Korean company KyungDong Navien Co., Ltd., and Navien Rus (the Russian subsidiary of the Korean company KD Navien) sued Igor Filatov, an individual entrepreneur (Case No СИП-196/2024). They asked the court to recognize Filatov’s actions as acts of unfair competition and invalidate his assignment deed of 2021 regarding trademark No. 491279.

As usual, the history of relations between the parties dates back to many years ago.

Back in 2005, the Korean company registered a trademark GOM Ace in Korea in respect of water heaters. Three years later the company decided to bring its business to Russia. It found Filatov, who posed as vice president of “The Heating Laboratory” company, a company which was, in fact, non-existent. The parties signed a distribution agreement in 2008 according to which the Korean company supplied gas-fired boilers of a Navien Ace series. 

In 2009, Filatov, without informing the Korean company, set up a company “Gaztekhnotorg” and filed a trademark application in the name of his company for the word , i.e. the designation used for labelling the heaters manufactured and sold by the Korean company. The trademark was registered in 2013 under No. 491279 in several classes concerning water heating equipment.

“Gaztekhnotorg” was liquidated in 2021 but before that, the trademark was assigned to Filatov. In fact, he assigned the trademark to himself. 

Several years earlier, the Korean company registered its trademark “NAVIEN ACE” (No. 600685) in 2016 and (No. 826147) in August 2021. Three months later, in November 2021, Filatov appealed against the above registrations Nos. 600685 and 826147 and the patent office invalidated the trademarks in 2022. Following that, Filatov wrote a letter to Navien Rus whereby he informed that he held trademark No. 491279 and had not made infringement claims against Navien Rus for 11 years. He was not going to use the trademark and wanted to sell his trademark to Navien Rus for €150,000 (US$173,000). Otherwise, he continued, he would sue Navien Rus and there would be a huge scandal and damages for Navien Rus.

Filatov also circulated warning letters to various distributing companies and entered his trademark into the Customs Register to hamper imports of the equipment.

Since Navien Rus dismissed his claim without merit, Filatov brought a case against Navien Rus  (А40-82512/2022) and claimed 830 million rubles (US$10.6 million) of compensation; however the court awarded only 4 million rubles only (US$51,000) in May 2023. Filatov appealed the judgment without success.

Now, as mentioned above, the Korean company sued Filatov in 2024 with the unfair competition claim and invalidation of the assignment. The company invoked the Paris Convention forbidding unfair competition, the Russian Law On Protection of Competition and Decree No. 10 of the Supreme Court, according to which unfair competition associated with unlawful registration of a trademark shall not be allowed and such registration may be cancelled. Qualification of the behaviour of the trademark owner depends on the purpose of registration with consideration of his behaviour before and after filing the trademark application. The court pointed out that instead of acting in good faith in his capacity of distributor of the equipment, Filatov registered a company, registered the trademark and finally assigned it to himself, thereby becoming direct competitor of the Korean company. It follows from his letter to Navien Rus that he had no intentions to use the trademark but sell it to Navien Rus. When his proposal was rejected he made efforts to make difficult the business of Navien Rus and oust it from the market. All his behaviour is an ongoing act of unfair competition.

Finally, the court recognized Filatov’s actions as unfair competition. Since the claim regarding unfair competition is satisfied, this means that acquisition of right for the trademark was unfair, so the trademark should be invalidated as well as its assignment.

Notwithstanding, Filatov appealed the judgment with reckless abandon at the Presidium of the IP Court. He claimed that the lower court had not confirmed the combination of all special features of unfair competition. The court carefully rehashed all the details of the previous court hearings and confirmed conclusions proving unfair competition acts on the part of Filatov. His cassation appeal was dismissed.

There are many foreign companies wishing to enter the Russian market and indeed, Russian businessmen are doing good business for the most part, however such cases remain unnoticed and outside public attention. Only the cases involving bad business practices come to the fore like the one described above. Experience shows that foreign companies are well advised to engage IP lawyers when they start relations with their Russian counterparts. Almost any business involves intellectual property so it is highly advisable to build relationships in a way that none of the parties may be at a disadvantage in a long run.