Russian Supreme Court clarifications assist courts in intellectual property rulings

In "Resolution No. 10 “On Applying Part Four of the Russian Civil Code”* the Plenum of the Russian Supreme Court clarifies the procedure for applying Russian civil law to intellectual property to ensure consistent resolution of IP related disputes in court. These clarifications can also help businesses structure their civil law relationships and understand the prospects and methods of protecting intellectual property rights.

Clarifications are traditionally based on specific court cases. Although the Resolution did not carry the status of a statutory regulation, its provisions are often crucial for the courts when taking a decision on a particular issue, and the courts are already relying on the Resolution when resolving disputes.

In our opinion, some of the clarifications in this Resolution are of particular importance for the protection of intellectual property.

Jurisdiction over disputes on the means of individualisation

In recent years, there was no clarity about the jurisdiction of disputes over the means of individualisation, such as domain name disputes. As a result, commercial courts often dismissed claims against individuals for lack of jurisdiction.

This situation compelled rightholders to resort to other methods of dispute resolution available within the commercial court system, which was known for having a greater expertise in intellectual property disputes than the courts of general jurisdiction.

The Plenum ultimately clarified that disputes regarding means of individualisation, including domain name disputes, are to be reviewed by commercial courts, irrespective of those involved in the dispute.

Restrictions on assignment of exclusive rights

The Plenum clarified that the assignment of exclusive intellectual property rights cannot be conditional upon any restrictions, such as in relation to territory, term or methods of use.

Otherwise, the agreement must be reclassified into a licence agreement if possible, or recognised as being void.

Failure to use intellectual property under a licence agreement

The licence fee must be paid to the licensor regardless of whether or not the licensee uses the intellectual property. If the licence fee is fixed, the licensee must pay the fixed amount.

If the licence fee is calculated based on the licensee’s income, revenue or another performance indicator, and the licensee fails to use the licensed intellectual property, the licensor could claim compensation for any resulting losses, which would be determined based on an arm’s length fee, and then terminate the agreement.

Liability for using intellectual property beyond the scope of the licence agreement

If the licensee uses intellectual property beyond the licence agreement, the licensor may claim losses or compensation for infringement of intellectual property rights and could include a relevant penalty clause in the agreement.

This clause may provide for the following types of penalties:

• offset penalty, where the defaulting party pays losses or compensation to the extent not coved by the penalty;
• liquidated penalty, where the defaulting party pays only the pre-agreed amount of the penalty;
• alternative penalty, where the defaulting party pays either a penalty or losses/compensation; or
• punitive penalty, where the defaulting party pays losses/compensation and a penalty.

In this way, the rightholders may provide for additional remedies in licence agreements to protect their rights from any wrongful acts of the licensees.

Rightholder’s instructions in connection with the use of intellectual property

If the rightholder gives another person any instructions or assignments in connection with the use of intellectual property (e.g. to perform on-order production, transportation or storage of goods bearing its trademarks) this use requires no separate licence agreement, and constitutes the exercise of exclusive rights by the rightholder.

With this clarification, it will no longer be required to enter into additional licence agreements or include licence clauses in other agreements, such as production agreements or supply contracts, which was necessary in practice to prevent claims regarding unauthorised use of intellectual property.

Contracts for future intellectual property

The Resolution allows for agreements to be entered into, including agreements for the disposal of an exclusive right, licence agreements and pledge agreements for intellectual property to be created in the future.

To this end, the relevant agreement must provide a detailed description of the future intellectual property so that it can be unequivocally identified when created in the future.

Evidence in intellectual property cases

The Plenum made the rule of proof less stringent, moving away from unnecessary formalities that were frequently required by the courts. As a result, printouts and screenshots of web pages that were submitted by a party to a dispute are recognised as admissible evidence. As notarial certification of web pages is no longer required, it becomes more time and cost efficient for the parties to prepare for and participate in court proceedings.

Moreover, the Resolution allows for the use of photo and video recordings as evidence of infringement (e.g. recordings proving the sale of counterfeit products) without the involvement of a notary.

Abstract claims to preclude actions

The Plenum has consolidated the Intellectual Property Court’s practice of recent years that disallow general and abstract prohibitions on actions that infringe exclusive intellectual property rights, such as the prohibition to sell counterfeit products in the future or the prohibition to post information on the Internet that infringes on exclusive rights.

As a result, protection by precluding certain actions is permissible only in relation to incomplete infringements or if a threat of infringement is proven.

Works, inventions, utility models and industrial designs for hire

When considering a dispute over whether a work, invention, utility model or industrial design was made for hire, the courts should examine the content of an employee’s job duties. The employer has the exclusive right to a work if it is created as part of an employee’s job duties. The burden of proof lies with the employer.

The fact that the employer’s technical and other resources were used in the creation of intellectual property does not mean that the relevant intellectual property is employment-related.

Previously, the courts had no uniform position as to whether the fee for an employment-related work can be paid under an employment contract. For instance, the courts often indicated that a civil-law contract was required to pay the fee. The Plenum has clarified that such a fee may be provided for in both an employment contract and a civil-law contract.

As a result, it may be advisable for employers, when hiring and signing employment contracts, to regulate their relations regarding the creation of employment-related intellectual property objects (including the amount of fees) with employees whose activities involve the creation of works.

Termination of trademark protection due to non-use

The Plenum has specified the conditions under which the holder of a trademark is to prove its use in the event of a non-use cancellation claim. The rightholder must prove the real, non-sham use of the trademark in relation to each product and service specified in the statement of claim. In general, the homogeneity criterion does not apply. In the case of a widely known trademark for a particular product, however, the legal protection remains valid with respect to homogeneous products.

As a result of this clarification, it will be easier for holders of well-known trademarks to prove their use in relation to the products and/or services indicated in the trademark registration.

Use of trademarks in contextual advertising

Where an advertiser uses trademarks as keywords when placing advertisements on the Internet, including search engines, such actions can be recognised as an act of unfair competition.

The Plenum, however, did not clarify whether such actions can be recognised as trademark infringement. There have been cases in court practice where such actions were recognised as an infringement, but this practice is not well established.

Comment

The new Resolution of the Plenum consolidates positive trends in law enforcement practice related to intellectual property, increases legal certainty and generally reflects the heightened interest of both the state and public in the development and proper protection of intellectual property.

If you have any questions on this eAlert, do not hesitate to contact CMS Russia experts Anton Bankovskiy and Vladislav Eltovskiy or your regular contact at CMS Russia.

* In Russian