Kait Sport LLC v. Kait Sport LLC (Case No. A40-53262/2012-19-370)
In a case decided in September 2013 (published October 29, 2013), the Supreme Arbitration Court of the Russian Federation (“Supreme Court” or “Court”) clarified the standard for deciding cases of non-use cancellation of a trademark. In this case, the plaintiff, an active company in the sports clothing and equipment business, sought to register KAIT-SPORT in Classes 25 and 35, to be used in connection with the manufacture and sale of sports clothing and equipment. To this end, the company had already entered into a number of agreements with -third parties, including lease agreements and other contracts relating to potential manufacture of the subject goods. The defendant, however, which had once been active and apparently well known in the same field but had become a shell company, still owned a registered trademark for KAIT-SPORT. The plaintiff brought an action to cancel this mark for non-use, but did not succeed either in the first instance commercial court (Moscow City Arbitration Court) or on the first two levels of appeal (Ninth Division Arbitration Court and Federal Arbitration Court (Moscow Division)). The lower courts based their decision on the grounds that (1) the goods of the respective parties were not similar, (2) the plaintiff was not an “interested party” for purposes of bringing the non-use action and (3) the plaintiff had not proven non-use by the defendant. The plaintiff then appealed to the Supreme Court, which reversed the decisions below.
In its ruling, the Supreme Court held that the lower courts had erred on all three grounds. First, the lower courts had held that the commercial steps taken by the plaintiff to establish its business in Russia did not establish that the goods and services of the two parties were similar. The court rejected this conclusion, finding that the goods and services of interest to both parties were obviously similar (manufacture of sports clothing and equipment). Second, in concluding that the plaintiff lacked standing to bring the non-use action, the lower courts failed to apply established law set out by the Presidium of the Supreme Arbitration Court in LLC Kazachie v. Rospatent (Case 14503/10, March 1, 2011) which clearly set the standard for “interested party” in this context, namely, that the plaintiff had a real intent to use the mark in the Russian Federation. Here, the plaintiff had filed an application for registration of the subject mark, had entered into business arrangements to use the mark and had a company name that was similar to the mark in dispute, thus meeting this standard. Finally, the court held that the lower courts incorrectly reversed the burden of proof of non-use of the mark, which should rest not on the plaintiff, but on the defendant. Here, the defendant failed to meet that burden, not only by submitting no evidence, but even by failing to appear before the courts in the matter.
In providing for non-use actions in Part IV of the Civil Code of the Russian Federation (which includes the trademark and other intellectual property laws) the Russian Duma was likely contemplating a useful tool for legitimate trademark owners to combat piracy on the register. Requiring plaintiffs to demonstrate “standing,” however, created what has become a difficult hurdle for legitimate owners of, especially internationally-known, marks to overcome in order to clear the register of piratical marks. This case, decided by the highest court in the Russian Federation, interestingly in a case involving two local litigants, seems to indicate that standing might now more easily be proved, for example, by filing an application (possibly even before it is rejected) and taking certain steps to effectuate a business plan.