Brands will limit the amount of compensation

The Ministry of Education and Science has presented a bill designed to resolve the situation with the “serial” collection of compensation for the same violation of the rights of trademark holders. In pursuance of the decision of the Constitutional Court, it is proposed to include in the Civil Code (CC) the ability of courts to reduce the amount of such compensation in the event that the violator has already paid it in a similar case, or to completely refuse recovery in the case of affiliation of copyright holders. As lawyers explain, the amendments are designed to stop abuses by copyright holders who divide trademarks into affiliated companies and split the claim into several claims.

The Ministry of Education and Science has prepared draft amendments to the Civil Code regarding liability for violation of exclusive rights to a trademark. Now the copyright holder, at his choice, can demand from the violator either compensation for losses or material compensation, in particular in the amount of twice the cost of the goods on which the trademark was illegally placed.

In practice, situations arise when similar trademarks are registered to different copyright holders – and each of them demands compensation from the violator. This required clarification from the Constitutional Court (CC), which in December 2023 declared the provisions of the Civil Code unconstitutional in the part that does not allow reducing the amount of compensation in the amount of double the cost of counterfeit goods, when one action violated the rights to several objects of exclusive rights at once. The submission of several claims for compensation in itself is not an abuse, the Constitutional Court explained, but the courts must also take into account the good faith of the rights holders demanding compensation and their interdependence.

The draft law prepared in pursuance of this decision proposes to establish in the Civil Code the possibility of a court reducing the amount of compensation based on the application of the defendant if he has already compensated twice the cost of counterfeit goods at the claim of another copyright holder for whom a confusingly similar trademark is registered. It also provides for the right of the court to refuse compensation if there is a connection between the copyright holder who filed the claim and the one who has already received compensation, but there are no “reasonable economic grounds” for granting consent to register confusingly similar trademarks, except “for the purpose of using such rights solely as a means of enrichment.” At the same time, the refusal to pay compensation does not exclude the recovery of damages from the violator for each copyright holder.

As Sergei Zuikov, patent attorney and managing partner of Zuikov and Partners, notes, the changes are designed to stop abuses by unscrupulous copyright holders: in practice, there are quite a lot of situations where the copyright holder “splits” a claim into several claims, or divides trademarks into several affiliated companies. According to Yuri Yakhin, senior lawyer at the intellectual property practice of the law firm Melling, Voitishkin and Partners, such cases can be caused by various circumstances: from “pure abuse” to situations where “for some reason the first court decision cannot be executed, or the affiliation is not It’s that close, and companies have to protect their trademarks on their own.”

Denis Volkov, senior lawyer in the intellectual property and technology practice at BGP Litigation, considers a new approach logical: liability in such cases should be related to the fact of violation and the number of violations, and not to the number of persons legally using the trademark. But, he adds, it is important that in practice a balance of interests is maintained, for this it is necessary to take into account all significant circumstances, including the nature of the violation and its consequences for the copyright holder, the degree of affiliation of the copyright holders. Senior lawyer at the Regionservice Bar Association, Ksenia Kasyanenko, adds that the amendments may be relevant in light of the current bill on allocating a share in the exclusive right to the results of intellectual activity (adopted in the first reading, see Kommersant on November 9, 2023).

Evgenia Kryuchkova