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Author
Sergey Zuykov

Managing Partner / Patent Attorney of the Russian Federation / Eurasian Patent Attorney

02 June 2022

The current practice of applying monetary sanctions to protect the exclusive right to a trademark

Most trademark holders are interested in preventing violations of the exclusive right and collecting monetary amounts from persons who illegally use the means of individualization. Therefore, among all the methods of protecting exclusive rights, the most interesting from the point of view of practice are those that apply liability measures, according to the general rule, in the presence of guilt.


According to subclauses 3 of clause 1 and clause, 3 of Article 1252 and clause 4 of Article 1515 Civil Code of the Russian Federation, protection of exclusive rights to trademarks is carried out, in particular, by filing a claim for damages or paying compensation for violation of this right. Still, in practice, the first method is used much less often.


More strict rules explain this by proving the necessary set of circumstances with which the law connects the possibility of recovery.


For example, in the case of N A60-54488/2017 the court, in denying the claim for damages for violation of exclusive trademark rights, stressed that to recover damages, you must prove together the fact of their occurrence, the wrongfulness of conduct, and that the defendant is guilty as a tortfeasor, the causal connection between the wrongful actions (inaction) of the defendant and the ensuing negative consequences to the plaintiff's property and the number of recoverable damages. At the same time, the court pointed out that the causal relationship should have the following characteristics: 1) the cause precedes the effect, 2) the cause is a necessary and sufficient reason for the occurrence of the effect.


Examples of a successful recovery of damages include the following cases.


In case No. A07-10720/2017, the right holder of the trademark DOBRAYA BURENKA, claimed damages in the amount of 20 million rubles. The Court of the First Instance, rejecting the claim, pointed out the lack of similarity between the designations, but the higher courts partially satisfied the requirement, recognizing the presence of the necessary degree of similarity.


To justify the damages, the plaintiff referred to a license agreement concluded with another person on the use of another trademark, according to which the remuneration for use is 300,000 rubles per month. According to the plaintiff's calculations, if the defendant had entered into a license agreement with the plaintiff to use the disputed trademark for 3 years (the period of illegal use of the trademark), the plaintiff would have received a profit of 10.8 million rubles.


The court agreed with this method of calculating the damages; however, since the use of the trademark was proven only for 1 month, it decided to recover 300,000 rubles.


In the case of N A75-7224/2020, the right holder of a well-known trademark CHANEL N 135, citing losses caused to him, calculated their size (632 100 RUB) based on the price of the original products, current at the date of sale by the defendant of a counterfeit (i.e., loss of income that the company would have received under normal conditions of civil turnover if her right had not been violated); courts have concluded that claims to be satisfied in full.


The defendant's argument that the damages should be calculated based on the price of counterfeit goods was rejected since the plaintiff lawfully calculated the cost of damages from the price of the original product displaced from the market.


Similarly, in case No. A66-6469/2020, the court granted the same plaintiff's claims in the amount of 500,000 rubles, i.e. in full, determining the amount based on the prices for original products that were valid at the date of seizure of counterfeit goods, guided by the principle that one unit of counterfeit goods displaces one unit of original products from the market.


Clause 4 of Article 1515 of the Civil Code of the Russian Federation provides the copyright holder with three options for calculating the required amount of compensation for violation of an exclusive right:


1) in the amount of 10,000 to 5 million rubles, determined at the discretion of the court based on the nature of the violation;

2) twice the value of the goods on which the trademark is illegally placed;

3) twice the value of the right to use the trademark, determined based on the price that, under comparable circumstances, is usually charged for the legitimate use of the trademark.

It is noteworthy that the court cannot change the form of payment chosen by the plaintiff-owner (p. 59 resolution of the Plenum of the RF armed forces 23.04.2019 N 10), nor may replace the loss compensation – for example, in the case of N A72 16220/2019 the plaintiff asked the court to recover from the defendant 200 000 damages for violation of exclusive rights to a trademark, but the court of the first instance sought compensation in the same amount. The higher courts noted that the court was not entitled to consider and satisfy the claim for recovery of compensation since such a claim was not made by the plaintiff.


The "traditional" method of calculating compensation is to determine the amount of compensation to be paid. This method is used in most cases based on the nature of the violation in any fixed amount in the range of 10,000-5 million rubles.


When applying this method of calculating compensation, it should be taken into account that to justify the amount (if it is not minimal), it is necessary to submit to the court documents confirming the proportionality of the amount collected to the nature of the violation (paragraph 61 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 10 of 23.04.2019). In practice, this is usually confirmed by the presence of circumstances such as the repetition of and/or duration of offenses.


The most notable examples are cases in which the plaintiffs sought the maximum amounts. For example, in case No. A41-39390/2020, the defendants sold clothing using a designation confusingly similar to the trademark BASIK BABY. The plaintiff claimed compensation from the defendants in the amount of 5,000,000 rubles. In granting the claim, the court noted that it considers the nature of the violation committed, particularly that the violation is ongoing (lasted for several years) and took place on several sites and social networks.


However, it is not always advisable to calculate compensation based on the nature of the violation. In some cases, it is more practical to use options with double the cost (counterfeit goods/rights of use).


When the size is calculated by double the cost of counterfeit goods, for justification, it is necessary to confirm the number of such goods and the price at which they are sold (offered for sale) to third parties (paragraph 61 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 10 of 23.04.2019). Such evidence may include, for example, product catalogs that indicate the cost, the defendant's customs declaration for goods imported into the Russian Federation, etc.


For example, in case No. A40-249772/2019, when satisfying the claim, the court was guided by information from the cargo customs declaration and an extract from the sales books.


When choosing the calculation method, it is necessary to carefully analyze the scope and essence of trademark protection and correlate this information with future evidence.


For example, in case No. A45-6211/2018, the plaintiff-the right holder of a sign that applies only to the service of the 42nd class of the ICTU "sale of goods", established the fact of illegal use of the sign as a store name and demanded payment of compensation, calculating the amount by doubling the cost of counterfeit goods. However, the calculation was made based on the cost of goods sold by the respondent and not services for the sale of goods of the 42nd class of the ICTU.


The court, rejecting the claim, explained that the plaintiff's trademark was registered not about goods, but about services for the sale of goods, and without specifying specific goods in the name of services, while the sale of goods and the provision of services for the sale of goods are not identical and have a different object and orientation. In the present case, the defendant's activity was not related to the provision of services to third parties; the defendant sold specific goods, which made it impossible to calculate the amount of compensation according to the plaintiff's version.


Double the cost of the right to use a trademark is based on the price that, under comparable circumstances, is usually charged for its lawful use in the same way that the infringer used (paragraph 61 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 10 of 23.04.2019). This is often confirmed by the plaintiff's contracts with a third party on granting the right to use a trademark license or commercial concession, but the courts also accept expert opinions and reports on the assessment of the value of the right to use the mark.


This method of calculating compensation is quite complex since, in some cases, it is problematic to allocate the share that corresponds to the circumstances of the case in the amount of remuneration for a specific contract submitted.


Practice emphasizes that when determining the cost of the right to use the corresponding trademark, only the cost of the right to use the same method of use should be taken as the basis for calculating the amount of compensation while submitting a license agreement to the court does not imply that compensation in all cases should be determined by the court in twice the price of the specified contract.


For example, in case No. A70-1339/2018, the plaintiff provided a non-exclusive license for all goods of the four classes of ICTU, the remuneration for which was 90,000 rubles, in support of the price that is usually charged for the lawful use of a trademark under comparable circumstances.


The court took into account that the factors that influenced the determination of the amount of remuneration under the license agreement differ from the circumstances of the use of the trademark by the defendant, and allocated part of the amount (4,500 rubles) from the specified amount, based on the fact that the defendant used the trademark only in one of the 5 ways specified in the license agreement, and only in relation to goods of only one of the 4 classes of MCTU.


Originally published in Trademark Lawyer, issue 2 (2022)

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