This article explains how Russian law defines the existing rights for means of individualization, such as trademarks, trade names and commercial designations, and analyzes how such rights correspond to each other.
Understanding the differences in the definitions of such rights, as well as the limitations and restrictions placed on the commercial use of such rights, is vital when considering issues related to, for example, the commercial use of such rights, including within investment projects or when establishing a franchise business in Russia. Furthermore, issues related to the correlation between such rights are key when considering a strategy to protect I.P. rights in Russia within, for example, I.P. portfolio management, as well as when dealing with an existing or potential dispute relating to the violation of an I.P. right in Russia by a third party.
When dealing with I.P. rights involving a foreign element, in addition to the issues related to the correlation between such rights, what also needs to be considered are the issues related to the differences in definitions of such rights used by other jurisdictions. While there are no problems in defining the right to a trademark – this right corresponds to the definitions generally applied worldwide – problems arise in respect of other categories of I.P., such as trade names and commercial designations.
In Russian law, a trademark is a designation recognised to distinguish goods and services and properly registered in Russia by a legal entity or an individual entrepreneur. The right to a trademark arises from the appropriate registration of such designation as a trademark, and shall be confirmed by a corresponding certificate. The holder of the exclusive right to a trademark may operate at its own discretion – that is, the right to a trademark can be used commercially in transactions.
A trade name can also be referred to as a firm name or a company name – this is a matter of discrepancy in translation of this definition from Russian into English.
A trade name is a mean of individualisation of a profit-making legal entity, the right to which is automatically protected when the legal entity is registered. Such right cannot be assigned or licensed. In case of conflict between legal entities with identical or confusingly similar trade names which conduct similar business, the legal entity that was registered first has the right of priority, irrespective of which entity commenced its business activities first.
In accordance with the Russian Civil Code, a commercial designation is considered to be a separately protected class of I.P. Unlike a trade name, which identifies a legal entity, a commercial designation identifies an enterprise as an industrial unit.
A commercial designation is distinguished from a trade name in that it need not be identified in corporate documents or be officially registered. The commercial designation itself can be assigned to a third party only as a part of the transfer of the enterprise for which it provides individualization. However, the right to a commercial designation can be used commercially in transactions (e.g., it may be licensed or pledged), but with certain limitations.
The exclusive right to a commercial designation does not exist until it is used with reference to the particular enterprise. Therefore, in practice lawyers often find it almost impossible to apply commercial designation provisions to legal entities other than enterprise (property complex) owners. In most cases the Russian courts ask the legal entity trying to enforce its exclusive right to the commercial designation to provide an enterprise ownership certificate. If such a certificate cannot be produced in evidence, the court will generally refuse to accept the entity’s ownership of the commercial designation.
Accordingly, taking into the consideration these discrepancies in the definition and application of the provisions relating to commercial designations, at this stage protecting a designation in Russia is likely best done by using a trademark and/or as a part of a trade name. Otherwise, when referring to the exclusive right to a commercial designation, there is a significant risk that a company will not be able to prove its rights properly, and thus will be unable to protect them.
At present, amendments to the Russian Civil Code are underway. Therefore, it is expected (and hoped) that most outstanding I.P. related issues will be resolved through the amendments.
The table available here compares the features of trademarks, trade names and commercial designations.
When comparing the means of individualization or branding, it must also be considered how the rights for such means coexist on the market and how they correlate to each other when conflict occurs.
In such cases, two key principles apply:
- The principle of independent protection.
- The principle of the older right taking priority.
The principle of independent protection means that the trademark, trade name and commercial designation can coexist when they belong to either the same or different entities. A conflict of rights arises when the possibility of confusion occurs – that is, similarity of the designations plus similarity of goods and services provided under such designations leads to a likelihood of confusion regarding the entities manufacturing the goods or providing the services.
The principle of the older right taking priority means that in case of a conflict of rights, the right which was arisen first takes priority.
The ability to gain robust protection of intellectual property in Russia is one of the main questions that concern foreign investors. In this regard this is important to mention that the recent changes in the Russian I.P. legislation as well as positive developments in the latest court practices allow an optimistic conclusion that the Russian law will be able to provide reasonably effective tools for I.P. rights protection. The rights analyzed herein – trademarks, trade names and commercial designations – provide a means of individualization whose key role is to distinguish market players from each other. Knowing the differences between and features of such rights, the limitations and restrictions of their commercial use, as well as knowing the rules on when and how such rights can coexist on the market is vital when considering a strategy on using and protecting brands in Russia.