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Clarifications on resolution of non-use disputes against bankrupt trademark holders


 
On March 21, 2018, the Russian Supreme Court published its Decision in case No. A55 5711/2014, which may have a dramatic impact on resolution of trademark non-use disputes.
 
Under the merits of the case, Heineken filed a non-use claim against Samarskiy Vodochnyi Zavod based on its failure to use the trademark Volzhskaya Okhota for 3 consecutive years.
 
Initially, the claim was addressed to the IP Court, which usually acts as a first instance court for non-use claims. Later, the case as an exception was transferred to the Commercial Court of Samara Region to be decided within the framework of a bankruptcy case initiated a few years ago against the Respondent. The change of venue was reasoned by the presumption that termination of the trademark may reduce the amount of bankruptcy assets thus negatively affecting the creditors’ rights (following another precedent IP Court’s Decision in case No. SIP-360/2016, dated November 23, 2016).
 
When considering the case on merits, the inferior bankruptcy courts of the first and appeal instances denied the non-use claim. They classified the winding up procedure against the Respondent and subsequent termination of its commercial activity as an independent circumstance preventing to use a trademark (art. 1486, Civil Code). In fact, the courts exempted the Respondent from the obligation to use the trademark based on its bankrupt status.
 
Such a favorable approach to a bankrupt company was even further favored by the Supreme Court.
 
On the one hand, the Supreme Court refused to classify a bankrupt status as an exemption.
 
However, on the other hand, the Supreme Court noted that such non-use disputes have a unique nature: the Claimant’s attempt to terminate the trademark is likely to harm the Respondent’s creditors (rather than the Respondent itself), as termination of the trademark will inevitably result in a decrease of bankruptcy assets.
 
Therefore, a non-use claim should not be admissible unless the trademark is sold or attempted to be sold at a bankruptcy tender under a specific bankruptcy mechanism.
 
Along with the recent changes to a pre-trial procedure for IP disputes, before filing a non-use claim in Russia we recommend to carefully analyze the following aspects:
 
1. check the current status of the trademark holder and assess the risks of insolvency for the next 6-12 months
2. in case of low risks, arrange a pre-trial settlement (send a letter of intent to the trademark holder) or file a lawsuit to the IP Court (if the letter is rejected or ignored for 2 months)
3. in case of high risks, prepare for a bankruptcy tender or file a lawsuit to the IP Court afterwards
 
Such tactics will allow your client to save extra efforts to be brought in case your opponent suddenly goes bankrupt.
 


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