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Court Denied Termination of Ongoing Agreement on Using Unregistered Trademark

06 Jul 2021

The Court for Intellectual Property Rights (hereinafter the IPR Court) denied the claim for termination of the agreement on transfer of know-how containing elements of the trademark license agreement. The claim was substantiated by the fact that the user expected to be able to use the trademark, which at the time of the agreement was in the process of registration which Rospatent finally denied.

The entrepreneur filed a lawsuit in court simultaneously for termination of the agreement on transfer of production secret (know-how) and for its invalidation.

In accordance with the terms of the agreement, the company undertook to provide the plaintiff with access for a fee to the production secret (know-how) belonging to it, as well as the right to use the trademark in business activities as soon as the company received a certificate for it.

However, as a result of the consideration of the application for registration of the designation as a trademark by Rospatent, such registration was denied.

The plaintiff argued that, by concluding the agreement, it hoped to benefit the right to operate under the registered trademark, eliminating the possibility of copying the model of business activities and the legal protection of its business activities from unfair competition. As a result, it was largely deprived of what it was entitled to expect when entering into the agreement. The courts dismissed the claim in three instances, having found that the company has properly and fully performed its contractual obligations, and the entrepreneur was not deceived or misled.

The courts pointed out that the plaintiff’s signature under the agreement was onomastic and the parties agreed on all the material terms, clearly expressed its subject matter and the will of the parties to enter into such an agreement, and the parties were aware of the consequences of the transaction. There was no evidence of false information misleading or otherwise influencing the plaintiff. The plaintiff understood the nature of the concluded agreement and the meaning of its actions, and as a user, it was interested to pay for the right to use. The courts emphasized that the plaintiff was informed of all the conditions of this agreement, in particular, that the trademark application was under consideration; the agreement was concluded solely on a voluntary basis; at the time of conclusion of the agreement, all its paragraphs suited the plaintiff well. 

By virtue of clause 5 of Article 166 of the Civil Code of the Russian Federation, a statement of invalidity of the transaction has no legal effect if the party invoking invalidity is acting in bad faith, in particular, if its conduct after the deal induced others to assume the validity of the transaction.

The fact of the plaintiffэs acceptance of performance under the agreement is confirmed by a handover certificate and screenshots of web pages showing access to know-how. The plaintiff did not raise any objections or complaints about the scope, timing or quality of the service provided. The plaintiff began to use the know-how as soon as the certificate was signed and the plaintiff received access to its account.