Another Russian vodka row brewing

- Last updated on GMT

Related tags: Trademark, Brand

Russia has already run roughshod over international trademark
regulations with regard to one of the country's best known vodka
brands, Stolichnaya, but it now appears that a second brand,
Cristall, could also see its trademark registration annulled.

The battle for the rights to Stolichnaya has been long and hard, with the Russian authorities effectively renationalising the brand on the grounds that the company which claimed to have the international rights, Cyprus-based SPI, had acquired them illegally.

Now, a report in the Russian newspaper Kommersant​ suggests that Soyuzplodoimport, the state-run company which now handles Stolichnaya and its sister brand Mokovskaya, has set its sights on the Kristall Trade and Industrial Group and its main brand, Cristall.

Citing a source at the patent office Rospatent, the report claims that 13 premium, vodkas produced under the Cristall Black Label range could be threatened by the legal action, which this time centres around the similarity between the names of Soyuzplodoimport's Kristal brand and Cristall.

The state-owned company is reported to be claiming that its vodka trademark was registered many years ago and that Cristall is taking advantage of its brand equity. Cristall, on the other hand, suggests that the trademark dispute is simply another attempt by Soyuzplodoimport to deflect criticism of its poor trading performance - and presumably to improve that performance by bogging down the competition in legal battles.

The Kristall case echoes that of SPI, where the trademark dispute essentially boiled down to a clash between two powerful Russian businessmen - Yuri Shefler, who owns SPI, and Vladimir Loginov, a former Russian agriculture minister and now head of Soyuzplodoimport.

At one stage, the legal battle descended into farce with Loginov accusing Shefler of attempting to have him killed, but the outcome was rarely in doubt. Shefler's 1997 acquisition of the Stolichnaya brand from Soyuzplodoimport's predecessor was ruled to be illegal on the grounds that the ex-Soviet company which sold the brands to Shefler had no right to do so.

Furthermore, the Russian authorities argue that Shefler paid substantially under the odds for the brands - as little as $61,000 according to some sources - which have been valued at as much as $1.4 billion.

But once in Soyuzplodoimport's hands, the success of the brands appeared to evaporate, with an investigation by the Russian Audit Chamber last October showing that the state-owned company had posted sales of just 25 million rubles in the frst nine months of the year - and furthermore, that none of this money was handed over to the Russian government.

The battle with SPI was not a complete victory, either, as the Russians have only retained the rights to the brands in Russia itself, and cannot stop SPI from selling Stolichnaya on international markets, although the vodka is now made in Latvia rather than Russia, something which Shefler had argued would dilute the strong national identity of the brand but which is common practice for other brands, such as Smirnoff.

In the case of Kristall, the power behind the brand is businessman Sergei Zivenko, former head of the Moscow-based Kristall distillery, the country's biggest, itself part owned by the state. Zivenko was ousted as general director of the firm in July 2002, a move which prompted employees loyal to him to barricade themselves inside the distillery in protest.

The armed siege was ended when the distillery agreed to sell several brands, including the 13 Cristall brands now being targeted by Soyuzplodoimport, to Zivenko, who created a new company, Kristall Trade and Industrial Group, to manage them.

The Audit Chamber also criticised this move, saying that the sale of the brands had not been in the country's interests, but found no evidence of wrong doing.

Related topics: Processing & Packaging

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