MONDAY, 15 DECEMBER 2014
Red Spots With Flowers: new Russian IP court sets a couple of precedents in design dispute

On 13 November 2014 the Court for Intellectual Property Rights (IPC) of Moscow issued a precedent-setting ruling, which actually established two precedents.  First, the claimant, as the holder of right (copyright in this case), by entering into an amicable settlement regarding the claim to prohibit of illegal use of copyright, cannot claim compensation for infringement of the same right in different litigation. The courts took a similar position in cases of a different nature, but this is the first time this principle has been applied to intellectual property protection.  Secondly, the IPC handed down a decision regarding copyright protection for industrial designs, holding that such infringement must be prohibited in the case of reproduction in an industrial design, even if the copyright in an artwork was not registered as an industrial design. This position is contrary to that of the Federal Arbitration Court of Moscow Region in a similar case in 2010.

Let us highlight the circumstances of case № А66–6209/2013.

In November 2012, ZAO Corall (Closed Joint Stock Company) filed a claim before the Arbitration Court of Moscow against OOO Al-Trade (Limited Liability Company) to prevent the illegal use of an artwork, namely, “Red spots with flowers” (Case А40-151961/2012).  In that action the parties reached an amicable settlement in April 2013, under which the claimant waved its claim and the defendant was to “cease any and all actions infringing the right of ZAO Corall resulting in putting into civil circulation “Rosalinda” ceramic plates decorated by the design “Red spots with flowers” in the territory of the Russian Federation without the consent of the holder (ZAO Corall), namely:

  • The storage, for the purpose of further sale, of “Rosalinda” ceramic plates decorated with the design “Red spots with flowers”;
  • The offering of “Rosalinda” ceramic plates decorated by the design “Red spots with flowers” for sale under the conditions and according to the procedure stipulated in the amicable settlement agreement.”

No representatives were engaged by OOO Al-Trade in that case.

After almost two months, on expiration of the deadline for filing the cassation claim against the court ruling regarding the amicable agreement, in May 2013, ZAO Corall filed a new claim before the Arbitration Court of Tver Region against OOO Al-Trade (because the latter had changed its legal address) on charging a compensation amounting to 2 million Roubles for illegal use of copyright in the “Red spots with flowers” design, Case № А66-6209/2013.

This claim was based on the fact that, in the amicable settlement, OOO Al-Trade recognized that it had infringed the claimant’s right ( having to cease any and all actions infringing the rights of ZAO Corall), and that, due to the infringement, ZAO Corall suffered losses in sales, in respect of which OOO Al-Trade was supposed to pay the compensation.

Attorneys from Zuykov & Partners represented the interests of OOO Al-Trade in this case.

The claim was rejected by court of all the three instances, although the reasoning in each instance was different.

The Court of Tver Region believed that the amicable settlement in the case on prohibiting the illegal use of an artwork had failed to settle the dispute, i.e. that ZAO Corall still had the right to obtain compensation for the illegal use of copyright. At the same time the courts rejected the claim due to lack of evidence of existence of copyright and because the claimant’s copyright was not registered as an industrial design.

Both parties filed appeals.  The 14th Appeal Arbitration Court upheld the disposition of the ruling, but varied the statement of reasons for rejecting the claim. The appeal court stated that the claimant had proved that it was the holder of copyright but, for copyright protection, there was no need to obtain a patent for an industrial design. However, the appeal court upheld the dismissal of the claim because the dispute between the parties on copyright infringement in relation to the “Red spots with flowers” design had been resolved by the amicable settlement in Case № А40-151961/2012.

Eventually, both parties filed cassation claims. In the light of the importance of the dispute and the necessity to draw attention to this case, attorneys for the defendants wrote a letter to the Chairman of the Court for Intellectual Property Rights Lyudmila Novoselova. Probably, this publication was the reason why the case was examined by two Presiding judges, Victor Khimichev and Sergey Ukolov.

On examination of the case the Court, again leaving the result unchanged (the claim was dismissed), made an amendment to the appeal ruling, stating that procedural breaches regarding attachment of evidence caused a wrong establishment of facts. However, the main point of the IPC’s ruling is the Court’s opinion regarding two important law enforcement positions which undoubtedly will be precedent-setting in law enforcement practice.  

The first precedent relates to the conclusion of an amicable settlement by the parties in resolving a dispute and the opportunity of filing a new claim for the same reason but with a different demand. The Court for Intellectual Property Rights in its ruling in Case № А66-6209/2013 said this:

According to the legal view of the RF Constitution Court, presented in its Order dated 24.02.2004 № 1-О, an amicable settlement is an agreement between the parties on settlement of a dispute based on voluntary regulation of mutual claims and acceptance of mutual concessions, and is a procedural remedy of rights protection.

… Therefore, proceeding from the meaning and content of the legal provisions regulating settlement procedures, and from the objectives of arbitration proceedings we conclude that in its nature an amicable settlement ratified by court is the procedural method of dispute settlement which is based on reconciliation between the parties on mutually acceptable conditions which thus fully liquidates the dispute regarding the right.  

… With such a settlement if ratified by an arbitration court, the parties settle their dispute (fully or in part) on the bases of voluntary regulation of mutual claims and acceptance of mutual concessions.

Proceeding from the meaning and contents of the regulations regarding reconciliation of the parties, and from the objectives of arbitration proceedings, we conclude that an amicable settlement ratified by court is based on reconciliation between the parties on mutually acceptable conditions resulting in final cessation of a dispute (either in full or in a relevant part) …

In the above-mentioned case the parties, when concluding the amicable settlement, did not regulate legal consequences of this settlement for the legal relations arising from the infringement of the exclusive rights, which was the cause for filing a claim to court. Consequently, the amicable settlement of the parties means total termination of the dispute arising from the said legal relation. In this respect, further claims arising from the same legal relation will not be acceptable, irrespective of the fact that the earlier claim was of recovery nature. Both claims are directly related to those infringements of an exclusive right, protection of which was sought in Case № А40-151961/2012 (emphasis added).

Therefore the holder, by concluding an amicable settlement under which the defendant undertakes not to use the disputed exclusive right object in any manner, may not charge a compensation for infringement of the same right, because the dispute in relation to this right was already settled.

However, the most interesting matter is the legal standing of the IPC regarding the possibility to prevent use of the copyright reproduced in an industrial design.

Four years ago in Case А40-62908/2009 the 9th Appeal Arbitration Court and the Federal Arbitration Court of Moscow Region issued rulings under which they rejected the protection of copyright used by their reproduction on goods (or being goods themselves) because the copyright was not registered as an industrial design (Article 1352 RF Civil Code).

The Ruling of the 14th Appeal Arbitration Court in that case may hardly be deemed a precedent because there was the Cassation Ruling issued by the Federal Arbitration Court of Moscow Region in Case А40-62908/2009.

In consideration of the above, in order to know the view of the new Cassation instance (ie the Court for Intellectual Property Rights) in this matter attorneys for the defendant filed a cassation claim against the rationale of the appeal ruling. The IPC rejected this cassation claim and provided a clear opinion regarding the possibility of copyright protection pointing out that copyright protection does not depend on whether the right was patented.  

The IPC’s Ruling in Case № А66-6209/2013 says this:

The Appeal Court was reasonably guided by the provisions of the RF Civil Code regulating copyright, not patent right. And the fact that the plate decoration was not registered as an industrial design does not mean (as the first instance court, OOO Al-Trade and A.N. Sokolov erroneously believed) that copyright to a drawing reproduced on a plate was not protectable.

In the meaning of Clause 2 Article 1225, and Clause 1 Article 1255 of the RF Civil Code, copyright is protected by law and in accordance with Clause 1 Article 1250 of the RF Civil Code it is protectable in the manners provided by the Civil Code. Consequently, copyright in an artwork is protectable irrespective of whether the design or a plate decoration was registered as an industrial design or not. 

This ruling of IPC opens new horizons in protection of copyright reproduced in industrial design. However we must pay special attention to the evidence regarding the enjoyment of copyright.

This contribution has been kindly prepared for Class 99 by Sergey Zuykov (attorneys from Zuykov & Partners represented the interests of OOO Al-Trade in Case № А66-6209/2013)

Posted by: Blog Administrator @ 13.01
Tags: Russia, infringement,effect of earlier settlement,
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