In relation to the military aggression of the Russian Federation against Ukraine, the Law of Ukraine of March 24, 2022 No. 2142-IX “On Amendments to the Tax Code of Ukraine and other legislative acts of Ukraine to improve legislation during martial law” was adopted by the Verkhovna Rada of Ukraine (hereinafter – the Law). This Law amends, in particular, the Customs Code of Ukraine in the part of granting the Cabinet of Ministers of Ukraine the right to establish categories of goods in respect of which the customs authorities do not take measures to assist in the protection of intellectual property rights envisaged by section XIV of the Customs Code of Ukraine. In addition, the law stipulates that temporarily, for the period of martial law, the state of emergency, the renewal of the registration of intellectual property rights in the customs register of intellectual property rights is carried out by the relevant software and information complex of a single automated information system of customs authorities of Ukraine in automatic mode.

While we fully support the efforts of the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine to launch the economy, stimulate entrepreneurs to conduct foreign economic activity, increase tax revenues, prevent shortages of vital categories of goods in the domestic market, as well as to ensure the availability in the domestic market of affordable essential goods, Pakharenko & Partners, as rights holder companies representatives, would like to express our concern over the possibility of creating favorable conditions for fraudsters to import and distribute counterfeit goods. That is why we sent appeals to the Cabinet of Ministers and the State Customs Service of Ukraine in which we drew attention to such aspects.

Counterfeiting is infringement of intellectual property rights (IP) which is associated with increased (compared to other infringements of IP rights) socio-economic risks, as it involves the products of unknown origin and quality, production and distribution of which is has been adopted by organized crime and proceeds of which are used to finance other crimes (such as arms and drug trafficking), which pose a critical threat to our country in the context of martial law in Ukraine.

Quick money derived from the sale of counterfeit goods during the war in Ukraine are most likely to be directed for the needs of the enemy.

Thus, counterfeiting is not only a matter of morality and infringement of IP rights, but also a criminal shadow business run by organized criminal groups, and the proceeds of the same can be used to finance war crimes against our state. Therefore, we can suggest that a state that does not fulfill its international obligations, does not fight against counterfeiting, does not merely “fail to protect intellectual property rights”, but, in fact, supports the shadow business (causing damage to legitimate businesses that pay taxes) and finances organized crime and war criminals.

In war-affected conditions, the decisions of the Government of Ukraine not to take measures to assist in the protection of intellectual property rights may not result in the economic recovery, but rather play into the hands of organized criminal groups and various fraudsters who never paid taxes, never conducted legitimate business, and were using illegal, smuggling logistics channels for importing counterfeit products and illegally selling them in markets and spontaneous trade spaces.

In the opinion of the right holders, a more balanced decision of the Government of Ukraine would be to improve the automated risk analysis and management system of the State Customs Service ensuring complete exclusion of the human factor and carrying out inspections of cargoes which, according to UKTZED codes, are matching goods in respect of which the measures provided for by section XIV of the Customs Code were applied during the recent two years. In case of detection of goods with features of infringement of intellectual property rights, under martial law, it is necessary to limit the measures applied by the customs to the possibility of drawing up a customs offense protocol based on the right holders’ conclusion on the availability of counterfeiting features. By the decision of a court or other body having the relevant authority during martial law, such goods shall be transferred free of charge for the needs of medical, educational, socio-cultural institutions, other institutions and institutions financed by state or local budgets, or subject to recycling, disposal or destruction under Article 243 of the Customs Code of Ukraine. It is also necessary to increase the fine for violating the requirements of Article 476 of the Customs Code of Ukraine in order to increase revenues to the state budget of Ukraine.

Should the Government of Ukraine decide not to apply measures to assist in the protection of intellectual property rights under Section XIV of the Customs Code of Ukraine in respect of a wide range of goods, war criminals and other fraudsters will gain unlawful advantage over scrupulous entrepreneurs, the state budget will not receive the necessary taxes, and the system of assisting in protection of intellectual property rights at the border will suffer irreparable losses and will be set back a decade.

This position was also voiced and discussed at the Zoom conference of the National Association of Patent Attorneys of Ukraine on April 20, 2022, and was generally supported by colleagues in the market.

We hope that the position of the professional community will be heard by the Government of Ukraine.

Glory to Ukraine!