RS From problem to solution To make sure that trademarks do not become problematic

To make sure that trademarks do not become problematic

June 2012

Currently, a lot of foreign companies set up subsidiary companies in Russia which use the foreign holding company’s (trademark owner’s) brand name.

However, companies do not always take into consideration the fact that trademark protection in Russia is only valid if it is registered internationally or nationally. International registration is deemed lawful only if the trademark is registered in accordance with the Madrid Agreement Concerning the International Registration of Marks dated April 14th, 1891 and its accompanying Protocol dated June 28th, 1989, which are both legally-binding in Russia. The International Bureau for Intellectual Property is the body that processes international trademark registration.

The Russian Agency for Patents and Trademarks is responsible for providing Russian registration (in accordance with the Russian law).

If a company is lacking any of the stated trademark registrations, then any individual can use that trademark in any way or he/she can claim ownership of this trademark

According to the Civil Code of the Russian Federation rights for using a trademark can only be awarded to the user of this trademark only on the basis of a license (sub-license) agreement. The agreement should contain conditions about right of use of the trademark, where it can be used and compensation to be paid to the trademark owner. The license agreement for trademark use should be in writing, is subject to mandatory government registration and is considered valid once it is registered.

Subsidiary companies often use trademarks without receiving written permission (without a license agreement) from the holding company (trademark owner). It is against the Russian law to use the trademark and one runs the risk of being criminally or administratively prosecuted, and consequently, fined and/or have their good with the trademark confiscated. Individuals unlawfully using trademarks may be held criminally liable by the police, customs control or the Federal Service for Supervision of Consumer Rights Protection and Human Welfare.

It is also unlawful if the holding company grants the subsidiary company trademark use rights orally or in a letter specifying that the subsidiary company is permitted to use the trademark. The main risk in this case is the possibility of disputes with tax authorities regarding taxation.

If a properly documented and registered license agreement about providing trademark use rights is lacking, then there is a risk that the expenses of the holding company dealing with using this trademark (payments made to the holding company or advertisement) cannot be counted as part of the company’s expenses when calculating profit taxes. This means that the subsidiary company is obligated to pay additional profit taxes from this amount into the Russian Federation budget.

Therefore, in order to minimise risks associated with the subsidiary company’s trademark use (granted by the foreign holding company/trademark owner) in the Russian Federation it is necessary to adhere to the following requirements:

  1. The trademark should be registered and protected in accordance with legislative and regulatory acts ratified by the Russian Federation or in accordance with Russian Federation law,
  2. The act of providing trademark use rights should be documented in a license (sublicense) agreement registered in the Russian Service for Patents and Trademarks. RS

ICLC is willing to professionally prepare and register license agreements for providing trademark use rights.