Compensation for the unlawful use of trademarks was awarded to companies that have exited the Russian market.

It is prohibited to trade in counterfeits

Inmar Legal Ltd is examining a case in which compensation for the unlawful use of trademarks was awarded to companies that have formally exited the Russian market.

In November 2023, the Arbitration Court of Primorsky Krai heard a claim filed by Chanel SARL and Christian Dior Couture S.A. against individual entrepreneur Trofimova for compensation due to the unlawful use of trademarks in the amount of 255,999 rubles. The defendant contested the claim, arguing the absence of evidence regarding the sale of the goods and the lack of facts demonstrating the use of products bearing designations confusingly similar to the trademarks of the plaintiffs.

During an inspection by the Ministry of Internal Affairs of Russia in Arsenievsky, district illegal use of the trademarks Chanel, Dior, Gucci, and D&G was discovered at the “Bazaar” store owned by Trofimova. The storefront featured counterfeit goods that bore clear indications of original brand identification. No agreements with the trademark holders were provided.

In support of the claimed amount of compensation, the plaintiffs stated that as a result of the defendant’s actions, end consumers in the Russian Federation were misled and compelled to purchase counterfeit products of inferior quality, believing they were acquiring authentic goods. These circumstances caused reputational damage to the plaintiffs, as well as a loss of clients aligned with the brand.

The court ruled in favor of compensation in the amounts of 60,000 rubles and 20,000 rubles for the infringement of exclusive rights to the trademarks Chanel and Dior, respectively. The Arbitration Court of Primorsky Krai took into account the explanations provided by the Supreme Court of the Russian Federation on February 7, 2023, in case No. A63-6499/2021 concerning the calculation of lost profits due to the sale of counterfeit goods.

Position of the Supreme Court on Unlawful Use of Trademarks

Previously, the Supreme Court of the Russian Federation annulled the decisions of lower courts in case No. A63-6499/2021, emphasizing that the court must establish the amount of lost income, bearing in mind that this amount will not directly correlate with the number of counterfeits sold. Thus, it should not be calculated by multiplying the price of the original goods by the amount of counterfeit goods sold. A mere formal argument that one unit of counterfeit goods displaces one original product from the market is insufficient. Losses must be substantiated in more detail, considering the actual market conditions for selling goods.

It is important to note that the court’s decision is based on existing international treaties, including the Madrid Agreement and the Madrid Protocol, which provide legal protection for trademarks on the territory of Russia.

Ms Kristina Cheremisina, Junior associate of Inmar Legal Ltd commented on the situation from a legal perspective: “I advise entrepreneurs to heed the court’s decision and refrain from selling counterfeit goods. This not only prevents potential legal consequences in the form of fines and compensations but also fosters the maintenance of business reputation and strengthens client trust. Instead, focus on compliance with intellectual property legislation, which will ensure the stability of your entrepreneurial activity in the long term.”