How to determine compensation for using someone else’s brand if goods with its image are made to order
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Using the example of the Vsemayki marketplace case, which offered for sale products with the famous logo of the automaker GAZ, the Supreme Court of the Russian Federation (SC) explained how to calculate compensation for the use of someone else’s brand if goods with its image are produced to order. The Supreme Court indicated that it is impossible to recover compensation based on all theoretically possible goods to be manufactured; it is necessary to take into account the actually produced counterfeit products. Lawyers say that the clarifications of the Supreme Court will be useful for disputes with aggregators and marketplaces. At the same time, experts warn that it will not be easy for copyright holders to obtain reliable information about the actual quantity of products bearing their brand and they should carefully consider options for calculating compensation.
The Supreme Court considered a dispute about compensation for the illegal use of someone else’s logo by an online platform offering to produce goods with the image of this brand. Cases on compensation for violation of intellectual property rights have previously been considered at the highest court level, but in this dispute, for the first time, the issue concerns the liability of an online store that manufactures goods to order.
Counterfeit sample
PJSC GAZ discovered that the online store vsemayki.ru offered for sale goods with the illegal use of its “Running Deer/GAZ” logo. The copyright holder filed a lawsuit against individual entrepreneur Vasily Levchenko and Vsemarket LLC (administers the online store) for the recovery of 3.2 million rubles. compensation for violation of his trademark rights. The amount is defined as twice the cost of 109 types of products with the logo offered on the site, including clothing, dishes, toys and stationery.
The individual entrepreneur stated in court that he did not upload the controversial design with the GAZ logo to the website, but only produced the goods ordered to him, and therefore is not responsible for someone else’s brand. The Vsemayki website, according to him, is a “unique marketplace” that allows users to choose a product model and image on it and distributes orders between manufacturers. Mr. Levchenko presented his calculation of compensation based on the number of orders and units of production he processed: the double cost of goods sold amounted to 16.2 thousand rubles.
Vsemarket, in turn, indicated that it was only an “information intermediary”; it did not sell the goods itself and was not responsible for the choice of image by the customer. The company also disputed the calculation of compensation. The third party involved in the case was a designer who reported that he had uploaded an article depicting the GAZ logo to the site, receiving 500 rubles. for the layout, “not knowing that these actions violate someone’s rights.”
The arbitration courts fully satisfied the claim. The courts found that the owner of the domain www.vsemayki.ru is IP Elena Levchenko, who transferred “full administration of the site” to Vsemarket, on which designers can upload layouts, and users can place images on selected products.
Vsemarket itself provides services for advertising, introducing created products into circulation, settlements with customers, sorting and storing manufactured goods, receiving remuneration for this.
Thus, the company operates as an online store, and the condition of the user agreement regarding the responsibility of the customer himself for the use of his chosen image on the product “does not relieve it of responsibility” for violating someone else’s exclusive rights, the decisions say. The plaintiff’s calculation of compensation was found to be correct.
The marketplace appealed the calculation of compensation to the Supreme Court, believing that the amount should be determined based on the number of “actually existing (produced and sold) counterfeit goods.” The courts proceeded from the assumption that the defendant “has one copy of each type of product” with the plaintiff’s brand. But the website contains “only a catalog of designs that can be selected, and not a catalog of already produced goods,” and images on products “are printed only after placing an order,” Vsemarket insisted. The case was transferred to the Economic Collegium of the Supreme Court, which overturned the court decisions.
According to Art. 1515 of the Civil Code of the Russian Federation (Civil Code), the copyright holder can demand compensation in the amount of twice the cost of goods with his brand, the Supreme Court noted, this “makes it possible to recover from the violator double the income that he received or intended to receive from the sale of counterfeit goods.”
But for this, the plaintiff must provide a calculation and justification for the amount, including “documents confirming the number of copies (of goods) and their price.”
GAZ included in the calculation all the names, models, sizes, color options of the goods offered on the site, confirming this with a screenshot of the catalog pages. But the courts did not take into account the arguments that the goods posted on the website “are manufactured to order and do not really exist, so identifying them as counterfeit is impossible,” the Supreme Court pointed out. To establish the actual quantity of goods produced with the GAZ brand and their prices, the case was sent for a new consideration.
Without goods is not considered
“Nowadays, a significant segment of sales has moved to the online environment, so requests from copyright holders to aggregators and marketplaces, which, as a rule, act as information intermediaries, are very common,” emphasizes Maria Pershonkova, senior lawyer at the Kosenkov and Suvorov law firm. But in the practice of the Supreme Court, such an issue is being considered for the first time, notes Maxim Volkov, deputy head of the Patentus dispute resolution practice.
There is no uniform approach of courts to such disputes. Thus, GAZ previously sued Yandex Market and Wildberries for compensation with varying degrees of success, says Ms. Pershonkova. Lawyer at the IP Versus.legal practice, Yuri Petrushevsky, says that the courts more often satisfy claims against Vsemayki, but there are refusals to collect compensation from other sites where prints with the logo were also offered for application.
At the same time, the opinions of lawyers about the position of the Supreme Court differ. Maria Pershonkova agrees that “compensation in the amount of twice the cost of a counterfeit cannot be arbitrary and must be documented,” adding that goods that have not yet been sold can also be taken into account, but “they must exist in reality.” However, Maxim Ali, a partner in Comply’s intellectual property practice, believes that even offering products for sale on the site should be punishable: “It is not clear why a trademark violator should not be held accountable for displaying a wide range of products under someone else’s brand.”
At the same time, Yuri Petrushevsky believes, VseMarket’s argument can be adopted by other online stores, which “will refer to the absence of goods in reality before ordering them on the site,” which will make it difficult for copyright holders to prove such compensation.
In the future, according to Mr. Ali, “the position of the Supreme Court may make it difficult for copyright holders to prove: the plaintiffs really do not have information about the volume of goods, and in disputes with multi-brand stores it is extremely difficult to isolate revenue from a specific type of product.”
By the same logic, violators can claim that the information on the website about the quantity of goods sold or remaining is incorrect, adds Maxim Volkov. To verify the accuracy of the information, the plaintiff can request through the court accounting documents on the purchase, availability and movement of goods, as well as sales book data from the Federal Tax Service, Ms. Pershonkova clarifies.
What do copyright holders have?
In any case, according to lawyers, copyright holders now need to more thoughtfully choose the option for calculating compensation. It is preferable to collect double the cost of counterfeit goods when it is possible to reliably know the quantity of products sold, says Mr. Petrushevsky. For example, Mr. Volkov clarifies, if information can be obtained from public registers – EGAIS for alcohol and “Mercury” for products of animal origin. If the goods are not in the system, then “it is better for copyright holders to make a test purchase of counterfeit goods before going to court in order to have irrefutable evidence of the use of the brand,” advises Yuri Petrushevsky. In addition, it is possible to confirm quantity data if counterfeit goods are detected during the detention of a consignment of imported goods by customs, adds Vasily Zuev, head of the intellectual property practice of the Intellectual Capital law firm.
In other cases, it is better to choose another calculation method. You can demand from the violator double the cost of the right to use the brand under a license, says Mr. Petrushevsky, or compensation in a fixed amount (according to the Civil Code from 10 thousand rubles to 5 million rubles), but in the latter case the court “will most likely reduce the amount of payment “
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