ART DE LEX lawyers demonstrate the legality of the antitrust authority's injunction on the use of corporate name

On 28 March 2016 the Copyright Court delivered a watershed judgment in a challenge to the legality of the antitrust authority's injunction restricting a legal entity's right to use its corporate name for purposes of unfair competition.

The FAS of Russia Directorate for Tula Oblast rendered on 13 March 2015 a ruling in case No 02-02/20-2014 brought by OOO Zdravservis (city of Tula), which finds OOO Zdravservis Dar Donated and an affiliated individual in the context of acquisition of the right to the official name of Zdravservis Dar and to use same solely for the purposes of harming OOO Zdravservis to be in breach of part 2, article 14 of the Federal Law on Protection of Competition.

The Directorate ordered OOO Zdravservis Dar to cease and desist from the violation by barring the use of the official name of Zdravservis Dar in business operations on the wholesale market for pharmaceutical and medical products within the scope of Russian National Classification of Economic Activities (RNCEA) 51.46.

OOO Zdravservis is a major wholesaler of pharmaceutical and medical products with an annual turnover of over 5 bln roubles, its presence stretching across 20+ states in the Russian Federation. The company has been operating since the late 1990s, has a good business reputation and a wide customer base.

The antitrust authority found that the behaviour of the defendants in the antitrust case as regards the acquisition of an equity stake in Zdravservis Dar, incorporated earlier than OOO Zdravservis (and not engaged in any activities), its relocation from the city of Perm to the city of Tula without any actual business operations and the claim lodged against Zdravservis for an injunction on the use of its corporate name was undertaken solely in order to damage Zdravservis. Russia's FASD for Tula Oblast effectively prohibited the infringer from abusing the exclusive right to a product name and from using it in the pursuit of business activities.

As a rationale for its decision, the antitrust authority invoked article 10 Civil Code of the Russian Federation (RF CC), which prohibits the exercise of civil rights solely with the intent to cause harm to another, as well as other abuse of rights, including for purposes of anticompetitive practices.

In putting a stop to the abuse of the right to business name for purposes of anticompetitive practices and causing injury to OOO Zdravservis, the antitrust authority acted within the law, the courts found. No evidence to the contrary having been offered during the court proceedings, the courts held that neither Zdravservis Dar nor the individual had demonstrated that they had a reasonable economic rationale for the behaviour imputed to them.

The courts of trial, appeal and cassation upheld the antitrust authority's decision and Injunction, having denied Zdravservis Dar's claim to set aside the directorate's rulings. Before the Intellectual Property Court the interests of OOO Zdravservis were advocated by Yaroslav Kulik, a partner and the head of сompetition practice at ART DE LEX.

The courts' finding is significant in that it endorses the application of such restrictions on the exclusive rights of economic agents for purposes of redressing the violations of competition law committed by them.

Thus, where impossible to stop unfair competition using exclusive rights to a business name through other legal remedies, the antitrust authority is entitled to order economic agents to cease and desist from using the business name.

You can read the court rulings in the case here.