Judicial Practice: Recovery of Compensation from Infringers of Trademark Rights in the Republic of Kazakhstan
A trademark owner has the right to demand compensation for damages or compensation in the event of a violation of their exclusive rights. At the same time, it is important to prove the fact of the violation, but in practice, judicial practice regarding trademarks is ambiguous and depends on many factors. In this article, we will examine judicial practice on the recovery of compensation from infringers of trademark rights in Kazakhstan.
Intellectual property legislation in the Republic of Kazakhstan establishes that a trademark owner has the right to demand compensation or recovery of damages if they prove the fact of violation of their exclusive rights (Clause 6, Article 1032 of the Civil Code of the Republic of Kazakhstan; Clause 6, Article 44 of the Law on Trademarks of the Republic of Kazakhstan).
Losses include (Clause 4, Article 9 of the Civil Code of the Republic of Kazakhstan):
-
Expenses incurred or to be incurred by the person whose rights have been violated;
-
Actual damage – loss of or damage to property;
-
Lost profits – unreceived income that could have been obtained if the rights had not been violated.
For trademarks, the amount of compensation is not fixed in the legislation, therefore it is determined by the court in each specific case individually, depending on the nature of the violation and the market value of homogeneous (original) goods marked with trademarks (Clause 6, Article 44 of the Law of the Republic of Kazakhstan "On Trademarks, Service Marks and Appellations of Origin").
Below we examine the law enforcement practice on this issue:
-
The plaintiff must collect evidence of trademark infringement in order to substantiate their claims to the court. For example, in a dispute over the recovery of compensation in the amount of USD 2,075 for trademark infringement, the court refused to satisfy the claims. The decision was due to the fact that the plaintiff did not provide calculations of the compensation amount and evidence of the sale of goods marked with the trademark.
-
It is possible to revise the amount of compensation downwards if the violation was eliminated by the time the statement of claim was filed. In a civil case on a claim for the recovery of compensation in the amount of USD 6,220 for the illegal use of a trademark, the amount of compensation was reduced to USD 2,075, since the defendant eliminated the violation and did not sell a single product bearing the plaintiff's trademark.
-
The amount of compensation for trademark infringement can be calculated within the range of 100 to 15,000 MCI* by analogy with the protection of copyright and related rights. In a dispute over the recovery of compensation in the amount of 200 MCI (approx. USD 1,050), taking into account the nature of the violation and the fact that it does not entail losses for the plaintiff commensurate with the claimed amount of compensation, the court reduced the amount of compensation to 100 MCI (approx. USD 525). *Note. MCI is the Monthly Calculation Index. It is used to calculate benefits and other social payments, as well as penalties, taxes, and other payments in accordance with the legislation of the Republic of Kazakhstan.
-
Compensation can be recovered within civil proceedings if the defendant has already been brought to administrative liability for copyright infringement. In a civil case on a claim for the recovery of compensation in the amount of USD 3,665, the court satisfied the claims in full, since the defendant had already been brought to administrative liability for trademark infringement on the basis of Article 158 of the Administrative Code of the Republic of Kazakhstan.
-
Compensation for copyright infringement is a statutory penalty, therefore it relieves the plaintiff from the obligation to prove losses. In a civil case on a claim for the recovery of compensation in the amount of USD 1,050, the court satisfied the claims in full without the need to prove and provide a calculation of the amount of compensation, which are not provided in the case of a penalty.
-
If a disputed trademark, which has legal protection in the territory of the Republic of Kazakhstan, is registered in the name of a third party in any EAEU country with an earlier priority, the distributor of goods marked with such a trademark cannot be held liable for importing the goods until the date of obtaining legal protection in Kazakhstan. The claim for the recovery of monetary compensation in the amount of USD 10,370 for the illegal use of the plaintiff's trademarks was dismissed, since the plaintiff's trademark was registered in an EAEU country to a third party from whom the goods were imported prior to the date of registration of the trademark in the name of the local company.
-
The amount of compensation can be calculated based on the data specified in the valuation company's certificate regarding the market value of the detected counterfeit volume. The Specialized Interdistrict Economic Court of Almaty satisfied all the plaintiff's claims, including the recovery of the claimed compensation in the amount of USD 10,370 based on the submitted valuation company certificate.
-
In the absence of the fact of importing goods marked with a trademark into the territory of the Republic of Kazakhstan, the claim for compensation is not subject to satisfaction. In a dispute over a claim for the recovery of compensation for caused material damage in the amount of USD 3,500, the court of first instance satisfied the claims in full. However, the appellate instance reversed the decision and issued a new one dismissing the statement of claim, since the goods were not sold and used for their intended purpose in the territory of the Republic of Kazakhstan, but were located in the temporary storage warehouse of the State Revenue Department for the city of Almaty due to the suspension of the release of goods by customs authorities.
-
The plaintiff must submit evidence to the court of causing losses in connection with the defendant's use of the plaintiff's trademark and the defendant's extraction of profit. In a claim to recognize the use of a trademark as illegal and to pay compensation, the court refused the compensation part because the plaintiff did not provide any evidence reliably confirming the fact that they suffered any losses in connection with the defendant's use of the trademark and the extraction of profit. In particular, the court was not provided with information on what period of illegal use of the trademark the plaintiff is asking to recover compensation for and what confirms this.
-
The legislator provides for the payment of compensation based on the nature of the violation and the market value of homogeneous goods. In a civil case on a claim for the payment of compensation in the amount of USD 625 for trademark infringement, the court refused because the plaintiff did not indicate how this amount was determined, nor did they provide the court with homogeneous goods in order to determine the amount of compensation.
Thus, judicial practice on the issue of paying compensation for trademark infringement is ambiguous and depends on many factors. But in general, the following conclusions can be drawn:
-
It is impossible to recover damages and compensation at the same time, since the legislation establishes compensation for trademark infringement, which is an alternative to the recovery of damages;
-
The initial purpose of introducing compensation has not been achieved, since compensation for trademark infringement is rarely considered by courts as a statutory penalty that does not require the plaintiff to prove damages, and is more equated to damages, i.e., it requires the provision of a calculation of the amount for both;
-
Right holders cannot fully exercise their legal right, since they are required to provide a detailed and justified calculation of the amount of compensation.
Since 2018, right holders have been provided with the opportunity to recover compensation for trademark infringement as an alternative to damages. Previously, there was no such opportunity, and proving damages in the form of actual damage or lost profit is very difficult in practice.
Compensation as a penalty should have a security nature and deter violators from profiting from the unauthorized use of a trademark in the future. The purpose of its introduction is to provide right holders with the opportunity to recover compensation without the need to prove and provide a calculation of damages.
The absence of fixed limits of compensation for trademark infringement removes the issue of the absence of judicial discretion and is successfully implemented by courts, which is confirmed by law enforcement practice. The courts' requirement regarding the provision of the calculation of the compensation amount is based on Clause 6, Article 1032 of the Civil Code of the Republic of Kazakhstan and Clause 6, Article 44 of the Law on Trademarks of the Republic of Kazakhstan:
“6. Upon proof of the fact of an offense, the right holder (owner) has the right, instead of recovering damages, to demand from the infringer the payment of compensation in an amount determined by the court, based on the nature of the violation, the market value of homogeneous (original) goods on which the trademark or a designation confusingly similar to it is placed with the consent of the right holder.”
Thus, despite the fact that compensation was introduced as an alternative to the recovery of damages, it is more equated to damages, since it requires a justified calculation in accordance with the requirements of intellectual property legislation.