Recognizing the Acquisition and Use of Exclusive Trademark Rights as Unfair Competition

What constitutes unfair competition through the acquisition and use of exclusive trademark rights?

In accordance with paragraph 1 of Article 14.4 of the Law on the Protection of Competition, “unfair competition related to the acquisition and use of the exclusive right to means of individualization of a legal entity, means of individualization of goods, works or services (hereinafter referred to as means of individualization) is not permitted.”

At the same time, unfair competition related only to the acquisition of an exclusive right to means of individualization is also not permitted by virtue of Article 14.8 of the Law on the Protection of Competition, which classifies other forms of unfair competition as unfair competition along with those provided for in Articles 14.1 - 14.7 of the said Law.

To prove this type of unfair competition, it is necessary to confirm:

1. the fact of widespread use of the disputed designation by other persons prior to the date of filing by the defendant of an application for registration of this designation as a trademark; the designation becoming known among consumers as a result of its use by other persons;
2. the defendant was aware of the fact that such designation was used by other persons prior to the date of filing an application for registration as a trademark;
3. the presence of the defendant’s intention (goal), through the acquisition of an exclusive right to such a designation (acquisition of a monopoly on it), to cause harm to the plaintiff or to displace him from the commodity market by presenting demands aimed at preventing the use of the disputed designation;
4. the existence, at the time of filing by the defendant of an application for registration of this designation as a trademark, of competitive relations between the defendant and the plaintiff;
5. causing or the likelihood of causing harm to the plaintiff by making demands to stop using the disputed designation.

Since the last two features of unfair competition were discussed in the article entitled “Unfair Competition by Copying or Imitation”, the current article will be devoted to the special features indicated under the first three points.

1. The defendant's intention (goal) to cause harm to the plaintiff

By virtue of paragraph 169 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated 23.04.2019 No. 10 "On the Application of Part Four of the Civil Code of the Russian Federation", the qualification of the actions of the copyright holder to acquire an exclusive right to a trademark through its state registration as an act of unfair competition depends on the goal pursued by the person in acquiring such a right, the intentions of this person at the time of filing the relevant application. The goal of the person, his intentions can be established taking into account, among other things, the behavior of the copyright holder prior to filing an application for a trademark, as well as his subsequent (after obtaining the right) behavior. If a person files an application for state registration as a trademark of a designation used by other persons, the awareness, reputation of the designation, and the likelihood of an accidental coincidence of such a coincidence are subject to assessment, among other things.

The above is consistent with the explanations provided in the letter of the Federal Antimonopoly Service of the Russian Federation dated 26.08.2019 No. AK/74286/19 “On the specifics of considering cases of violation of the prohibition established by Article 14.4 of the Law “On Protection of Competition” (hereinafter referred to as the letter of the FAS Russia No. AK/74286/19), according to which unfair behavior is manifested primarily in the intent to gain advantages over competitors, since in order to recognize the actions of the violator as an act of the unfair competition, information is required on the goal-setting of the alleged violator (the conscious commission of actions aimed at unfair competition), as well as on the scale and possibility of the impact of the violation on competition in general.

In this case, the bad faith of the copyright holder must be established first of all at the stage of filing an application for registration of the designation as a trademark, since it is at this moment that the intention (intent) to unfairly compete with other market participants is realized through the use of the exclusive right to a trademark, which provides for a prohibition for other persons to use identical or similar designations to individualize goods and services.

The goal is understood as obtaining advantages in the implementation of entrepreneurial activities related to the use of the results of intellectual activity or means of individualization.

According to the meaning of paragraph 9 of Article 4 of the Law on the Protection of Competition, such advantages may be associated both with obtaining direct economic benefits and with causing losses or harm to the business reputation of the copyright holder or with the threat of such harm.

Such an unfair purpose may be determined on the basis of direct evidence of the alleged infringer’s knowledge of the designation previously used by another person, or on the basis of indirect evidence based, among other things, on the wide familiarity of the designation to third parties (and therefore, probably, to the alleged infringer, since the fact of using the designation is widely known), on the probability of a coincidence (balance of probabilities).

A similar legal position was presented in the decisions of the Presidium of the Intellectual Property Court dated 05.04.2023 in case No. SIP-338/2022, dated 19.02.2024 in case No. SIP-1136/2022, dated 04.10.2022 in case No. SIP-1120/2021.

Thus, the cornerstone in proving the considered composition of unfair competition is the intention (goal) of one person to cause harm to another person-competitor.

2. The defendant is aware of the fact that the designation is being used by other persons

As stated above, an unfair purpose may be proven by objective evidence of the defendant's awareness of the use of a designation registered as a trademark by other persons prior to the filing date of the trademark application, since in this case such a fact as the intent or purposefulness of committing unfair acts is manifested.

When analyzing judicial practice, the court took into account such circumstances as the initiation of disputes immediately after the registration of the disputed trademark, corporate participation in the companies of one of the parties, family ties, repost of publications of a competitor, etc. as direct evidence of awareness (decisions of the Intellectual Property Court of 18.08.2023 in case No. SIP-484/2023, of 20.04.2023 in case No. SIP-1085/2022, of 28.11.2023 in case No. SIP-408/2023, from 11.05.2022 in case No. SIP-1120/2021, the decision of the Intellectual Property Court from 07.03.2024 in case No. A42-8930/2022).

In paragraph 17 of the Review of judicial practice in cases related to the assessment of actions of trademark owners, approved by the Presidium of the Supreme Court of the Russian Federation on 15.11.2023, states that the fact of the applicant's awareness of the use of a designation by another person when filing an application for registration of a trademark may be established by the court, among other things, taking into account how original and recognizable the designation is.

For example, in the decision of 05.07.2024 in case No. SIP-43/2023, the Intellectual Property Court indicated that the use of phrases composed according to the formula "toponym + word standard" as means of individualization or a unique characteristic of goods and services is a common practice. For example, "Russian Standard", "Moscow Standard", "Leningrad Standard", "Ural Standard", "Tverskoy Standard", "Kurgan Standard", etc. In this case, the location of both the plaintiffs and the defendant is the city of Vladimir. These circumstances allow for the coincidence of designations.

However, it should be remembered that the establishment of the right holder's awareness of the use by other persons of an identical or confusingly similar designation before the priority date of the trademark is in itself insufficient to conclude that the defendant, in acquiring the exclusive right to the trademark, acted in bad faith and had the purpose of taking advantage of unjustified advantages or causing harm to the plaintiff. It is also necessary to prove the plaintiff's intent to cause harm to the plaintiff.

3. The fact of widespread use of the controversial designation

In the absence of direct evidence of the defendant's awareness of the fact that the disputed designation was used by other persons prior to the date of filing by the right holder of an application for registration of such designation as a trademark, the court proceeds to examine the issue of the wide recognition of such designation due to the activities carried out by the plaintiff (as indirect evidence determining the presumption of the defendant's awareness of their activities).

The more widely a designation is used by a particular person, the more likely it is that the other party to the dispute is aware of such use.

The said fact can generally be proven by providing information on the duration and intensity of use of the relevant designation in relation to specific goods/services, on the territory and volumes of supplied goods marked with the disputed designation, on advertising costs, the manufacturer’s position on the market in the relevant sector of the economy and other information that would indicate the wide awareness of the designation registered as the disputed trademark prior to the date of filing the relevant application, including as a result of its use by the plaintiff.

The procedural side of the issue

As regards the procedural part of the issue considered in this article, based on Part 2 of Article 14.4 of the Law on Protection of Competition, applied taking into account paragraph 2 of Article 1513 of the Civil Code of the Russian Federation, an interested party may file an objection to the granting of legal protection to a trademark due to the fact that the actions of the copyright holder related to the granting of legal protection to this trademark or another trademark similar to it to the point of confusion are recognized as unfair competition (however, the recognition as unfair competition of only actions to use a trademark, but not to acquire it, is not a basis for challenging the granting of legal protection to a trademark).

Based on the above explanations, and also taking into account the provisions of Article 4 of the Arbitration Procedure Code of the Russian Federation, the right to file a claim for recognition of the actions of a person to acquire an exclusive right to a trademark, considered by the arbitration court, as an act of unfair competition arises only for the person whose rights and legitimate interests are violated by such actions, and not for any person who has become aware of the presence of elements of unfair competition in the defendant's actions. The burden of proof of the circumstances on which the plaintiff bases his claims is placed precisely on him.

Consequently, in a case on recognizing the actions of a person to acquire and use the exclusive right to a trademark as unfair, considered by the court without preliminary consideration by the antimonopoly authority, they are subject to examination for their good faith in relation to the plaintiff, and not to other business entities, in connection with which the plaintiff must prove the violation of his own rights and precisely at the time the defendant acquired the exclusive right to the trademark.

A similar legal position is reflected in the decisions of the Presidium of the Intellectual Property Court of 17.10.2016 in case No. SIP-189/2016, of 16.07.2018 in case No. SIP-313/2017, of 02.11.2018 in case No. SIP-795/2017, of 24.06.2019 in case No. SIP-134/2018 and others.

Consequently, when considering a claim for recognition of the actions of a legal entity as an act of unfair competition, the court must establish whether the plaintiff has an interest in filing such a claim, or whether the defendant’s actions violated or threatened to violate the rights and legitimate interests of the plaintiff.

Rospatent, having received a corresponding objection with an attached decision of the court or antimonopoly authority, recognizes the granting of legal protection to the trademark as invalid (subparagraph 6 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation).

To sum up, it should be noted that all of the above circumstances must be proven together, since the absence of confirmation of even one of them entails recognition of the absence of a violation in the form of unfair competition through the acquisition and use of an exclusive right to a trademark.