compensatıon for loss of reputatıon ın tredemark law

INTRODUCTION

The reputation of a trademark refers to the positive impression that the trademark has left on customers over the years and its standing in the market. In other words, "the reputation of the trademark" expresses the respect and recognition it has gained in terms of the quality and standard of the goods and services it represents. As we will explain below, in cases where a trademark does not have such a reputation, the issue of compensation for loss of reputation will not arise in cases of trademark infringement.

In Turkish law, there are three types of damage that the trademark holder can request from the infringer in case of trademark infringement: material compensation, moral compensation, and compensation for loss of reputation. This article will discuss the distinguishing features of compensation for loss of reputation in trademark law, as well as the conditions under which such compensation can be claimed.

CONCEPT OF COMPENSATION FOR LOSS OF REPUTATION

Compensation for loss of reputation is regulated in Article 150, Paragraph 2 of the Industrial Property Law No. 6769, which states:

Compensation

ARTICLE 150- (1) Those who commit acts that constitute an infringement of industrial property rights are obligated to compensate the damage of the right holder.

(2) In the case of infringement of industrial property rights, if the product or service subject to the right is poorly used or produced by the infringer, or if products produced in this way are procured or released to the market in an inappropriate manner, resulting in damage to the reputation of the industrial property right, additional compensation can be claimed.

(3) Before filing a compensation lawsuit based on the infringement of industrial property rights, the right holder may request the court to decide that the infringer submits documents related to the use of the industrial property right in order to determine the amount of damage suffered or to determine the evidence in the compensation case.

As stated in Paragraph 2 of Article 150 of the Industrial Property Law No. 6769, the phrase “…additional compensation can be claimed…” indicates that compensation for loss of reputation is not a replacement for other material and/or moral compensation, but rather a third type of compensation that can be requested alongside them. Indeed, as stated in the decision of the Turkish Court of Appeals, General Assembly of Civil Chambers, E. 2017/2478, K. 2019/1345:

"Under the law that was in effect at the time of the case and should be applied to the present case, the Decree Law No. 556 on the Protection of Trademarks provides for three types of compensation claims in the event of trademark infringement: material and moral compensation, as well as compensation for reputation loss."

As seen in this high court decision, compensation for loss of reputation is a third type of compensation that can be requested from the infringer in addition to material and moral compensation.

DISTINGUISHING CHARACTERISTICS OF COMPENSATION FOR LOSS OF REPUTATION

Unlike the conditions required to request other types of compensation for unlawful acts under general tort law, compensation for loss of reputation can only be claimed for well-known trademarks. This is because gaining reputation for a trademark results from the trademark owner's long years of effort, and if the trademark has not gained any such reputation, there can be no claim for compensation for loss of reputation. In this regard, the burden of proof is on the trademark holder, who must prove that the trademark has a market reputation and recognition. After proving the trademark’s well-known status, the court will investigate the presence of the infringing acts referred to in Paragraph 2 of Article 150 of the Industrial Property Law. As stated in the decision of the Turkish Court of Appeals, 11th Civil Chamber, E. 2021/405, K. 2022/2070:

"According to the relevant provision, in order to rule on compensation for loss of reputation, it must first be proven that the claimant's trademark is either a well-known trademark or that quality and prestigious products or services are produced or provided under that trademark."

However, to claim compensation for loss of reputation, the trademark must have created a certain level of prestige and trust among consumers over the years, and this must have been damaged by the acts that constitute infringement of the trademark rights as specified by law. The infringements listed in Paragraph 2 of Article 150 of the Industrial Property Law are not exhaustive, and further explanations will be provided below regarding the nature of these acts.

LEGAL NATURE OF COMPENSATION FOR LOSS OF REPUTATION

• Relationship Between Compensation for Loss of Reputation and Moral Compensation

The commercial reputation of the trademark holder (not the trademark itself) is the intangible commercial entity formed by the image and trust gained in the market. The loss and damages to this reputation form the basis for a claim for moral compensation. In other words, the loss of commercial reputation due to harm to the trademark’s reputation can justify a claim for moral compensation. Compensation for loss of reputation, however, directly aims to protect the reputation of the trademark itself. In other words, while the legal conditions for compensation for loss of reputation apply to the relationship between the trademark’s industrial value and its reputation, the provisions governing moral compensation apply to the relationship between the trademark’s product and the commercial entity of the trademark holder. In legal disputes, the key distinction when addressing moral compensation and compensation for loss of reputation is whether the affected party is the commercial entity or the trademark itself. However, in high court decisions, this distinction can sometimes overlap, and in some cases, the loss of reputation compensation is discussed in terms of its moral aspect. In our opinion, this does not undermine the fact that compensation for loss of reputation is a distinct form of compensation.

Indeed, in its decision, the Istanbul Regional Court of Appeal, 44th Civil Chamber, E. 2020/1359, K. 2022/1482, stated:

"Since compensation for loss of reputation directly concerns the trademark’s reputation, the compensation is aimed at addressing the damage to the trademark’s reputation, not the legal entity’s business."

As noted in the decision of the Court of Appeals above, when the trademark’s reputation is damaged, the trademark holder may also request moral compensation if the negative impact extends to their personal or commercial life.

The Application of the Court of Cassation

According to the current view of the Court of Cassation, the concept of reputation damages has both material and moral aspects. In its decision numbered E. 2015/8175 K. 2016/5114, the 11th Civil Chamber of the Court of Cassation stated:

"The concept of a brand’s reputation encompasses the image expressed by the brand. Image and trust-building have a cost. Reputation damage occurs as a result of the deterioration of the image that has been established or is being established. When determining reputation damages, one should consider the costs incurred for the construction of the image (such as advertising campaigns) to restore the damage, while also taking into account the moral aspect of the reputation loss."

In this decision, the Court emphasized that reputation damages include both material and moral elements. Furthermore, in its recent decision E. 2021/405 K. 2022/2070, the 11th Civil Chamber underlined that the brand owner may also suffer damage due to the loss of reputation, which is a separate issue from reputation damage and constitutes material damages. According to this ruling:

"Reputation damages are not moral compensation; rather, they are a type of material compensation arising from the devaluation of industrial property rights due to imitation, poor production, or marketing. The actual damage occurs to the industrial property itself, not the right holder. The person suffering from this devaluation (reputation loss) is the right holder."

Conditions for Reputation Damage Compensation

According to Article 150 of the Industrial Property Law No. 6769:

1. Liability
   Persons who commit acts that infringe industrial property rights are obliged to compensate for the damage caused to the right holder.

2. Reputation Damage
   If the infringement of industrial property rights causes harm to the reputation of the products or services concerned, due to improper use or production, or if the infringing products are made available or placed on the market inappropriately, reputation damages may also be claimed.

3. Request for Evidence
   Before filing a lawsuit for compensation based on the infringement of industrial property rights, the right holder may request a court decision for the submission of documents regarding the use of the industrial property right, to determine the extent of the damages incurred.

According to the above-mentioned article of the Industrial Property Law, for reputation damage compensation to be possible, the cumulative conditions for compensation due to tort must be met. Additionally, there are certain conditions related to trademark law in this regard. The necessary conditions for claiming reputation damage compensation, with their specific characteristics in trademark law, will be discussed below.

1. ACT
   The first requirement for awarding reputation damage compensation is the existence of an intentional act. The acts that constitute an infringement on the reputation of a trademark are listed in Article 150/2 of the Industrial Property Law. The provision aims to demonstrate that not every act against a trademark constitutes an infringement. It provides that compensation may be requested if the trademark is "improperly used," "improperly produced," "improperly supplied," or "marketed in an inappropriate way," causing damage to the trademark's reputation. These acts are not exhaustive, and based on the specifics of the case, the scope of these acts can be extended by analogy to include actions such as using the trademark in violation of Article 7 of the Industrial Property Law or extending the rights granted by license without permission.

The Court of Cassation, in its decision E. 2015/8175 K. 2016/5114, ruled that:

“The court should have examined whether the defendant used the plaintiff’s trademark while providing services at a smaller scale in a fair, and whether the plaintiff’s image and reputation were damaged as a result. Additionally, it should have considered whether the plaintiff needed to undertake any corrective activities and expenses to restore this reputation, before ruling on reputation compensation under the Decree Law No. 556."

In its decision E. 2021/405 K. 2022/2070, the Court of Cassation elaborated on the framework of infringement acts:

"On the other hand, the infringing party must produce goods under a mark that directly contradicts the plaintiff's brand, manufacture them in poor quality, have the packaging damage the reputation, or market the goods in an inappropriate environment or manner."

2. UNLAWFULNESS
   During the commission of acts causing reputation damage, whether there are justifications under the law will be determined in accordance with tort law. In this context, if the trademark holder consents to the damage beforehand, the act will no longer be unlawful. In cases where the trademark holder fails to take preventive actions in a reasonable time frame after becoming aware of the infringement, the trademark holder’s failure to act will be considered contributory negligence, thereby exacerbating the damages.

3. DAMAGE
   It is not sufficient for a trademark to merely be infringed for reputation damage compensation to be awarded. The trademark’s damage must be clearly shown, including how the damage occurred and how it can be remedied. The burden of proof in this regard lies with the trademark owner. Furthermore, the owner of the trademark does not need to show that their own reputation has been harmed. The damage will be evaluated solely in terms of the trademark’s reputation; the trademark holder’s personal or commercial reputation will not be the subject of investigation unless there is additional damage.

Reputation damage compensation may be claimed alongside material and moral damages. However, the loss of reputation in itself does not automatically mean a loss of the trademark holder’s commercial reputation. Such damages can only be argued where there is a strong connection between the trademark and its owner.

4. SUFFICIENT CAUSAL CONNECTION
   As with general tort law, a sufficient causal connection must be established for reputation damage compensation. If such a connection cannot be drawn, liability does not arise. If the unlawful act is committed by multiple parties, each party will be fully responsible for the damage caused by their actions.

5. FAULT
   The commission of the acts specified by the law may lead one to assume they must be done intentionally, but fault in the context of reputation damage compensation may also arise from negligence. For instance, a commercial enterprise (such as an importer or large retail chain) is expected to exercise greater care and diligence than smaller retailers. Failure to do so may result in liability for damages.

JURISDICTION AND COMPETENT COURT
For reputation damage compensation, the competent court is not determined by general provisions but by the specific regulations in the Industrial Property Law. According to Article 156 of this law, the competent court for cases arising from intellectual and industrial property rights is the Intellectual Property Court.

STATUTE OF LIMITATIONS
According to Article 157 of the Industrial Property Law, the statute of limitations for reputation damage claims follows the provisions of the Turkish Obligations Code. The limitation period is two years from the date the claimant learns of the damage and the liable party, and no more than ten years from the commission of the act itself.

EVALUATION AND CONCLUSION
It is important to note that reputation damage compensation can only be claimed for trademarks that are recognized and respected in the market. Not all registered trademarks in the Trademark Registry are eligible for such claims. The burden of proof for the trademark’s reputation lies with the trademark owner.

Reputation damage compensation can be claimed for damage to the trademark’s industrial value, while any additional damage to the trademark holder’s commercial or personal assets may also be claimed as material or moral damages. Reputation damage compensation is about the devaluation of the trademark itself, not the trademark holder’s personal or commercial integrity.

The acts specified in the law must be proven by the trademark owner to show that they caused harm to the trademark’s reputation. These acts may not be exhaustive and can be extended by analogy under the rules of proof.

BIBLIOGAPHY

AYTUĞAR Bilge ve KÜÇÜK Sultan: 6769 Sayili Sinai̇ Mülki̇yet Kanunu’na Göre Marka Hakkina Tecavüzden Doğan İti̇bar Kaybi Tazmi̇nati İnönü Üniversitesi Hukuk Fakültesi Dergisi, 2020

ARKAN, Sabih: Ticari İşletme Hukuku, Ankara 2019.

AYDIN, Fatih: “Sınai Mülkiyet Kanunu ve Yargıtay Uygulamasında Marka Hukukunda Tazminat”, TBB Dergisi, 2017 (133), s. 517-575.

AYHAN, Rıza/ÇAĞLAR, Hayrettin/ÖZDAMAR, Mehmet: Ticari İşletme Hukuku Genel Esaslar, B. 12, Ankara 2019.