The Russian Supreme Arbitration Court has confirmed the ban on third parties using trademarks in their advertisments of services

Pepeliaev Group advises that the Russian Supreme Arbitration Court (the “SAC”) supported the stance taken by the Nineteenth Arbitration Court of Appeal and the Federal Arbitration Court for the Central Circuit, according to which provisions of article 1487 of the Russian Civil Code (“Exhaustion of the exclusive right to a trademark”) only apply to the use of the trademark with regard to goods that have been lawfully put into circulation, but not services. Therefore, the use, without the right holder’s permission, of a trademark/ service mark by third parties to advertise services associated with the relevant goods constitutes a violation of the exclusive right to the trademark / service mark (see case No. А64-2744/2010).

BACKGROUND

A third party placed an advertisement for servicing cars in a periodical using trademarks / service marks held by OAO AVTOVAZ. These trademarks / service marks are protected not only with regard to goods, but also with regard to services of class 37 of the International Classification of Goods and Services (repair and servicing).

In this respect, OAO AVTOVAZ filed a claim with the court to have the use of trademarks/ service marks ruled illegal.

CONCLUSIONS OF THE COURTS

The first instance court dismissed the claim citing the so called “exhaustion of the exclusive rights” to trademarks, where the use of a trademark by third parties with regard to goods lawfully put into circulation does not violate the exclusive right to this trademark (see Decision of the Arbitration Court of Tambov Region dated 16 September 2010 in case No. А64-2744/2010).

The court of appeal (see Resolution of the Nineteenth Arbitration Court of Appeal dated 19 January 2011 г. in case No. А64-2744/2010) overturned the decision of the first instance court based on the following grounds.

As the text of the advertising material contains not only information about the sale of cars (goods), but also about servicing them, the trademarks used in the advertisement could also be regarded as relating not only to the goods, but also to the servicing.

Since, in accordance with the court’s position, article 1487 of the Civil Code on the exhaustion of exclusive rights to a trademark does not apply to services, the use of trademarks / service marks without permission of the right holder with regard to services associated with goods lawfully put into circulation violates the exclusive right to these trademarks / service marks, provided that these trademarks / service marks have been registered for the relevant services.

In should be noted that in its decision the court of appeal directly states that the arguments it used took into account the position specified in Resolution No. 14685/03 of the SAC’s Presidium dated 6 April 2004 in case No. А76-9599/02-46-442/33-94 (the Volkswagen Aktiengesellschaft case). This Resolution of the SAC’s Presidium became well-known in the professional community and was often used in practice as an argument supporting the theory that in certain circumstances third parties may use trademarks without permission of the right holder not only to advertise their goods, but also services.

The court of cassation upheld the conclusions of the court of appeal and the relevant resolutions (see Resolution of the Federal Arbitration Court for the Central Circuit dated 18 April 2011 in case No. А64-2744/2010).

The SAC refused to refer the case to the SAC’s Presidium for a supervisory review (see Ruling No. VAS-6546/11 dated 1 June 2011).

CONCLUSIONS AND RECOMMENDATIONS OF PEPELIAEV GROUP

1. The case in question outlines the courts’ interpretation of article 1487 of the Civil Code regarding the exhaustion of exclusive rights to a trademark. Currently, the courts rely on the premise that this article only applies to goods, but not to services.

Therefore, the use of a trademark / service mark by third parties without permission of the right holder with regard to services associated with goods lawfully put into circulation is treated by the courts as a violation of the exclusive right to such trademark / service mark, provided that the trademark / service mark has been registered for the particular services.

This case is also important as the courts have not directly expressed their opinion before with regard to this issue when it was touched on in similar cases, and administrative and judicial authorities interpreted article 1487 of the Civil Code in different ways.

2. We believe the courts’ position in the case in question provides additional opportunities to right holders to control their trademarks / service marks in the service market and considerably enhances the existing mechanism protecting the rights to trademarks.

3. With regard to the above stances taken by the courts, we recommend that persons providing various sorts of services make sure once more that they do not advertise their services using any trademark / service mark belonging to third parties and registered with regard to corresponding services.

For further information, please contact:

in Moscow – Valentina Orlova, Head of Practice IP and trade marks practice, at (495) 967-00-07 or by v.orlova@pgplaw.ru; Alexandra Pelikh, Senior Associate, at (495) 967-00-07 or by a.pelikh@pgplaw.ru; Mikhail Alekseev, Senior Associate,  at (495) 967-00-07 or by m.alekseev@pgplaw.ru

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