Competition Rules targeting Trade Mark Frauds strengthened in Russia

The Law on Competition and Restricting Monopolistic Activities in Markets of Goods of 22.03.1991 was modified on 09.10.2002 introducing some important clauses dealing with trademarks in Russia.

It is proclaimed in Article 12 of the Law that it determines organizational and legal grounds for preventing and suppressing monopolistic activities and unfair competition in markets of goods.

According to para 2 Article 2 the Law does not pertain to relations connected with objects of intellectual rights, with the exception of the cases, where agreements providing for their use are aimed at restricting competition, or if the acquirement, use and violation of exclusive rights to objects of intellectual property may result in unfair competition.

Unfair competition is defined in Article 4 as any acts by those engaged in business aimed at acquiring privileges in entrepreneurial activity, which contradict valid legislation, business customs, requirements of honesty, reasonableness and justice and may cause or have caused damage to other competing persons engaged in business or may inflict detriment to their good will.

Among forms of unfair competition expressly prohibited by the said Law Article 10 cites

-sale, exchange or otherwise putting in circulation of goods illegally using results of intellectual activity and means of individualization of persons, products or services equated with results of intellectual activity

-unfair competition connected with acquiring and using exclusive rights to means of individualization of persons, products or services.

A decision by an Anti-monopoly authority in respect of violations of the above provisions regarding individualization of products or services must be forwarded to the Federal Executive Authority in charge of patents and trademarks, which must decide on premature ceasing of the validity of the registration of the object of exclusive rights or on the cancellation of the registration of this object according to the procedure provided for in the law on trademarks, service marks and appellations of origin.

This provision of the Law is motivated to our mind by the practice of registration of trademarks belonging to foreign companies by a company in Russia in its own name with a subsequent offer to that foreign company to buy it back. This practice is illustrated by a Court case dating back to 1998 of Accorus Ltd versus Vatro Closed Joint Stock Company. An American company was delivering goods in Russia through the Vatro Company without registering its trademark METRINCH in Russia. This trademark was instead registered by Accorus Ltd and used according to the Court's statement in order to obtain money for permitting the importation of the goods, bearing this trademark, into Russia. The court found that the Trade Mark owner’s rights were in this case abused and rejected the case. Though this decision by the Court seemed not to be well-founded on the Law which was in force at that time, it was nevertheless significant insofar as it showed the trend towards establishing the notion of bad faith in the Trade Mark Legislation.

The notion of acting in bad faith seems therefore to have established itself in the new legislation recently introduced, which opens the way for still further cases of resisting attempts at extortion in the future.