Maxim Ali has commented on the proceedings with the Sever-Metropol franchise for Delovoy Petersburg

Maxim Ali - Partner

In 2017 entrepreneur Vadim Dolgoborodov acquired the right to use the Sever-Metropol trademarks and the secret to the production of branded products. In February last year, representatives of the brand identified a number of alleged breaches and, despite their prompt resolution, sought to terminate the contract unilaterally. In the court of first instance, the franchisee-partner of the network of famous cafes managed to challenge the termination; however, the co-owner of the Sever-Metropol, Elena Shevchenko, intends to appeal this decision.

For Delovoy Peterburg, Maxima Ali, Head of the IP/IT Practice at Maxima Legal, commented on the main details of the conflict.

“Usually the rightholders are so tough when entering into a commercial concession agreement that it is not difficult for them to find breaches and grounds for terminating an agreement. In this case, the franchisee’s position in the negotiations may have been affected or simply it showed too much reluctance to “tighten the screws” at the stage of negotiations. Perhaps the franchisee played into the hands of the fact that representatives of the other side and was too ready to identify breaches and terminate. As a result, not all evidence was well-framed (the court questioned the fact of the checks, although it could be confirmed by a video recording), and they did not ask a court to rule that the termination was lawful”, Maxim explained.

Maxim also emphasised that at the appeal stage, Elena Shevchenko will not be able to present new evidence of the breaches, unless they prove that there were some obstacles to doing this earlier.

At the same time, in a different case, Elena Shevchenko is trying to remove the Sever-Metropol signs from 20 pastry shops owned by Vadim Dolgoborodov. According to Maxim Ali, the grounds for the use of trademarks depends on the decision in a dispute on the legality of terminating a contract of commercial concession.

“However it is worth paying attention to two more nuances. Firstly, Elena Shevchenko, in addition to terminating the contract of commercial concession, gave “other” reasons, including breaches of quality standards. Perhaps the contract is structured so that the legitimate use of trademarks by the franchisee is only possible if it meets the quality standards established in the contract. Accordingly, these breaches could hypothetically be regarded as a trademark infringement”, Maxim suggested. If Elena Shevchenko referred to the same breaches as in the dispute over the termination of the contract, and if “the appeal will directly say that there were no breaches (now the trial court only said that they were not proven), then Mr Dolgoborodov will not have to prove the lack of breaches again”, Maxim added.

Secondly, one of the trademarks that Elena Shevchenko holds is not covered by the commercial concession agreement with Vadim Dolgoborodov. “That is, formally, its use was not granted to Mr Dolgoborodov. Therefore, the court has yet considered why this appeared in the claim: whether it was a fact of unfair registration (to create a formal basis for making claims against the franchisee) or the franchisee really went beyond the scope of the contract and used the logo of which the parties had not agreed on”.

To read the full article (in Russian), please see the Delovoy Peterburg website >>>