Fight Against Unscrupulous Distributors

Well-known brands that sell their products in Russia through a distributor often find that the distributor has registered a trade mark that is identical to or confusingly similar to the trade mark of the copyright holder without obtaining the copyright holder's consent. Moreover, the former distributor, as the holder of the exclusive right to the trade mark in Russia, may demand that the copyright holder enter into a distribution or agency agreement with them, threatening to file a lawsuit for trade mark infringement in Russia or to receive compensation for relinquishing the right to the trade mark. How can a foreign copyright holder protect themselves in such a situation?

Appeal to the Federal Antimonopoly Service of the Russian Federation

The presence of a distribution agreement does not give the distributor the right to register a trade mark that is identical to the trade mark of a foreign manufacturer or similar to it to the extent of confusion, unless otherwise expressly provided for in the agreement (Article 1229 of the Civil Code of the Russian Federation). Consent to the promotion of goods under the brand of a foreign copyright holder within the framework of the agency relations established by the distribution agreement is not in itself the copyright holder's consent to the filing of an application for the registration of a trade mark in the name of the distributor¹.

At first glance, the most logical way to protect the rights of a foreign copyright holder is to apply to Rospatent to invalidate the grant of legal protection to the distributor's trade mark. However, Rospatent does not have the authority to establish facts of abuse of rights or unfair competition².

Therefore, you should first contact the Federal Antimonopoly Service (FAS), and upon receiving its decision confirming that the distributor has violated Article 14.4 of Federal Law No. 135-FZ dated July 26, 2006, "On Protection of Competition", submit an application to Rospatent to cancel the trademark registration based on Subparagraph 6 of Article 1512 of the Civil Code of the Russian Federation.

In order to recognize the distributor's actions in acquiring and using the exclusive right to a trade mark as an act of unfair competition, the following must be established³:

• that the foreign rights holder lawfully used the relevant designation to individualize the goods or services they produce without registering it as a trade mark, and that designation gained recognition among consumers;
• the distributor was aware of this use;
• the distributor's actions were aimed at gaining advantages in conducting business activities (in particular, by acquiring the exclusive right to a trade mark, they intended to exploit the reputation and recognition of the designation);
• the existence of a competitive relationship;
• there has been damage/the possibility of causing damage to the foreign copyright holder or the possibility of harming its business reputation.

As part of this procedure, the FAS will assess not only the distributor's unfairness at the time of filing an application for trade mark registration, but also its subsequent behavior in using the trade mark.

Additional evidence of unfairness may include actions taken by the distributor immediately after the registration of the disputed trademark, which are aimed at preventing other distributors of the foreign copyright holder from selling their products. At the same time, in order to effectively challenge the granting of legal protection to a trade mark, it is necessary to recognize as unfair competition not only the use of a trade mark, but also its state registration⁵.

In addition, one of the criteria for holding a distributor accountable for violating Article 14.4 of the Law on Protection of Competition is the existence of a competitive relationship between the rightholder and the infringer of the exclusive right. According to the SIP's position in a similar case, the relationship between a foreign copyright holder and a distributor cannot be considered competitive, as the parties' actions are coordinated and aimed at improving the efficiency of product sales⁶. A more convincing position is that the existence of a distribution agreement between a foreign copyright holder and a distributor does not prevent them from being considered competitors if they sell products in the same product market⁷.

However, It Is Still Possible To Contact Rospatent...

Another way to protect your rights is to contact Rospatent directly with a request to cancel the trade mark registration based on subparagraph 6 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation.

If Rospatent refuses the request and explains that it does not have the authority to determine whether there is an abuse of rights or unfair competition, the applicant can appeal the decision in court. At the same time, the court, on the basis of the provisions of Article 10 of the Civil Code of the Russian Federation, has the right, on its own initiative, to recognize the actions of a person to register a trade mark as abuse of law or unfair competition.

In this case, the court decides to invalidate Rospatent's decision and obliges to cancel the registration of the distributor's trade mark⁸. The advantage of this procedure is that the court can recognize the actions of a person as an abuse of law in accordance with art. 10 of the Civil Code of the Russian Federation. Unlike the FAS, the court is not obliged to establish the fact of a competitive relationship between the parties. Moreover, a foreign copyright holder has the right, bypassing the administrative procedure, to file a lawsuit to recognize the distributor's actions as an act of unfair competition⁹. A positive court decision will serve as the basis for revoking the trade mark registration with Rospatent.

Nevertheless, a preliminary appeal to the FAS seems to be a more consistent and strategically correct step, since this body, authorized to monitor compliance with antimonopoly legislation, has broad powers to collect evidence, obtain information and conduct inspections.

Special Grounds for Cancellation of Trade Mark Registration

A foreign copyright holder may also apply to Rospatent and challenge the granting of legal protection to a trade mark on a different basis than the recognition of the distributor's actions as unfair competition. This refers to subparagraph 5 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation, according to which the granting of legal protection to a trade mark may be challenged and declared invalid if the protection is granted in the name of an agent or representative of a person who holds this exclusive right in one of the member states of the Convention for the Protection of Industrial Property of March 20, 1883 (the Paris Convention), in violation of the requirements set forth in this document.

According to article 6-septies of the Paris Convention, "if the agent or representative of the one who owns the mark in one of the countries of the [Paris] Union, without the permission of the owner, submits an application for registration of this mark on his behalf in one or more such countries, the owner has the right ... to demand its cancellation".

In order to hold a distributor liable on the basis of sub-clause 5, clause 2, Article 1512 of the Civil Code of the Russian Federation, it must be proved:

• that the copyright holder of the disputed trade mark must be an agent or representative of the person who filed the objection;
• the person who filed the objection must have the exclusive right to the trade mark in one of the member states of the Paris Convention;
• the trade marks of the person who filed the objection and the owner of the disputed trade mark (agent, representative) are identical or similar to the point of confusion.

One of the criteria for holding a distributor liable under subparagraph 5 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation is that the foreign manufacturer must have the exclusive right to the trade mark in one of the member states of the Paris Convention. At the same time, the trade mark must be registered in the name of the foreign right holder, and not in the name of the legal entities affiliated with it. In one of the cases, the court found the plaintiff's reference to the existence of registered trade marks in the names of companies that form a group and are established by the same individuals to be unfounded, as only the person holding the exclusive right to the trade mark has the right to file objections under subparagraph 5 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation¹⁰.

According to established judicial practice, the existence of a specific distribution or agency contract is not mandatory for the application of Article 6-septies of the Paris Convention¹¹. This article should also apply to individuals who have acted as distributors of the goods of a trade mark owner who has applied for the registration of an identical or similar trade mark in another country.

If the trade mark registered by the distributor is identical to the brand name of a foreign trade mark owner, the latter has an additional basis for challenging the registration. In this case, the granting of legal protection may be declared invalid on the basis of subparagraph 1 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation, due to the violation of paragraph 8 of Article 1483 of the Civil Code of the Russian Federation, according to which designations identical or similar to the extent of confusion with a trade mark protected in the Russian Federation may not be registered as trade marks for similar goods.

Since, in accordance with Article 8 of the Paris Convention, a trade mark is protected in all countries of the [Paris] Union, without mandatory registration and regardless of whether it is part of a trade mark, the names of foreign legal entities are subject to protection in the Russian Federation¹².

To protect the exclusive right to the name of a foreign manufacturer, it is necessary to prove:

• that such a right was acquired by a foreign legal entity before the priority of the disputed trade mark was established;
• the disputed trade mark and the name are identical or similar to the point of confusion;
• the goods and services for which the disputed trade mark is registered and the name is used are homogeneous.

Choosing a Strategy for Challenging the Registration of a Trade Mark

So, let's list the strategies for dealing with unscrupulous distributors once again:

• the FAS recognizing the distributor's actions as unfair competition and subsequently applying to Rospatent (with the FAS's decision attached) to cancel the trade mark registration based on subparagraph 6 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation;
• appealing to a court to recognize the distributor's actions as unfair competition (the court's decision will serve as the basis for canceling the trade mark registration);
• application to Rospatent for the invalidation of the granting of legal protection to a trade mark on the basis of subparagraph 6 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation without prior application to a competent authority (the Federal Antimonopoly Service or a court), receiving a refusal, and appealing the decision of Rospatent to a court, which, on its own initiative, makes a decision on abuse of rights on the basis of Article 10 of the Civil Code of the Russian Federation;
• appeal to Rospatent in order to invalidate the granting of legal protection to a trade mark on the basis of subparagraph 5 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation or subparagraph 1 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation.

Thus, if a person has the exclusive right to a trade mark in one of the member states of the Paris Convention, it is advisable to challenge the registration of a trade mark on the basis of subparagraph 5 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation. This defense strategy is simpler because it does not require a prior application to a competent authority (the Federal Antimonopoly Service or a court) to establish the fact of abuse of rights or unfair competition in a separate proceeding. Moreover, when challenging a registration on this basis, there is no need to prove the existence of competitive relations, an unfair purpose, etc.

If a person does not have the exclusive right to a trade mark in a state that is a party to the Paris Convention (for example, if the foreign copyright holder has not registered the trade mark, or if the dispute is local and does not affect other states that are parties to the Paris Convention), then a more consistent strategy would be to contact the Federal Antimonopoly Service and then Rospatent in order to have the trade mark registration revoked under subparagraph 6 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation.

If the distributor has copied part of the foreign copyright holder's brand name, you can apply to Rospatent to have the distributor's trade mark registration revoked, also based on subparagraph 1 of paragraph 2 of Article 1512 of the Civil Code of the Russian Federation.