Coca-Cola and McDonald’s have left Russia. Their marks left behind

NEW YORK/MOSCOW, Aug 17 (Reuters) – Western companies with iconic brands like Coca-Cola leaving Russia face years of struggle against counterfeits and unauthorized imports clamoring to fill the void they leave behind them, a risky offer because the courts show little sympathy for the companies that leave.

The companies withdrew from Russia this spring after Moscow sent thousands of troops to Ukraine, in response to pressure from investors and the public. Some, like Coca-Cola Co (KO.N), finalized their exit in August after five months, while others like McDonald’s Corp (MCD.N) sold their businesses. Some, including Procter & Gamble Co (PG.N), partially stayed, selling essential goods. Read more

They defend their trademarks to protect their brands from loss of value, and in case they ever return to the country, intellectual property lawyers said.

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But they face a sea of ​​opportunists, importers and flip-flop court rulings.

Coca-Cola, first available in the Soviet Union in 1979, is already trapped in the fight against gray market products, which are unauthorized imports, and Russian counterfeits of its fruit-infused Fanta line, according to court documents and interviews with lawyers involved.

Other business battles are just beginning as Russian entrepreneurs aim to capitalize on their household names as they leave.

Rospatent, the Russian government’s intellectual property agency, is receiving an influx of trademark applications from popular Western brands in the country, said Robert Reading, head of intellectual property group content strategy at analytics firm Clarivate. Plc, which tracks the filings.

Normally, governments reject applications for trademarks that are identical or very similar to existing trademarks, intellectual property experts have said.

But the Russian government passed a decree this spring allowing companies to use patents from countries deemed “unfriendly”, such as the United States and the United Kingdom, without paying the owner of the intellectual property, putting Western brands on the defensive.

Russia also now allows “parallel imports,” or gray market items, for products ranging from Carefree women’s products to any brand of footwear.

The murky territory for big brands in Russia resembles the “Wild West,” said Carey Kulp, an attorney at Philadelphia intellectual property law firm Volpe Koenig PC.

“The big issue in Russia is whether the court will support Western brands?” Reading says.

GIVE TO THE STATE

Moscow entrepreneurs Alexander Gershtein and Vadim Ryabchenko, who own a company manufacturing bandages and medical equipment, have registered around 20 brands, including Coca-Cola, Adidas (ADSGn.DE), Mercedes Benz (MBGn.DE) and the brand of Pampers diapers from P&G.

Gershtein said his company may be able to make items such as Pampers-brand diapers and he may license others, if he gets the approvals, he said.

“If, for example, the state says it wants to produce…then we will give the state the Mercedes brand,” Gershtein said. “And there’s nothing wrong with that.”

He said he has yet to hear from the companies asking him to withdraw his candidacies.

P&G and Adidas declined to comment. Mercedes Benz did not return requests for comment.

COURT ROOM CLOSED

So far, Coca-Cola has failed to convince a Russian judge to take sides in cases against gray market sodas imported from the United States and competitors with nearly identical names, such as “Fantola”, which have flooded the market.

Importer Pivoindustria LLC was able to sell thousands of cans of peach and pineapple Fanta and cherry Coca-Cola – even though the government did not add sodas to the list of goods eligible for parallel imports.

Pivoindustria buys the sodas from U.S. Costco and Walmart stores and plans to import more, a company executive said. The most recent shipment arrived in Russia in April, said Maxim Sosov, a lawyer for Pivoindustria.

Coca-Cola is seeking judgment against Pivoindustria, after unsuccessfully trying to order customs to block soda shipments, Sosov said.

“(The judge) understands that parallel imports are good because they are competition, cheaper price, and it’s better for consumers,” Sosov said, adding that they also help support Russian businesses. .

Coca-Cola appealed the court rulings and said it “protects its goodwill and reputation when third parties seek to trade the company’s world-famous brand.”

Reuters was unable to attend a hearing on one of three cases Coca-Cola has filed against Pivoindustria because the Atlanta-based company won a judge’s approval to block public access, a decision which, according to Sosov, was illegal. A lawyer for Coca-Cola said the information discussed at the hearing was “not publicly available” and she could not freely make her case to impose judgment on Pivoindustria.

Coca-Cola declined to comment on the closed case.

Coca-Cola also appealed in April a Russian court’s decision to approve the Chernogolovka beverage company’s “Fantola” brand before the Ukraine dispute, according to court documents.

“This should, in normal times, be an easy win for Coca-Cola,” said Peter Maggs, a research professor at the University of Illinois School of Law and an expert on Russian law. “At this point, Chernogolovka’s only possible argument is that Coca-Cola has dropped its brand.”

A Chernogolovka executive, however, told Reuters that “we have already won this case several times…in several countries, not just Russia.”

“We continue to insist that what we do does not mislead the consumer,” its CEO Natalia Sakhnina said, insisting that Chernogolovka has never used the recipes, designs, names or someone else’s fonts.

“‘Fan’ is in both words…it’s also in ‘fantastic,'” Sakhnina said.

Chernogolovka is aiming for a 50% share of Russia’s nearly $9 billion soft drink market now that Coca-Cola is cutting operations, Reuters reported. The company started making Cola Chernogolovka in May. Read more

‘MAMA’S BORSCH’

Some entrepreneurs in Russia are trying to “Russify” Western brands, said Josh Gerben, founding partner of law firm Gerben Perrott PLLC.

German confectioner Haribo, famous for its “gummi” bears, filed a notice of objection with government authorities in June against a request to use the name “Russian Haribo” in Cyrillic letters, spokeswoman Jennifer Millns said. .

An entrepreneur in May applied for permission to use McDonald’s golden arches and red sign, emblazoned with “Mother’s Borsch” in Cyrillic, for cafes and bars, according to a filing found by the law firm.

In June, another entrepreneur applied for permission to use the New Balance sports shoe brand in Cyrillic letters, according to another filing.

The McDonald’s Golden Arches logo was visible and its flagship Big Mac burger was still on sale in some franchise stores months after the chain closed in March. Read more

McDonald’s and New Balance did not return requests for comment.

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Reporting by Jessica DiNapoli in New York and Alexander Marrow in Moscow; Additional reporting by Hilary Russ in New York and Filipp Lebedev in Moscow; Editing by Vanessa O’Connell and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

Jessica DiNapoli

Thomson Reuters

New York-based journalist covering American consumer products ranging from paper towels to packaged foods, the companies that make them, and how they are responding to the economy. Previously reported on corporate boards and distressed companies.

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