Prior rights and registered intellectual property

Trademark rights are obtained through registration or use. It is crucial for a brand owner who is either a prior user or a subsequent registrant of a trademark to be aware of the practical steps to take in order to prevent the monopolisation of the mark in a particular jurisdiction. Generally, an exclusive right to a trademark is obtained in Russia through registration with the Russia Patent and Trademark Office (Rospatent). This is true for regular trademarks and for well-known trademarks. Even though it is legal to use unregistered marks, companies doing business in Russia should register their core marks as trademarks as early as possible. The benefits that a registered trademark provides to its holder are permission to:

• enforce a trademark in civil, administrative or criminal proceedings;
• transfer and license a trademark with mandatory recordal at Rospatent;
• obtain customs recordals;
• use foreign words in advertising; and
• most importantly, have a statutorily-recognised right to use the trademark.

Foreign company names and commercial designations are recognised as a type of IP right without the need for registration. Commercial designations are essentially unregistered business names that are in use.

As Russia is a member of the Paris Convention, exclusive rights in a foreign company name is recognised without registration. Conversely, companies incorporated in Russia acquire the right to a company name upon registration with the Company's Register. However, commercial designation provides only weak rights. On a practical level, a registered trademark is a much more valuable asset than a commercial designation because one must collect substantial evidence of longstanding use and notoriety of a commercial designation in order to establish prior rights. A short comparison is as follows:

A prior user who fails to register the mark can lose the right to use it in commerce if the subsequent registrant is granted protection for an identical or confusingly similar mark for the same classes in the International Classification of Goods and Services. A prior user has limited options to prevent the monopolisation of its mark by the registrant. First, a prior user can attempt to block registration of the mark at Rospatent by arguing that it is misleading. Second, a prior user can also challenge the bad-faith registration on the grounds of unfair competition or abuse of rights.

Opposing trademark registration due to misleading character of the mark

According to Article 1483(3)(1) of the Russian Civil Code, no trademark registration may be granted for a mark that is or comprises elements that are false or mislead consumers as to the manufacturer of a product. In other words, Rospatent should refuse registration of a mark if consumers associate it with the prior user and not with its subsequent registrant. During the prosecution of a registrant's application, a prior user is entitled to file written observations with Rospatent (before the priority date of the subject application) explaining that the prior user's mark has acquired distinctiveness in the minds of Russian consumers. Should Rospatent grant the trademark registration, that decision can be appealed first to the Chamber for Patent Disputes and then to the IP Court. A prior user must show evidence of long-standing and substantial prior use of the mark in commerce in Russia. The following evidence can be collected by a prior user retrospectively to show the acquired distinctiveness of the mark:

• production and sales volumes of goods or services in Russia;
• geography of goods or services in Russia;
• advertising expenses in Russia;
• duration of use of the mark;
• results of public opinion polls;
• information about publications in respect of the goods or services;
• information about the demonstration of goods or services at exhibitions in Russia.

In Zeldis v ROSPATENT (2014), the IP Court refused to overturn Rospatent’s decision to register the mark BARSUKOR, despite its confusing similarity with BARSUK – the mark previously used in Russia by another company, because the prior user failed to provide retrospective results of public opinion polls that could prove the mark's acquired distinctiveness.

 Challenging trademark registration based on unfair competition or abuse of rights

According to Article 1512(2)(6) of the Civil Code, a trademark registration can be challenged at any time during the term of its protection if the trademark registration is declared to be either an unfair competition or an abuse of right. Trademark cancellation proceedings can be initiated by the prior user based on the Federal Antimonopoly Service's (FAS) finding or a court's finding that the right conferred under the trademark registration constitutes unfair competition or abuse of right.

Unfair competition

The prohibition of unfair competition in the form of acquisition and use of an exclusive right to a trademark is set out in Article 14.4 of the Competition Law (135-FZ). A prior user that wants to cancel a trademark registration obtained by a squatter or a bad-faith registrant can file a complaint with the FAS, whose decision can then be appealed to the court. Alternatively, a prior user can apply directly to a commercial court to prove that registration of the trademark constitutes unfair competition. However, the judicial process to establish unfair competition is more costly and time-consuming than the administrative process before the FAS.

When deciding whether the registration and use of a trademark constitutes unfair competition the following facts are material:

• the prior user of the mark and subsequent registrant are competitors;
• the prior user was using the mark in Russia before registration;
• the mark has acquired notoriety among consumers in Russia before registration;
• the subsequent registrant was aware of the fact that the mark was in use in Russia before taking action to acquire exclusive rights in it;
• registration of the mark was intended to harm competitors by pushing them out of the market or obtaining unfair competitive advantages by monopolising the mark.

Unfair competition can only be established if all of the abovementioned circumstances are established. In Metall Profile Company v VIK Company (2018), the IP Court found that there was unfair competition by the holder of TEXTURVIK, reasoning that a confusingly similar designation TEXTURE was in use by a competitor for homogenous goods and the mark acquired notoriety among consumers prior to its registration.

On the other hand, in Décor LLC v FAS (2016), the IP Court said that the trademark holder's registration of the GAUDI mark does not constitute unfair competition as the registrant was not aware of any prior use of the mark and his intent to register the mark was legal.

Abuse of rights

Registration of a trademark with the sole purpose of inflicting harm to a third party is considered an abuse of right in accordance with Article 10 of the Civil Code. An assertion of an abuse of right can either be a prior user's defence in a trademark infringement action initiated by a bad-faith registrant or it may be a separate cause of action. Most often, prior users put forward both arguments – an abuse of rights and unfair competition.

A trademark holder's behaviour before and after registration of the mark is taken into account by courts in order to decide its intent. The registration would be an act contrary to honest practices if the mark in question can be shown to have acquired notoriety in favour of a prior user and was registered with the sole purpose of pushing the prior user's product out of the market.

At the same time, the trademark holder's conduct after the mark was registered can also substantiate a claim of unfair competition or abuse of rights. For example, it would be inappropriate if the party obtained the registration in bad faith and then proceeded to send warning letters to competitors requesting monetary relief or initiated multiple trademark infringement actions to exclude competitors from the market.

In general, a prior user bears a relatively heavy burden to prove unfair competition or abuse of right by a trademark holder. Russian courts are especially reluctant to recognise trademark registration as an abuse of right or unfair competition when the trademark holder is using the mark before registration along with the prior user. In SOZH Synthesis v KHIM GROUP (2015), the registrant of the ARCTIKLINE trademark filed an infringement suit against its former business partner. The IP Court dismissed the unfair competition and abuse of rights claims, reasoning that even though the trademark owner knew about the prior use of the mark by its business partner it did not intend to freeride on its reputation and had a legitimate interest in registration of the mark.

Comment

Russian law provides very limited protection for trademarks that are used in the course of trade without registration. Prior users can try to oppose registration of a mark due to its misleading character or to challenge the registration of the mark on the grounds of unfair competition or abuse of right. However, both options require enormous effort and investment on the brand owner’s part to collect the required evidence retrospectively. Therefore, the best strategy for companies doing business in Russia would be to file for trademark registration of core marks as soon as Russia becomes a region of interest.