Introduction
Facts
Lower court decisions
Supreme Arbitrazh Court decision
Comment


Introduction

The concept of bad-faith trademark registration is recognised in many legal systems around the world. One of the practical implications of this concept is that third-party filing of a trademark application or registration in bad faith should be opposed and such trademark registrations be cancelled.

European trademark laws and enforcement mechanisms are not based on establishing a technical similarity of goods, but rather on:

  • the respect for property rights;
  • the investment of time, effort and resources in creating a successful brand; and
  • the encouragement of competitive advantages for the trademark owner's efforts.

As such, EU trademark law provides that a holder of a senior trademark with a significant reputation may oppose the registration of a later identical or similar trademark in respect of dissimilar goods and services in cases where the owner of the later trademark would unduly benefit from the distinctive character or reputation of the senior trademark.

The Russian courts have generally sustained such claims for cancellation of trademark registrations where the trademarks in question are identical or confusingly similar and registered in respect of similar goods only. This approach has limited the ability of trademark owners to defend their marks against companies that exploit the reputation of famous brands by way of registering and using identical and confusingly similar marks for dissimilar goods.

However, it now seems that Russian court practice has taken a welcome turn. Two precedent-setting decisions on the VACHERON CONSTANTIN and JAEGER LeCOULTRE trademarks were recently considered by the Presidium of the Supreme Arbitrazh Court.

Facts

Richemont International SA, Switzerland, owner of International Trademark Registration 436637 (which covers Russia) in respect of the words VACHERON CONSTANTIN in combination with a Maltese cross device in Class 14 (watches and jewellery), and Vacheron & Constantin SA applied to Rospatent (the Russian patent and trademark office) for cancellation of the VACHERON CONSTANTIN mark, registered by Rospatent in 2004 (Number 278829) in Class 25 (?l?thing) in the name of Tessir Partners Ltd. The trademark was initially registered in the name of local company Ritter-Gentleman LLC and later assigned to Tessir Partners Ltd.

The plaintiff claimed that the trademark VACHERON CONSTANTIN was registered deliberatly by a Russian company to create associations with one the most valuable and internationally famous brands of Swiss watches and, insofar as the VACHERON CONSTANTIN trademark was used for expensive clothing, it took unfair advantage of this reputation. Richemont International also pointed to Ritter-Gentleman's simultaneous registration or attempts to register several Swiss watch brands (JAEGER LeCOULTRE, BREGUET, BENTLEY and BLANCPAIN) for use with goods in Class 25. The actions of Tessir Partners thus fully met the classic definition of bad-faith action, as it resulted in the dilution of a famous brand and misled consumers in respect of the manufacturer of the goods produced under the trademark.

The plaintiff stated that the registration of the VACHERON CONSTANTIN trademark was performed in breach of the following laws:

  • Article 6.3 of the Law on Trademarks, Service Marks and Appellations of Origin of Goods 1993, according to which "it is not allowed to register as a trademark signs representing elements that are false or capable of misleading consumers regarding a product or its manufacturer";
  • Clause 2.5 of the Rules for Compiling, Submitting and Considering Applications for Registration of a Trademark or Service Mark (approved by Rospatent Order 32 of March 2003), which states that:

"It is not permitted to register as trademarks or elements thereof signs constituting or containing the elements indicated in Article 6.3 of the Law, to wit: 2.5.1. being false or capable of misleading the consumer regarding a product or its manufacturer. Such designations include, in particular, designations causing in the consumer's mind an image of a certain quality of the product, its manufacturer or place of origin which does not correspond to reality. A sign is recognized as false or misleading if at least one of its elements is false or misleading."

Further, the plaintiff argued that the VACHERON CONSTANTIN trademark was registered contrary to Article 10bis of the Paris Convention for the Protection of Industrial Property, which stipulates that:

  • countries that are party to the convention are bound to ensure effective protection against unfair competition;
  • any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition; and
  • the following activities are prohibited:
    • acts that create confusion with the establishment, goods or industrial or commercial activities of a competitor;
    • false allegations in the course of trade that discredit the establishment, goods or industrial or commercial activities of a competitor; and
    • indications or allegations in the course of trade that are liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for purpose or quality of the goods.

Lower court decisions

The cancellation action was overruled by Rospatent's Chamber for Patent Disputes on February 18 2010.

Appeals to the Moscow City Arbitrazh Court,(1) the Ninth Arbitrazh Court of Appeals(2) and the Federal Arbitrazh Court of the Moscow Region(3) – where the plaintiff sought to invalidate the Rospatent decision – were also dismissed.

Dismissing the case, the courts concluded that the goods produced by two different companies under similar trademarks were not similar for the purposes of terminating legal protection, since they:

  • fell under different classes of the International Classification of Goods and Services;
  • served different functional purposes;
  • were not mutually replaceable or complementary;
  • shared no common selling areas or consumers; and
  • did not compete with each other.

The courts also found no evidence of the VACHERON CONSTANTIN trademark's fame in Russia. Rospatent and the courts established the failure to prove the well-known status of the trademark in Russia in regard to goods in Class 14 of the International Classification of Goods and Services. With no evidence produced to show that the mark registered under Number 43637 was applicable to goods in Class 25, or that such goods had been imported into Russia, the courts had no reason to invoke the above provision.

The plaintiff requested a supervisory review before the Supreme Arbitrazh Court, asking it to overturn the lower court decisions and satisfy the claim in full. The plaintiff argued that the position adopted by Rospatent and the courts in this case was contrary to the international application of the Paris Convention and was harmful to Russian trademark practice.

Supreme Arbitrazh Court decision

The Supreme Arbitrazh Court(4) accepted the plaintiff's request for supervisory review and transferred the case to its Presidium for consideration, stating that the lower court decisions were inconsistent with existing law enforcement practice of Russian arbitrazh courts and referring to the decision in the JAEGER LeCOULTRE trademark case.(5)

In the JAEGER LeCOULTRE case, two Swiss companies – Richemont International SA and Manufacture Jaeger Le Coultre SA – successfully contested (at three judicial instances) Rospatent's decision that protected the JAEGER LeCOULTRE trademark registered in the name of Ritter-Gentleman Limited Liability Company and assigned in the name of InPro AG, which was using the trademark for garments. Initially, the Moscow City Arbitrazh Court(6) turned down the plaintiff's application for invalidation of the Rospatent decision and refused to grant a cancellation action brought against the JAEGER LeCOULTRE registered trademark, explaining that the challenged trademarks were registered for dissimilar goods. The plaintiff appealed, arguing that the first instance decision should be dismissed as illegitimate and groundless on the basis that Richemont International's Jaeger-LeCoultre trademark protected one of the world's oldest and most famous brands of Swiss watches, which enjoyed well-deserved popularity around the globe (including in Russia) and was registered in 142 countries. Therefore, the challenged trademark registration could mislead consumers as to the respective goods or their makers, and goods such as garments, watches, jewellery and clothing accessories should be accepted as mutually complementary and hence similar.

As a result, the Ninth Arbitrazh Court of Appeals(7) agreed with the applicants that it was highly probable that consumers would see the goods carrying the challenged trademark as coming from the same producer or related producers, and overturned the Moscow City Arbitrazh Court's decision. The Ninth Arbitrazh Court of Appeals ruled to invalidate and cancel the Rospatent decision and to oblige Rospatent to pronounce the trademark registration null and void. The Federal Arbitrazh Court of the Moscow Region(8) fully declined the cassation appeals of Ritter-Gentleman and Rospatent and supported the decision of the Ninth Arbitrazh Court of Appeals, which fully granted the claims of Richemont International SA and Manufacture Jaeger Le Coultre SA seeking invalidation of the JAEGER LeCOULTRE trademark of Ritter-Gentleman.

The appellate authority offered a broader interpretation that the relevant circle of consumers in this case, who enjoyed sufficiently high income levels, would share a substantially consistent opinion that the goods concerned (ie, garments, footwear, headgear, watches, glasses and accessories such as cuff links and buttons) were mutually complementary in terms of quality and value. The similarity of goods for such consumers is determined to a significant extent by the quality of the goods and by their value corresponding to such quality. For this reason, similarity is recognised if the corresponding goods, by their nature or designated purposes, can be attributed by consumers to the same source of origin. Consideration of this case was suspended in the Supreme Court until the decision in the VACHERON CONSTANTIN case.

The Presidium of the Supreme Arbitrazh Court(9) decided the VACHERON CONSTANTIN case in an oral hearing and reversed all of the lower courts' decisions, while also ordering Rospatent to cancel the Class 25 registration. Sustaining the claim, it referred, among other things, to Article 10bis of the Paris Convention, which defines an act of unfair competition as any act of competition that is contrary to honest practices in industrial or commercial matters.

Comment

This decision of the Presidium of the Supreme Arbitrazh Court is important, as it establishes guidelines for lower-level courts on how to address the complicated issue of the registration of marks that are identical or similar to famous and reputable trademarks for dissimilar goods. It has further widened the scope of protection for trademark owners against bad-faith registrations and dilution of famous brands.

For further information on this topic please contact Eugene Arievich or Alisa Fomina at Baker & McKenzie - CIS Limited by telephone (+7 495 787 2700), fax (+7 495 787 2701) or email (eugene.arievich@bakermckenzie.com or alisa.fomina@bakermckenzie.com).

Endnotes

(1) Decision ?40-73286/10-143-6259, March 5 2011.

(2) Decision 9?P-9595/2011, May 26 2011.

(3) Decision ?40-73286/10-143-625, September 15 2011.

(4) Decision ??-16912/11, February 9 2012.

(5) Case ?40-126318/2010, Decision F05-8064/11, Federal Arbitrazh Court of the Moscow Region, September 1 2011.

(6) Decision ?40-126318/10-26-1045, February 2 2011.

(7) Decision 09??-7652/11, May 13 2011.

(8) Decision F05-8064/11, September 1 2011.

(9) Decision 16912/11, April 24 2012.

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