The Superior Court of Justice Issues Decision Allowing Comparative Advertising

In Brazil, the advertising activity is regulated by Law 4,680, of June 18, 1965, which establishes rules about the exercise of the profession, and Decree 57,690, of February 01, 1966, which regulates Law 4,680.

There is no federal law specifically regulating comparative advertising and, in the lack of proper legislation, the practice is regulated very broadly by the Consumer Defense Code – Law 8.078, of September 11, 1990 and the Industrial Property Act – Law 9,279, of May 14, 1996.

By the time Law 4,680 and Decree 57,690 were enacted, Brazil was under a dictatorship that harshly censured advertising. Since the Government tried to approve in Congress a bill of law requiring prior approval of any advertisement before its dissemination in the media, the Brazilian advertising community decided to create self-regulating rules, thus developing the Brazilian Advertising Self-Regulation Code. Also, a non-governmental organization named Brazilian Advertising Self-Regulating Council (CONAR) was founded to fully enforce the code and monitor the advertising activity in Brazil, including comparative advertising.

Comparative advertising is accepted by CONAR in article 32 of the above Code, which establishes rules for such practice. Said article, however, does not produce effects of law internally.

Recently, the Superior Court of Justice issued a decision taking the position that comparative advertising should be acceptable, as long as its main objective is to inform and/or protect the consumer. It must be based on objective and verifiable information, it cannot be misleading, create confusion between goods, be detrimental to the competitor’s product or mark, or tantamount to encroachment on third party’s goodwill.

The claim that gave cause to the decision deals with the non-authorized use of the mark “DURACELL” in packages of the product “RAYOVAC” and corresponding divulgation materials, through comparative advertising. The claim is also based on unfair competition in view of the use of the following slogan: “The war against the rabbit is declared”, in a clear reference to Duracell’s mascot.

Law 9,279/96 is very restrictive as far as the use of trademarks by third parties in commercial contexts is concerned. Article 129 of Law 9,279/96 guarantees the exclusive use of a registered mark by its owner and the court action was essentially grounded on such provision. Article 195, item III of the same law prevents the fraudulent diversion of clientele and it was also used in the claim.

In reviewing the claim, the Justices decided to establish a balance between the interests of the (i) trademark owner; and (ii) consumers. The decision was divided in following items:

(i) Consumers: comparative advertising should be seen as any other ordinary pieces of advertising, which serves to guide the consumer’s freedom of choice, being prohibited any sort of abusivity and the advertising capable of misleading consumers;

(ii) Trademark: article 132 sets out the limits for trademark protection (fair use). Its item VI establishes that the trademark owner may not “prevent reference to the trademark in a speech, scientific or literary works, or in any other publication, provided that the reference is made with no commercial connotation and without detriment to the distinctive character of the trademark”. Although comparative advertising has a clear commercial connotation, the above limitation would show, according to the Ministers, that the trademark rights would not be absolute. There are constitutional provisions that go against the trademark rights, such as freedom of speech, access to information and free competition, and the mere citation of trademark owned by another company, by itself, would not be enough to support a court action; and

(iii) Unfair competition: article 195 enumerates 14 items describing conducts that characterize unfair competition and such items would aim at avoiding the undue use of someone else’s property resulting in damages to the respective owner and consumers. Thus, from the competition perspective, comparative advertising could only be prohibited if consisting in denigration, confusion or undue use of someone else’s image or prestige. It should also be added that comparative advertising would also serve as a “facilitator instrument”, because an unknown mark could bring more importance to a piece of advertising by citing a well-known mark which is generally acquired by consumers.

In other words, the Superior Court of Justice basically followed the same parameters fixed by CONAR in section 32 of its Code to deal with comparative advertising. The practice is accepted, showing that the exclusive rights over a certain trademark are not absolute. However, there are limits that must be observed.

There is no “black or white” answer to what type of comparative advertising is allowed. The long section 5 of the Federal Constitution, containing 78 items and several other sub items (including protection of industrial property vs freedom of speech, access to information and free competition), is understood to be hierarchically neutral. Thus, as a general rule, one right does not have prevalence over the other and the decision will always rely on the particularities of each case.

However, the Court’s decision consolidates the positioning that comparative advertising is an accepted practice in Brazil, bringing more legal certainty to the subject matter.

The positioning also stresses that trademark rights should be relativized in certain situations to attend consumers’ interests and establishes important parameters that should be observed whenever an advertising campaign is released upon the use of third party’s trademarks.