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The defence of the rights to a company name and a commercial designation

April 25, 2019

The special designations recognized in accordance with the manner established by the law, which act as the original tools for attracting the interest of the consumers to certain segments of the market of products and services – the means of individualization – are used for the individualization of the participants in the civil circulation and the products manufactured by such participants.

Nowadays, the current legislation stipulates the following protected means of individualization: company names, commercial designations, trademarks (service marks), NPOP.

Conventionally, the said means of individualization can be divided into two groups: the designations that individualize the participants in the civil circulation and the designations that are used by the participants in the business activity or the individualization of the products, works, or services. The first group of designations includes company names and commercial designations.

By implication of Article 1474 of the Civil Code of the Russian Federation, a company name serves as a means of individualization of the legal entity under which it acts in the civil circulation. The main function of the company name is to individualize (distinguish) a particular legal entity among all participants in the civil circulation, and, as a result, to form a stable association with it at the third parties.

According to Article 1475 of the Civil Code of the Russian Federation, the exclusive right to a company name shall emerge from the date of the state registration of the legal entity and it shall be in effect until the moment, when the name is excluded from the Unified State Register of Legal Entities in connection with the termination of the activity of the legal entity or in connection with a change of the name.

The content of the exclusive right to a company name shall be reduced to a possibility of the right holder (the legal entity) to use its name as a means of individualization in any method that does not contradict the law, including by indicating it on signs, letterheads, bills and other documentation, in announcements and advertisements, on the products or the packaging thereof, on the Internet (Paragraph 1 of Article 1474 of the Civil Code of the Russian Federation).

The exclusive right to a company name is of an absolute nature, what means that the third parties are not entitled to use the designations that are identical or confusingly similar to it. However, only the use of the identical or confusingly similar designation is not a sufficient basis for the application of the measures of the civil responsibility.

The law enshrines a number of conditions, subject to the observance of which simultaneously, results in that the legal entity actions can be recognized as a violation of the exclusive right to the company name.

Thus, according to Paragraph 3 of Article 1474 of the Civil Code of the Russian Federation, it is possible to speak on the violation of the exclusive right, if the following circumstances have place simultaneously:

  • The company name of the third party coincides fully with the company name of the right holder or it is confusingly similar to it;
  • The organizations conduct a similar activity (in this case, the RCEA (the Russian Classification of Economic Activities) codes contained in the Unified State Register of Legal Entities (USRLE) shall be taken into account);
  • The company name of the company-right holder must be included in the USRLE earlier than the company name of the third party.

In case, if at least one of the circumstances is absent, the exclusive right to the company name shall not be considered as violated: “... the mere fact that the company names coincide, when the plaintiffs and the defendant conduct different kinds of economic activity, can not be a basis for a total prohibition of the use by the defendant of the combinations of words in the company name” (Resolution of the Intellectual Property Court of October 28, 2014 in case No. A75-11531/2013).

In case, if all of the above said circumstances are determined, the right holder shall be entitled to lodge a claim to the person, who has committed the violation, on a prohibition of the use of the company name in particular kinds of activities and/or a claim for reimbursement for the losses (and not a recovery of compensation!).

Lodging the claim on the prohibition of the use of the company name, it is enough for the right holder to prove only the fact of the violation (Resolution of the Intellectual Property Court of October 1, 2014 in case No. A40-146738/2013, Resolution of the Ninth Arbitration Court of Appeal of March 23, 2016 in case No. A40-187312/2015). The prohibition of the use of the company name can be implemented through the termination of the use of the disputed designation with respect to some particular kinds of activities or by changing the name.

At the same time, the right holder shall not be entitled to compel another legal entity to change the company name. As it follows from Paragraph 5 of Article 1473 of the Civil Code of the Russian Federation, Paragraph 60 of Resolution of the Plenum of the Supreme Court of the Russian Federation and Plenum of the Supreme Arbitration Court of the Russian Federation No. 29 of March 26, 2009 “On Some Issues Arisen in Connection with the Entry into Force of Part Four of the Civil Code of the Russian Federation,” only the registering authority shall be entitled to file a statement of claim on compulsion to the change of the company name. As it follows from Resolution of the Intellectual Property Court of November 26, 2014 in case No. A50-3269/2014, “... such method of defending the exclusive rights to the means of individualization as compulsion to change the constituent documents, excluding the disputed designation from the company name, followed by the registration of the changes is not stipulated by the law.”

When filing a material claim for the recovery of losses, the right holder should be guided by the general provisions of the civil legislation, in particular, by Article 15 of the Civil Code of the Russian Federation.

According to Article 15 of the Civil Code of the Russian Federation, the losses shall mean the real damage suffered by the company-right holder as a result of the violation committed and the lost profits, which shall mean the unreceived income that the company could have received under the normal conditions (in the absence of the violation).

When proving the amount of the losses, it is necessary to prove the fact of the emergence of the losses, the cause and effect relationship between the violation committed and the losses, as well as the amount of the losses. The person, who is recovering the lost profits, must prove that the possibility of obtaining income by him has really existed, i.e. he must give the documentary evidence that he has undertaken some particular actions and he has exercised some preparations for this purpose aimed at gaining income that has not been obtained due to the violation.

The analysis of the judicial practice in this category of cases shows that right holders do not always manage to confirm the existence of the cause and effect relationship and to recover the losses (case No. A65-25309/2013).

Unlike a company name, a commercial designation is not subject to the state registration and it is a known means of individualization of one or several enterprises on a particular territory. Many people often identify the company names and the commercial designations; however, this is incorrect, as the commercial designation has a different legal nature and the distinctive features.

The commercial designation is characterized by the following combination of the features:

  • There is no requirement for a mandatory registration;
  • The designation must be known within a particular territory;
  • The designation should be used by the right holder for the individualization of the enterprise continuously.
  • The designation can be used for the individualization of one or several enterprises;
  • The designation should not confuse the consumer regarding the ownership of the enterprise to a particular person.

The law does not determine the moment of the emergence of the exclusive right to the commercial designation, and at the same time, the designation shall be recognized as commercial and it shall be protected, if it possesses distinctive features, it is known and it is used by the right holder for the individualization of the enterprise within a particular territory. The moment of the termination of the exclusive right is not determined in the law. As it follows from Paragraph 2 of Article 1540 of the Civil Code of the Russian Federation, the exclusive right to the commercial designation shall be terminated, if the right holder does not use this designation continuously during a year. We believe that such period of the non-use can be calculated at any period during the effect of the exclusive right from the moment of the discovery of such non-use.

As to the issue of determining the moment of the emergence of the exclusive right to the commercial designation, the judicial practice has developed an approach according to which the exclusive right can not emerge before the moment of the beginning of the real use of such designation for the individualization of the enterprise (Paragraph 64 of Resolution of the Plenum of the Supreme Court of the Russian Federation and Plenum of the Supreme Arbitration Court of the Russian Federation No. 29 of March 26, 2009 “On Some Issues Arisen in Connection with the Entry into Force of Part Four of the Civil Code of the Russian Federation”). When proving the emergence of the exclusive right and its ownership, the moment of the beginning of the use of the designation is essential.

When considering the issue on the violation of the exclusive right to the commercial designation, one should also be guided by the principle of “supremacy of the law.” However, taking into account the specifics of the emergence and the effect of the exclusive right to the commercial designation, not every use of the identical or confusingly similar designation can be considered a violation. The violation can be considered the use of the designation for the individualization of the enterprise, which conducts the similar activity within the same territory.

In order to bring the violator to the civil responsibility, the right holder must prove the fact of the existence of the exclusive right to the commercial designation and the fact of the illegal use of such designation. A particular attention should be paid to the fact that the following should be clear from the documents submitted by the right holder: what designation is used; how the designation is used and with respect to what enterprise it is used.

The right holder is entitled to claim the termination in full or in part of the use of the disputed designation. In this case, a partial prohibition shall be understood as either a prohibition on the use of the designation on a particular territory, or with respect to the manufacture (providing) of certain products (services).

As it follows from Paragraph 3 of Article 1539 of the Civil Code of the Russian Federation, for a violation of the exclusive right to the commercial designation, the right holder shall also be entitled to claim from the person, who has committed the violation, a recovery of the losses caused by the violation. In this regard, it can be concluded that in order to defend the exclusive right to a commercial designation in the absence of its mandatory registration, it is necessary to use more material evidence confirming the emergence and the effect of the exclusive right.

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Author of article

Evgeniya Provatorova

Evgeniya Provatorova

Paralegal