Nowadays trade - marks are very often getting employed as competition tools. For instance, the number of cases regarding protection of trademark rights, tried by the Arbitration (Commercial) court of the Sverdlov region in 2006, rose seven times to 2003¹. Still, claims of right holders are not always reasonable.

Sometimes entrepreneurs cite actions of “infringers” of trademark rights as reasons for their economic losses. This may be illustrated by the case of Ekaterinburgskiy Myasokombinat (meaning “meat packing plant”) against Khoroshiy Vkus Kombinat (rendered as The “Good Taste” foodstuffs plant) regarding the trademark infringement tried by the Arbitration (Commercial) court of the Sverdlov region in 2006-2007. Lawyers and trademark attorneys of the Ekaterinburg branch of Gorodissky & Partners represented the interests of the defendant.

The products of Ekaterinburgskiy Myasokombinat (EMK) have been well-known to customers in Ekaterinburg for a long time. The EMK has held a monopoly at the regional meat and sausages market for a significant period. Dozens of small meat-processing shops were opening in the early 90s. However, this did not affect the alignment of market forces: production volumes were extremely high and the EMK brand was dominant in customers’ minds. With time, hough, its market position was shaken. One of the main reasons was the corporate conflicts within EMK, which still have to be resolved, and the rise of powerful rivals that offered quality products to customers.

Khoroshiy Vkus Kombinat (KVK), a relatively young and developing company, is counted among such rivals. Within four years the KVK has succeeded in reaching a sales volume and a brand recognition level comparable with those of the recent monopolist.

The strategy of KVK² was to achieve brand recognition. For this purpose a graphic symbol containing a word element with the designation of Khoroshiy Vkus was created and used on production lines, as well as in advertising materials, on company stands, and so on. However, the said designation failed to be registered as a trademark in proper time. The subsequent course of events has shown that it was a serous mistake…

Having felt increasing pressure from its competitor, EMK tried to “crack down” on the former with the help of the exclusive right to the trademark belonging to it pursuant (Registration № 174547). The trademark consisted of a graphic symbol with a stylized abbreviation of EMK and a word element “Ekaterinburgskiy Myasokombinat” (the word element was excluded from legal protection of the trademark). EMK was acting resolutely: it obtained a search report from the Russian PTO that the rival’s designation had not been registered as a trademark, and the opinion, given by a leading Ural legal institute, proving that such designation is confusingly similar to the EMK trademark.

So, EMK filed a statement of claim to the Arbitration (Commercial) court of the Sverdlov region where demanded that Khoroshiy Vkus be prohibited from carrying out the following activities: to manufacture and sell sausages and meat products under the disputed sign; to withdraw all goods bearing the disputed sign from sale; to remove at the expense of KVK the disputed sign from the produced goods and packaging or, if such actions cannot be implemented, to destroy the produced goods and packaging; to seek compensation for unlawful trademark use to the amount of 5 mln. roubles (more than 200 000 US dollars).

Feeling a threat to its business, KVK consulted the Ekaterinburg office of Gorodissky & Partners. Taking into consideration the scale of business, the threat of maximum compensation recovery, as provided by the Law, seemed to be real, if the designation of Khoroshiy Vkus were or be acknowledged as confusingly similar to the EMK trademark. Moreover, the prohibition against the disputed sign would mean the need of rebranding for KVK, and, as a consequence, additional expenses.

Having examined the case materials, we came to the conclusion that the claims of EMK to Khoroshiy Vkus turned out to be unfounded, since the disputed sign was not confusingly similar to the trademark according to Registration № 174547.

After that, a strategy of protection of the interests of our client was promptly worked out. We advised the client to file an application for registration of the disputed sign as a trademark without any further delay, and to contest the basic argument of the EMK claim that KVK uses a designation that is confusingly similar to another trademark.

An application for a registration of Khoroshiy Vkus as a trademark was filed at the Russian PTO; an opinion grounding the fact that the designation of the defendant is not confusingly similar to the trademark of the plaintiff was submitted to the Arbitration (Commercial) court.

In compliance with court practice of factfinding related to the degree of similarity of trademarks, EMK filed a petition for a forensic examination appointment. Since then, the main fight has been connected to approval of expert candidates and contesting the relevance of forensic examinations. The result of the long procedural contest was that a trademark attorney from Ekaterinburg was appointed an expert.

The Russian PTO has already adjudicated on the registration of the designation of Khoroshiy Vkus as a trademark. However, the expert’s opinion submitted to the court contained a contradictory conclusion, namely, that the designation of Khoroshiy Vkus was confusingly similar to the EMK trademark.

An opposition to the expert’s opinion, pointing out at the insufficiency of the conclusions made by the forensic examination, was filed before the Arbitration (Commercial) court in response. We indicated that, first and foremost, the expert failed to determine correctly the types of the designations under comparison.

According to the expert’s opinion, the EMK trademark “represents a device mark comprising an unprotected word element “Ekaterinburgskiy Myasokombinat”; in other words, Registration № 174547 is a device mark, containing an unprotected word element “Ekaterinburgskiy Myasokombinat”.

The type of designation of KVK was determined in exactly the same way: “the labels placed on the goods and provided by the court… also contain a device mark with the Khoroshiy Vkus word element”. Nonetheless, the legal nature of the word mark (protected or unprotected) does not affect the general conclusion about its type.

Pursuant to Chapter 1 art. 5 of the Trademark Law, word, figurative, three dimensional, or other signs or their combinations may be registered as trademarks. According to Chapter 1 art. 6 of the same Law, unregistrable elements may be included as unprotected elements in a trademark, provided they do not prevail.

As is evident from the above, an unprotected element is an inalienable element of a trademark, but it is not subject to independent legal protection. If an unprotected word mark is included in a design trademark, it does not mean that such trademark is to be regarded as a design mark.

The said trademark, consisting of a combination of the design and word elements should be referred to as a “combined” designation.

A customer of meat and sausage products has no knowledge of which elements of the EMK trademark are protected — he or she perceives the trademark as a whole and correlates it with a corpus of other trade designations, the latter being also perceived as a whole, without distinguishing between protected and unprotected elements.

As a result, the expert substituted the question put by the court: “Are the word marks and graphic designations confusingly similar?” for the following question: “Are the graphic (design) elements of the designations confusingly similar?”

Second, the expert applied the wrong methods of designation analysis for confusing similarity.

In order to determine the degree of similarity between the combined designations, it is necessary to make a separate analysis for confusing similarity for both the word and design elements, as well as comparing the location of these elements within the designations under discussion.

The expert had ignored the expressly differing word elements in her analysis, but she herself noticed that “the unprotected word element Ekaterinburgskiy Myasokombinat” occupies 31% of the total area of the EMK trademark, whereas the unregistrable element Khoroshiy Vkus occupies 25% of the respective designation.

Then the expert cited claim 4.2.4.2 of the Guidelines for Examination of Claimed Designations for Identity and Similarity deliberately incorrectly, while she used these Guidelines as the basis for the expert examination.

Referring to the aforementioned clause, the expert wrote: “the examination of word marks takes into consideration identity and similarity of protected elements, thus preventing the examination of unprotected word elements…”Yet the cited clause of the Guidelines actually says as follows: “However, the coincidence of such (unprotected) elements may intensify similarity of the designations… and, vice versa, the difference of unprotected elements may further increase the difference in designations…”

Third, in our view, the conclusion regarding confusing similarity of the design element was also drawn incorrectly. The expert failed to take into account that the distinctiveness of the bordering of both designations is low. We provided evidence that such bordering is widely used by manufacturers of meat and sausage products, as well as other foodstuffs. Thus, it was not taken into consideration that the differing design elements “EMK” and the stylized sun (designation Khoroshiy Vkus) in the designations in question were characterized by high distinctiveness.

The Arbitration (Commercial) court accepted our objections and required that there be an additional expert examination, and commissioned the same expert for this purpose. In the additional examination, the expert confirmed her position. However, the answers to additional questions of the court lead to inevitable logical discrepancies with the opinion of the previous examination.

The KVK had already obtained Registration № 308665 for its own designation as a trademark before the court hearing, during which the opinion of the expert examination was studied.

In this situation, it took us little effort to contest as contradictory and ungrounded both opinions of the trademark attorneys from Ekaterinburg, to obtain a re-examination appointment, and to involve as an expert a leading Russian intellectual property specialist.

The opinion of the re-examination proved the legal status of Khoroshiy Vkus in this matter — the designations under comparison were not acknowledged confusingly similar.

The Arbitration (Commercial) court denied the claim of EMK on the basis of the re-examination opinion, and the fact of registration of Khoroshiy Vkus designation as a trademark, meaning that our client — KVK was entitled to use its trademark in business.

Finally, the plaintiff attempted to appeal the said decision, but by the ruling of the Seventeenth Arbitration (Commercial) Court of Appeal (city of Perm), the decision of the Arbitration (Commercial) court of the Sverdlov region regarding this case was affirmed and the appeal of EMK was dismissed.

The case was not considered in a cassation court.

Sergei Egorov
Evgeny Dedkov

¹ According to Delovoy Kvartal magazine, № 38 (610) dated October 15, 2007.
² Delovoy Kvartal, № 31 (555) dated August 28, 2006.