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How to prove the rights to a commercial designation, if you carry out an online shop business

July 23, 2019

We live in the age of high technology, when in order to buy products, whether they are: sneakers, a phone or food, there is no need to go to a shopping mall or to go a shop, but it is enough simply to follow the link that will lead to an online shop, to select the desired product on the website and to order it.

The different designations (word, combined, figurative), with the help of which sellers seek to attract the attention of buyers and to distinguish themselves among competitors can be used both for the individualization of conventional shops, and for the individualization of online shops. These designations are placed directly on websites in the form of so-called logos or, if there is a word element in the designation, such element may be a part of a domain name.

However, not all economic entities register these designations as trademarks; therefore the issue regarding how the person using the so-called logo can defend his rights arises, if the competitors begin using an identical or confusingly similar designation with respect to the homogeneous activities.

The legislator has introduced a concept – a commercial designation regarding the designations, which are not registered as a trademark or which are not the company names of a legal entity, and which are used by the persons carrying out the commercial activities.

By virtue of Subparagraph 16 of Paragraph 1 of Article 1225 of the Civil Code of the Russian Federation (hereinafter referred to as the C.C.R.F., the Code), the commercial designations on the territory of the Russian Federation shall be granted legal protection.

In accordance with Paragraph 1 of Article 1538 of the C.C.R.F., the legal entities, which carry out their business activities (including the non-commercial organizations, which right to carry out such activities is granted in accordance with the law based on their constituent documents), as well as individual entrepreneurs may use the commercial designations, which are not the company names and which are not subject to be included obligatory in the constituent documents and the Unified State Register of Legal Entities for the individualization of the trading, industrial and other enterprises owned by them (Article 132).

According to Paragraph 1 of Article 1539 of the C.C.R.F., the right holder owns an exclusive right to use the commercial designation as a means of individualization of the enterprise owned by him in any manner, which is not contrary to the law (the exclusive right to a commercial designation), including by indicating the commercial designation on billboards, letterheads, bills and other documentation, in announcements and advertisements, on the products or the packaging thereof, in the Internet, if such designation possesses sufficient distinctive features and its use by the right holder for the individualization of his enterprise is known within a particular territory.

Moreover, Paragraph 177 of Resolution of the Plenum of the Supreme Court of the Russian Federation of 23.04.2019 No. 10 “On the Application of Part Four of the Civil Code of the Russian Federation” (hereinafter referred to as Resolution No. 10) states that the right to a commercial designation arises not earlier the moment of the beginning of the actual use of such designation for the individualization of the enterprise (for example, a shop, a restaurant and so on).

The right to a commercial designation is protected provided that the use of the designation by the right holder for the individualization of his enterprise is known within a particular territory after December 31, 2007 (regardless of when the use of the designations has begun).

Thus, the rights to a commercial designation arise from the person, who carries out the business activities, and they are subject to be protected under the following conditions:

– the designation has sufficient distinctive features;

– its use is known within a particular territory;

– the use of such designation for the individualization of the enterprise.

In this case, Paragraph 178 of Resolution No. 10 states that by implication of Paragraph 2 of Article 1540 of the C.C.R.F., the exclusive right to a commercial designation shall stop automatically, if the right holder is not using this designation continuously during a year.

It is worth noting that prior to the introduction into effect of Part Four of the C.C.R.F. in 2008, the commercial designation was mentioned only in Chapter 54 of the C.C.R.F. devoted to regulating a franchise agreement.

Thus, Article 1027 of the C.C.R.F. (in the version of 26.01.1996) states that under a franchise agreement, one party (a right holder) is obliged to grant to the other party (a user) for remuneration, for a period or without indicating a period, the right to use in the user's business activities a complex of the exclusive rights owned by the right holder, including the right to the company name and (or) the commercial designation of the right holder, to the protected commercial information, as well as to other subject matters of the exclusive rights that are stipulated by the agreement – a trademark, a service mark, etc.

In this case, prior to the introduction the Part of the Code into effect, which regulates the relations arising in the field of intellectual property, the legislator did not give a definition of what the commercial designation was, and how it was protected.

After a short excursion into the history of the emergence in the Russian legislation of the commercial designation as an independent means of individualization, I would like to come back to the topic of the article.

For example, an individual entrepreneur carries out his business activities by selling clothes via an online shop.

A combined designation possessing sufficient distinctive features, which is not registered as a trademark, is used for the individualization of the online shop. Moreover, a word element of the combined designation is used as a domain name, which directs to the online shop.

At the same time, the entrepreneur does not have a property complex as such in the form of an office or warehouse, since he carries out his activities from home accepting orders, purchasing the products ordered from suppliers and sending them to customers by means of a courier service.

At some point, the entrepreneur finds out about the appearance of the competitor, who has copied this designation and which he uses, while carrying out the homogeneous activities at his Internet resource.

In this regard, the question arises how the entrepreneur can defend his right to the designation used by him, provided that it is not registered as a trademark.

As it follows from the general rule that is connected with the consideration of the cases regarding the defence of the intellectual property rights, the burden of proving the availability of the exclusive right to the intellectual property subject matter or the means of individualization, as well as the fact of its illegal use by the defendant, lies with the plaintiff.

If we talk about the evidence of the fact of the illegal use, then everything is quite clear with them, and such evidence as a lawyer’s request, a notarial examination protocol of the website, a test purchase and others can be applied to the situation described by me. Then the plaintiff will have to prove that the designation has been used by the defendant with respect to the activities, which are homogeneous with the plaintiff’s ones, as well as that it is confusingly similar to the designation, for the defence of the rights to which the plaintiff has applied.

However, as to the commercial designation, it is not such an easy task to prove that the plaintiff has an exclusive right to it, and here is why.

In order to prove the fact of the availability of the exclusive right of the plaintiff to the commercial designation, the plaintiff should submit the evidence that the commercial designation have sufficient distinctive features and that the fact of the plaintiff’s use of this commercial designation on a particular territory is known, as well as the fact of the plaintiff’s use of this designation for the individualization of the enterprise owned by him (in the sense of Article 132 of the C.C.R.F.).

The fact of the above conditions is established by the court on the basis of the documents confirming the actual use of the designations for the individualization of the enterprise. At the same time, the person who has applied for the defence of the exclusive right to the commercial designation, must prove the totality of the above conditions, in the event he fails to prove at least one of these conditions, the exclusive right to the commercial designation can not be deemed to arise.

As we can see, the list of the circumstances that the plaintiff has to prove with regard to the fact that he has the exclusive right in this category of disputes is quite extensive, unlike the defence of the right to a trademark, where in order to prove the availability of the right, it is enough to submit to the court a certificate on the registration of the rights to the trademark.

Let us start finding out step by step what we need to prove our rights to the commercial designation:

  1. the availability of the sufficient distinctive features of the commercial designation. Let us assume that the plaintiff has a rather original logo developed by a designer, which is a combined designation containing both a word element and a figurative one, the word elements being made in an original font with special stylistic elements, in connection with which we conclude that such designation has the distinctive features;
  2. the known fact of the plaintiff's use of this commercial designation on a particular territory. The circumstances of a long-term and (or) intensive use of the designation on a particular territory, the advertising costs made, the significant volumes of the products sold and the services provided, which have this designation, the results of a survey of the consumers of the products regarding the issue of the designation being known on a particular territory, and other similar information can serve as a confirmation of the fact that the designation used for the individualization of the enterprise is known.
  3. the date of the beginning of the plaintiff’s use of the commercial designation. It can be confirmed, for example, by the dated documents, which the commercial designation is placed on;
  4. the fact of the plaintiff’s use of the commercial designation for the individualization of the enterprise owned by him (in the sense of Article 132 of the C.C.R.F.).

It would seem that all is well, but what enterprise does the plaintiff own? After all, the plaintiff does not manufacture cars, he does not build airplanes, he is not engaged in woodworking, and he even does not have a small candle factory near Samara, which the character of the novel “The Twelve Chairs” by Ilf and Petrov, Father Fyodor, dreamed of. In the eyes of everyman, an enterprise is usually understood as something grandiose, colossal, at least Chelyabinsk Tube Rolling Plant or Uralvagonzavod.

What about the plaintiff? No more than an ordinary online shop, where he is his own head, accountant, seller and courier, and the case is not about something large-scale at all.

So, now he can not be an owner of the right to a commercial designation, can he?

For some reason, I have recalled immediately the phrase from the iconic television movie “The Meeting Place Can Not Be Changed,” where the main character, Gleb Zheglov, performed by Vladimir Vysotsky, says the following phrase: “Well, what do you think, Comrade Taraskin. If he is not a locksmith, but a minister of religion, then the defence of the rights is not guaranteed to him, is it?”

In order to find out, whether an individual entrepreneur has any enterprise, for the individualization of which he uses his designation, it is necessary to refer to the norm of the Code, which gives a definition of an enterprise.

In accordance with Paragraph 1 of Article 132 of the C.C.R.F., an enterprise as a subject matter of the rights shall be recognized as a property complex used for carrying out the business activities.

The enterprise as a property complex includes all types of property intended for its activities, including the land plots, the buildings, the structures, the equipment, the implements, the raw materials, the products, the rights of claim, the debts, as well as the rights to the designations that individualize the enterprise, its products, works and services (the commercial designation, the trademarks, the service marks), and other exclusive rights, unless otherwise is stipulated by the law or by the agreement (Unnumbered Paragraph 2 of Paragraph 2 of Article 132 of the C.C.R.F.).

The law does not set any requirements for the composition of the elements of the property complex for the purpose of attributing it to an enterprise.

The similar legal position was reflected in the decision of the Intellectual Property Court of 13.07.2018 in case No. SIP-297/2018.

In accordance with the provisions of Article 128 of the C.C.R.F., the subject matters of the civil rights include things, including money and securities, other property, including the property rights; works and services; the protected results of the intellectual activities and the equated to them means of individualization (intellectual property); intangible benefits.

Taking into account the fact that the information technology has a certain value and can be a subject of a transaction, a domain name, the right to administer it, should be qualified as the property right, which essence is in the ability of the person, who has registered the domain name, to place on the Internet the information resource that is accessed by a user of the Internet by typing certain characters that make up the domain name. (Resolution of the Ninth Arbitration Court of Appeal of 05.03.2019 No. A40-173311/18).

Based on the above, taking into account the nature of the activities carried out by the entrepreneur, it can be concluded that the plaintiff uses the designation to individualize his enterprise, since he has the property right to the domain name, he obtains the right to the products, which he sells in the course of the transactions for a purchase/sale of the product, he uses the equipment, for example, a computer.

Thus, summing up this article, we conclude that the right to a commercial designation may arise from any person carrying out the commercial activities, regardless of the field of his activities and the size of the organization. However, as to the issues connected with the defence of this right and collecting evidence, it is advisable to turn to professionals.

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Author of article

Roman Larshin

Roman Larshin

Lawyer