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Supreme Court tackles trade mark squatting

31 December 2015

1 MINUTE READ

The Supreme Court of Russia recently handed down a landmark judgment in a case involving a company that through its affiliates has registered thousands of trade marks in the country, many of them for common words and phrases. In a series of cases, the company has sought damages from manufacturers for trade mark infringement. In one dispute, concerning the mark Aphrodite, it sought damages of about ₽2.5 million. While the lower courts rejected its claim based on non-use of the trade mark, the IP Court cancelled these rulings. However, in a precedent-setting ruling, the Supreme Court has reinstated the original decisions, finding that the squatter's actions were an abuse of its rights. The result should be good news for legitimate businesses in Russia.

On July 18 2015 the Supreme Court of Russia acting as a court of cassation handed down a landmark judgment in a case concerning trade mark squatting. In case A08-8802/2013, a famous trade mark squatter New Technologies, LLC tiled a civil lawsuit against the large manufacturer of ice cream Belgorodsky Khladokombinat (Belgorod Cold Store Facility) OJSC, claiming cessation of the infringement of its rights to the trade mark Aphrodite and payment of damages of about ₽2.5 million ($540,000).

This is not the only case where the said squatter and its affiliated companies have applied to court claiming the payment of compensation for the unlawful use of their trade marks. These companies jointly own more than 7,000 trade marks in Russia, most of them commonly used phrases and words, such as Health and Fantasy, registered for various goods and services. The total amount of compensation claimed by the squatter has reached about P 10 million (see chart for a selection of cases).

The court of first instance refused to grant the claims of the squatter, stating that its acts were an obvious abuse of right even though the defendant did not deny the tact of the use of the trade mark. Тле appeal court supported the decision of the first instance court, pointing out that the trade mark of the squatter had not been used for 19 years (from the date of its registration in 1996), and the squatter had never produced any kind of goods during this period. Hence, claiming monetary compensation from a third party will be recognised as abuse of the trade mark right.

Examples of court cases involving OOO «New Technologies»

No Court case ID Court name Plaintiff Defender Subject matter Result
1 № SIP – 275/2014 Court for Intellectual Property Rights ZAO “Molodets” OOO “New technologies” Premature cancellation of the trademark registrations Nos. 379619 and 219919о for «МОЛОДЕЦ» (translit. «MOLODETS»)
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The court proceeding was stopped due to the conclusion of the amicable agreement under which the parties thereof shall conclude an alienation agreement in respect of the trademarks Nos. 219919 and 379619. The price of alienation is ₽700 000.
2 № SIP – 881/2014 Court for Intellectual Property Rights OOO «Confectionary plant «Pobeda» OOO “New technologies” Premature cancellation of the word mark «ПОБЕДА» (translit. «POBEDA»), Russian registration No. 166399, due to its non-use
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The court proceeding was stopped due to the conclusion of the amicable agreement under which the parties thereof shall conclude an alienation agreement in respect of the trademark No. 166399.
3 № SIP – 880/2014 Court for Intellectual Property Rights OOO «Confectionary plant «Pobeda» OOO “New technologies” Premature cancellation of the word mark “ВКУС ПОБЕДЫ» (translit. «VKUS POBEDY»), Russian registration No. 395926
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The court proceeding was stopped due to the conclusion of the amicable agreement under which the parties thereof shall conclude an alienation agreement in respect of the trademark No. 395926.
4 № SIP – 879/2014 Court for Intellectual Property Rights OOO «Confectionary plant «Pobeda» OOO “New technologies” Premature cancellation of the word mark “ПОБЕДА ВКУСА » (translit. «POBEDA VKUSA»), Russian registration No. 395927
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The court proceeding was stopped due to the conclusion of the amicable agreement under which the parties thereof shall conclude an alienation agreement in respect of the trademark No. 395927.
5 A14 – 2219/2014 Arbitration Court of Voronezh Region OOO “New technologies” OOO Firma «Tatyana» An action to forbid the defendant use the designation «Анжелика» (translit. «Anzhelika») and «золотой колос» («zolotoy kolos») for the individualization of the goods, works or services in respect of which the trademarks Nos. 386367 and 383394 are registered; to claim from the Defender a compensation in the amount of ₽600 000 for the infringement of the exclusive trademark right to the Russian registrations Nos. 386367 and 383394
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The court proceeding was stopped due to the adoption of the amicable agreement under which the Defendant shall pay off a compensation in the amount of ₽200 000.
6 A14 – 7064/2014 Arbitration Court of Voronezh Region OOO “New technologies” OOO "Parfume-Finist" An action to claim a compensation in the amount of ₽591 199,20 for the infringement of the exclusive trademark rights to the Russian registration No. 397592. (Volshebnoe)
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The court proceeding was stopped due to the adoption of the amicable agreement under which the Defendant shall pay off a compensation in the amount of ₽300 000 Rubles.
7 A21 – 4620/2014 Arbitration Court of Voronezh Region OOO “New technologies” OOO «Viga-Balt» An action to claim a compensation in the amount of ₽212 425, 84 for the illegal use of the trademarks By the Court Decision as of October 16, 2014, the claims were partially satisfied; a compensation in the amount of ₽20 000 was levied in favor of the Plaintiff.

Examples of court cases involving ZAO Association of business cooperation of Afghanistan war veterans MIR (affiliated company)

No Court case ID Court name Plaintiff Defender Subject matter Result
1 A14 – 2221/2014 Arbitration Court of Voronezh Region ZAO «Association of business cooperation of Afghanistan war veterans «MIR» OOO «Taina» An action to forbid the Defender to use the designation «Тайна» («Taina») for the individualization of the goods, work and services in respect of which the trademark No. 227405 is registered as well as to claim from the Defender a compensation in the amount of ₽100 000 for the infringement of exclusive trademarks rights to the Russian registration No.227405.
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The court proceeding was stopped due to the adoption of the amicable agreement under which the Defendant shall pay off a compensation in the amount of ₽30 000 and the Parties undertake to conclude a license agreement granting a non-exclusive license for the period of 5 years.
2 № A14 – 2218/2014 Arbitration Court of Voronezh Region ZAO «Association of business cooperation of Afghanistan war veterans «MIR» Individual entrepreneur Pischulina N.G. An action to forbid the Defendant to use the designation «Малыш» («Malysh») for the individualization of the goods, work and services in respect of which the trademark No. 157272 is registered as well as to claim from the Defender a compensation in the amount of ₽100 000 for the infringement of the exclusive rights to the trademark
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The court proceeding was stopped due to the conclusion of the amicable agreement under which the Defendant paid off a compensation in the amount of ₽100 000.
3 A38 – 3072/2014 Arbitration Court of Mari El Republic ZAO «Association of business cooperation of Afghanistan war veterans «MIR» OOO «Sladkie Traditsyi» An action to claim a compensation in the amount of ₽100 000 for the infringement of exclusive rights to the trademark «Сладкая парочка» («Sladkaya Parochka»)
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The claims were partially satisfied; the compensation in the amount of ₽50 000 was levied
4 A63 – 6127/2014 Arbitration Court of Stavropolskyi Krai ZAO «Association of business cooperation of Afghanistan war veterans «MIR» Individual entrepreneur Rogozinskyi A.V. An action to claim a compensation in the amount of ₽144 000 for the infringement of exclusive rights to the trademark No. 173173
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The claims were satisfied in full; the compensation in the amount of ₽144 000 was levied

Sadly, the IP Court of Russia, acting as a court of cassation, reversed these decisions of the lower courts and sent the case For re-consideration to the court of first instance. In cancelling the decisions of the lower courts, the IP Court referred to the provisions of Article 10 bis of the Paris Convention, according to which in order to recognise the actions of the party related to the registration of the trade mark as unfair competition or abuse of right it is necessary to evaluate the fairness of such registration, which cannot be done without establishing the purpose of the registration in question. In this regard the court should examine all circumstances connected with the registration of the trade mark and the subsequent activity of the right owner, to establish the purpose of the registration.

At the same time, according to the ruling of the IP Court, non-use of the trade mark itself, as well as the enforcement proceedings initiated by the right owner, cannot be recognised as evidence confirming the abuse of right of the claimant.

The reasoning of the IP Court left open the question regarding the exact circumstances which should be re-examined by the court during the new trial, and it was indeed unclear how the court should determine the purpose of registration of the trade mark of the squatter, which had been done in 1996.

As expected, the ruling of the IP Court was appealed by Belgorod Cold Store Facility to the Supreme Court of Russia.

The judgment of the Supreme Court put an end to this dispute and set a precedent. The judgment cancelled the ruling of the IP Court and upheld the decisions of the lower courts, according to which all claims of the squatter were rejected.

The Supreme Court based its position on the following findings:

  1. The main purpose of the trade mark is to individualise the goods and services and to distinguish the goods and/or services of one company from those of another company.
  2. The court has the right to refuse enforcement of the rights of a party on the basis of Article 10 bis of the Paris Convention and Article 10 of the Russian Civil Code, if during the consideration of the case the abuse of right of the claimant is established.
  3. In view of the general requirement of the law to use the registered trade mark (otherwise its legal protection can be terminated due to non-use), registration of the trade mark with the purpose of creating obstacles to third parties in the absence of the actual use of such trade mark by its right owner shall be recognised as unfair. Moreover, a right owner who did not make enough efforts to start the use of the trade mark within the period of three years set by the law cannot claim trade mark infringement. Trying to enforce a trade mark which has not been used by the right owner, including claiming monetary compensation, shall be recognised as abuse of rights.

Taking into account the large number of the trade marks registered in the name of New Technologies, LLC as well as the absence of evidence of use of such trade marks, and the long list of court cases initiated by them, the Supreme Court recognised the actions of the squatter as an abuse of right.

We may reasonably expect that this case will positively affect enforcement practice in Russia. Time will tell whether these expectations are justified.

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