Court Clarified Approach for Calculating Compensation Determined by Double Value of Right to Use Trademark
The Court for Intellectual Property Rights (hereinafter the IPR Court) sent the case back to the court of appeals due to the fact that the court unreasonably underestimated the amount of compensation, calculated by the plaintiff on the basis of twice the value of the right to use the trademark.
A foreign company filed a lawsuit seeking compensation for infringement of the exclusive right to the trademark No. 1212958 in the amount of $30,000.
The court of first instance granted the claim. The Court of Appeal quashed the decision as follows: The Court for Intellectual Property Rights (hereinafter the IPR Court), however, overturned the resolution of the court of appeal and sent the case back for reconsideration..
In its decision, the IPR Court noted that the plaintiff claimed for compensation on the basis of paragraph 2 of clause 4 of Article 1515 of the Civil Code of the Russian Federation, i.e., twice the value of the right to use the trademark, calculated on the basis of the price which in comparable circumstances is usually charged for its legitimate use in the manner used by the infringer, prevailing in the period corresponding to the time of the offense.
According to paragraphs 59, 61 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of April 23, 2019 No. 10 the plaintiff must provide justification for the amount recovered, and the court in determining the amount of compensation is not entitled on its own initiative to change the way of calculation of compensation chosen by the right holder.
Submission to the court of the agreement does not imply that the compensation in all cases must be determined by the court in the amount of two times the price of the agreement in question. At the same time, determining the amount in a smaller amount is not a reduction in the amount of compensation, if the court found the value of the right, which was lower than that claimed by the plaintiff.
The Court of Appeal compared the terms of the plaintiff’s agreement with the circumstances of the offense, including taking into account that the term of the agreement was 2 years, and the defendant used the designation only for 2 months. However, it was impossible to determine from the court decision on what basis the court came to such a conclusion and applied the reduction factor of 1/12.
The IPR Court noted that the period of use of the designation by the infringer in the calculation must correspond to the period for which the right of use is granted in normal course of business.
However, the conclusion of a license agreement for a short period of time and for the sale of a “small” or “trial” batch of goods (as the defendant insisted on, describing the circumstances of his use of the mark), does not correspond to such course of business.
However, the above does not mean that the term of the agreements submitted cannot be taken into account, or that only such a term should be taken into account. But it cannot be determined below the established practice of the minimum term for which licensing agreements are concluded.
The IPR Court also concluded that the collection of compensation in the amount significantly lower than the costs of protecting the exclusive right, which the right holder is forced to bear, limits the possibility of protection.
In this case, the infringer enjoyed advantage over the right holder, which does not comply with the requirement to observe the balance of rights and legitimate interests of the parties and contradicts part 3 of Article 8 of the Code of Commercial Procedure of the Russian Federation and clause 4 of Article 1 of the Civil Code of the Russian Federation.