IP Court provides guidance on use of trademark under rights holder's supervision

In LLC Watergroup v Budweiser Budvar, National Corporation (Case No SIP-140/2014, full judgment published on December 26 2014), the Russian IP Court has considered yet another dispute concerning the early termination of the protection of a trademark due to non-use. 

LLC Watergroup, a Russia-based company, filed suit against Budweiser Budvar, National Corporation, a Czech-based company best known for manufacturing beer, seeking to terminate the protection of Budvar's international trademark BUDWEISER (Registration No 238203), which is registered in respect of goods in Class 32 of the Nice Classification and designates the Russian Federation, due to non-use.

According to Article 1486(1) of the Civil Code of the Russian Federation, the protection of a registered trademark can be terminated if the rights holder has not used the trademark within a three-year period. In such a case, an interested person may request the early termination of the protection of the trademark and, in court, the rights holder has the burden of proving that it has used the trademark directly or that an authorised person has used it under the supervision of the rights holder.

Watergroup argued that it qualified as an interested person, which was evidenced by the fact that it imported goods bearing the designation 'Budweiser' into the territory of the Russian Federation, albeit without official authorisation from Budvar, and that the protection of the disputed trademark prevented Watergroup from importing its goods. The court agreed with Watergroup on this point.

Watergroup also claimed that Budvar did not use the disputed trademark in Russia. In particular, it argued that Budvar:

• did not manufacture beer in Russia;

• did not import beer bearing the disputed trademark into the territory of the Russian Federation;

• did not put the goods into circulation in Russia; and

• had not executed a licence agreement with an authorised person which would put the goods into circulation in Russia under the supervision of Budvar.

The court dismissed the claim in full based on the evidence of use of the trademark by an authorised entity under the supervision of Budvar.

Budvar had appointed a Russia-based closed joint stock company, the Moscow Brewing Company, as an authorised distributor of goods bearing the disputed trademark pursuant to a distribution agreement executed by and between Budvar and the Moscow Brewing Company. Pursuant to this agreement, Budvar had regularly supplied beer to the Moscow Brewing Company within the last three years, which was evidenced by a number of invoices; the Moscow Brewing Company then resold the beer in Russia to large retail chains, such as Billa, Sellgros, Telezhka and Bahetle.

Budvar also presented to the court sample of goods (a glass bottle and two beer cans) which bore the disputed trademark and indicated the manufacturer (Budvar) and the importer (the Moscow Brewing Company) of the beer.

In interpreting the meaning of the phrase “use of trademark by an authorised person under the supervision of the rights holder”, the court emphasised that, in cases involving the manufacturing of goods, this would mean supervising the quality, volume and resale of the goods, while in cases of involving the importation and resale of goods, there was no need to prove such supervision; it would be sufficient to provide, for example, an application to the Russian customs authorities to register a trademark in the Customs Register of Intellectual Property indicating the rights holder and the authorised importer. Budvar provided evidence that the disputed trademark was registered in the Customs Register on May 27 2011, with Budvar as the rights holder and the Moscow Brewing Company as the authorised importer (Letter No 14-42/24940 of the Federal Customs Service of the Russian Federation dated May 27 2011).

The court concluded that the evidence presented by Budvar disproved the arguments of Watergroup.

Sergey Treshchev and Alexey Pashinskiy, Squire Patton Boggs Moscow LLC, Moscow