Parasitic Copying: Ukraine in Comparison to its EU Counterparts

23 Мар

Статья посвящена проблеме недобросовестной конкуренции, в частности контрафактной продукции. Авторы подробно сравнивают законодательство и право Украины и Европейского Союза.

Parasitic copying has had a noticeable anti­competitive effect on Ukrainian competition over the years and, in light of the global proliferation of advertising through the mass media, it is only going to become more prevalent in the future. Although trademark laws can, to an extent, be relied on to pros­ecute violators, it is the rules of unfair competition law that act as an instrumental agent for pro­tecting the innovative achieve­ments of businesses. In other words, although we are dealing with intellectual property rights, the provisions of trademark laws fall short of providing adequate protection to businesses. This is particularly so in scenarios where intellectual protection has elapsed, where unregistered trademarks are copied as well as when one is dealing with ad­vertising slogans. In the words of Article 1 of the On Protection against Unfair Competition Act (the Act), what we are dealing here with are practices «which contradict the rules, market, and other practices in business ac­tivity». Thus, the rules of unfair competition law will remain the focus of this article.

It should be noted right at the outset that this is not an area of law where a direct comparison can be made between Ukrainian and EU law. Rather, the laws of individual Member States will be considered. This is because there is no harmonization of principles of how to deal with parasitic copy­ing in the EU, despite having com­monly applied instruments such as the EC Trade Marks Directive, the EC Unfair Commercial Practices Directive or the EC Directive on the Enforcement of Intellectual Property Rights. One of the princi­pal reasons for this anomaly is the fact that the rules of unfair com­petition are much older than com­petition/antitrust laws, meaning that they were not subject to «EU harmonization» as Member States were reluctant to depart from considerable legal tradition and case law. In addition, although the principles of unfair compe­tition derive from Article lObis of the Paris Convention for the Protection of Industrial Property (to which Ukraine is also a sig­natory), the approaches differ substantially. The Member States vary to such an extent that some do not even have laws on unfair competition — i.e. the Republic of Ireland and the UK.

Before commenting on how protection against parasitic copy­ing is divergently afforded across the EU, the focus of this article will firstly shift to how this con­cept is dealt with in Ukraine un­der the Act.

The prosecution of parasitic copying in Ukraine

The Act was designed to «es­tablish, develop, and secure fair competition practices in com­mercial market activities.» It is derived from Article lObis of the Paris Convention, which provides that «any act of competition con­trary to honest practices in in­dustrial or commercial matters constitutes an act of unfair com­petition». Parasitic copying falls perfectly within this dishonest practice, as it involves one:

1. unlawfully employing a name, commercial (brand) name, trademark, advertising materials, product packaging design and pe­riodicals, or similar identifier of another business so as to cause confusion between the activities or products of the perpetrator and those of the other business (Article 4 of the Act);

  1. removing the original manufacturer’s brand from a product and selling it under the perpetrator’s brand without the express permission of the origi­nal owner (Article 5 of the Act);
  2. causing confusion by copy­ing the exterior appearance of a product that belongs to another business and putting it into cir­culation without explicitly indi­cating the manufacturer of the copy (Article 6 of the Act).

In fact, since the year 2000, the Antimonopoly Committee of Ukraine (AMCU) has shown an increasing interest in unfair com­petition cases, subjecting such unfair businesses practices to increased scrutiny. For example, in 2010, 8% of all activity of the regulator was dedicated to unfair competition.

Violators can face a fine of up to 5% of their gross worldwide income (sales) for the fiscal year preceding the year in which the fine is imposed. In addition, fol­lowing the AMCU’s decision on the illegality of their actions, perpetrators are momentarily obliged to put a stop to their un­fair conduct. As an illustration, a fine of UAH 300,000 was imposed on LLC Viva when it copied the packaging of the world famous Raffaello sweet, manufactured by Italian company Ferrero SpA. A fine of UAH 500,000 was im­posed on Rainbow Ltd, a producer of pharmaceutical drugs, when it introduced a drug under the name of DOLAR, extracting the name of another drug called Dolaren, pro­duced by a famous Indian compa­ny, Nabros Pharma Pvt. Ltd. The exterior design of the packaging was also largely copied. This led AMCU officials to come to the opinion that consumers were confused as to the true origin of the drug and decided to penalize the manufacturer purporting to free ride on the brand popularity and business reputation of anoth­er. More importantly, in addition to the fine, violating businesses risk having to recall the infring­ing product from stores as well as the seizure of the production thereof, a scenario which is much more damaging than a mere ad­ministrative fine.

When facing the unfortunate scenario of being the victim of parasitic copying, businesses should notify the AMCU of the infringement. As an illustration, when dealing with the Article 4 violation, the following should be submitted:

  1. material evidence, dem­onstrating when the particular name, trademark, etc., was used for the first time by the victim;
  2. if possible, material evi­dence demonstrating when the violator initially resorted to the unlawful conduct;
  3. written argumentation aimed at showing how similar the relevant goods/services are, in an attempt to demonstrate that the victim and the perpetra­tor are present on the same prod­uct market; and
  4. materials evidencing that the victim and the perpetrator are present on the same geo­graphical market.

During its investigations, the AMCU will determine who has priority to the relevant in­tellectual property and whether the relevant conduct is likely to cause confusion between the activities or products of the per­petrator and those of the other business. No specific timing for a decision has been set by the Act so it depends very much on the complexity of each particu­lar infringement. Following the AMCU’s decision, if successful, the victim can address commer­cial courts in an attempt to ob­tain reparatory damages. In the same vein, if unsatisfied with the decision of AMCU officials, the perpetrator can follow the pre­scribed legal channels to chal­lenge the decision as well as the sum of the reparatory damages set by the commercial courts.

The prosecution of parasitic copying across the EU

As mentioned above, the prosecution of parasitic copy­ing varies across the EU. The European Commission, in its recent study (Study on Trade Secrets and Parasitic Copying (Look-alikes) MARKT/2010/20/D (the Study), has found that gener­ally, the common elements of the distinctive laws of unfair compe­tition need to demonstrate that:

1. the product that is being copied has distinctive elements that are not common within the trade;

  1. the parasitic copy may cause consumer confusion or be misleading as to trade origin or that it may be deceptive; and
  2. the copying has an unfair element, amounting to either tak­ing an unfair advantage or exploit­ing another trader’s reputation.

According to the Study, Ger­many is often cited as an attrac­tive jurisdiction in which to liti­gate for parasitic copying, owing to its developed legislation, case law as well as the system of en­forcement. Also, the legal thresh­old that has to be satisfied before a case can be brought is lower than in some Member States. As an illustration, in Germany, whether or not a consumer is deceived or confused by the exis­tence of the parasitic copy is not important because the very fact that there is intention to copy the original product is actionable.

The opposite is true in the UK and the Republic of Ireland, whose jurisprudence is substan­tially derived from common law and is based on the tort of passing off. Here, whether a consumer is confused is of crucial importance, as otherwise one of the key elements — misrep­resentation — will not be met. Thus, the victim must satisfy the court that a misrepresenta­tion has been made in the course of trade, affecting the victim’s goodwill and then prove that, as a direct result, the parasitic copy causes damage to the victim. In practice, this means that as long as a look-alike does not mislead or confuse the public, it amounts to a perfectly legitimate product. This leads to the unfor­tunate realization that if a para­sitic copy would be actionable in another Member State, it would not necessarily be actionable un­der the tort of passing off in the common law jurisdictions where it all falls down to how the tort is interpreted and applied.

The Study also found that in some Member States (such as the Republic of Ireland, Cyprus, Swe­den and Romania) parasitic copy­ing can even have criminal law implications. It showed that most Member States provide for certain remedies aimed at preventing par­asitic copying (such as injunctions or desist and cease orders) as well as financial remedies designed to compensate the victims, either by awarding damages or paying for the costs of legal action. Some Member States (such as Cyprus, Denmark and the Republic of Ireland) pro­vide for fines to be levied, whilst others, such as France, Italy, Latvia, Poland and Romania, in recogni­tion that this is an issue of business reputation, insist that the ruling in­validating the parasitic copy must be published either on the infring­er’s website or in a national news­paper. Certain Member States (such as the Republic of Ireland, the UK, Denmark and Hungary) provide for the possibility to have the unlawful parasitic copies destroyed or seized by the relevant authorities.

Conclusively, it is evident that the prosecution of para­sitic copying varies consider­ably across the continent. Un­less parasitic copying is denned as a distinctive theory of harm within the laws of competition and antitrust, it is unlikely that the concept will be harmonised within the EU. This, in turn, rules out the possibility for Ukraine to harmonise its own principles with an approach which has been universally adopted by the EU as a whole. Nevertheless, this article attempts to provide a snapshot of how parasitic copying is dealt with in Ukraine and amongst certain Member States, enabling the reader to discern whether it is even worth taking action against this par­ticular form of unfair practice, and if so, in which particular jurisdiction.

Авторы:

Dmitry P. TARANYK

is a counsel with Sayenko Kharenko

IPredragKRUPEZ

is an associate with Sayenko Kharenko

Источник: The Ukrainian Journal of Business Law. — 2012. — № 3. — Р. 26 — 28.