Franchisor May Use Trademark In Territory Despite Franchisee’s Licence

International Law Office:

Russia’s highest commercial court, the Supreme Arbitrazh Court, recently ruled that where a franchisor with a Russian-registered trademark grants a franchisee an exclusive licence to use that trademark within a defined territory, the exclusive licence does not, by itself, prohibit the franchisor from also using its trademark in that territory.

Facts
The dispute arose from a franchise agreement that granted a franchisee an exclusive licence to use the trademark PYATEROCHKA, which is registered in Russia as a brand name for a chain of supermarkets, in a designated territory. The agreement did not explicitly prohibit the franchisor from using its own mark in the territory; nor did it explicitly permit such use.

Several years into the agreement, the franchisor decided to establish some company-owned stores in the franchisee’s territory. Apparently in a naive attempt to circumvent the trademark exclusivity issue, the franchisor added a plus-sign to its mark and began opening stores under the name Pyaterochka+. This resulted in a costly dispute involving an administrative tribunal, a court trial and three levels of appeal.

Lower court rulingsread on.

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