Counterfeit is gaining points – Newspaper Kommersant No. 25 (7470) of 02/10/2023

In the case of counterfeit Chanel and Dior glasses, the Supreme Court of the Russian Federation (SC) recognized that for inexpensive fakes it is impossible to recover damages in favor of the copyright holder at the cost of the original product. That is, for sellers of obvious counterfeit, the responsibility will be lower than for those who pass off fakes as the original. Lawyers fear that in connection with this, there will be even more cheap fakes in Russia. According to experts, brands from countries that banned the supply of luxury goods to the Russian Federation in 2022 will continue to sue violators, but the amounts they can claim will now decrease.

On February 9, the Supreme Court published a decision in the case of damages for the sale of counterfeit goods. In April 2019, Olga Prudnikova, an entrepreneur from Pyatigorsk, was brought to administrative responsibility for selling six pairs of fake Chanel and Christian Dior glasses, ordering them to destroy the counterfeit.

After that, Chanel SARL (Switzerland) and Christian Dior Couture SA (France) as copyright holders demanded 125 thousand rubles from Olga Prudnikova. losses as lost profits. The amount was calculated on the basis that “one unit of counterfeit products forces one unit of original products out of the market,” that is, for six pairs of fakes, the cost of six pairs of real branded glasses. Arbitration courts of three instances satisfied the claim.

The IP appealed this to the Supreme Court, pointing out that the recovery of damages in this amount “contradicts the principles of reasonableness, fairness and proportionality of responsibility” (for more details, see Kommersant on January 10). The case was referred to the Economic Board of the Armed Forces, which canceled all decisions and sent the dispute for a new consideration, giving important clarifications for practice.

The Supreme Court clarified that compensation for damages “is of a compensatory nature and is aimed at restoring the property status of the injured person.” At the same time, the lost profit is compensated if such income “could be extracted under normal conditions of turnover or when taking measures and preparations, but the possibility of receiving it was lost due to the unlawful actions of the defendant.” That is, the plaintiff must prove that the violation committed by the defendant “was the only obstacle that did not allow him to benefit,” the Supreme Court emphasized.

Meanwhile, the board noted, the courts did not examine “the issue of similarities and differences between original and counterfeit goods,” that is, “whether an ordinary consumer could understand that he was buying a product not from the copyright holder.” The courts also failed to take into account that “the parties are not competing in the same market because the infringer creates apparently unoriginal prestige brand products and sells them to a completely different class of consumers than those who buy the genuine product.”

The plaintiffs did not provide evidence that due to counterfeit goods they “directly lose customers” who are ready to buy the original, and bringing the defendant to administrative responsibility does not exempt them from this, the board noted.

To recover lost profits, the court must establish the income lost by the plaintiffs and take into account that it will not directly depend on the number of fakes, that is, “cannot be calculated by multiplying the cost of the original product by the number of counterfeit goods sold.”

Until now, there has been no uniform practice on the issue of the amount of losses of the right holder due to counterfeiting. But in many cases, the courts proceeded from the cost of the original and calculated the damages for fakes on a one-to-one basis, says Andrey Gorodissky & Partners IP practice lawyer and patent attorney Veronika Popelenskaya, but now this approach may change.

“The sale of obviously counterfeit products of premium brands at a price and in places that clearly indicate that the product is not original does not lead to the loss of the client by the copyright holder,” says Victoria Olkhova, senior lawyer at Kosenkov and Suvorov law firm. “The buyer who bought counterfeit glasses in the transition for 100 rubles, I would not buy an original product that is 100 or more times more expensive. At the same time, Yulia Yarnykh, a partner at Semenov & Pevzner, emphasizes that “the law makes no exceptions” for small entrepreneurs selling cheap and obvious fakes compared to sellers of high-quality replicas.

Ms. Yarnykh explains that the copyright holder has the right to choose whether to ask for compensation or damages for fakes, the latter, as a rule, allow you to receive a larger amount of compensation. But now the Supreme Court has raised the standard of proving damages and substantiating their size, which may encourage plaintiffs to “a simpler and more reliable method of protection – a claim for compensation,” she believes. These consequences apply to claims by both Russian and foreign right holders.

Victoria Olkhova believes that the ban on the import of luxury goods from the EU, the USA and England, introduced in Russia in 2022, will not lead to the fact that foreign brands will no longer sue sellers of fakes. “But if a foreign company does not sell its goods on the Russian market, it is unlikely that it will be able to justify the losses from counterfeiters,” adds Ms. Olkhova. from 10 thousand to 5 million rubles.” However, the compensation awarded by the courts is often very low, says Veronika Popelenskaya.

The “mitigation of liability for counterfeiters and the tightening of requirements for evidence of the copyright holder to justify the damage”, shown by the Supreme Court, according to Ms. Popelenskaya, can “widely open the door to the Russian market for fakes”, since “the distribution of counterfeit goods may now turn out to be more profitable than the amount of payments for the benefit of the right holders. Yulia Yarnykh also sees the risks of growing “violations and flooding the Russian market with fakes due to the insignificant amount of liability.”

Anna Zanina, Ekaterina Volkova