Trademark litigation in Russia - WTR 2020

October 8, 2019

WTR 2020

Maxim Mikhailov

Trademark Litigation

Legislative framework and causes of action

Trademark law, rules and regulations

Russia’s IP regulation system is continuously developing and important amendments to substantive and procedural law are adopted each year. As a civil law country, Russia’s IP sphere is regulated in accordance with its Constitution as the supreme source of law. It also abides by the generally recognised principles and norms of international law, ratified international treaties, the Civil Code, as well as other federal laws and legal acts relating to intellectual property.

Russia is a party to the following international treaties relating to trademarks:

• the Paris Convention for the Protection of Industrial Property;
• the Madrid Agreement Concerning the International Registration of Marks and the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks;
• the Singapore Treaty on the Law of Trademarks;
• the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks;
• the Agreement on Trade-Related Aspects of Intellectual Property Rights and Protocol (TRIPs) and protocol dated 6 December 2005 amending TRIPs; and
• the Treaty on the Eurasian Economic Union.

The following are among key Russian acts regulating trademark litigation:

• Federal Constitutional Law 1-FKZ on Commercial Courts in the Russian Federation;
• Part 4 of the Civil Code;
• Federal Law 135-FZ on Competition Protection;
• the Code of Commercial Courts Procedure (including amendments effective since 1 October 2019); and
• Ruling of the Plenum of the Supreme Court, Number 10 (23 April 2019) on Application of Part 4 of the Civil Code.

Causes of action

The most common causes of action in Russia are trademark infringement and unfair competition. Dilution is not directly regulated in law, but court practice has seen several cases relating to the dilution of widely known trademarks based on unfair competition (Cases SIP-279/2014 and SIP-839/2014), as well as the undue care in registration argument (Cases А40-63533/04-67-642 and А40-73286/10-143-625). Also, registration and subsequent use in bad faith of the trademark may serve as grounds for refusal to grant judicial protection to the relevant rights holder (IP Court Information Brief SP-21/2).

Infringement may involve the unauthorised use of a similar designation in relation to goods for which the trademark was registered, or homogeneous goods, if such use will lead to the likelihood of confusion. Russian law stipulates the following types of use requiring authorisation:

• the use of marks on goods (including labels) and the packaging of goods which are manufactured, offered for sale, sold, exhibited at exhibitions and fairs or otherwise introduced into the civil turnover in Russia or stored or transported for that purpose or imported into Russia;
• the manufacturing of goods in the form of a trademark (including three-dimensional goods materialising a two-dimensional trademark);
• the use of marks in performing works or rendering services;
• the use of marks on documents relating to the introduction of the goods into the civil turnover;
• the use of marks in offers for the sale of goods, performance of works and rendering services, as well as in announcements, billboards and advertisements; and
• the use of marks on the Internet, including in a domain name or through other methods of address.

Unfair competition may be invoked in case of, among other things, the following actions of a competitor on the Russian market:

• illegal use of a designation which is identical or confusingly similar to a trademark, corporate registered name, commercial designation or appellation of origin of the goods of a competitor by putting such designation on the goods, labels, packaging or using it with regard to the goods being sold or otherwise introduced into civil turnover in Russia, as well as by using it on the Internet, particularly through a domain name or other methods of address;
• copying or imitating the appearance of the goods being introduced onto the market in Russia by a competitor, as well as such goods’ packaging, labels, names, ranges of colours, the brand style in general (eg, clothing, salesrooms and shop-window dressing) or other elements individualising the competitor and/or its goods; and
• use of keywords or phrases which are identical or confusingly similar to someone else’s trademark by advertisers in placing context (eg, pay per click) advertisements as criteria for showing the advertisement.

Alternative dispute resolution

Mediation

Under Russian procedural law, parties to a dispute may refer to an intermediary (including a mediator) for dispute settlement and entering into a settlement agreement. Settlement agreements may be entered into at any stage of the court procedure.

The mediation process can begin at the court’s proposal or the parties’ initiative. In such cases, the judicial process will be postponed for up to 60 days. Courts cannot order mediation.

The use of mediation is regulated by Federal Law 193-FZ on Alternative Dispute Resolution Procedure with the Participation of an Intermediary (Mediation Procedure) (27 July 2010). Based on this, a mediator can act as a professional educated in the sphere of mediation (in respect of the dispute being underway in the competent state court) and as non-professional in other cases. If, as a result of the mediator’s effort, the parties conclude the mediation agreement, such agreement may be affirmed by the competent state court as a settlement agreement.

Despite significant efforts undertaken by the court system (including arranging rooms for mediation and advertising in the court buildings), this procedure is not widely used in Russia because:

• it is not obligatory;
• it is high in cost;
• mediators have no official status as participants in the process; and
• there is a lack of trust in mediation in general.

Arbitration

Arbitration in Russia is regulated by Federal Law 382-FZ on Arbitration (Third-Party Procedure) in the Russian Federation (29 December 2015). Based on Article 1248(1) and Article 11(1) of the Civil Code, disputes relating to IP rights (including trademark rights) may be referred to arbitration.

The dispute may be referred to arbitration before the decision is taken by the first-instance court in case the parties are bound by the written arbitration agreement. An arbitral award is binding and subject to instant execution by the parties, unless a specific term is not fixed in the award. The competent state court may enforce an arbitration award by issuing an execution order. The arbitration award may be appealed to the competent state court, unless the parties agreed in their arbitration agreement that the arbitration award is final.

Not all IP disputes are subject to this procedure. Under Article 33(2) of the Code of Commercial Courts Procedure, disputes exclusively processed by the Specialised Court for Intellectual Property Rights may not be referred to arbitration.

In addition to mediation and arbitration, for the purposes of facilitating a dispute settlement, the parties may use instruments provided by Russian procedural law – for example:

• partial or full refusal from action;
• partial or full recognition of claims;
• recognition of circumstances;
• agreement on the circumstances of the case; and
• settlement agreement at any stage of litigation process.

For disputes concerning the unlawful use of trademarks in domain names, extra-judicial procedure based on ICANN UDRP may be employed (Russian ccTLDs are not yet covered). Resorting to the UDRP-based procedure does not prejudice or hamper applying to a state court on the same subject.

Litigation venue and formats

The court system consists of federal and regional courts. Federal courts are represented by the state commercial courts and courts of general jurisdiction, both of which are headed by the Supreme Court. The Constitutional Court also serves at the federal level, mostly resolving issues of compliance with the Constitution of federal laws and some other normative legal acts. At the regional level, there are regional charter courts and magistrates.  

As trademarks in Russia belong either to legal entities or individual entrepreneurs for the purposes of business activity, trademark litigation, in most cases, falls within jurisdiction of the state commercial courts, including the specialised IP Court. In some cases, including those relating to trademark infringement by domain owners as individuals, the courts of general jurisdiction will be the venue. However, if in the course of the judicial proceedings a particular court finds out that the dispute is not subject to its jurisdiction, the case will be transferred to a relevant other court with the correct jurisdiction.

The court will return or leave the statement of claim without consideration if the obligatory pre-trial settlement procedure was not complied with. Pre-trial procedure should be performed in the following cases:

• a claim for early termination of the legal protection of the trademark due to its non-use within three years; and
• an infringement claim requesting compensation or damages.

Before filing a non-use action, the claimant should forward to the rights holder a written offer with the proposal to either cancel their trademark by filing the appropriate request with Russian Trademark and Patent Office (Rospatent) or assigning it to the claimant. If within two months of the sending date, the rights holder fails to resort to one of the two scenarios, the claimant has the right to file a non-use cancellation action within 30 days.

An infringement pre-trial letter claiming damages or compensation gives the infringer 30 days for voluntarily settlement of the requests contained in such letter. The rights holder may file a lawsuit within the statute of limitation. 

State commercial courts are divided into a number of levels. First-instance courts are represented by the state commercial courts of each region (eg, the Moscow City Commercial Court or the Novosibirsk Region Commercial Court). These courts have jurisdiction over trademark infringement issues. The first-instance court should consider the case within six months of receiving the statement of claim, with a possible three-month extension. In case one of the parties is located in a foreign country, the duration of process may be extended in accordance with relevant international treaty or, in absence of such treaty, for up to one year.

Since the claim is to be filed at the place of location of the infringer, forum shopping is possible when the claimant can name multiple persons as co-defendants (eg, manufacturer/importer, wholesalers and retailers). In such cases, the claimant has the option to choose with which territorial court to file their action. The first-instance court decision, unless appealed, enters into force on the expiration of the one month appropriated for its appeal.

The next level comprises 21 state commercial courts of appeal. Such courts review first-instance decisions that have not entered into force from the standpoint of their conformity with law and due reasoning. New evidence cannot be added at this stage, unless excusable reasons are provided for not submitting particular evidence at first instance. The court of appeal decision enters into force immediately on rendering and may be further appealed in the IP Court (as the cassation appeal instance) within two months.

The IP Court, consisting of a three-judge panel, checks the previous court decisions for conformity with substantive and procedural law. It may uphold, cancel or amend the judicial acts of the lower courts, as well as sending them to the corresponding court for re-consideration. An IP Court ruling may be appealed in the Supreme Court (as cassation and, thereafter, supervisory instance).

The IP Court also serves as the first-instance court in the following cases:

• disputes on granting or terminating the legal protection of trademarks by Rospatent;
• contesting decisions of the anti-monopoly authorities in cases relating to acquiring trademark protection;
• early termination of legal protection of a trademark due to non-use; and
• disputes on recognising the rights holder’s actions regarding acquiring legal protection for a trademark as unfair competition.

In cases challenging Rospatent decisions on trademark opposition, the IP Court limits its review to the scope of initially filed opposition materials, since new arguments of the parties may serve as grounds for another case.

IP Court first-instance decisions may, within two months, be challenged in the IP Court’s Presidium, acting as the cassation appeal instance. Further appeal is possible in the Supreme Court.

Invalidation actions are considered by the Rospatent Chamber for Patent Disputes in separate administrative proceedings. As Rospatent is not part of the Russian court system, there is no possibility to combine such actions with an infringement case in one litigation process. Moreover, the invalidation procedure will not serve as the reason for suspending the infringement case.

Rights holders may act on their own before the court or be represented by patent attorneys, attorneys at law, individuals with higher education law degrees or PhDs in law.

Damages and remedies

Civil liability

Remedies under civil proceedings include:

• injunction;
• payment of damages or compensation;
• removing from circulation and destroying, at the expense of the infringer, the counterfeit goods, labels and packages on which the trademark or confusingly similar designation is placed; and
• liquidation of the legal entity or termination of the individual entrepreneur’s registration and activity in connection with the trademark infringement (by prosecutor’s lawsuit).

Based on judicial statistics, more than 90% of rights holders choose compensation as a remedy. Damages are unpopular due to the cumbersome requirements of the documents underlying the claim amount. Compensation, as an alternative measure, was introduced into Russian law mostly because of the difficulties in justifying the relevant amounts of damages.

Subject to the court establishing infringement, the rights holder may claim one of the following amounts of compensation:

• Rb10,000 to Rb5 million – the court has the discretion to change the requested compensation based on the gravity, duration, fault and potential damages;
• double the value of the counterfeit products (based on the selling price and general amount of manufactured goods); or
• double the amount of the royalties under the non-exclusive licence agreement which may have been concluded with the rights holder.

One of the above three options should be chosen by the rights holder as early as the pre-trial letter to the infringer, in which case pre-trial obligatory proceedings will be deemed as complied with in suing for compensation.

Administrative liability

The Code of Administrative Offences provides for liability. Illegal use of someone else’s trademark or similar designations for homogeneous goods invokes an administrative fine of up to Rb200,000 with the confiscation of items containing illegal reproductions of the trademark, as well as materials and equipment used for production and other tools for committing the administrative offence.

Illegal manufacturing for the purposes of selling or the realisation of goods illegally containing someone else’s trademark or similar designations for homogeneous goods (excluding cases of unfair competition) entails an administrative fine of up to fivefold the price of the infringing goods and no less than Rb100,000, with the confiscation of items containing illegal reproduction of a trademark, as well as materials and equipment used for their production and other tools for committing the administrative offence.   

Unfair competition manifested in the introduction into turnover of a commodity with illegal use of a trademark entails an administrative fine of between 1% and 15% of the infringer’s proceeds from the realisation of goods, works or services on the market where the infringement has been committed, but no less than Rb100,000.

Criminal liability

The Criminal Code provides for criminal liability regarding the illegal use of someone else’s trademark or similar designations for homogeneous goods or the illegal use of the warning signs ‘R’, ®, ‘trademark’ or ‘registered trademark’ in respect of the trademark not registered in Russia, if the offence was committed two or more times and led to damages exceeding Rb250,000. The liability ranges from different fines to up to six years’ imprisonment for infringement committed by an organised group.

Evidencing the case

Under the Code of Commercial Courts Procedure, each participant of the case should prove the circumstances underlying its claims. Evidence may be written or oral, including case participants’ statements, expert opinions, specialist consultations, witness testimony, audio and video files, video-conferencing, affidavits, screenshots certified by the participants, web-archive data and sociological surveys. The notary public may secure relevant evidence if there are grounds to believe that obtaining and providing such evidence becomes impossible or difficult at a later stage.

Among the evidence, sociological surveys are highly influential on the judge. Under Russian law, specific knowledge is not required to establish the similarity or homogeneity of goods, and the judge may establish either based on his or her own conviction. Expertise is therefore very rarely used in trademark disputes.

Evidence is always matter-specific – for example, to fend off trademark cancellation action, the rights holder should provide the court with proper evidence of use, such as:

• payment documents showing that the goods marked with the trademark were introduced into civil circulation;
• documents showing that the trademark was used under the control of the owner if the mark was used not by the owner itself (eg, distribution or licence agreements regarding the trademark);
• advertising material;
• customs declarations confirming import of the marked goods into Russia; and
• documents showing that the goods with the trademark were exhibited at fairs.

There is no discovery procedure in Russia. A case participant who has no opportunity to receive evidence from a particular person may file the request with the court on obtaining the evidence. The court may honour the request and demand corresponding evidence.

All documents and evidence form the foreign country should be translated into Russian and duly legalised, where appropriate, in accordance with the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents 1961, to which Russia is a member.

Available defences

Defences depend on the circumstances of a particular case. Some common protective arguments include:

• failure to prove confusing similarity;
• abuse of rights;
• statute of limitations restrictions;
• fair use argument (very limited); and
• a claimant’s lack of interest and/or valid reasons for non-use (based on Article 19 of TRIPs) in non-use cancellation actions.

Appeals process

The decision of the first-instance court may be appealed at several consecutive levels.

The court of appeal may keep the first-instance decision intact, change it or repeal it, adopting a new judicial act as well as terminating the procedures on the case or leaving the case without consideration in full or in part. 

The court of appeal’s ruling, in its turn, is subject to review by the court of cassation appeal. The latter may confirm, change or repeal previous judicial acts, adopt a new judicial act, terminate the procedures on the case, leave the case without consideration in full or in part, or forward the repealed or amended judicial act for re-consideration to relevant court.  

Further cassation and, thereafter, supervisory review by the Supreme Court require preliminary clearance by the Supreme Court judge regarding the necessity to hold the hearing. The Presidium of the Supreme Court, acting as supervisory instance, holds the hearing when it is necessary to establish a uniform approach to court practice and rule of law.