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Abuse of Right as Grounds for Refusal to Satisfy Claims

April 25, 2017

The conflict of rights and interests in the legal practice occurs daily and everywhere. In the ordinary conflict situation, the right holder either really tries to defend his legitimate interests, which have been damaged, or because of a lack of legal literacy he tries to exercise his civil rights in a wrong way. However, there are other situations.

The person often realizes fully what rights he has, where the right's boundaries are clear, where they are blurred, and he understands perfectly how to make money from this. That is, if the legal field is used not to protect one’s own interests, but to infringe upon the legitimate interests of other people and the unjust enrichment is the goal of it, then it is appropriate to talk about the abuse of right, which is prohibited by Article 10 of the Civil Code of the Russian Federation.

What does it mean with respect to the Intellectual Property? It is not a secret that today the cost of a trademark or trademarks can be up to half, and sometimes even more than half the price of any company. Therefore, it is not surprising that trademarks are regularly attacked by a number of persons.

Who are these people? Firstly, they are small legal entities and individuals, who can be conditionally combined under the name “patent trolls.” Their main goal is to earn money by pinching off a part of the profit from an economically successful brand or company. Typically, “trolls” buy up or register a significant number of patents and trademarks, which they sell later to interested companies gaining good profits or use them to claim compensation in court from the companies for the use of the designations, which are confusingly similar. That is, this category of entrepreneurs uses the trademarks belonging to them not to protect the goods or services manufactured by them, but to obtain money from other legal entities.

It should be noted that “patent trolls” as a rule act deviously and expectantly: they set an interesting goal for themselves and then give the victim enough time to invest a lot of money in the project so that it would be economically unreasonable to stop the project. In such a situation, bona fide entrepreneurs having received a claim for compensation prefer to pay off, than to recall the goods that have already been manufactured and shipped and spend time and money to change the trademark.

Relatively small companies tend to become the troll's victims. The prolonged court proceedings are too costly for them. However, there are exceptions to this rule.

Secondly, the threat to a trademark can come from competitors. Any weakening of the opposite party's position serves their interests, and its complete withdrawal from the market is an ideal variant. The entire arsenal of means stipulated by the legislation is used to achieve these goals: filing statements for the police, filing applications to the Federal Antimonopoly Service, to the court. Trying to give their claims greater importance and legitimacy, in the vast majority of cases they register or purchase the trademark or designation that are similar or identical to the trademark or designation of the competitor. This circumstance subsequently becomes a subject of proceedings and the grounds for attacking the competitor’s active trademarks.

The third category of persons who are always a source of troubles is the former business partners, the own employees, dismissed with scandal and who have held resentment, former wives and husbands. It is quite logical that after breaking business or family relations, these people are likely to be engaged in the same things as they have been doing during the last few years, they will continue to work in the same direction as before. This circumstance, in turn, can lead to the beginning of fierce and uncompromising wars for the trademarks. Here it is necessary to take into account the fact that in addition to striving to get benefits, these people will also be moved by anger, resentment and a desire for revenge.

The provisions of Article 10 of the Civil Code of the Russian Federation stated abstractly have made it very difficult to use the Article in practice for a long time. It was impossible to use it for the protection of the legitimate interests of right holders. Moreover, the courts that adjudicated disputes on the intellectual property issues de facto ignored it. The servants of Themis in the overwhelming majority of cases were not interested in the fact whether the claims made can lead to the infringement of other people's legal rights or not. However, in recent years the situation has begun to change, and judges increasingly use Article 10 of the Civil Code of the Russian Federation as an efficient tool to repress an unfair exercise of rights.

In many respects, this has become possible by the fact that the complexity of giving a precise definition of the concept of “the abuse of right” is more than offset by the possibility of the assessment by the court of the moral side of the claims filed by anybody and the lack of necessity to prove their judgments. This is because Article 10 of the Civil Code of the Russian Federation, in fact, is based on the principal legal document of our country. Of course, we mean the Constitution, which Clause 3 of Article 17 reads that the exercise of human rights and freedoms should not infringe the rights and freedoms of other people. Thus, it turns out that one of the pillars of the entire legal system of our country, which guarantees a priori equality of participants in the civil legal relations, rests primarily on the subjective assessments of judges. However, if such an approach continues to guarantee a bona fide fulfillment of the civil obligations, I personally do not see anything wrong in it.

Currently, in the vast majority of cases, the claim for compensation for the damage caused by a similar trademark, if the defendant uses this designation to protect the goods and services actually manufactured, and the applicant does not use it shall be deemed the abuse of right. Moreover, even the very fact of registration of the trademark identical or confusingly similar to the already existing designation can now be deemed the abuse of right.

The person's actions on obtaining the exclusive right to a trademark shall be deemed the abuse of right, if this person impersonates a former right holder of the identical trademark with the purpose of obtaining a competitive advantage, and the registration of the trademark misleads the consumers.

Based on Clause 2 of Article 10 of the Civil Code of the Russian Federation “In case of failure to satisfy the requirements stipulated in Clause 1 of this Article, the court, arbitration court or arbitration tribunal shall reject a person's claim for the protection of the right held by such in full or in part, subject to the nature and consequences of the abuse made, and shall take other measures provided for by law.”

As it was explained in definition of the Supreme Court of the Russian Federation of 03.02.2015 No. 32-KG14-17, the purpose of the subjective right is to provide the authorized entity with a legally guaranteed opportunity to satisfy the needs, without infringing the interests of other persons, society and the State.

If the subjective right is exercised in contradiction with the purpose, the conflict arises between the interests of the society and a particular person.

It follows from the meaning of Article 10 of the Civil Code of the Russian Federation, that the abuse of right, i.e. the exercise of the subjective right in contradiction with its purpose, exists when the subject acts contrary to the provision, which grants him the appropriate right, does not correlate his behaviour with the interests of the society and the State, does not fulfill the legal obligation corresponding to this right.

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Olga Zhurid

Olga Zhurid

Lawyer