Compensation for damages for illegal use of a trademark in Uzbekistan

Current market analysis in Uzbekistan shows that the trademark owners often come across problems related to illegal use of the brand name by third parties. Exclusive trademark rights entitle the right holder to prevent any offence by applying to the appropriate state bodies, including the court, with a claim to impose a ban on any use of the trademark without the permission of the trademark owner.

However, prohibiting measures taken by courts are not always effective.

It is essential to understand that the brand (trademark) of the company primarily has a material value. At the same time, the intangible value of the brand makes a big impact. Therefore, any unauthorized use of the brand is not only about labelling the products /services without the right holder's permission, but also unjustified enrichment, which can be gained at the expense of marketing activities carried out by the right holder to promote his brand.

Therefore, the owner of trademark needs to be compensated for an illegal act that harms the business reputation of the company and its brand, since financial sanctions can urge violators prevent the infringement of IP rights of third parties.

Legal aspects 

The legislation of the Republic of Uzbekistan provides an option for the right holder to claim compensation for damages. However, applying the existing rules on compensation for damages in respect to illegal use of the trademark raises number of questions.

Article 14 of the Civil Code of the Republic of Uzbekistan on recovery of damages, is the fundamental law used to recover damages:

A person whose right has been violated may claim total compensation for the damage caused to him if the law or contract does not provide for fewer damages.

Moreover, Article 1107 of the Civil Code of the Republic of Uzbekistan provides for a separate rule specifying the right of the trademark owner to claim the compensation for the infringement of trademark rights:

The person who improperly uses the trademark must stop the infringement and compensate the trademark owner for the losses incurred by him.

Above mentioned rules provide for the fundamental right to claim damages. However, there is no limit or minimum amount of compensation payable by law. Accordingly, the right holder is entitled to claim damages corresponding to the value of claims, which can be justified with proper evidence.

It is important to emphasize that the legislator of Uzbekistan has adopted «Unified national evaluation standard», approved by the Director of the State Assets Management Agency of the Republic of Uzbekistan [Registered by the Ministry of Justice of the Republic of Uzbekistan dated June 4, 2020. Registration № 3239], determining the methods of calculating the amount of losses caused by the illegal trademark use. 

How to prove the loss?

According to the norms of the Civil Code of the Republic of Uzbekistan, loss means expenses necessary for the restoration of the violated right, as well as the lost income that this person would have received under normal conditions of civil turnover if his right had not been violated (loss of profits).

Under the rules of the Procedural Code, the claimant must prove the circumstances to which he refers as the basis for his claims. In other words, the burden of proof lies with the trademark owner. While collecting the proof base, trademark owner may face a number of procedural barriers. A complicating factor is the lack of access, even for attorneys-at-law, to the accounting records of the offending companies. Third-party accounting can be subject to audit only based on court action.

Notwithstanding, it is possible to gather the necessary information. Sometimes, the essential information is already available in open sources. For example, pharma companies often use the DrugAudit database, which contains information on the volume of marketed medicines. The information in this database may be used as an evidence, but the court must decide whether to accept such information or not.

On the other hand, the trademark owner has the right to initiate pre-trial procedures, which can be used as an effective tool to collect information on the scope of the violation. Besides the court, several state bodies are authorized to consider complaints/petitions regarding the violation of trademark rights. During the pre-trial procedures, the right holder shall take additional and important steps in order to demand the necessary information.

Another method is conducting direct negotiations with the violator as a pre-trial measure. Negotiations often give the expected results, as violators are keen on making concession and quickly stop the violation assuming the possible damages that can be demanded by the right holder, including prosecution procedures. As part of the pre-trial proceedings, the parties may sign settlement agreement containing terms for penalties. In this case, any arising disputes would fall into contract law.

Fine for illegal use of a trademark

In addition to damages, there are other types of fines stipulated in the legislation of the Republic of Uzbekistan for trademark violation. However, it should be noted that the right holder does not benefit financially from imposing fines. Instead, such measures are used to prevent the recurrence of the offence by unfair competitors.

Hence, according to Article 177 of the Code on Administrative Liability of the Republic of Uzbekistan - illegal use of a trademark incurs a fine of five to twenty basic calculation values (approximately: $130-530).

Moreover, Article 371 of the Law of the Republic of Uzbekistan «On Trademarks, Service Marks and Names of Places of Origin of Goods» states the following: The illegal use of a trademark, or confusingly similar designations in respect to homogeneous goods will result in a fine of one hundred to two hundred basic calculation values for legal personalities (approximately $2,700-5,400). Fines are determined for each type of offence separately.

The judicial practice related to imposing fine sanctions or damage recovery do not cover any high-profile cases, however, national courts considered in the past several cases on recovery of damages caused by illegal use of a trademark.

This branch of law remains unexplored to the full extent due to a lack of practice, although all necessary legal instruments are reflected in the law. The legal mechanism for applying these norms mainly depends on the judicial corpus, while the right holders themselves can also have a significant impact on the improvement of this practice.

Keywords: Uzbekistan, trademark, damages, fines, court.