Riding on Coattails of Fair Business: Combating Brand Squatting in Russian Trademark Law Practice

Russian trademark practice evolves and adapts to modern realities, facing numerous challenges. One of such challenges in Russian practice has been so-called brand squatting.

Brand squatting is a form of bad-faith conduct by a trademark owner or applicant. In practice, the scenario is often the same: a “rights holder” appears with a trademark registration and offers a choice — stop using the designation, pay compensation, or take a license. In most cases, the squatter does not genuinely use the trademark. The registration is obtained primarily as a tool for claims and litigation.

The encouraging trend is that Russian courts are increasingly looking beyond the mere similarity of designations. They are also examining the rights holder’s conduct: why the trademark was registered, whether it is actually used, and whether the owner is simply trying to “commercialize” the registration. In its 2023 Ruling in case No. A11-417/2019, the Supreme Court made it clear that a trademark cannot be used as an instrument of abuse of rights or for gaining unjustified advantages.

The Court confirmed that trademark rights must not be acquired for the purpose of suing bona fide market participants and seeking compensation where there is no genuine economic interest and no real intention to use the mark for the individualization of goods.

That is why, in any dispute of this kind, the context matters. It is important to show whether the rights holder actually uses the trademark for specific goods or services, and whether the owner or the trademark is known to ordinary consumers.

For that reason, when a cease-and-desist letter or claim is received by bona fide market participant, businesses should not rush or accept the proposed terms immediately, even if the situation appears straightforward at first glance. The first step should be getting ready for the proceedings. The common response is to defend the infringement claim and show that there is no likelihood of confusion.

At the same time, Russian law has developed several legal tools for dealing with bad-faith rights holders.

First, it is important to gather evidence showing how the disputed designation had been used before the claim from bad-faith rights holder was received. The date when the actual use began, proof of broad recognition and continuity of use may also help to demonstrate bona fide conduct.

Second, it is crucial to show that the squatter is not using his own trademark as intended. In other words, the rights holder may have no legitimate economic interest in the registration at all. Additional support may come from the evidence of numerous trademark registrations or a significant amount of court proceedings initiated by that person or company.

Under Russian law, bad-faith registration of a trademark may be recognized as abuse of rights aimed at obtaining unjustified competitive advantages. In such circumstances, the rights holder may be denied protection of the rights.

Alongside with building the defense strategy against the infringement claim, one may also challenge the very basis of the squatter’s position by using other legal mechanisms, including:

• a complaint to the Federal Antimonopoly Service based on unfair competition resulting from acquisition and use of exclusive rights;
• a claim before the Intellectual Property Court seeking recognition that the trademark registration constitutes an act of unfair competition;
• a petition for early termination of trademark protection due to non-use.

A squatter generally comprehends the risk of a non-use cancellation and tries to avoid it by registering a similar trademark, effectively creating a new instrument of pressure. In these situations, it is especially important to secure the sequence of events and demonstrate the real purpose of the rights holder’s actions — not to build a brand, but to create obstacles for a competitor.

An example of how mechanisms to deal with bad-faith rights holders work are illustrated in combination of cases No. SIP-264/2023 and No. SIP-408/2023.

The dispute arose around the designation “Viktoria sanatorium” which had been used by the sanatorium for many years. The rights holder, who had inherited earlier trademarks, did not confirm their actual use for the relevant services. Consequently, in case No. SIP-264/2023, the Intellectual Property Court terminated their protection due to non-use.

The Court specifically emphasized that the absence of business activity and references to external circumstances do not justify the long-term non-use of the trademarks. Thus, the protection of the rights holder's (“senior”) trademarks was terminated due to non-use. Nevertheless, the squatter had refreshed his registrations preemptively and continued to pressure the bona fide participant of the market based on the “fresh” trademarks.

Therefore, the conflict did not end there. Before the actual loss of the “senior” marks, the rights holder had registered new similar designations for the same services and then sent the sanatorium a demand: cease use, pay compensation or enter into a license agreement.

It was precisely such sequence of actions that became key for the case No. SIP-408/2023 subject to the claim on recognition of the actions aimed at registering the trademarks as an act of unfair competition. The Court established that the defendant was aware of the sanatorium's long-term use of the designation, and the registration of the “fresh” marks was aimed not at bona fide business activity, but at gaining advantages, creating obstacles for a competitor and maintaining a tool for pressure after the protection of the earlier registrations had been terminated.

Considering all the circumstances of the case and the conduct of the rights holder, the claims to recognize the actions aimed at registering the new trademarks as an act of unfair competition were fully satisfied, despite the fact that the lawsuit was initially filed against the trademarks that did not formally fall under the three-year rule from the registration date.

Later, the bona fide market participant applied to the Chamber of Patent disputes with the court decision and eventually, upon consideration of the objections, legal protection of the “fresh” trademarks was also terminated.

In other words, the fact that a squatter has a fresh registration does not mean that termination of the legal protection of his trademark is unavailable before the expiry of the three-year period from the registration date.

This is precisely the practical value of such cases. They demonstrate that defending against a squatter is not limited to a dispute over likelihood of confusion or to passive defense against an infringement lawsuit. Russian law provides an offensive and consistent approach: to seek early termination of legal protection of unused trademarks, or to challenge the registration of new marks as an act of unfair competition. Collectively, such mechanisms make it possible not only to defend against the claims of a bad-faith rights holder but also to demolish the legal basis upon which those claims are built.

In practice, brand squatting tends to succeed where a business has no strategy. The key is not to make hasty decisions. One should defend his rights and interests actively — and Russian law provides increasingly effective tools for doing so.