Know your exploitation rights: how to make and enforce a Russian trademark licence

This article first appeared in World Trademark Review issue 73, published by Globe Business Media Group – IP Division. To view the issue in full, please go to www.WorldTrademarkReview.com

In Russia, licensing is regarded as a crucial form of contractual IP disposal. In fact, a licence confers a rights holder’s valid permission for an authorised person to use its intellectual property, subject to particular terms and conditions.

In practice, different types of licence are legally recognised and generally used in Russia. Trademark licences are one of the most popular and applicable licensing models, allowing businesses to manufacture and distribute goods or provide services in a particular (contracted) territory.

Pursuant to Article 1489(1) of the Civil Code, under a licence agreement the trademark owner (licensor) grants or agrees to grant another party (licensee) the right to use its trademark in – or without indication to – a certain territory and in connection with all or part of the goods for which the trademark is registered.

In addition, trademark licensing and related issues (eg, recordal) are specifically regulated by Articles 1232, 1233(1) to (3), 1235 to 1238 and 1490 of Part IV of the Civil Code. General provisions of the code – especially those that govern general aspects of contract law and obligations (Part I) – may also apply. Further, the trademark licence relationship may be affected by other laws and regulations, including those governing competition, advertising, tax and currency control.

Generally, foreign trademark owners are free to license directly or indirectly to Russian entities and there is no requirement to establish a local company; however, the licensed trademark must be registered before the deal is done.

Registration and ownership

Licences for unregistered marks will not be recorded with the Federal Service for Intellectual Property (Rospatent). Therefore, pending national marks, pending international registrations, marks in use and trademark applications cannot be licensed in Russia.

Trademarks can be protected on a national or international basis. National marks must be filed and registered with Rospatent. As Russia is a signatory to the Madrid Agreement and the Madrid Protocol, international trademark registrations which designate Russia are also protected and enforced in Russia.

Crucially, trademarks can be filed and registered in the name of individual entrepreneurs or legal entities. Although registrations are usually owned by one person or one group of persons (eg, an association), ownership can be shared between several individuals or companies. In other words, two or more parties can file and register a trademark in order to divide the interests in their exclusive rights. Recent court practice reaffirms this option (see Les Publications Conde Nast SA v Rospatent, (case ref A40-210165/2016)).

In such a case, an agreement between co-owners governing the management, exploitation, disposal, enforcement and operations of a trademark must be made upon registration, as available under Article 1229(3) of the Civil Code.

Licence form and recordal

Trademark licence agreements must be made in writing and prepared or translated into Russian. In practice, bilingual versions are drafted for cross-border deals. If the licence agreement is produced and executed in a foreign language (eg, English), a certified Russian translation may be prepared and attached to the original contract.

Further, underlying licence grants targeted at Russia, including those governed by the applicable foreign law, must be registered with Rospatent.

The types of documentation that may be submitted to Rospatent for recordal purposes are:

• the original trademark licence agreement;
• a notarised excerpt from the original licence agreement; or
• a notification on the disposal of IP rights in the form of a licence (a so-called ‘statement of licence’).

If the parties refuse to disclose the original contract along with agreed financial terms or other sensitive data, their best option is to make, sign and file an excerpt from the licence agreement or submit a notification for the purposes of registration. The document filed with Rospatent (ie, the agreement, excerpt or notification) must contain all of the essential elements and mandatory clauses, as required by Russian law and local practice.

Essential elements and mandatory clauses

Depending on the transaction structure and parties’ negotiations, the underlying trademark licence agreement may contain various terms and conditions. Russian contract law is based on the fundamental principle of freedom of contract, meaning that the parties are free to agree on the applicable terms and conditions of a contract.

From a general IP perspective, the licence contract should outline:

• the parties (ie, the corporate names and addresses of the licensor and licensee);
• the subject matter (ie, the registration number of the licensed trademark);
• the licensed goods or services (ie, the specific goods or services covered by the trademark registration, which are contracted in favour of the licensee);
• the type of licence (ie, sole, exclusive or non-exclusive);
• the scope of rights (ie, permitted use of the mark);
• the compensation clause (ie, licence entrance fee, lump sum and royalties);
• the term of licence (ie, the period of trademark protection or a specific duration);
• the territory (ie, Russia or a specific area);
• the sub-licensing clause (ie, whether this is permitted and to whom);
• the quality control clause (ie, the licensor’s specific quality requirements and inspection rights);
• the termination clause (ie, mutual or unilateral, for cause or convenience); and
• the signatures of the parties (ie, the names and titles of the respective signees).

The trademark licence agreement will usually contain other terms and conditions, including:

• definition and interpretation sections;
• the parties’ general rights and obligations;
• the product advertising and promotion clause;
• the protection of trademark rights and confidential information (if applicable) clause;
• the licensee’s default and posttermination clause;
• the licence transfer and assignment clause; and
• the governing law and dispute resolution policy.

Governing law and dispute resolution

There is no legal imperative for a trademark licence agreement to be governed by Russian law. Under the basic principle of international private law, the contracting parties are free to choose the relevant governing law when or after entering into a deal.

In the absence of a contracted law, the law of the jurisdiction in which the licensee is authorised to use the trademark applies (Article 1211(8) of the Civil Code). In any event, the law of a jurisdiction that is more bound up with the contract may apply – especially where the nature, terms and conditions of the contract clearly evidence such a fact (Article 1211(9) of the code).

In terms of disputes, the contracting parties reserve the right to choose between the local courts, the arbitration tribunals or the mediation service. A local forum is usually the preferred option with regard to cross-border licensing deals considering the essential timing, cost and enforcement factors. Arbitration is a ood alternative and may be conducted in any jurisdiction and by any tribunal, as chosen by the contracting parties. If the contract contains no arbitration clause, it may not be submitted for arbitration, as confirmed by case law. Mediation is also available as an alternative dispute resolution procedure.

A court judgment on a trademark licensing dispute obtained from another jurisdiction may be enforceable in Russia, provided that recognition and enforcement of the foreign court judgment is stipulated by the relevant international treaty to which Russia is a party and the relevant federal law. In addition, Russia is a signatory to many multilateral and bilateral international treaties for recognition and enforcement of foreign judgments, including the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention). Hence, an arbitral award on a licensing conflict issued from another jurisdiction that is a signatory to the New York Convention may be enforceable in Russia. If applicable, a special local law governs mediation proceedings in Russia.

Good faith and fair dealing

The concepts of good faith and fair dealing are the key principles of the Russian civil law system. These concepts are strongly enforced by the Russian courts in all disputes involving domestic or international contracts – trademark licence agreements are no exception.

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