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Thursday, November 23, 2006

The Fight Against Brand Squatting

By Roman Golovatsky

The opportunities available to the owners of exclusive rights are a constant source of temptation, not least for those seeking an unfair advantage over the competition.It seems that one of the most problematic is the issue of trademark protection. The aforementioned persons would register someone else's, perhaps renowned, trademark in their name, using different sorts of gimmicks to take advantage of oversights committed by the trademark's actual owner.

These problems exist in almost every country alert to the issues of intellectual property protection. The international practice refers to this phenomenon as brand squatting. Exclusive rights give notable advantages in entrepreneurial activity, being the basis of economic policy, allowing the holder to dictate certain conditions to the market. This is why brand squatting is so rife in our country.

By occupying the intellectual property of others, brand squatters often pursue different objectives. In some cases, such activity is performed to eliminate competition from the market or to significantly decrease its market share. In other instances, a trademark is registered with the purpose of its subsequent resale to the actual owner or to the party offering the greater reward.

In Russia, squatting manifested itself mainly in relation to foreign companies, although Russian companies are often targeted as well. The reasons for this vary. One of the main reasons is that foreign companies entering the Russian market do not take adequate measures to protect their means of individualization, their intellectual property.

Thus, according to press sources, a number of famous brands such as IKEA, FORBES, FUNAI, AKAI and many others have been registered in our country without their actual owners knowing anything about it. The registration may be made in the name of Russian companies or foreign companies specially registered for these purposes.

Quite often a foreign company does not plan initially to enter the Russian market directly. Therefore, company products are delivered to Russia in small shipments through intermediaries. When company analysts realize just how attractive the Russian market is, the company's trademarks turn out to be registered in the name of one of its suppliers. Usually this is done to control the shipments of products to Russia and keep the competition away from similar activities.

This illustrates just how pressing this problem is. Russian legislation provides quite a variety of protective measures against squatters.

A common method not related to contesting the registration of a trademark is the filing of an application by an interested party with the Chamber for patent disputes, Rospatent, for an early termination of the protection of a trademark due to its non-use. Granting the exclusive right to a trademark, the state is at the same time interested in it being actively used in commercial transactions, contributing to the development of the economy. This is why, in order to make sure that registered trademarks do not "collect dust," thus blocking its use of third parties, the state, as well as granting exclusive rights also establishes corresponding responsibilities. One of them is the responsibility to use a trademark. The failure to fulfill such responsibilities causes unfavorable consequences in the form of termination of protection of a non-used trademark.

Another method of fighting squatting is to contest the registration of trademarks made in the name of squatters.

In accordance with Article 28 of the Law on trademarks, the granting of protection to a trademark may be contested or deemed invalid in the event where the trademark has been registered in violation of Articles 6, 7 of this law. Therewith, the handling of this category of cases is laid upon the Chamber for patent disputes, which initiates proceedings based on a duly filed objection to the granting of protection to a trademark.

Item 3 Article 6 of the Law on trademarks prohibits registration of trademarks representing or containing elements which are false or may mislead the consumer as regards the product or its manufacturer.

A rather common case of squatting is the registration of a trademark, reproducing the trade name of a successful commercial firm. According to Article 138 of the Civil Code of the Russian Federation, a trade name and a trademark are "equal" means of individualization. Protection of trade names is no less significant for the development of competition than protection of trademarks, since they too contribute to recognition of a commercial entity in commercial transactions and are an integral part of its status.

In accordance with item 3 Article 7 of the Law on trademarks, a mark identical to a trade name (or its part) protected in the Russian Federation in relation to homogenous goods may not be registered as a trademark, if the right to the trade name arose prior to the priority date of the trademark being registered.

Talking about squatting in the context of competition issues, one should also note the protection granted on the basis of antimonopoly legislation. The majority of squatting cases are related to bad faith competition among commercial entities, this is why the procedures stipulated by antimonopoly legislation may turn out to be the last chance for the actual owner to recover their rights on intellectual property.

The antimonopoly legislation prohibits any actions related to acquiring or using exclusive rights for the means of individualization of a legal entity, its products, works or services aimed at unfair competition.

Issues related to the violation of antimonopoly legislation are handled by the federal antimonopoly authority, whose functions are currently performed by the Federal antimonopoly service of the Russian Federation, acting through its territorial subdivisions. Having established bad faith competition as fact, the antimonopoly authorities forward their decision to Rospatent to terminate, early, the registration of the given object of exclusive rights or to recognize its registration as invalid, in accordance with the procedure established by the trademark law.

Therewith, according to sub-item 4 item 1 Article 28 of the Law on trademarks, protection of a trademark may be contested and recognized as invalid in full or in part during the whole term of protection, if the actions of a rightholder related to trademark registration have been duly recognized as an act of bad faith competition.

In the event of a squatter filing a suit, the actual owner of a trademark or a person, to whom the bad faith demands were addressed may base their defense on Article 10 of the Civil Code of the Russian Federation. This article prohibits any actions by individuals or legal entities performed with the sole purpose of bringing damage to others, nor does it allow the use of civil rights for the purpose of limiting competition.

Summarizing the above, we may conclude that Russian legislation provides diverse protective measures against squatting, different in their implementation but having the same objective — not to allow the obtainment of exclusive rights to a trademark by an unrelated person or entity. An effective defense against squatting resulting in minimal losses for the actual rightholder is only possible with clear strategic planning, choosing legal instruments for the recovery of occupied intellectual property depending on the given case.Roman Golovatsky is an Associate at DLA Piper in St. Petersburg.

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