The Presidium of the Russian Supreme Arbitration Court (SAC) has indicated to courts that compensation of double the value of goods shall be recovered where a confusingly similar mark

Pepeliaev Group advises that 20 November 2011 saw the publication on the Supreme Arbitration Court’s official website of the Court’s Resolution No. 3602/11 in case No. 08-8099/2009 (Krasny Oktyabr v. Slavyanka). 

By this resolution, the court recognised that when a mark is unlawfully applied to goods and is confusingly similar to an existing mark, the right holder of the trademark thus infringed may demand compensation of double the value of goods to which such mark was applied.

FACTS OF THE CASE

OAO Moskovskaya Konditerskaya Fabrika Krasny Oktyabr is the owner of a combination trademark using the verbal element "Alenka". ZAO Konditerskaya Fabrika Slavyanka produced and sold slab chocolate under the name “Alina”, the packaging of which had a similar colour scheme, and depicted a girl in a similar coloured headscarf with her fringe coming out fr om underneath it.

A decision of the Federal Antimonopoly Service and subsequently also a decision of the City of Moscow Federal Arbitration Court held that, in marketing slab chocolate under the “Alina” mark, Slavyanka was guilty of bad faith competition under article 14(1)(4) of the Federal Law On the protection of competition.

In court, Krasny Oytyabr then demanded damages fr om Slavyanka of double the value of the infringing products. This amount exceeds by more than 62 times the amount of the maximum compensation that could be determined at a court’s discretion based on the nature of the breach had the claim been asserted under article 1515(4)(1) of the Russian Civil Code.

THE COURTS’ FINDINGS

1. The courts, based on a literal interpretation, found that the right holder was entitled to demand compensation only in the amount provided for in article 1515(4)(1) of the Civil Code, namely between RUB 10,000 and RUB 5,000,000. A claim for compensation of double the value of the infringing products may only be upheld if the trademark itself is affixed, and not just a confusingly similar mark. (See the Ruling of the Belgorod Region Arbitration Court dated 14 April 2010, the Resolution of the Ninth Appellate Arbitration Court dated 9 July 2010, and the Resolution of the Federal Arbitration Court for the Central Circuit dated 12 October 2010 in case No. A08-8099/2009).

Thus it was uncertain whether the holder of a trademark was entitled to demand compensation in double the amount of the infringing products only when the trademark itself was affixed to those products, or whether this also applied when a mark was affixed that was confusingly similar.

2. The Presidium of the Supreme Arbitration Court (SAC) made reference to article 1515(1) of the Civil Code, which provides that goods, stickers and the packaging of goods on which a trademark or a confusingly similar mark is unlawfully affixed, are infringing goods. Therefore it held that the rights of a trademark owner had been infringed by the use (by placing on the goods or on packaging) not only of an identical trademark but also a confusingly similar mark.

The Presidium of the SAC noted that, in article 1515(4) of the Civil Code, two types of compensation are provided for, with both being equally applicable when an exclusive right to a trademark is infringed and the right holder being able to make a choice in its own discretion. Therefore, placing on goods marks that are confusingly similar will allow a right holder, in its discretion, the choice of seeking the compensation referred to in article 1515(4)(1) of the Civil Code or in article 1515(4)(2) of the Civil Code, including compensation of double the value of the goods in question.

Further, the amount of compensation is restricted by the lim its established by law (double the amount of the value of the trademark, double the amount of the value of the right to use the trademark) and is recognised as commensurate to the consequences of the breach.
 
OUR CONCLUSIONS AND RECOMMENDATIONS

1. In this case, the Presidium of the SAC examined and gave answers to a range of questions that will have a significant effect on subsequent trademark enforcement practice, most notably:

• a right holder of a trademark may claim double the value of infringing products not only when the trademark itself is affixed to them, but also when a mark is affixed that is confusingly similar to the right holder’s trademark;
• a claim for the payment of compensation of double the value of goods is not restricted by the RUB 5,000,000 lim it when the amount of compensation is determined at the court’s discretion based on the nature of the infringement.

2. The legal position that the Presidium of the SAC has laid down in this case gives the right holders of trademarks more predictable outcomes and more effective ways to enforce their trademarks.

3. In relation to the legal position of the Presidium of the SAC, we recommend that right holders who use trademarks in their business activity assure themselves that third parties do not use confusingly similar marks.

Should marks be discovered that are confusingly similar to a trademark registered in relation to goods (services) of the same type, we may prepare opinions showing that the similarity exists, and could assist in obtaining similar opinions from other intellectual property professionals.

The fact that the goods are confusingly similar may also be confirmed by the Federal Antimonopoly Service when it examines a case on the violation of antimonopoly legislation.

4. Subsequently, when a party goes to court to enforce its exclusive right to a trademark and serves a statement of claim (as well as when making a claim at the pre-litigation stage), it makes sense to asset the claim for compensation to be paid of double the value of goods on which the confusingly similar mark was placed.

Such claims are more definite and leave the court’s discretion to a minimum when it comes to determining the amount of compensation for the infringement of an exclusive right to a trademark. In addition, when advancing such a claim, a calculation should be requested of the actual cost price and profit on the product group marked with such trademark or confusingly similar mark. This will mean that the infringer is obliged to supply such documents to the court.

For further information, please contact:

in Moscow – Valentina Orlova, Head of Practice IP and trade marks practice, at (495) 967-00-07 or by e-mail;

in St Petersburg - Sergey Spasennov, Partner, Head of St. Petersburg office, at (812) 640-60-10 or by e-mail