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Bankruptcy proceedings prove an unexpected hurdle to a trademark cancellation

28 November 2017

Heiniken United Breweries (plaintiff) initiated a court action in 2016 at the IP court against trademark “WINTER HUNT”, Reg. No 236790/1 in respect of beer and alcoholic drinks owned by Mr. Yezhikoff, an individual entrepreneur. The basis for the court action was non-use of the trademark during three years. The IP court issued a ruling transferring the case to the Moscow Commercial court because it transpired that there was a bankruptcy case for Mr. Yezhikoff under consideration in the said Moscow Commercial court. So, the IP court reasoned that the trademark non-use case should be considered within the framework of the bankruptcy case.

The plaintiff appealed the ruling of IP court to the cassation instance of IP court which is the Presidium of the IP court (there is no appeal instance at the IP court).

The Presidium of IP court noted that the Commercial court of Moscow had recognized Mr. Yezhikoff insolvent and initiated a six-months procedure of disposal of his property. The IP court explained that the exclusive right for the disputed trademark was a property right and it should be included into the bankruptcy assets therefore the case on termination of the right for the trademark should be considered within the framework of the bankruptcy case. It justified the ruling of the first instance IP court stating that according to the Code of Commercial Procedure the case should not be accepted for consideration if the claim should be considered within the framework of a bankruptcy case.

Ruling appealed

The plaintiff did not agree with such statement and argued that the case should be under jurisdiction of IP court and should not be considered by the Commercial court of Moscow. He based his arguments on the earlier ruling of the Supreme Commercial court which had stated that only property related claims of creditors against the debtor may be considered within the framework of a bankruptcy case, and that, only after the court recognizers the debtor as bankrupt. The plaintiff is not a creditor of the trademark owner. He further argued that the right for a trademark was not a proprietary right and at the time of initiating a court action he was not yet recognized bankrupt. The court nevertheless explained that the right for a trademark is indeed a proprietary right according to Article 1226 of the Civil Code. When the issue of jurisdiction is being resolved during a bankruptcy case it should be determined whether that specific proprietary (including trademarks) right should be included in the bankruptcy assets.

The exclusive right being a proprietary right has certain value and as a non-material asset is part of the property of the insolvent debtor.

If a business stopped its activity and is undergoing bankruptcy proceedings its property should be sold as regulated by the bankruptcy law. When the court starts bankrupt procedures all claims made not in connection with the bankruptcy case should be left without consideration.

The non-use claim was filed by the plaintiff after the start of the bankruptcy proceedings hence the non-use case cannot be examined. Nevertheless, the plaintiff is not deprived of the right to protect his rights. The trademark has been included in the bankruptcy assets and is going to be sold together with other property items.

A new turn

Now the trustee of the bankrupt entrepreneur appointed a meeting of creditors on November 29, 2017 where the controversial trademark is going to be sold. The starting price is $50. Now Heiniken United Breweries has every opportunity to buy the trademark if no competitors come in the way and bid for a higher price. On the other hand, the period of non-use is not interrupted because of change of ownership. Who will risk to buy the trademark in such circumstances? If someone other than Heiniken buys the trademark and invokes force majeure circumstances will he take the risk knowing that the trademark is in the cross hairs of Heiniken? No answer.