by Bruno Lopes Holfinger e Filipe Fonteles Cabral
January 01, 2010
Over the past 15 years, political and economic issues in Brazil have prompted legislative change in several administrative and legal aspects, specifically in the field of IP. In 1996, Congress passed a new and modern IP law, the impact of which has been clearly felt. Trademark filing has increased by 55 percent in the last 10 years, patent filing rose by approximately 30 percent between 1998 and 2008, and patent, litigations jumped from 80 to 200 per year between 1996 and 1998. Such numbers reflect the economic growth of the Brazilian market.
Brazil as an international authority
Regarding patent protection, at the international level, attention was drawn to the WIPO’s appointment of the Brazilian Patent and Trademark Office (PTO) as an international patent search authority (ISA) and international preliminary examining authority (IPEA) under the Patent Cooperation Treaty (PCT) in June 2009. The Brazilian PTO is the 14th agency in the world and the first in Latin America to achieve this status. This recognition is aimed at reducing the initial cost of patent prosecution for Brazilian and/or Portuguese-speaking companies, research centres and inventors. Those who wish to protect their knowledge and technologies through the PCT system in their native tongue can now do so, as Portuguese was approved for the publication of patent applications.
In this context, quantitative and qualitative adjustments were required. This included, for example, instigating a technical qualification for members of staff working as examiners. Many now have Master’s degrees or doctorates. There has also been an increase in the number of qualified personnel who can carry out international patent searches, and who are fluent in English and another language. The number of patent examiners has increased from 110 to 250. By the end of 2009, around 70 will be trained specifically for examination in telecommunications, electronics and chemistry.
Patent and trademark e-filing
The Brazilian PTO is currently testing an electronic patent filing system, which is forecast to become fully operational at the beginning of 2011. E-Patent intends to accelerate the examination phase and reduce the time to patent grant from the current average of seven years to four years. In addition to time, the accessibility of file wrappers and reduction in administrative costs will lower search and query costs. E-Patent is expected to have the same results as "e-Marks" which has been operational since September 2007.
The benefits of Brazilian technological innovation law
In the domestic scenario, the grant of patents can be viewed as an indicator of innovation capacity, and the number of patents granted to a given country reflects its technological advancement. The Brazilian government has passed new laws to stimulate innovation and technological research by providing specific incentives, such as allowing tax deductions on multiple technology research and innovation development expenditure. Among said incentives, the legislation establishes, for instance, a tax deduction of 20 percent on technology research and innovation development expenditures, if the subject of the expenditure has been protected by patent and/or plant varieties registration. It has also reduced the rate that foreign remittances are charged for registering and maintaining trademarks, patents and plant varieties from 15 percent to zero. As a result, according to data from the Brazilian Ministry of Science and Technology, between 2007 and 2008, there was a 147 percent increase in the number of companies investing in research and development, and benefiting from the tax incentives.
Growth across Brazil has been homogenous and is 247 percent of what it was in 2006, indicating that Brazil represents a favourable environment for technological innovation for businesses, universities and research centres. From a total of R$6.82 billion ($3.9 billion) invested in R&D activities, tax waivers and financial incentives for these companies have reached R$2.21 billion ($1.26 billion).
Protection of non-traditional marks
To be registered as a mark in Brazil, a sign must be distinctive and visually perceptive (Article 122 of the current IP law). The Brazilian PTO invokes such legal provision to deny trademark protection for non-traditional signs, such as sound and smell marks.
Nevertheless, the same IP law provides broad protection against unfair competition, where any individual who uses fraudulent means to divert consumers is considered guilty of the practice of unfair competition (Article 195, III). Brazil is a member of the Paris Convention and its local courts have a tradition of applying legal provisions against unfair competition, based on local law or Article 10 bis of the Convention. Sound marks, various types of trade dress, retail store layouts, Internet search engine sponsored links and many other forms of IP infringement have already been tested in the Brazilian courts, with positive results for IP owners. Therefore, although non-traditional marks that are not visually perceptive are not accepted for registration at the Brazilian PTO, there is wide scope of protection under unfair competition rules.
Protection of trademarks against dilution
The former Brazilian IP law had a provision for protecting "notorious marks", which, once registered, could be enforced against similar or identical marks in any and all fields of activity. However, rigid prerequisites, such as obtaining trademark registration in Brazil and proving notoriety throughout the country, could in practice block IP owners from claiming such protection.
What if the mark was duly registered and relatively famous but not "that notorious" throughout the country? Worse yet, what if the mark was that notorious countrywide but not registered in Brazil? In those cases, trademark rights could not be enforced for products or services unrelated to the IP owners’ activities.
The current Brazilian IP law has solved this problem. In addition to the protection of "notorious marks", the new IP law also protects the registrant or the applicant of a mark against any offence to the material integrity or the reputation of its mark (Article 130, III). Neither registration nor countrywide fame is required. In order to claim such protection, the IP owner must prove that the use of a similar mark by a third party may affect the integrity or reputation of its mark.
The first decision that applied this provision was issued in 2006 by the Federal Court of Appeal of the Second Region (Rio de Janeiro and Espirito Santo states). Justice Liliane Roriz, who wrote the leading decision, quoted trademark dilution theory in guaranteeing protection of "DOUBLEMINT" chewing gum against a similar mark for different products. Although "dilution" is not expressly mentioned in Brazilian IP law, the same rationale is used to protect trademarks under Article 130, III.
State and federal courts specialising in IP
IP issues have become regular topics in Seminars for enforcement authorities, including judges, public attorneys and police officers. In Rio de Janeiro, which is the location of the Brazilian PTO and the venue for most trademark and patent nullity actions, the federal courts have adopted new rules. Since 2001, IP lawsuits have been sent to four specific and specialised federal courts. Similar measures were adopted by the Federal Court of Appeals of the Second Region, which has two chambers concentrating on IP litigation. Since 2001, in Rio de Janeiro’s state courts, where infringement actions are pursued, any corporate law issues, including IP matters, have been examined by one of the seven corporate courts.
This court structure has secured high-quality decisions within a reasonable timeframe. Although you can still find some experienced judges in other states, Rio de Janeiro is without doubt, one of the preferred venues for handling IP lawsuits.
Special preliminary injunction provision
As a general rule, in Brazilian civil procedure law, a preliminary injunction can be requested at any time during the course of a lawsuit. In particular cases, the judge may grant this request even before the defendant is served with the summons. In order to have a preliminary injunction granted, the plaintiff must convince the judge of the fumus boni juris (likelihood of success based on solid rights) and the periculum in mora (that the plaintiff’s rights could be severely damaged if no action is immediately taken).
A preliminary injunction request is particularly important for IP owners as the continued commercialisation of infringing goods may cause financial loss and irreparable damage to the mark’s reputation. It is sometimes necessary to obtain an injunction before the summons are served (ex parte injunction) in order to preserve evidence and avoid an unsuccessful search and seizure raid. The 1996 Brazilian IP law has a specific provision regarding ex parte injunctions. According to the first paragraph of Article 209, in IP infringement cases, the judge is allowed to grant an ex parte restraining order to prevent future violations. For trademark litigations, the second paragraph enables the judge to authorise the seizure of all counterfeits when there is a blatant reproduction or imitation of a registered mark.
These are powerful tools that distinguish IP cases from ordinary preliminary injunction claims, leaving the judges comfortable to grant restraining orders against infringers.
Criteria for calculation of losses and damages
Although still not having punitive damages for IP infringement, the Brazilian IP law has brought concrete benefits for victims of IP infringement seeking compensation for losses and damages. Article 210 establishes that the damages awarded to the injured party will be determined according to one of the following criteria:
(a) The benefits that would have been gained by the injured party if the violation had not occurred
(b) The benefits gained by the infringer, or
The above legal provision met the long-term expectations of IP owners since the courts now have solid grounds on which to calculate damages. Even if the infringer does not keep records of its illegal operations, the court will determine the damages using different criteria such as items (a) or (c) above.
Completing the favourable scenario for damage recovery, in the last few years, the Superior Court of Justice has fixed the understanding that in IP violation cases, damages may be presumed without the need for proof. This understanding has hit infringers who have tried to avoid paying damages based on the formal requirements of the Brazilian civil code. As a result, substantial amounts are already being awarded in IP infringement cases.
A number of important changes have fostered IP investment in Brazil and rendered its protection and enforcement more feasible. Such changes have enhanced Brazil’s reputation internationally as a strategic region for foreign investment. Equally important is the fact that Brazilian industries and researchers are exploring and protecting their innovations abroad.
There is, however, still a long way to go. The years leading up to the 2014 FIFA World Cup and 2016 Olympics in Brazil will be decisive for legal discussions, especially regarding the prevention of ambush marketing, sponsorship contracts, licensing matters, border control of IP rights, and so on. In this germinal phase of development, the Brazilian PTO has already manifested its commitment to help FIFA and the International Olympic Committee prevent unauthorised exploitation of their rights, in co-ordination with Brazilian customs, the police and .public prosecutors.