Currently, with the continuous evolution of the trademark industry, trademark right owners in Russia also need to gradually adapt to various newly emerging challenges in reality, one of which is the so-called "brand squatting."

Brand squatting is a form of bad-faith conduct adopted by a trademark owner or applicant. In practice, the routines are often exactly the same: a so-called "right holder" suddenly appears holding a trademark registration certificate and then offers several options: cease using the designation; pay compensation; or purchase a license. In most cases, squatters do not genuinely use the trademark, and their primary purpose in conducting registration is to seek claims and litigation.

However, an encouraging new trend is that Russian courts are increasingly looking beyond the mere similarity between designations and are simultaneously examining the conduct of the right holder: why was the trademark registered? Was there any actual use? Does the right holder merely intend to complete "monetization" through the registered trademark? In the decision for Case No. A11-417/2019 in 2023, the Supreme Court of the Russian Federation explicitly pointed out that trademarks must not be used as instruments for the abuse of rights or the unfair acquisition of advantages.

The court confirmed that the acquisition of trademark rights cannot have the purpose of suing good-faith market participants and demanding compensation, especially under circumstances where no real economic benefit is brought and there is no genuine intention to use the trademark for goods.

Therefore, in this type of dispute, conducting an analysis of the specific context is of vital importance. The key lies in: did the right holder actually use the trademark for specific goods or services? Is the right holder or the trademark known to ordinary consumers?

Precisely because of this, when good-faith market participants receive a cease-and-desist letter or a claim letter, they should not act in haste. Even if the initial situation appears to be simple and clear, do not immediately accept the conditions proposed by the opposing party. The first step should be to commence preparations for response procedures. The usual method of response is: defending against the infringement allegations and proving that no likelihood of confusion exists.

Meanwhile, Russian law has developed several legal instruments to counter bad-faith right holders.

First, the party concerned should collect evidence to prove that the contested sign had already been used before the bad-faith right holder raised its claims. The date on which actual use commenced, evidence of widespread recognition, and records of continuous use all help to reflect the good faith of one's own conduct.

Second, the key lies in proving that the squatter did not use its trademark in accordance with the original purpose of a trademark. In other words, the right holder may have no legitimate economic interest in the registration at all. If the natural person or company owns a large volume of trademark registrations or has initiated a large number of lawsuits, such evidence can also provide additional support.

According to Russian law, a trademark registration that violates the principle of good faith may be determined as an "abuse of rights" aimed at obtaining an unfair competitive advantage. Under such circumstances, the right holder may be refused the grant of right protection.

While formulating a defense strategy against infringement allegations, one can also make good use of other legal mechanisms to fundamentally shake the squatter's position. These mechanisms include:

• Filing a complaint with the Federal Antimonopoly Service, asserting that its acquisition and use of such exclusive rights constitute unfair competition;

• Initiating a lawsuit in the Intellectual Property Rights Court, requesting a determination that the trademark registration conduct constitutes an act of unfair competition;

• Applying for the early termination of the trademark's legal protection based on the ground of "non-actual use."

Squatters are usually well aware of the risk of a trademark being canceled due to non-use, and therefore attempt to circumvent it by registering a similar trademark, thereby creating a new tool for profit-making. In this situation, it is particularly important to clarify the chronological order in which the events occurred and to prove the genuine purpose of the right holder, which is not to build a brand, but to create obstacles for competitors.

The text below will illustrate how the various mechanisms for combating bad-faith right holders operate, in conjunction with the specific circumstances of Case No. SIP-264/2023 and Case No. SIP-408/2023.

The aforementioned disputes revolved around the designation "Viktoria sanatorium," which had actually been used by the sanatorium for many years. Although the right holder inherited the prior registered trademarks, it failed to prove that it had actually used these trademarks on the relevant services. Therefore, in Case No. SIP-264/2023, the Intellectual Property Rights Court terminated the legal protection of these trademarks on the ground of non-actual use.

The court specifically pointed out that a lack of commercial activity, or using external reasons as an excuse, cannot become a justified reason for the long-term non-use of a trademark. Accordingly, the trademark rights of the right holder (i.e., the prior trademark holder) were terminated due to non-use. However, the squatter had already preemptively renewed its trademark registrations before this, and relied on these "new" trademarks to continue exerting pressure on good-faith market participants.

Therefore, the dispute did not end there. Before the prior trademarks actually lapsed, the right holder registered new similar designations for the identical services, and subsequently presented demands to the sanatorium: cease use, pay compensation, or enter into a license agreement.

It was precisely this series of acts that became the key to Case No. SIP-408/2023. In that case, the plaintiff requested the court to determine that the acts performed by the right holder for registering the trademarks constituted unfair competition. The court found that the defendant clearly knew that the sanatorium had used the designation for a long time, and the purpose of its registering the "new" trademarks was not out of good-faith business operations, but to obtain an unfair advantage, create obstacles for competitors, and continue to retain such a tool for exerting pressure after the protection of the prior trademarks was terminated.

Comprehensive consideration given to the entire circumstances of the case and the conduct of the right holder, the court fully supported the requests of the plaintiff, determining that its conduct of registering the new trademarks constituted unfair competition. It is worth noting that the court still made the aforementioned determination despite the fact that the trademarks initially sued by the plaintiff had not formally satisfied the condition of being registered for full three years.

Subsequently, the aforementioned good-faith market participant held the court judgment and filed an application with the Chamber for Patent Disputes. Ultimately, upon examination of the relevant oppositions, the legal protection of these "new" trademarks was also terminated.

In other words, the fact that a squatter holds newly registered trademarks does not mean that the legal protection of its trademarks cannot be terminated early before the registration reaches full three years.

This is precisely where the practical value of this type of case lies. They demonstrate that parties are not confined to disputes concerning the "likelihood of confusion" when fighting against squatters, nor do they merely react passively to infringement lawsuits. Russian law provides an active, coherent line of approach for response: one can request the early termination of the legal protection of unused trademarks, and can also have the registration conduct of new trademarks determined as unfair competition. Through the comprehensive application of these mechanisms, one can not only effectively defend against the claim assertions of bad-faith right holders, but can also thoroughly dismantle the legal foundation upon which these assertions rely.

In practice, the reason why brand squatting can succeed is often because enterprises lack response strategies. The key lies in not making hasty decisions, but actively safeguarding one's own legitimate rights and interests, and Russian law is precisely providing increasingly effective tools for this purpose.