Can Reputation be Compensated under Turkish Trademark Law?

Trademarks are considered to be among the most valuable assets for a business. However, trademark reputation is often harmed by counterfeit products, improper use, and malicious commercial practices. As a remedy for such damage, Turkish law has in place a mechanism for reputational compensation: Article 150/2 of the Industrial Property Law No. 6769 (the “IPL”) governs claims for damages arising from the loss of reputation, allowing trademark owners to seek compensation independently of material or moral damages.

• Damage to Trademark Reputation and Its Scope

Trademark reputation refers to the positive perceptions formed in the minds of consumers about a trademark. This perception enhances the trademark’s reliability and appeal, thereby supporting its commercial success. However, this reputation, often built through substantial investments over many years, can be easily damaged. Such harm can unfairly undermine the trust of consumers in the trademark by tarnishing the image attached to it. In this context, compensation for the loss of a trademark's reputation includes not only material damages but also the moral damages resulting from harm to the positive image associated with the trademark.

Indeed, the Supreme Court defines reputational compensation as a type of compensation distinct from material and moral damages yet incorporating elements of both, stating: “The concept of trademark reputation refers to the image created through the trademark, as building and maintaining both image and trust involves significant costs. Reputational damage, therefore, arises from the harm caused to this constructed or ongoing image. In determining compensation for reputational damage, the expenses incurred in building and maintaining this image (such as advertising campaigns) should be considered to assess the cost of rectifying the damage, along with the moral impact of the loss of reputation” (11th Civil Chamber decision, dated 05.05.2016 and numbered F. 2015/8175, D. 2016/5114).

• Conditions for Claiming Reputational Compensation

Since trademark infringement constitutes a tort, all the elements of tort liability (unlawful act, fault, damage and causal link) must be satisfied in order to claim reputational compensation under Article 150/2 of the IPL. Accordingly, the following conditions must be met:

Unlawful Act: The claimant must prove that the infringer acted unlawfully by:

• ▪️ Using the claimant’s trademark on products or services in a detrimental manner, or
• ▪️ Manufacturing products or providing services under the claimant’s trademark in a harmful way, or
• ▪️ Acquiring products or services bearing the claimant’s trademark that were created or supplied in the abovementioned manner, or
• ▪️ Supplying the products or services under the claimant’s trademark to the market in an inappropriate way.

Examples of actions that harm the reputation of the trademark include using the trademark on defective or low-quality products or services or offering them at a price so low that it undermines the trademark's reputation. In a decision by the Supreme Court, the unauthorized use of the registered “Hello Kitty” trademark on pendants, earrings, and rings, with significant differences in appearance, shape, characteristics, color, and design, was deemed as improper and inappropriate use (11th Civil Chamber decision, dated 02.07.2024 and numbered F. 2023/3429, D. 2024/5427).

On the other hand, improper use or release of goods or services bearing the original trademark is outside the scope of this provision.

Damage and Fault: For this condition to be met (i) damage to the trademark's reputation must result from its economic use through unlawful acts constituting infringement; and (ii) the person committing the infringement must be at fault.

In this context, personal use that falls under inappropriate or improper use does not give rise to reputational compensation. For instance, installing LPG on a high-end car cannot be subject to reputational compensation, as the trademark owner's rights over the mark have been exhausted. This principle is clearly stated in a decision by the Supreme Court, which mentions that reputational compensation is directly linked to the damage inflicted on the trademark's reputation (11th Civil Chamber decision, dated 11.05.2009 and numbered F. 2008/1536, D. 2009/5629).

With respect to fault, the degree of fault (intent or negligence) is irrelevant for claiming such compensation, although it plays a crucial role in determining the amount of compensation.

Casual Link: Trademark reputation must be damaged as a result of a wrongful act that constitutes an infringement.

Subjects of the Claim: Generally, those that may be subject to reputational compensation claim include infringers involved in the production of the goods and those responsible for their sale or distribution. However, the claim may not always have to be directed at third parties, as licensees who are in a legal relationship with the trademark owner under a licensing agreement may also cause damage to the trademark's reputation.

In addition to these conditions, the question of whether a trademark must be well-known to claim reputational compensation remains a matter of debate in the doctrine. However, since trademark infringement without altering the standards of the original trademark is exceptionally rare, it is likely that reputational compensation could be granted in nearly all cases of infringement under the current legal framework. Therefore, the argument that a trademark does not need to be well-known to claim reputational compensation seems both reasonable and legally justifiable.

Ultimately, although some Supreme Court decisions tend to regard damage to a trademark's image solely as grounds for moral compensation, reputational compensation is neither intended to cover actual damages or lost profits nor to remedy the trademark owner's loss of image or reputation. On the contrary, it specifically addresses the loss of trust and reputation suffered by the trademark itself and thus, may be claimed as a distinct category of compensation.