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Aivars Pastalnieks
Any serious businessman does his best to register his/her trademark when entering a new market. Even so, the use of other's trademarks has become a profitable business. The turnover for fake brand names is growing from year to year. As regards to profit, some estimations show that the theft of trademarks can be compared to organised crime - the weapon trade and the drug market.
Until now, registering trademarks was considered to be a thing for foreign businessmen, ensures exclusive rights to the use of a specific product. Introducing any old invention is much more difficult than a well-known brand name. Customers get used to trademarks faster - and it boosts profit.
A trademark is intellectual property. Some of the world's harshest struggles occur in this field. Company representatives follow registration made by others with great attention. An argument may arise when, for instance, the word "Lion" and the graphical image of the same lion is used.
In the Baltics, mainly foreign businessmen argue about trademarks. For example, British motorcar producer Jaguar has objected to appearance of Swiss watches with the same brand name in Latvia. The British lost this argument due to the fact that the Swiss aren't producing any motorcars.
The unawareness of customers on the Baltic market has also attracted the fakes of goods owned by many famous companies. The famous "Boss" trademark, employs companies from all over the world.
Local Baltic companies have not only become increasingly active as regards to registering their trademarks in the recent years; they also boldly confront foreign companies on issues basically concerning trademarks and services.
For example, producer of confectionery Adolf Ritter made an attempt to prohibit Estonian Kalev from using the word "Bitter" in the name of one of its chocolates - and lost the case. German dental company Vita claimed that Latvian Viada of the same profile put up obstacles against Vita operations in the market. This claim was also rejected.
The Coca-Cola Company is quite meticulous about the appearance of the soft drink "Fantastika" produced by Cido,quite close to what their "Fanta" looks like. Someone might get confused! Worldwide practice states that violation of these rights may be claimed whenever a survey has shown that 10% of the product's customers may mistake one product for another.
Nevertheless, local products seem to be losing the argument with foreign companies. American Procter&Gamble won its case against Latvian Dzintars for using the brand name Ariels.
The struggle in the use of trademarks also takes place between the Baltic countries themselves. Philip Morris Lietuva filed a case against Estonian tobacco products Astra and Prima, which lasted at least four years. Estonian Kalev attempted to dispute Latvian Laima chocolates Bird's Milk, as the local enterprise was also producing sweets under the brand name of Pigeon's Milk. The case was taken to the Supreme Court, where it was eventually rejected.
Approximately a third of similar cases all over the world are submitted to court by patenting offices. Grigory Polyakov, Chairman of the Appeal Council of the Patent Office in Latvia, told the BC that the Council had received 159 complaints the previous year: 80 claims were satisfied, 49 - rejected. Only four cases were submitted to court by Appeal Council regulations.
Head of the Trademark and Industrial Design Department in Lithuania, Algirdas Stulpinas, told the BC that 8 310 trademarks had been registered in the country during the previous year, and that 224 protests had been registered. The Appeal Department examined 72 of these cases, for 67 of them decisions have been made, and appeals have been submitted to court in only four cases.
In Estonia, representatives of the relevant authorities admitted that an average of 5 to 10% of these cases are actually taken to court.
However, the figures don't really reflect the actual situation. Many companies don't even apply to court due to the expensive procedure involved, too expensive for small enterprises. In Europe, for instance, patent courts have long been been set up, while there is no such thing in the Baltic States. Our judges are just taking their first steps towards specialising in these disputes.
One of the preconditions set for the Baltic States before joining the World Trade Organisation (WTO) was to ensure the protection of intellectual property. The laws currently in force in the Baltic States have been elaborated on the basis of European normative acts, which, in turn, correspond to the requirements of WTO TRIPS. This means that the production, import, and imports for further processing or distribution of counterfeit goods in customs depositories is prohibited.
In order to obstruct the path for fake goods entering national markets, the holder of rights or an authorised agent thereof can apply to the Customs Administration and provide detailed descriptions of the original and faked counterfeit goods.
Quite a number of companies have taken the opportunity. Companies like Nike, Adidas, Reebok, Kodak, Fuji, Gillette, Seiko, etc., have requested help from Baltic customs offices. Representative of the Anti-Contraband Department at the Lithuanian Customs Administration, Ilona Rozeniene, reported that at least 10 cases have been brought to court after the arrest of goods, and five of these ended in favour of Nike, Adidas, Hugo Boss and Nivea. The latter having asked for a ban of exporting Niveja cream, produced in Latvia, to Lithuania.
Retail points and dealers of fake goods are well known, but clamping down is hindered by the fact that counterfeit goods are often incorporated as transit made by offshore company consignees.
As it turns out, protection of rights is followed taken only by a small proportion of all the possibly interested parties - this is mainly due to the complicated procedures and the lengthy legal proceedings. In Latvia, the courts make the decision to confiscate and destruct goods, and, unfortunately, the proceedings can last for years. Lithuania faces a similar situation.
At the moment, all three Baltic States are drafting laws that will stipulate changes aimed at facilitating the protection of intellectual property. At the same time, violation of rights to this kind of property has become increasingly profitable: the dirty business does not require any serious investment and there is no need to pay for advertising or to take responsibility for quality. The employment of a cheaper labour force and use of even cheaper raw materials reduces both the risk and the possible punishment.
* The term fake applies to goods (including the packaging of, users' manuals and warranty papers) marked with trademarks registered by similar goods without the permission of the trademark owner, as well as to goods that they may be mistaken for different parties previously registered.
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About 40 000 trademarks have been registered in Latvia, 24 820 (or 39 300, according to other sources) - in Lithuania, and over 30 000 - in Estonia.
The registration of a new trademark costs 100 lats in Latvia (around 60 US dollars), 2800 kroons (164 US dollars) in Estonia, and will soon reach 240 litas (60 US dollars) in Lithuania.
Raivo Krumins, Head of the Division for Protection of Intellectual Property at the Customs Board of Latvia
- Difficulties arise from the complexity of confiscating and destructing goods. In Germany, customs authorities only received 67 applications over the years between 1963 and 1995. Since 1995, when the customs authority was entitled to make decisions as to the regards of confiscating goods, they have received 163 applications. We are also taking steps towards the situation in which customs officials will be able to make decisions on destroying goods.
Mihkel Leesment, Senior Expert of the Customs Surveillance Department in Estonia
- For now, the time limit for detaining cargo in order to make a decision on further action has not been set. However, as of January 1st 2001, this will have to be done within three days. The work of customs officers will be burdened, as quite often the goods will have to be sent back to the producers for detecting its origin.
Grigory Polyakov, Director of Legal Affairs at the Patent Office of Latvia:
- Registration of trademarks is a good indicator for overlooking the processes going on in a country. In Latvia, foreign companies are basically interested in registering themselves in the alcohol, tobacco, food and medicine trades. This again proves that industries are not developing here: trade marks for the products of heavy and light industries are registered rarely. This is a characteristic for all of the three Baltic States.
Algirdas Stulpinas, Head of the Trademark and Industrial Design Department of Lithuania
8 310 trademarks were registered in the country last year, 224 complaints were made. The Appeal Department examined 72 cases, for 67 of them decisions were made, and appeals were submitted to the courts in four cases.
One of the most scandalous disputes hovers over famous vodka brands Stolichnaya and Moskovskaya. In the past, at least a hundred distilleries produced both brands of vodka in the Soviet Union. Sojuzplodoimport won the fight over the right to these trademarks in Lithuania and Estonia. Meanwhile, in Latvia, legal proceedings are still under way, and neither of the parties is ready to give up. The case has been dragging on for several years.
Vodkas Stolichnaya and Moskovskaya appeared in Latvia in 1945, reminds Valdis Bimanis, Intellectual Property Adviser for Latvijas Balzâms. Both brands of vodka have never been as popular as they have been in Latvia. This apparently explains the fierce fighting over profits in this particular area. Furthermore, speaking of Moskovskaya, it was announced the most popular vodka of the country, and also the most popular of all spirits in sold in Latvia last year.
Latvijas Balzamsproduces vodkas "Stolichnaya" and "Moskovskaya" only for the domestic market. In order to protect their rights, representatives of Latvijas Balzâms requested that customs offices detain any cargo containing vodka produced anywhere else in the world under the same name. Nevertheless, the market is still not clean - illegal producers are still eager to use these trademarks.
Some time ago, Sojuzplodoimport litigated Estonian alcohol producers Liviko for using Estonian label Stolichnaya. The parties came to an agreement that Liviko would stop producing the spirit.
Now the right to produce and distribute vodkas in Estonia under the name of Moskovskaya and Stolichnaya, Russkaya and Limonnaya belongs solely to joint stock company Onistar. They produce approximately 40 000 litres of vodka per month, as the BC was told by Chairman of the Onistar Board, Alexander Skoblov. Onistar is authorised to export all kinds of vodka to Lithuania, while only Russkaya is allowed to be imported to Latvia. Export activities have just been launched, so it is still too early to speak about definite volumes.
Riga
Sports equipment struck worst in the Baltics. Nike, Adidas, and Reebok have informed customs authorities from all three countries about their wish to protect their trademarks. In six months alone, the Latvian customs detained four cargoes: three of them in Riga and one in Daugavpils. The total base value for these loads is estimated at several hundreds of thousand of lats.
On April 25, a cargo containing 980 pairs of sports shoes, 400 tracksuits and a variety of other sports equipment was arrested in Daugavpils. The price of a pair of original Nike shoes averages around 60 lats, while a fake can be purchased for 20 lats. The same difference in prices is evident for tracksuits.
Three days after arresting the cargo, representatives of sports equipment companies witnessed a peculiar scene: part of the cargo was loaded back onto the trucks. No explanations were ever provided as to why such actions were taken - who ordered the reloading of the goods and why. As the trucks had Lithuanian license plates on them, it can be assumed that the cargo was meant for transit there.
Lat Soli pa solim was indicated as the consignee for the cargo in Latvia, and it was expected to be transferred later to offshore company Amanda, registered in Delaware. The same scheme is used by many other representatives of this "business", which makes criminal prosecution against them difficult to implement. Nike sued the consignee at the Riga District Court, and the proceedings have not yet been completed.
A more impressive cargo of counterfeit goods was detained by the Riga customs office on May 30th. Eight trucks containing several dozens of compressed bundles tripling in size as soon as opened. The effect was probably meant to psychologically confuse customs officers. In this case, the cargo was consigned to a company named ADM Baltik Tranzits. According to informal sources, the consignee agreed to the Nike proposal for burning the cargo. The company would thus suffer even less of a loss, as the longer the goods are kept in storehouse, the bigger the storage expenses grow.
As it was noted by Nike technology expert Juris Baumanis, the fake goods are mainly shipped from China and Turkey. The quality of these products is not even something worth talking about and there's no guarantee. Neither the shoes numbers nor bar codes are marked on the boxes. What's more important is that original sports shoes are designed for specific kinds of sports and the use of fakes could cause injury.
A large proportion of counterfeit fake sports equipment confiscated, nevertheless, the market is not fake-free. The customs authorities aren't able to detect everything, and fakes are often smuggled in small packages.
By the way, Latvian and Lithuanian markets absorb much more fakes than the Estonia, where customs officials have the right to confiscate and destroy goods right on the border. Others even go as far as saying that the same procedure can also occur at any retail point found guilty.
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