Estate, Construction, Land
- Tax and Transfer Pricing
- Transport: Aviation, Maritime & Shipping
- Law Firms Profiles
- Lawyers Profiles
Partner, Doubinsky & Osharova
Attorney-at-Law, Doubinsky & Osharova
Customs IP Questions in Ukraine: Latest Changes to Legislation
On 17 October 2019, the Verkhovna Rada of Ukraine adopted amendments to the Customs Code of Ukraine (hereinafter – the Code), which were embodied in the Law of Ukraine No. 202-IX On Introducing Amendments to the Customs Code of Ukraine regarding Enforcement of Intellectual Property Rights during Movement of Goods Across the Customs Border of Ukraine (hereinafter – the Law). On 14 November 2019, the Law On Introducing Amendments came into force.
The Law was adopted for the purpose of implementing the provisions of directives and Regulation (EU) No. 608/2013 in order to establish general rules for the effective fight against the illegal market of counterfeit and pirated goods without impeding the freedom of legal trade.
The amendments are aimed at strengthening the customs protection of intellectual property rights and accelerating the movement of original goods across the customs border.
Currently, the Law stipulates that the customs register may include objects of copyright and related rights, inventions, industrial designs, trademarks, geographical indications, plant varieties, topographies of semiconductor products. The measures to promote the enforcement of intellectual property rights can be applied exactly to these objects. Objects such as a utility model are excluded from the mentioned list. The industrial design remains. Although the mentioned object is an instrument of “patent trolls” to receive remuneration from real business for them to be able to use the industrial design, which is entered in the customs register, by prohibition of import or export of goods that have long become commonly used articles, it has the right to exist in the customs register. Other means should be used to combat patent trolling.
The Law On Introducing Amendments also distinguishes between the concepts of “counterfeit goods”, “pirated goods” and “goods suspected of infringement of intellectual property rights”.
A new version of the Code defines counterfeit goods as not only being those goods that contain objects of IP rights, the import of which into the customs territory of Ukraine or export from this territory is an infringement of the intellectual property rights protected by law, but also, in particular, any package, label, sticker, brochure, operating manual, warranty or other document of this type, even if presented separately, which are subjects of infringement of the intellectual property rights to the trademark or geographical indication, which contain any designation, name or term identical to a trademark or geographical indication protected in Ukraine, or which are confusingly similar to the mentioned trademark or geographical indication, and which may be used in relation to the same type of goods, in relation to which the trademark or geographical indication is protected in Ukraine.
The amended Code has been updated with the terms “pirated goods” and “goods suspected of infringement of intellectual property rights”.
From now on, measures to promote the enforcement of intellectual property rights are not applied, in particular, to original goods, that is to say, those goods manufactured with the right holder’s consent or the goods manufactured by a person duly authorized by the right holder to manufacture a certain quantity of the goods, including the quantity exceeding the quantity agreed between this person and the right holder. Moreover, such measures will not be applied to personal belongings and goods imported in the hand luggage and/or accompanied luggage to the amount of up to EUR 1000 through the customs station at an airport and up to EUR 500 at other customs stations and weighing up to 50 kg.
In fact, the updated Code permitted parallel import, which is in essence the import of original goods that are legally purchased outside Ukraine and are imported into Ukraine by importers, which are not authorized by the right holder.
According to the WTO glossary, parallel import is an operation when a product that was legally manufactured (that is to say, which is not counterfeit, not pirated) abroad is imported without the permission of the owner of the intellectual property rights (for example, the owner of the trademark or the patent).
As a rule, the right holder is not satisfied with the possibility of certain business entities (which are not authorized by the right holder) to perform parallel import into a certain territory of the original goods purchased outside the territory of importation.
However, the possibility of “fighting” against parallel import and the availability of appropriate countermeasures depends directly on the principle of exhaustion, which is in force in a certain country. This is:
-either the international principle of exhaustion, according to which the owner’s right to prohibit the use of a trademark is exhausted after the sale of the goods, regardless of the fact, in which country the goods were put into civil circulation. That is to say, in the event of putting the goods bearing a certain trademark into civil circulation in any country by the owner of this trademark, the subsequent resale of these goods in any other country, where the rights thereof are also protected, may no longer be limited or prohibited by the owner;
-or the national principle of exhaustion, which provides for the exhaustion of rights for each country individually. That is to say, if the goods were put into circulation in the territory of other states, their import and sale in the territory of the state that follows the national principle of exhaustion may be carried out only with the consent of the trademark owner or an authorized person.
Ukraine has not yet found its position. We do not have a legislative enshrinement of either of the above-stated principles of exhaustion. Although we all understand that the international principle of exhaustion is de facto in force in Ukraine.
The new version of the Code also changes the approaches to the destruction of goods, the customs clearance of which is suspended on suspicion of the infringement of intellectual property rights. The Code establishes the destruction of the mentioned goods as a result of so-called “tacit consent”. This means that in the event of suspension of the customs clearance of goods on suspicion of the infringement of intellectual property rights, the right holder has the right to initiate the destruction of the goods. The declarant agrees either to the destruction of the goods or submits an objection to the mentioned destruction. In the event of untimely submission by the declarant to the customs authority of the owner’s objection to the destruction thereof, the customs authority has the right to consider that the consent of the owner of the goods to the destruction thereof is thereby granted.
The simplified procedure for the destruction of the goods, the customs clearance of which was suspended on suspicion of the infringement of IP rights has been harmonized with the procedure defined by Regulation (EU) No. 608/2013. If the owner of the goods does not object to the destruction within an established period, the customs officers destroy the goods (tacit consent). Previously, the simplified procedure was only possible subject to the existence of an agreement in writing between the right holder and the owner of the goods.
The Code also individually defines the peculiarities of the suspension of the customs clearance and destruction of small consignments of goods (up to 3 units or weighing up to 2 kg), which are moved (shipped) as international postal and express items. In this connection, small consignments of goods (up to 3 units in one parcel or weighing up to 2 kg), which are moved as international postal and express items, may also be destroyed. For example, if the order of the goods is made on the web site AliExpress or on a similar web site and the customs officer suspects that the mentioned goods may be counterfeit or pirated, they may be destroyed and, as a result, the customer will not receive the order.
According to the Code, all costs related to the storage of the suspended goods (which is payable from the next calendar day after the day of placement thereof in a warehouse) shall be borne by the right holder. At the same time, the right holder may request from the customs authorities information on the amount of the mentioned costs and, in future, has the right to demand compensation for the mentioned costs from the owner of the goods. Thus, recovery of compensation is supposedly possible, but the problem is how all of this can actually be done.
Another innovation is the possibility of a pre-term release of the goods, the customs clearance of which is suspended on suspicion of infringement of intellectual property rights (Article 4001 of the Customs Code of Ukraine).
The problem point is a matter of notifying the right holder of the suspension and providing the relevant decision. Thus, according to the Code, the customs authority notifies the right holder of the suspension of the goods by sending a notification by facsimile and/or electronic communication. The date of receipt of the notification shall be the day when the mentioned notification was sent by the customs authority. At the same time, the customs authorities reckon on a 10-day period for submitting a decision of the right holder on the suspended goods from the date of the suspension of the goods. As a result, the right holder supposedly has a 10-day period established by law. In reality, the time limit for submitting a response is much shorter. In the event of the right holder being a non-resident of Ukraine, the submission to the customs authority of a court decision on the suspension of the customs clearance of goods within the time limits established by the current customs legislation of Ukraine is practically unrealistic.
Furthermore, from now on if, due to improper performance of the duties, the customs authorities permit counterfeit or pirated goods to cross the border of Ukraine, the right holder has no right to get compensation for material damages and to bring the customs authorities to responsibility.
The final provisions of Law On Introducing Amendments state that, within 3 months from the date of entry into force of this law, the Cabinet of Ministers of Ukraine should develop and approve regulatory legal acts necessary for the implementation of this law. The draft procedure for taking measures to promote enforcement of intellectual property rights and interaction of customs authorities with right holders, declarants and other interested parties and draft procedure for registration in the customs register of intellectual property rights protected in accordance with the law is currently being discussed.
The procedure for interaction between customs offices in the implementation of customs control and customs clearance of goods containing subject matters of intellectual property rights approved by Decree of the Ministry of Finance of Ukraine No. 647 of 30 May 2012 is in force. However, the mentioned Procedure does not contain answers to the following questions: how will the customs authorities ascertain the authenticity of the goods, what is the amount of costs for storage of the goods in the warehouse of the customs authority, the term and methods of payment of such costs, and how will the destruction of the goods take place?
We hope that with the adoption of the regulatory legal acts necessary for the implementation of the Law all controversial issues that are still unclear today will be resolved, and that one of the most important tasks of the customs authorities, which consists of the prevention of counterfeit and pirated goods from entering the domestic market of Ukraine, will be attained.