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Trademark law gets Brazilian treatment

by Rodrigo Borges Carneiro

January 01, 2007

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The landscape of trademark practice in Brazil is changing rapidly, with the national IP office constantly adopting measures to try and improve trademark prosecution – often with mixed results – and various state and federal bodies moving up a few gears in the fight against counterfeiting.

These are very interesting times to be involved in trademark prosecution and litigation in Brazil. This article will provide an overview of recent developments, beginning with a brief review of the changes brought in by the Industrial Property Law, which celebrated its 10th anniversary in 2006. The article also looks at recent changes at the Brazilian National Institute of Industrial Property (INPI) and provides a summary of the actions taken in the ongoing fight against counterfeiting.

Solid statutes

Industrial Property Law 9279/96, which was enacted on May 15 1996, made significant changes to trademark practice in Brazil. In a nutshell, the most important changes were:

  • the express incorporation into the Industrial Property Law of the protection for well-known marks provided by the Paris Convention for the Protection of Industrial Property; the abolition of the special registration of a mark as notorious and the introduction of the incidental declaration of high reputation of a mark, which, once obtained, confers special protection to the mark in all classes for five years;

 

  • the abolition of the special registration of slogans and the prohibition of the registration as a mark of slogans used only as a means of advertising;

 

  • the simplification of the trademark registration procedure with the prompt publication of the application for opposition purposes without prior examination and the abolition of the right to appeal against the acceptance of a registration; the recognition that licence greements need not be recorded before INPI in order to validate proof of use in forfeiture proceedings;
 
  • the introduction of several procedural remedies to curb infringements such as the possibility to obtain injunctive orders to suspend the violation and seize products bearing infringing marks in an ordinary civil court action; and
 
  • the introduction of parameters for the calculation of indemnification in the event of infringement.
 
These changes, with the exception of the controversial abolition of the registration of slogans, helped to build a framework for strong trademark protection in Brazil.

Case law

The courts have also been active in dealing with trademark infringements – an example is the recognition that infringement of a famous mark can lead to indemnification for moral damages as well as economic damages. The first decision in that regard, decided by the Superior Court of Justice (Special Appeal 46671), involved the sale of fake LOUIS VUITTON products. The court awarded economic damages to Louis Vuitton Malletier and its local distributor because it found that the Bale of counterfeit products for a fraction of the price of genuine LOUIS VUITTON products diluted the value of the LOUIS VUITTON mark in the eyes of consumers. The court highlighted that consumers of luxury goods agree to pay a high price on the promise of exclusivity and quality, and that counterfeiting is immediately damaging because it vulgarizes the mark in the consumer’s eyes, which affects sales of the original product. In addition to economic damages, the court granted an award for moral damages based on the notion that sales of counterfeit products will reflect on the reputation established by the mark in the market.


Awards of moral damages to legal entities in cases involving trademark dilution are expected to become more common following, among other things, Decision 227 of the Superior Court of Justice, which provides that legal entities can bear moral damages, and the interpretation of the new Civil Code (Law 10.406/2002), which extends to legal entities the protection of personal rights usually limited to natural persons.

Courts’ specialization

Another important development has been the introduction of specialized courts to deal with industrial property matters, at both federal and state court levels.

The Brazilian Federal Court of Appeals for the Second Region, which covers the states of Rio de janeiro and Espírito Santo, has implemented since 2005 specialized panels and a section for the judgment of cases involving industrial property and IP matters. The Federal Court of Appeals for the Second Region is especially important for industrial property matters because INPI is located in Rio de Janeiro and a significant number of cases involving cancellation of industrial property rights as well as actions aimed at reversing refusals by INPI to register industrial property rights are decided by the court.

Specialization of the courts follows the creation in 2000 of federal courts of first instance to decide cases involving industrial property rights. It is hoped that specialization of the courts will increase both the quality and speed of decisions in the field of industrial property. One immediate consequence has been the acceptance by federal courts of the joining into a single action of a request for cancellation of a trademark registration and suspension of the trademark use, as well as recovery of damages. Previously, federal courts had been found to lack jurisdiction to decide on matters of infringement and recovery of damages, which led to the filing of separate actions – one for cancellation of the trademark registration in the federal court and another aiming to suspend the use and seeking recovery of damages before the state court.

Beating the backlog

Despite the statutory, case law and court system improvements described above, one black cloud obscures the horizon for trademark owners and practitioners in Brazil: the backlog of trademark applications at INPI has dramatically increased in the past io years, to the point where it now takes over five years to register a trademark. The situation has deteriorated due to a lack of investment and sufficient human resources in the face of a significant increase in trademark filings. In addition, INPI has taken on a number of projects in the past few years without putting the requisite structures in place. For example, it adopted the Nice Classification in 2000 without providing for a reasonable transition period, which contributed to the creation of a backlog of 6oo,ooo pending applications. These delays undermine the advantages stemming from the adoption of a modern law and threaten the whole system of trademark protection in Brazil. INPI’s plan to clear the backlog includes the following measures: recruiting more staff – some 60 new trademark examiners have been hired this year; examining applications filed prior to 2000 under the provisions of the old Brazilian classification system; the same classification system is also being used for renewals filed after January 2000 which have not yet been decided; and suspending the paper publication of the weekly Official Gazette – all decisions are now published electronically only.

In addition, oppositions are now published almost instantaneously. To do so, INPI publishes only the minimum information required for the applicant to know that an objection has been raised.

INPI has also announced a simplification of the procedure for recordation of assignments: multiple recordals are now published in a single notice in the Official Gazette and the recordal is effected in a separate sheet rather than at the back of the certificate of registration, as was previously the case. This eliminates the need to submit copies of the certificates of registration.

Because docketing and the management of physical files were singled out as major causes of delay, INPI has decided no longer to accept paper filings. Aiming to become a completely paperless office, it now handles electronic filings only. On September i 2006 INPI rolled out a new online trademark application filing system called e-marcas. While the possibility to file trademark applications electronically is positive, INPI’s decision to forgo paper applications entirely after the briefest of transition periods has proved controversial. Luckily for applicants, various difficulties in implementing e-marcas mean that the transition period has been extended several times so far; at the time of writing, the deadline to move to electronic applications only was January 31 2007.

What makes the transition to electronic filing difficult for applicants is the selection of the products or services relevant for each application. E-marcas enables applicants to select only products and services listed in the Nice Classification; applicants wishing to claim products and services that do not specifically feature in the classification need to consult the INPI committee in charge of classification questions, which involves additional costs and a delay of approximately seven days per application. Therefore, applicants are strongly advised to claim only products and services specifically listed in the Nice Classification. (The limitation to the description of products and services does not apply to applications filed under a Paris Convention priority claim.)

The decision to abandon paper filings led the Brazilian Association of Industrial Property Agents (ABAPI) to file a court action against INPI on November 8 2006 in the Federal Court. ABAPI recognizes the benefits of electronic filing as an alternative, but argues that abandoning paper filing entirely is illegal as it unduly limits the constitutional rights of industrial property owners. Also, ABAPI cites the examples of the United States and the European Union, where both filing systems coexist.

ABAPI also questions the decision to abandon the publication of the paper version Official Gazette. On November 27 2006 the public prosecutor recommended that a paper version of the Official Gazette coexist with the electronic version. One of the prosecutoi s arguments was that access to the Internet is still low among the Brazilian public, especially in the north and northeast of the country.


In another attempt to reduce the trademark application backlog, on November 1 2006 INPI called on all trademark applicants to indicate specifically which of their applications that are pending they are still interested in having examined. This call applied to all trademark applications filed on or before December 312004 for which examination has not been completed. The purpose was obviously to avoid wasting time examining applications in which applicants had lost interest. The communication also set out that those applications for which confirmation of interest was not received within the deadline would be subject to specific office actions, which would generate costs for applicants. The deadline for responding to INPI’s call expired on December 7 2006.

Again, while INPI’s objective was laudable, the method chosen was far from ideal and will most certainly generate more litigation.

First, the timeframe within which applicants had to respond was very short. Second, it is unfair, to say the least, to charge applicants a fee to maintain an application for which they have already paid a filing fee -the delay in examining their applications was clearly not attributable to them. An alternative could have been to ask applicants to withdraw, voluntarily, pending applications that were no longer of interest.

Preparing for the Madrid Protocol

All the above measures to reduce the timeframe for examining pending applications have also been taken to prepare INPI for the Madrid Protocol. During a meeting held on November 22 2006 the Brazilian Chamber of Foreign Trade (CAMEX) recommended that Brazil adopt the protocol. The Brazilian Inter-ministerial Group of Intellectual Property, created under CAMEX with the task of suggesting actions that accord with both the intemal and external governmental policies concerning foreign trade of goods and services related to IP rights, had previously made the same recommendation.

CAMEX’s decision will now be sent to the Ministry of Casa Civil, a government department which assists the president of Brazil, where a bill will be prepared and submitted to the Brazilian Congress.

However, according to news reports on the CAMEX website, the adoption of the Madrid Protocol will not occur until 2008. By then, CAMEX believes that INPI will have cleared its backlog of pending applications, which is a prerequisite for INPI to be able to comply with the 18-month examination period required under the protocol.

The adoption of the protocol is also the object of heated debate among the industrial property community in Brazil. Those advocating of its adoption point to the potential benefits in reducing costs to Brazilian companies in obtaining trademark registrations internationally. However, the reality does not seem to favour the adoption of the protocol at this time. As seen above, the number of pending applications and the timeframe for examination are still big challenges. Further, the number of Brazilian companies that have registrations abroad is still insignificant compared to the number of applications filed in Brazil. The actual gain would, therefore, be localized and the vast majority of local applicants may face increased costs and difficulties in obtaining a registration.

The anti-counterfeiting battie

Fighting trademark counterfeiting is difficult enough under normal circumstances, but it becomes a daunting task in a country as big and as complex as Brazil. However, despite a poor track record in dealing with counterfeiting, the Braziiian government’s attitude is changing.

The national efforts in this area were amplified after the creation of the National Anti-piracy and Intellectual Property Infringement Council pursuant to Provisory Measure 220/2004 and Decree 5.244. The council replaced the Inter-ministerial Committee against Counterfeiting, which was set up in 2001 by the former government and severely criticized for its inability to take effective action.

The council is composed of representatives from a variety of government bodies, including the Ministries of justice, External Relations and Culture, and the Federal Police. There are also representatives from the private sector, chosen by the Ministry of Justice from a selection of recognized private entities, organizations and associations.

The council has produced a plan of work with 99 actions divided into four main categories: educational, repressive, economic and legislative measures.

The following measures are among many taken at federal, state and local levels to fight against counterfeiting:


  • running educational campaigns in newspapers, schools, universities and unions;
  • organizing periodical training of customs and police officials with the aid of representatives of IP owners and specialists in the area;
 
  • consulting the highway federal patrol on how to conduct raids and inspections;
  • creating specialized precincts such as the precinct to deal with crimes relating to incorporeal property in Rio de janeiro;
  • conducting raids and operations in several states, particularly Rio and São Paulo, and several ports with the apprehension and destruction of millions of doRars’ worth in counterfeited products;
  • conducting special raids in shopping centres in the city of São Paulo, which is notorious for harbouring counterfeiters;
  • modifying the customs regulations to allow for the temporary seizure of goods and the possibility to request a court order for the definitive seizure of the goods and their destruction; and
  • adopting new provisions in the Criminal Code and the Criminal Procedural Code in relation to copyright crimes, setting out higher penalties and the possibility to destroy the goods and materials used in the production of pirated goods.

 

The most recent action against infringement was the enactment of Decree 51.305/06 of the state of São Paulo, published on November 24 2006, which allows authorities to revoke permits to conduct business for companies and street vendors if they are involved in counterfeiting activities. There are also other measures under discussion, particularly legislative measures, which would increase penalties for counterfeiting and allow the destruction of goods and materiais used in the production of counterfeited goods, as well as permitting the expatriation of foreigners involved in counterfeiting. One of the biggest challenges is, however, to change the public perception of counterfeiting. Surveys conducted in Brazil prove that many purchasers of counterfeit products know that they are counterfeit and are part of the upper classes. This contradicts the common belief that a lack of financial resources is the reason for buying counterfeit and pirated goods rather than the genuine items.

Conclusion

All the changes and the heated debate that they have generated in the areas of both prosecution and enforcement (in particular against counterfeiting) prove the importance of trademark protection today. Particularly sensitive is the difficult choice to be made regarding the adoption of the Madrid Protocol; this must involve a careful analysis of the possible advantages for the local market. The future of trademark law practice in Brazil may be difficult to predict, so businesses and trademark agents should keep a close eye on local developments to make sure that they make the most of any new options for trademark protection and finetune their strategies to curb counterfeiting.

 

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Rodrigo Borges Carneiro

Advogado, Agente da Propriedade Industrial

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