Don’t be like CITRUS or what to do to regulate your brand rights?
Intellectual property

Don’t be like CITRUS or what to do to regulate your brand rights?

A court recently banned “CITRUS” from using the site and trademark. Sergiy Barbashin, an attorney-at-law and managing partner at Trustme Law Firm, has analyzed this case regarding brands’ protection, division, and registration.

Situation with Citrus

What has happened to Citrus? The question is currently being resolved: who is the owner of the trademarks CITRUS, Citrus Gadgets and Accessories, CITRUS discount, and other brands. According to the description of the situation in the court decision, it can be seen that the transfer of TM rights took place between T-Rent and ZT-Invest. However, E-Tickets Service Ukraine wants to appeal that. The company justifies its claims by obtaining the rights to trademarks in 2017 from the same “T-Rent.”

As for the ban on the use of TM, sites, change owners, etc. – this is not the final decision. These are the measures taken to secure the claim. That is, the court, at the request of the party, resorted to a number of actions so that the parties do not complicate the trial. For example, there is no change in the owners of trademarks during the proceedings, and as a consequence – the inability to enforce court decisions or the need to replace the parties during the proceedings.

I would like to draw your attention to the fact that it is too early to conclude “who is right and who is not.”

  • First, there is no decision on the case itself, which must be made by the court in a complete analysis of all documents and evidence.
  • Second, the parties can sign an amicable agreement and close the case before making the decision.
  • Third, the measures taken to secure the claim can be challenged.

Similar examples

Cases of “brand sharing” happen regularly. It is relevant to mention the dispute between the owners of the Oliva brand and Viva Oliva. This dispute and other circumstances are related to the rebranding of the Oliva chain of establishments. The Oliva trademark was declared invalid by a court decision.

The situation turned out to be less unambiguous between “Varenichnaya Pobeda” and “Varenichnaya Katyusha.” Varenychnaya Pobeda demanded to stop the infringement of intellectual property by former franchisees. Because it was believed that consumers could confuse brands because the name, corporate identity, and design are similar. The court found the brands dissimilar, but Katyusha was banned from using a similar design subject to Pobeda’s copyright.

Brand disputes happen all over the world. For example, the Canadian company Covertech Fabricating has hired a distributor to sell a new line of insulation materials under the ULTRA brand in the United States. It turned out that the distributor started using the brand on his own and applied for trademark registration. The court sided with Covertech Fabricating, prohibiting the unreliable partner from registering and using a “joint” TM.

And Meizu “won” at Xiaomi in the fight to register the name MIX. As it turned out, both companies are interested in this name, but Meizu was the first to be registered as a trademark.

Each situation is unique: the relationship of owners, franchise and licensing agreements, misunderstandings about TM. However, everyone is united by the dispute over the brand, and further, we will analyze the forms of protection and their features.

Typical forms of protection

A brand is a complex concept that can include various objects. For example:

  • name – trademark;
  • new technologies, devices, methods – patents for outputs, utility models;
  • appearance or packaging – industrial design;
  • computer code, graphics, music, words, etc. – copyright.

Certain rights to rights arise from the time they are created, and those rights should be acquired by the owner or customer if they are not the creators. For example, when it comes to ordering a logo or brand book from a designer. Entities such as trademarks or patents are subject to registration after registration.

Typical options for “monopolization” of rights on the example of TM

1. Registration for one owner – an individual

It is a widespread option and the best variant when the owner is alone and carries out economic activities as an individual entrepreneur.

If, in fact, the activity is not carried out by an individual, but through a company, in most situations, it is necessary to enter into a license agreement for the use of the trademark. When paying royalties to an individual, the company will act as a tax agent and withhold an 18% personal income tax and a 1.5% military tax on the budget.

One of the disadvantages of this option is the direct connection with the individual. In any dispute over the TM, the owner, not his company, will be the party. This can lead to summonses to court hearings, and in case of loss of the matter – recovery of damages, relations with the executive service. If the decision is not implemented, there are risks of blocking accounts, imposing a travel ban, etc.

If there are several owners and only one has been registered, others should consider whether they are satisfied with such circumstances, as one can dispose of the joint brand independently. The trademark can be re-registered to all owners or to a joint venture in this situation.

2. Registration for several owners

The law allows the registration of trademarks, patents, etc., for several persons. These can be both companies and individuals. The option is usually considered if there is no joint venture or owners are still structuring corporate relationships.

In Ukraine, when applying for several persons, the fee is 30% higher than for one person. For example, the fee for one class of trademark for one applicant – UAH 4,000 (UAH 3,200 for online applications), and for several applicants – UAH 5,200 (UAH 4,160 for online applications).

It is recommended that several applicants sign a trademark agreement. The contract can determine the % of each owner of the TM, how the brand is used, the decision-making process, who and under what conditions has the primary right to repurchase shares, and other disputes. After all, by default, the rights to TM will be equal. Everyone will use TM at their own discretion, which may contradict the chosen development strategy. And the issuance of a license or transfer of rights to others is possible only with the consent of other owners.

The disadvantage of this option is the regulation of relations only by contract and the complex dispute procedure. For example, there is no agreement between the owners, the parties cannot agree on specific issues, or the two owners complicate the decision-making process if their positions are different. Judicial practice in resolving such disputes is also not widespread, making it impossible to predict the chances of resolving the dispute in advance.

3. Registration of rights to the company

This is a popular registration option if several owners have set up a joint venture. Or if the activities of one brand are carried out through several companies. For example, one company carries out operational and economic activities related to financial risks, and the other carries out assets and intellectual property.

The advantage of this option is corporate law and more or less well-established litigation on litigation. In fact, owners can regulate the trademark and the general rights to the company and its assets, which will include intellectual property. Relationships can be spelled out in an individually prepared company charter and corporate agreement between the participants.

As the company’s activities are conducted through a director or other representative, it is recommended to limit such persons. For example, the ban on signing agreements on the transfer of trademark rights patents without a decision of the general meeting of participants.

Of course, even this option can not 100% no claims of others. However, the better the procedure for disposing of assets and TM, the easier it will be to resolve disputes.

The other important things

Mandatory trademark use

If the trademark is not used for five years, this is the background for invalidating the certificate. I will add that it is not necessary to please yourself with the opportunity to sign and prepare something “when it becomes necessary”. After all, we will have to show different and long-term use of TM by independent evidence. Agreements, letters, and other documents without reference to facts (deliveries, payments, etc.) may not be considered appropriate and admissible evidence.

Marriage rights

If the transfer and structuring of rights take place, in some cases, it is better to obtain the consent of the spouses to avoid lengthy litigation. After all, according to the Family Code, it is possible to dispose of jointly owned property by mutual consent. If there is no agreement, there is a risk that the contract will be invalidated.

An example is the case of TM “Klumba,” in which the courts for the period 2013-2020 investigated: whether the wife had the right to alienate TM without the written consent of her husband. The court found that the support was necessary, but permission was obtained by signing a memorandum with the spouses and the future buyer. As it turned out, the TM was registered to the wife, but the husband “participated in the advertising of the trademark, his work, and funds to ensure its development.”

Inheritance

The process of inheriting corporate rights or part of a trademark can be lengthy. Not the fact that the parties will immediately be able to find common ground with the new owner. In such circumstances, the parties’ actions should be provided for in advance in the trademark rights agreement or in the corporate documents. For example, complete management and disposal of another owner before inheritance without the right to alienate intellectual property, the redemption of shares (rights) under certain conditions, etc.

Conclusion

A conscious attitude to the legal component of the brand is the key to success in protecting it. I recommend a mindful approach to the protection process and answer the following questions for yourself:

  • to whom the intellectual property objects will be issued and registered;
  • what exactly will be registered, as trademarks can be verbal, graphic, combined, and new technologies can be applied to the process as well as to the device, form, and design;
  • obtain rights from all involved persons, including performers, authors, artists, programmers, employees, etc.

I hope that this information will help our entrepreneurs to agreed beforehand or structure the relationship in a decent way to protect the results of their financial, time, and labor investments.

The material is prepared for ain.ua

Link to the article

The author of the material is

Sergiy Barbashin – IT attorney, managing partner at Trustme Law Firm, Intellectual Property Expert