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Anti-counterfeiting 2010 – Brazil

by José Henrique Vasi Werner

June 23, 2010

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Legal framework

Trademark protection is regulated by:

the Federal Constitution;
the Industrial Property Law (9,279/96);
the Paris Convention of 1883 (as reviewed in Stockholm in 1967);
the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs); and
the August 1995 Protocol for Harmonization of Rules Regarding Intellectual Property within Mercosur in the Area of Trademarks, Indications of Source and Denominations of Origin.
Patent protection is regulated by:

the Federal Constitution;
the Industrial Property Law;
the Buenos Aires Pan-American Convention of 1910;
the Paris Convention (as reviewed in Stockholm); and
TRIPs.
Although the enforcement of TRIPs was previously in dispute before the Brazilian courts, all provisions of the agreement came into force as of 2000.

Copyright protection is regulated by:

the Federal Constitution;
the Civil Code;
the Copyright Law (9,610/98);
the Berne Convention;
the Universal Copyright Convention 1955; and
the Washington Copyright Convention 1946.
Software protection is regulated by Law 9,609/98.

Border measures

Brazilian Customs does not maintain a centralized IP rights database allowing rights holders to record their rights. In addition, there is no standard procedure throughout the country for the seizure of goods at the border.

However, even given these two fundamental shortcomings in the customs legislation, it is still possible to have effective border protection in Brazil.

According to the Industrial Property Law and the Customs Regulation (Decree-Law 6.759/2009), the customs authorities, ex officio or at the request of an interested party,may seize any product in violation of IP rights.

Based on this legislation, a rights holder may file a petition before the General Department of the Customs Administration (COANA), which should include a list of IP rights and a request to trigger the surveillance of illegal imports. Such requests can also be directed to major Brazilian ports and airports, to overcome any lack of communication between COANA and the local customs authorities.

In addition to filing a written request, a meeting with the customs authorities is highly advisable. This will allow the rights holder to explain its concerns and to familiarize the local authorities with the goods that are being infringed.

Combined with a specific training programme for customs agents, this strategy will generally give the rights holder the best chance of ensuring that illegal shipments are automatically blocked at Brazilian ports and airports.

As a matter of procedure, if the customs authorities identify a shipment of counterfeit products, the rights holder is immediately notified so that it can examine existing samples in order to verify their origin (ie, whether they are illegal or otherwise) and to present a formal statement confirming this fact.

If a court action is not filed, the import proceeding is resumed and the goods are released.

If a violation is confirmed, the rights holder must file a court action within 10 business days and provide the customs authorities with evidence that the court action has been filed.

Criminal remedies available include injunctions and criminal complaints through which the rights holder can obtain the seizure of all counterfeit goods, imprisonment of the infringers and destruction of the goods.

In the civil sphere, the rights holder can file injunction actions and indemnification actions to obtain search and seizure and restraining orders, recovery of damages, destruction of the products and reimbursement of court expenses.

Criminal prosecution

Criminal remedies are less time consuming and less expensive than civil injunctions and civil actions. For example, depending on the IP right involved, criminal proceedings can be used as the main weapon in anti-piracy campaigns.

The following actions in respect of intellectual property constitute crimes under Brazilian criminal law:

copyright violations;
patent infringement;
trademark infringement;
software violations; and
unfair competition practices.
Other crimes that may apply, generally, are:

larceny by fraud;
receipt of stolen goods;
fraud in commerce;
tax evasion; and
crimes against consumers.
In practice, criminal measures are often used to stop counterfeiting activities and other IP infringements in Brazil.

Penalties

The penalties available under Brazilian Law for crimes against industrial property rights include imprisonment and fines. The sentence can vary from one month to one year, depending on the severity of the crime. The law also allows for the punitive alternative of payment of a fine. The amount of this fine will vary, depending on the crime.

In the case of copyright violations, a Law introduced in 2003 provided for penalties to be increased to up to four years’ imprisonment (with a minimum term of two years).

Bill 333/1999, which is currently before the Brazilian National Congress, proposes to increase the penalties in counterfeiting cases where certain other criminal activity may be involved. In such cases defendants would face up to four years’ imprisonment. However, the bill has been awaiting approval since 1999, so this does not apply at present.

Police measures

The police may carry out a police inquiry independently and may use search and seizure measures to seize counterfeit products and interrogate suspects and all those involved. Any and all instruments or objects may be seized.

The injured party can conduct search and seizure measures against many infringers simultaneously, even if they have not previously been identified by the rights holder. Raids may take place anywhere that a criminal act is being committed.

Once the police search and seizure has been carried out and the criminal action has been commenced, the judge will order the destruction of all infringing goods, where possible, together with all instruments and objects that are connected with the criminal act.

Criminal search and seizure

Criminal search and seizure is usually carried out before any judicial procedure or during the police inquiry.

In principle, only materials that are strictly necessary to substantiate the crime will be seized. During the seizure, judicial experts will carry out a survey of the seized goods and certify that the goods are counterfeit.

The judicial experts must also prepare an opinion containing all information necessary to ascertain the level of responsibility of the defendant. The experts must answer questions formulated by the rights holder, the public prosecutor and the judge. The defendant has no opportunity to formulate questions or to intervene in any way during this preliminary proceeding.

The experts’ opinion is fundamental to the outcome of the action. An expert opinion which is unfavourable to the requesting party is subject to appeal.

Criminal actions

Crimes involving patent infringement, trademark infringement, software violations and unfair competition practices are private actions. This means that the rights holder is the plaintiff in the criminal action filed against the infringers. In such cases the public prosecutor acts with the special purpose of assuring that the law will prevail during the proceedings.

In contrast, copyright violations are public actions. In such cases the public prosecutor is the plaintiff in the criminal action. The rights holder may act as an assistant to the public prosecutor in order to support the criminal action and participate in all futures phases of the criminal prosecution.

Civil enforcement

Civil measures are appropriate when taken against individuals or legal entities that have sufficient assets to endure the claimed damages. This is seldom the case in the event of piracy.

Civil judges tend to issue restraining orders where both the likelihood of prevailing on the merits and the risks of irreparable harm are demonstrated. Ex parte injunctions are also available and are commonly applied. The courts often award actual and statutory damages.

Expedited procedures

The Civil Procedure Code allows plaintiffs to obtain the remedy claimed before a final judgment is given, under the following circumstances:

There is unequivocal proof of the veracity of the plaintiff’s allegation;
There is a reasonable fear that the damage inflicted is or would be irreparable or very difficult to repair; and
The defendant is abusing the process of law and/or its bad intent is clear.
The order will not be granted if there is a risk that the potential harm to the defendant as a result would be irreversible.

Financial compensation

Damages can be claimed on the basis of:

the benefits that would have been gained by the rights holder had the infringement not occurred;
the benefits gained by the infringer through the infringement; or
the remuneration that the infringer would have paid to the rights holder for a licence which would have legally permitted it to exploit the subject matter of the rights.
However, an order for financial compensation is sometimes undermined by the slow process of the Brazilian civil courts.

Anti-counterfeiting online

Copyright violations, trademark infringements, domain name misappropriations and extensive trade in counterfeit products are the most common illegal activities conducted in Brazil.

Although Brazil does not have a specific internet regulation which clearly defines the new categories of online crime, the Civil Code, Criminal Code, Consumer Protection Code, Copyright Law, Industrial Property Law and other relevant regulations afford rights holders reasonable protection against counterfeiting activities.

Disputes are analyzed on a case-by-case basis, and depending on the type of involvement of each internet player, it will be subject to civil and/or criminal prosecution according to its liability.

Indeed, depending on the specific case, liability can be extended to website administrators and internet service providers (ISPs). In such cases the rights holder must prove an effective connection between the active or inactive behaviour of the website administrator or ISP and the violation, so that a court action can be initiated.

In any event, the rights holder must undertake intelligence work to:

identify counterfeit products being traded online, small players that are trading in illegal products, national and international sources, distributors and buyers;
obtain physical addresses; and
identify and define the liabilities of the website administrator or ISP.
Specialized police departments established in Rio de Janeiro and São Paulo can receive complaints from rights holders. Depending on the results and the crime committed, the rights holder may file a civil court action for indemnification purposes or a private criminal action. Where the case involves a public action, the rights holder may act as an assistant to the public prosecutor.

Preventive measures/strategies

The first step in any anti-counterfeiting programme is to ensure that the rights holder’s intellectual property is fully protected. In Brazil, as in all other Latin American countries, this requires registration of the rights holder’s trademarks with the Brazilian Patent and Trademark Office (PTO) in Rio de Janeiro. There are often substantial backlogs and delays at the Brazilian PTO, so it is advisable to seek registration of relevant trademarks as soon as possible.

The selection of local counsel is perhaps the most critical decision for the rights holder when putting together an enforcement team. In Brazil, as in most countries, there is a wide array of potential counsel from which rights owners may select to assist in the operation of an anticounterfeiting programme. However, all potential counsel with trademark protection experience do not have equal experience in the actual enforcement of IP rights.

Anti-counterfeiting actions in Brazil are largely conducted through criminal actions with special forms of pleading. In addition, as anti-counterfeiting activity often takes place on the street, resulting in raids on locations which may be guarded by armed criminals, it can be dangerous work and should not be undertaken by lawyers who do not have experience in the field.

Brazil is a very large country, and the sources of manufacture and distribution of counterfeit goods can cover a large and varied geographical territory. While many trademark lawyers operate in the centres of São Paulo and Rio de Janeiro, few have truly country-wide capabilities of the type that will ensure that the rights holder’s intellectual property is protected to the maximum extent possible.

The use of investigators is necessary to make trap purchases and to pinpoint the locations where counterfeit goods are manufactured and distributed. Some counsel in Brazil have their own in-house investigation teams. The benefit of this arrangement is that the investigators conduct their activities under the supervision of lawyers who are regulated by the Brazilian bars and who have ethical and fiduciary obligations to the client.

It is vital that all contracts with licensees and manufacturers include provisions requiring the contracting party expressly to recognize that title to the IP rights rests with the rights holder. They should also include quality control provisions allowing the rights holder to inspect not only the products that are made or distributed under licence, but also the premises of the contracting party – including all books and records, which must be made available to the rights holder on reasonable notice.

Contracting parties can also play a vital role in enforcement efforts. It is useful for the rights holder to train licensees in the identification of counterfeit products and to establish a system which allows the licensees to contact the rights holder’s enforcement team upon discovering any counterfeit products.

The use of authentication technology is not as widespread in Brazil as it is in Asia, North America and Europe. However, this is merely a timing issue and it is likely that the use of technology in the fight against counterfeiting will increase in the years to come.

As mentioned above, almost all anticounterfeiting actions taken in Brazil are criminal in nature. Civil cases are valuable only if it is thought that the defendant may have substantial assets available for payment of damages. Even then, however, the civil system is too slow and cumbersome and is subject to many levels of appeal, making its use less than compelling.

Good relationships with public enforcement agencies, such as the police and public prosecutors, are crucial. Again, this requires the selection of counsel who have good contacts and are widely experienced in the enforcement of criminal IP laws.

It is also useful to join with other rights holders in trade associations devoted to anti-counterfeiting. This is very helpful in lobbying government officials and legislatures to improve the laws and regulations on IP enforcement.

  

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José Henrique Vasi Werner

Partner, Lawyer, Industrial Property Agent

He has a postgraduate degree in Criminal Law and Criminal Procedure from Estácio de Sá University. He is legal Dire[...]

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