Cost Recovery in the Administrative Case in Rospatent

In the Beginning Was the Word…

Part 1 of Article 4 of the Arbitration Procedural Code of the Russian Federation establishes the right of every interested party to apply to an arbitration court for the protection of their violated or disputed rights and legitimate interests.

At the same time, the above-mentioned Code also establishes that persons participating in the case bear the risk of the consequences of their commission or failure to perform procedural actions (Part 2 of Article 9 of the Arbitration Procedure Code of the Russian Federation).

One of the consequences of going to court is the court’s collection of legal costs incurred by the persons participating in the case, in whose favor a judicial act was adopted, from the losing party.

This procedure is provided for when considering cases in court.

Meanwhile, many disputes arising between persons in the field of intellectual property can be initiated within the framework of administrative proceedings in the Federal Service for Intellectual Property (Chamber of Patent Disputes, Rospatent), without moving to the judicial level. However, legal acts do not contain separate provisions regarding the possibility of collecting expenses incurred by persons participating in an administrative case, in whose favor the relevant act was adopted.

In this regard, in the practice of the Intellectual Property Rights Court, unfortunately, a uniform approach has developed, due to which expenses incurred during administrative consideration of a dispute on granting legal protection to the results of intellectual activity and means of individualization are not subject to reimbursement as part of legal expenses for account of the losing party in the trial (decrees of the Presidium of the Intellectual Rights Court dated January 26, 2017 in case  No. SIP-571/2015, dated April 10, 2017 in case No. SIP-351/2016, dated July 7, 2020 in case No. SIP-631/2017).

At the same time, the Constitutional Court of the Russian Federation, in Resolution No. 20-P dated July 11, 2017, formulated a legal position on the issue of reimbursement of legal expenses, according to which, when reimbursement of legal expenses is not provided for by law, a person is not deprived of the opportunity to seek compensation for losses caused to him in an independent process, if there are grounds for this, enshrined in Article 15 of the Civil Code of the Russian Federation, which correlates with the requirements of the Constitution of the Russian Federation, its Article 19 (Part 1) on the equality of all before the law and the court and Article 35 (Part 1) on the protection of private property rights by law (definitions from 02/20/2002 No. 22-O, dated 02/25/2010 No. 317-O-O, dated 11/25/2010 No. 1560-O-O, dated 09/29/2011 No. 1150-O-O, etc.).

Along with this, the Constitutional Court of the Russian Federation noted that the above legal position was expressed in the absence of rules on the reimbursement of expenses that are procedural in nature, in particular for payment for the services of a representative, i.e. in the face of a clear legal gap. The application of this position by analogy to legal relations arising in connection with the consideration by Rospatent of disputes in the field of intellectual rights faces in practice reasonable difficulties (for example, decisions of the Intellectual Rights Court dated 06/5/2017 No. S01-345/2017, dated 06/15/2021 No. S01-785/2021, dated 02/17/2022 No. S01-2124/2021.).

Changing Practice

As the current legislation developed, the issue of collecting expenses when conducting an administrative case did not lose its relevance.

As a result, considering the complaint challenging the constitutionality of Articles 15, 1248 of the Civil Code of the Russian Federation, 106, 110 of the Arbitration Procedure Code of the Russian Federation, the Constitutional Court of the Russian Federation, in Resolution No. 1-P dated January 10, 2023, came to the following conclusions: the right to state, including judicial, protection intellectual property turns out to be unjustifiably limited insofar as the costs incurred by a party to administrative proceedings when considering a dispute on granting legal protection to the results of intellectual activity and means of individualization, in the system of current legal regulation are not regarded as an integral part of legal costs, and their recovery as damages cannot be recognized as an effective remedy.

Taking into account the above, the Constitutional Court of the Russian Federation ruled that, pending the introduction of the necessary changes to the legislation, the costs incurred by a party during the administrative proceedings of a dispute on granting legal protection to the results of intellectual activity and means of individualization may be attributed - in the event of a challenge to the decision taken by Rospatent - to the court - on the losing party according to the rules for reimbursement of legal costs provided for by arbitration procedural legislation, based on the universal principles of necessity, reasonableness and - taking into account the results of previous administrative proceedings, which may, among other things, indicate satisfaction of the applicant's objection in whole or in part - proportionality of the distribution of such costs.

Taking into account the above position, the Intellectual Rights Court, in its ruling dated December 19, 2023 in case No. A71-12318/2022, indicated that, thus, pending changes in legislation, the costs associated with the conduct of cases by the plaintiff’s representative in Rospatent cannot be considered as losses compensated according to the rules of Articles 15, 1082 of the Civil Code of the Russian Federation, since they are not directly related to the restoration of the violated right of the represented person. These costs are legal expenses and are reimbursed in a special manner provided for by procedural legislation (Article 110 of the Arbitration Procedural Code of the Russian Federation).

Legislative Amendment

In pursuance of the above resolution, Federal Law No. 4-FZ of January 30, 2024 was adopted, which amended paragraph 2 of Article 1248 of the Civil Code of the Russian Federation.

Thus, paragraph 2 of Article 1248 of the Civil Code of the Russian Federation established that in cases provided for by this Code, the protection of intellectual rights in relations related to the filing and consideration of applications for patents for inventions, utility models, industrial designs, selection achievements, trademarks, service marks , geographical indications and names of places of origin of goods, with state registration of these results of intellectual activity and means of individualization, with the issuance of relevant title documents, with challenging the provision of these results and means of legal protection or with its termination, is carried out administratively (clause 2 of Article 11) respectively, the federal executive body for intellectual property and the federal executive body for selection achievements, and in cases provided for in Articles 1401 - 1405 of this Code, the federal executive body authorized by the Government of the Russian Federation (clause 2 of Article 1401). The decisions of these bodies come into force from the date of adoption. They can be challenged in court in accordance with the procedure established by law.

The above-mentioned Law added a provision stipulating that if a dispute is considered in the manner specified in paragraph one of this paragraph, the costs of the party to the dispute associated with compliance with this procedure are subject to compensation to the party to the dispute in whose favor the federal executive body made the decision, the other party to the dispute. These costs consist of patent and other fees, as well as costs, including amounts of money payable to experts, specialists and translators, costs of paying reasonable fees for the services of patent attorneys, lawyers and other persons providing legal assistance (representatives), and other expenses incurred in connection with the consideration of the dispute. If, based on the results of consideration of the dispute, a decision is made to partially satisfy the claims, expenses are subject to reimbursement to the disputing party in proportion to the volume of satisfied claims.

Thus, expenses incurred during consideration of a dispute in Rospatent regarding the provision of legal protection to the results of intellectual activity and means of individualization can be recovered in accordance with Article 110 of the Arbitration Procedure Code of the Russian Federation. However, it is worth paying special attention here that this is only possible when challenging the decision of Rospatent in court.

Accordingly, due to recent changes in civil legislation, expenses incurred in conducting an administrative case in Rospatent, which subsequently moved to the judicial level, represent legal costs and not losses.

What If There Is No Court Involvement?

For cases where there is no judicial authority, we believe it is possible to draw attention to another conclusion made by the Constitutional Court of the Russian Federation in Resolution No. 1-P dated January 10, 2023, namely, that the established judicial practice proceeds from the fact that the expenses incurred by a person in the course of administrative proceedings dispute over the provision of legal protection to the results of intellectual activity and means of individualization are not subject to compensation as damages, at least when the behavior of the opposing party does not indicate abuse of its rights and, accordingly, the presence of illegality and guilt in its actions (rulings of the Intellectual Property Court rights dated June 5, 2017 N C01-345/2017, dated June 15, 2021 N C01-785/2021 and dated February 17, 2022 N C01-2124/2021).

Taking into account the above, it is possible to assume that one of the cases when the winning party in an administrative case in Rospatent has the opportunity to recover damages in the absence of challenging the decision of the administrative body in court may be if abuse of the right of one party is proven, in connection whose actions the other party incurred costs.

A similar situation was presented in case No. A41-51089/2020, however, unfortunately, based on the results of the trial, the court came to the conclusion that there was no set of conditions under which the costs incurred by the plaintiff could be qualified as losses (resolution of the Intellectual Property Rights Court dated 02/17/2022 in case No. A41-51089/2020 and the decision of the Moscow Arbitration Court dated 11/01/2022 in the same case).

In any case, given the relatively recent changes to the legislation, as always, further conclusions should be drawn based on the practice of applying these changes.