Fair use of trademarks: establishing boundaries in Russia

A fair balance between the interests of society and right holders is the object of legal regulation in the sphere of intellectual property. From this viewpoint, legal regulation of issues relating to fair use of a third party’s trademark appears to be of great interest. The fair use of a third party’s trademark implies an authorisation (with certain conditions) to use a trademark belonging to another person for the goods it was registered for.

This problem has been traditionally regarded as ‘the task of tasks’ for law makers and courts because of its complexity, and the inherent contradictions in the legal phenomenon of unapproved use of trademarks. The legal problem has been thoroughly worked through in IP laws of different countries. Russian IP law and practice leave a lot of unsolved problems in this area.

Russian law on trademarks incorporated in Part IV of the Russian Civil Code does not regulate the issue, with two exceptions: the national principle of exhaustion and the regulation of collisions between company names, trade names and trademarks.

All other possibilities of use of third parties’ trademarks do not have any strict definition in Russian law and, consequently, should be regulated on the basis of judicial interpretation. For a long time there were no significant decisions in Russian courts concerning this problem; as a result, there was a legal vacuum in this respect in the country.

However, two important decisions on this matter have been issued recently by Russian courts (Case No. А40-109143/10-51-962 and Case No. А40-108056/10-19-956). In both cases, respondents used third party trademarks and referred to some circumstances justifying such a use. Now Russian courts have begun the process of interpreting the limits of the exclusive rights to trademarks and fair use of trademarks in descriptive and comparative terms.

In these two court decisions, trademark owners sought to prohibit the use of their registered trademarks for the goods they had been registered for, and the owners claimed damages for the infringement. In both cases, the respondents used designations which were identical to the registered trademarks and for the same goods they had been registered for. In one case, the trademark was used on the packages of goods; in the other, the trademark was used in advertising leaflets.

At a glance, these court decisions in similar situations contradict each other. In the first case concerning the trademark ‘Epson’, the courts established the fact of infringement, ruled to destroy the infringing packages of goods, and ruled compensation of one million rubles ($33,000). In the other case, concerning the trademark ‘Flukostat’, the court fully dismissed the claim.

“Trademark owners sought to prohibit the use of their registered trademarks for the goods they had been registered for, and the owners claimed damages for the infringement.”

However, a review of the court decisions and the essence of the disputes led us to the conclusion that the decisions conformed to the general principles of fair use applied internationally.

In the first case, the respondent, the Russian company Iks-Technology, used the trademark Epson on the cartridges compatible with some Epson printers, and the designation was printed in bold script on the face front of packages. Moreover, the designation Epson appeared in the consignment notes and invoices that explicitly served for identification of goods and not only for information about product compatibility.

The appellate court further stated: “The respondent’s reference to the fact that printing the word ‘Epson’ had a purely informative function to indicate the compatibility of the product sold by the respondent and the goods sold under the trademark ‘Epson’ is not substantiated, and is dismissed by the court of appellate instance since the word ‘Epson’ does not contain any technical information, and all printer models have specific designations of digits and letters.

Besides, applying ... the designation ‘Epson’ ... on the packages of goods sold by the respondent may form the consumer’s opinion that the goods are produced with the approval and under the control of the claimant and the owner of the trademark ‘Epson’.”

In the second case, the respondent, Pfizer International LLC, used the designation ‘Flukostat’ (the claimant’s registered trademark) in advertising leaflets of its pharmaceutical preparation Diflukan. On the reverse side of the leaflets, the respondent placed a table where the Diflukan preparation was compared to analogous preparations of other producers, including Flukostat.

The dismissal of the claim by the courts of first instance and appellate instance was motivated as follows: “The court was guided by the fact that the designation ‘Flukostat’ in the advertising leaflet was not intended to identify the respondent’s goods and did not identify them, which made impossible the confusion of the goods’ producers by the consumers in this case.”

The court of the appellate instance additionally noted that: “[the claim that] the respondent used in his/her advertisement a designation that was not confusingly similar to, but identical with, the claimant’s trademark, is rejected by the court since the claimant’s trademark was not used for the designation of the respondent’s goods.”

We believe that despite some subtleties and imperfections in the decisions’ wording, the relevant court decisions give some certainty to the fair use problem in Russia. In the first case, the respondent used a third person’s trademark for illegal identification of goods. In the second case, the respondent took no such action, and the boundary between fair and illegal use was not crossed.

Unfortunately, in both cases the courts abstained from evaluating the respondents’ actions from the viewpoint of fair practices and abuse of rights. We presume that the opinion of the courts on lawfulness and fairness of the comparison of one’s own goods with the goods of a competitor would make a significant contribution to the development of trademark law in Russia.

In conclusion, a solution to the complicated legal problem of fair use of trademarks is gradually taking shape in Russia due to judicial interpretations. At the end of February, the Supreme Arbitrazh Court refused to reconsider the decision concerning the Flukostat case, and so it finally confirmed the correctness of such an approach.