The Supreme Court has determined positions on assessing the actions of trademark rights holders as unfair

By virtue of Art. 1 of the Civil Code of the Russian Federation [1], conscientious behavior of participants in civil legal relations is one of the basic principles of civil legislation and prohibits taking advantage of one’s illegal or dishonest behavior. Otherwise, the court may recognize such behavior as an abuse of rights and refuse to protect the rights of the dishonest participant, oblige him to compensate for losses resulting from unfair actions, etc. (Clause 2 and Clause 4 of Article 10 of the Civil Code of the Russian Federation).

In the law, the good faith of participants in civil transactions is presumed (clause 5 of Article 10 of the Civil Code of the Russian Federation), and abuse of rights is defined as the exercise of civil rights solely with the intention of causing harm to another person, actions in circumvention of the law for an unlawful purpose, as well as other deliberately dishonest exercise of civil rights (clause 1 of article 10 of the Civil Code of the Russian Federation). Judicial practice is based on the approach that the main criterion for abuse of rights is the intent of the person, i.e., such behavior, the sole purpose of which is to cause harm to another person (the absence of other bona fide goals), and which leads to an imbalance of interests of the participants in legal relations.

The categories of good faith and abuse of right are evaluative, and in each specific case the court can establish them only taking into account the totality of the circumstances of the case. It follows from this that the same fact (action or inaction) in one case may indicate dishonest behavior, but in another it may not mean that the participant is abusing the right. In particular, such situations often occur in cases of protection of trademark rights.

In this regard, in November 2023, the Presidium of the Supreme Court of the Russian Federation approved a Review of judicial practice in cases related to the assessment of the actions of trademark rights holders [2], in which, using the example of specific cases, it formed appropriate approaches.

We propose to consider some situations from the Review and trace the logic of the courts when assessing the facts that were taken into account by the courts when making opposing decisions. We believe that this may be useful in preparing a defense strategy in the event of such disputes.

In particular, consider the following, the most common circumstances in practice:

• The copyright holder does not use the trademark, but at the same time goes to court to protect the exclusive rights to it (for example, demands compensation for the illegal use of the mark)

To begin with, it must be emphasized that the Supreme Court clarified back in 2019 [3] that this fact in itself does not indicate an abuse of law. The Russian Supreme Court repeats this same position in paragraph 1 of the Review, while using the example of a specific case to show why it came to this conclusion.

First of all, the court found out the reason why the copyright holder does not use the mark and established the following set of circumstances:

• previously the copyright holder, as well as his legal predecessor, used the disputed trademark to individualize manufactured goods;
• at the time of consideration of the dispute, the product is not released due to production problems of the copyright holder;

In addition, the court took into account that the copyright holder filed a demand for compensation for the illegal use of the trademark before the defendant filed a claim for early termination of its legal protection. In this case, the court decided that, under such circumstances, the fact that the right holder did not use the trademark did not indicate abuse of the right.

However, in another case, which was considered in paragraph 2 of the Review, the court assessed differently the similar fact of non-use by the copyright holder of a trademark. Finding out the reason for non-use, the court found that in fact the copyright holder does not and did not have any economic interest or purpose to use the trademark to individualize goods.

The court came to this conclusion as a result of an assessment of the circumstances related to the acquisition by the copyright holder of the exclusive right to a trademark and its subsequent behavior, namely:

• the defendant proved that he uses his mark, similar to the disputed mark of the copyright holder, for its intended purpose and his mark is famous;
• the plaintiff (copyright holder) has not proven that he himself or the persons under his control are using the disputed trademark;
• the plaintiff (copyright holder), in addition to the disputed mark, registered a significant number of other trademarks in his name and filed hundreds of lawsuits demanding compensation for their illegal use.

Thus, the court found that the real intention of the copyright holder is not to protect his exclusive right to a trademark, but to simulate its violation in order to collect compensation from bona fide participants in civil circulation - owners of similar trademarks. Under such circumstances, the court decided that the copyright holder knowingly intended to cause harm to another person, and by presenting the corresponding demand to the court he abused his right.

Continuing the topic of non-use of a trademark, let us pay attention to clause 5 of the Review: it shows situations in which copyright holders claimed that they had granted the right to use to other persons on the basis of a license agreement, which, by virtue of clause 2 of Art. 1486 of the Civil Code of the Russian Federation [4] is a legal way to use a trademark.

However, in reality, such “use” turned out to be formal: in one case, the affiliation of the copyright holder with the licensee and the sham of the license agreement concluded by them was established, in the other, the copyright holder could not prove either the fact of the licensee’s sale of goods protected by the trademark, or preparation for it, or even whether the parties have relevant intentions. Thus, the existence of a license agreement does not in itself mean that the copyright holder is using the trademark.

In this regard, the Supreme Court of the Russian Federation indicated that in such cases it is necessary to evaluate the actions of the copyright holder taking into account the circumstances of both the conclusion and execution of such an agreement.

• The copyright holder initiates many legal disputes with similar demands (for example, demands compensation for illegal use of a trademark)

As shown above, a similar argument was taken into account by the court in one of the cases in which the copyright holder was found to be abusing the right. However, it must be taken into account that this fact in itself does not indicate bad faith of the copyright holder. In practice, courts [5] proceed from the fact that the actions of the copyright holder to protect the exclusive right do not indicate the presence of signs of bad faith and cannot be recognized as an abuse of right solely on the basis of a statement from the other party. A different understanding would actually lead to the impossibility of judicial protection of intellectual rights. Moreover, this fact, neither in itself nor even in combination with the fact of non-use of a trademark, does not guarantee that the copyright holder is recognized as dishonest.

In this regard, the Supreme Court of the Russian Federation, in paragraph 2 of the Review, determined the legal position according to which such a copyright holder is recognized as abusing the right if it is established that he acquired the right to a trademark not with the intention of using it to individualize goods, but with the intention of bringing claims against bona fide participants civil turnover for the recovery of appropriate compensation.

It is important to note that in this paragraph of the Review, the court outlined the totality of circumstances that should be examined in such cases when considering the issue of recognizing the copyright holder as dishonest. Thus, in addition to the fact of non-use of a trademark, it is necessary to establish the purpose of acquiring the exclusive right to a trademark, the real intention of the copyright holder to use it and the reasons for non-use.

Hot on the heels of the cases considered, it is interesting to note the position of the Supreme Court of the Russian Federation that the court’s assessment of the rights holder’s actions as an abuse of rights in relation to some persons does not mean that he is considered dishonest in relation to other persons (clause 3 of the Review).

At the same time, the Supreme Court of the Russian Federation indicated that the court should take into account the circumstances of the previously considered case related to the qualification of the actions of the same copyright holder to acquire the exclusive right to a trademark as an abuse of right.

Thus, despite the fact that abuse of rights in relation to one person does not in itself mean abuse in relation to another person, the court will consider and take into account these circumstances in conjunction with other evidence of bad faith in relation to the party to the dispute.

In addition, the Supreme Court indicated that the court must motivate its position, including: in the relevant part, if it comes to conclusions other than those contained in the judicial act in the previously considered case.

Thus, when receiving such a claim from the copyright holder, we recommend checking his “legal history” for similar disputes, and if confirmed, declare this in court as one of the evidence of abuse of rights.

Sources:

1. Civil Code of the Russian Federation (Part One) dated November 30, 1994 N 51-FZ (as amended on July 24, 2023) // SPS "ConsultantPlus"
2. Review of judicial practice in cases related to the assessment of the actions of trademark rights holders, approved By the Presidium of the Supreme Court of the Russian Federation 11/15/2023 // SPS "ConsultantPlus"
3. Clause 154 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated April 23, 2019 N 10 “On the application of part four of the Civil Code of the Russian Federation” // SPS "ConsultantPlus"
4. Civil Code of the Russian Federation (Part Four) dated December 18, 2006 N 230-FZ (as amended on June 13, 2023, as amended on December 14, 2023) // SPS “ConsultantPlus”
5. See, for example, Resolution of the Eighteenth Arbitration Court of Appeal dated 05/22/2023 N 18AP-4811/2023 in case N A07-21345/2022, Resolution of the Eleventh Arbitration Court of Appeal dated 02/27/2023 N 11AP-1470/2023 in case N A55-22791 /2021// SPS “ConsultantPlus”