How can franchisors protect their intellectual property (eg, trademarks and copyright)?
Trademark registration is an essential first element for every franchise transaction targeted at Russia. A trademark may not be granted for use within the scope of a franchise unless it is properly protected (ie, registered) in Russia. Therefore, a foreign trademark, mark-in-use or pending trademark application cannot be licensed by way of a franchise agreement.
Trademarks may be protected on a national or international basis. National marks must be filed and registered with the Federal Service for Intellectual Property (Rospatent). As Russia is a signatory to the Madrid Agreement and the Madrid Protocol, international trademark registrations, which designate Russia, are also protected.
The duration of the national trademark registration procedure is approximately one year. The examination procedure includes formal and substantive examination. In the course of substantive examination, Rospatent runs absolute and relative grounds tests to allow or refuse trademark registration.
Any words, pictures, three-dimensional configurations and other marks may be registered as trademarks. The registration of non-traditional marks (eg, sounds, colours and smells) is permitted.
To be registered, a mark must be new and distinctive. Distinctiveness may be inherent or acquired. A trademark can acquire distinctive character through intensive and actual use in commerce.
Generally, use of the mark need not be claimed before registration. Further, proof of use need not be submitted before the trademark application is filed. However, the owner must start using the trademark within three years of registration. If the mark is unused during any three-year period following trademark registration, any interested person may apply for cancellation of the trademark protection on the grounds of non-use.
Registered trademarks are listed on the Trademark Register and are valid for 10 years. Trademark registrations can be renewed for 10-year periods an unlimited number of times.
Often, franchisees will be granted access to certain business standards, operations manuals and proprietary software. As a result, copyright vested in such contracted works of authorship may be included along with trademarks in the content of the underlying franchise agreement.
Copyright subsists in scientific, literary and artistic works fixed in any tangible medium of expression, regardless of benefit, purpose or method of expression. To be copyrightable, a work of authorship must satisfy two fundamental criteria:
- it must represent a result of creative input; and
- it must be fixed in a tangible medium of expression (eg, on paper or a CD-ROM).
Generally, the following examples of works of authorship can obtain copyright protection in Russia:
- literary works;
- dramatic works;
- musical works;
- choreographic works and pantomimes;
- audio-visual works;
- sculptural, graphic and design works;
- photographic works;
- architectural works;
- pictorial works;
- computer programs; and
Essentially, copyright vests in a work of authorship from the moment of its creation. No registration or compliance with any other formalities is required to acquire, exercise, transact, franchise, protect or enforce copyright in Russia. However, a unique national system of registration is available for software. The software registration may give an irrebuttable presumption of copyright ownership and protection.
The standard duration of copyright protection, which applies to all works of authorship, is the lifetime of the author plus 70 years after her or his death.
Must IP licences be registered?
As with franchising, mandatory registration of IP licences involving the grant of use of registrable intellectual property (eg, patents, industrial designs, trademarks and service marks) is a legal requirement. Therefore, if the subject matter of the IP licence agreement is a trademark or patent, the licence will be subject to compulsory registration with Rospatent.
A registered IP licence (with respect to the registered intellectual property) is a condition for the validity and enforceability of the licence grant against third parties. Therefore, a non-registered IP licence (with respect to the registered intellectual property) will be invalid and unenforceable against third parties.
How can franchisors protect their know-how and trade secrets?
Many franchise agreements incorporate know-how licences as the transfer of proprietary and confidential information is often regarded as the most valuable intangible asset of every franchise business. Any piece of confidential information, including from the technical/scientific or professional/commercial side, may be protected as know-how.
Know-how is not subject to registration or deposit. Nevertheless, the owner of confidential information must undertake certain reasonable measures to maintain the confidentiality of the relevant data. If such measures are not implemented, know-how protection will not be afforded to the confidential information.
A proper legal way to acquire know-how protection is to set up a so-called ‘trade secrets regime’ as it is set out in Russian law. In brief, owners of confidential information must:
- properly identify and list the confidential information;
- limit access to the confidential information by establishing an appropriate procedure for dealings with the same;
- affix the notice ‘trade secret’ and the owner’s details to the medium in which the confidential information is stored; and
- follow up with the other required steps
If one of these steps is ignored or omitted by the owner of the confidential information, the trade secrets regime will not be considered as having been introduced. At the same time, there are other practical reasonable measures which can be undertaken for the purposes of achievement of know-how protection.
Know-how will be protected for as long as it is kept secret by its owner. When the confidentiality is lost, the exclusive rights lapse immediately.
What are the consequences of a franchisee’s breach of the franchisor’s IP, know-how or trade secret rights and what remedies are available to the franchisor in this regard?
Local IP enforcement is well developed and efficient in Russia:
- Enforcement court actions can be brought by respective IP owners and their registered (exclusive) licensees.
- Infringement of IP rights may primarily be prosecuted through administrative, civil or criminal proceedings depending on the nature of infringement and corresponding facts.
- A special quasi-judicial procedure based on unfair competition is available (eg, bad faith acquisition and use of IP rights, trade dress imitation).
- Cease and desist letters have become a mandatory pre-judicial remedy for companies that wish to sue infringers in court and claim damages or compensation.
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