Rejection of arguments about bad faith of the right holder when collecting compensation for use of trademark

By virtue of Art. 1515 of the Civil Code of the Russian Federation [1], in case of illegal use of a trademark, the right holder, at his choice, has the right to demand compensation from the violator in lieu of damages.

In disputes about the recovery of compensation, defendants often resort to arguments about the bad faith of the right holder and, on this basis, ask to dismiss the claim or reduce the amount of compensation.

The law defines abuse of the right as the exercise of civil rights solely with the intent to harm another person, actions bypassing the law with an unlawful purpose, as well as other obviously unfair exercise of civil rights (Article 10 of the Civil Code of the Russian Federation).

According to the clarifications of the Supreme Court [2] the court has the right to refuse the right holder to protect his right to a trademark on the basis of Article 10 of the Civil Code of the Russian Federation, if, based on specific factual circumstances, it qualifies his actions to apply specific protection measures as an abuse of the right.

Establishing the fact of bad faith is difficult, given the subjective nature of the category of abuse of the right and the need to refute the presumption of good faith of participants in civil transactions (clause 5, article 10 of the Civil Code of the Russian Federation).

So, in practice, the courts do not recognize the following circumstances and actions (inaction) of the right holder as abuse by themselves:

• non-use of the trademark by the right holder applying for the protection of his right [3];
• initiation by the copyright holder of a large number of litigations with similar requirements. The defendants substantiate this argument by the illegal purpose of the copyright holder - going to court to enrich themselves by collecting compensation from various participants in economic activity. The courts [4] reject this argument, arguing that the actions to protect the exclusive right do not in themselves indicate the presence of signs of bad faith and cannot be recognized as an abuse of the right solely on the basis of the application of the other party. Any other understanding would actually lead to the impossibility of judicial protection of intellectual rights;
• the right holder is a resident of a country included in the list of unfriendly states against which restrictive measures have been introduced in Russia [5]. However [6], the courts note that the Russian Federation guarantees equal protection of the intellectual property of foreign organizations, including those registered in unfriendly states, and therefore filing a claim in itself is not recognized as unfair action in relation to Art. 10 of the Civil Code of the Russian Federation.

Sources:

1."Civil Code of the Russian Federation (Part Four)" of December 18, 2006 N 230-FZ

2.Paragraph 154 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of April 23, 2019 N 10 "On the application of part four of the Civil Code of the Russian Federation"

3.Par. 4 p. 154 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of April 23, 2019 N 10 "On the application of part four of the Civil Code of the Russian Federation"

4.See, for example, Ruling of the Eighteenth Arbitration Court of Appeal dated May 22, 2023 N 18AP-4811/2023 in case N A07-21345/2022, Ruling of the Eleventh Arbitration Court of Appeal dated February 27, 2023 N 11AP-1470/2023 in case N A55-22791 /2021

5.Decree of the President of the Russian Federation of 05.03.2022 N 95 “On the temporary procedure for fulfilling obligations to certain foreign creditors”, Order of the Government of the Russian Federation of 05.03.2022 N 430-r “On approval of the list of foreign states and territories that commit unfriendly actions against the Russian Federation, Russian legal entities and individuals"

6.See, for example, Resolution of the First Arbitration Court of Appeal dated 01/13/2023 N 01AP-8600/2022 in case N A43-22156/2022, SIP Resolution dated 10/19/2022 N C01-1871/2022 in case N A28-11930/2021