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IPR Court considered options for indemnity calculation at twice price of franchise

Senior Partner / Trademark Attorney

The Court for Intellectual Property Rights (IPR Court) resolved cases on the indemnity for infringement of exclusive rights to a trademark and a work, respectively. The plaintiffs chose the double value of the right to use the result of intellectual activity as a method for calculating the amount of compensation. To determine the amount of compensation, the court took into account the sub-franchise agreement in one of the cases, correlating it to the duration of the infringement, and in the other case, the indemnity was based only on the results of the legal expertise.

Various right holders filed lawsuits on the indemnity for infringement of exclusive rights to:

●      Trademark No. 289416 in the amount of 180 000 rubles, calculated according to subparagraph 2 of paragraph 4, Article 1515 of the Civil Code of the Russian Federation (hereinafter the Civil Code) in the double value of the right to use the trademark;

●      Images of cartoon characters in the amount of 300,000 rubles, calculated in accordance with subparagraph 3, Article 1301 of the Civil Code in the double value of the right to use the works.

The claims were based on the fact that the infringers sold goods marked with the plaintiffs’ marks.

The courts granted the claims in part: they recovered 56000 rubles and 20076 rubles respectively and proceeded from the fact that they should have set the price which on comparable circumstances is usually charged for the fair use, and a specific amount of indemnity, based on that price.

In the first case, in confirmation of the value of the right to use the trademark, the plaintiff submitted a franchise agreement, which was signed with a third party, and the defendant submitted the contra-calculation, taking the double value of the right of use the mark and calculating the amount of indemnity attributable to 1 day of infringement as the basis which was defined by the legal expertise (37.7 rubles per day).

The plaintiff’s calculation was not accepted, because it was the sum resulting from the agreement of specific market players. However, the court rejected the contra-calculation as well, since indemnity in such an amount would not have met the requirements of reasonableness and fairness.

As a result, the amount of indemnity was established on the basis of the results of legal expertise on the market value of the right to use the trademark on a non-exclusive basis.

In the second case, the plaintiff justified the amount of indemnity sought by presenting both the franchise agreement for the right to use the works, concluded between it and a third party, and a sub-franchising agreement with a producer of food products.

The calculation of the indemnity was made on the basis of the minimum remuneration for the latter for one year. The court found that the defendant had offered to sell the goods for 79 days, and it reduced the amount of the indemnity proportionally.

Sergey Zuykov, the Managing Partner of Zuykov and partners, Russian Patent Attorney and Eurasian Patent Attorney, comments as follows. Submitting the franchise agreement does not imply that the indemnity in all cases will be determined in double the amount of the price of the said agreement. The basis for the calculation should be exactly the price which in comparable circumstances is usually charged for fair use, so the court may determine a different amount of compensation compared to the amount claimed by the plaintiff.

Originally published on World Trademark Review.

Senior Partner / Trademark Attorney