Brazil: Trademark Headlines in Latin America with Particular Emphasis on Brazil

Considering the vast extent of the Latin American geographical and trademark territory to cover and the usual time constraints, it seems appropriate to concentrate on recent trademark developments of greater interest in the Andean Pact and the South American Common Market (Mercosur) countries. These geo-economic blocs embrace Bolivia, Colombia, Ecuador, Peru, Venezuela, Argentina, Brazil, Paraguay and Uruguay.

The Commission of the Andean Community has approved Decision 486, the new IP regime that replaces Decision 344. The new Decision, intended to be TRIPS compliant, became effective on December 1, 2000 and established new IP rules for Bolivia, Colombia, Ecuador, Peru, and Venezuela. TRIPS is indeed the propelling force that has prompted the Andean Pact countries and other countries in Latin America to adapt their national legislation so as to get in line with the TRIPS principles. Some of these countries have already made attempts at compliance and others are in the process of doing so. Decision 486 has introduced some progressive principles that could be considered quite surprising when one makes a comparison with intellectual property legislation that is at present in force in the majority of Latin American countries.

Here are some of the main provisions of Decision 486: - On Registrability: sounds and scents are now registrable as trademarks; words and symbols that could not be registered for lack of distinctiveness are now registrable if they have acquired a secondary meaning; - Opposition Proceedings: to successfully oppose, based on a registration owned abroad, legitimate interest must be proven. The simultaneous filing of an application to register the opponent’s mark is also required; oppositions can be sustained, irrespective of the difference in goods and services, whenever there is risk of economic or commercial damage or of dilution of a well-known mark; greater facilities are now given to reject an application filed by a representative or distributor of the owner of the mark; - International Exhaustion: international exhaustion of rights is adopted for trademarks; - Recording License Agreements: trademark license agreements must be recorded with the respective national Trademark Offices; - Well-Known Marks: special provisions have been introduced to determine whether a trademark should or should not be considered well-known. For this purpose the degree of knowledge of the mark by certain sectors must be proven, as well as the extent and period of use; advertising; the sales figures both within the country and internationally; the degree of distinctiveness of the mark; the value of the mark as a company asset; the interest by third parties to enter into franchise or license agreements and general business activity surrounding the trademark; - Unfair Competition: provisions relating to unfair competition have been outlined, and it has been defined as all acts which are contrary to honest uses and practices; - Border Measures: border measures are contemplated and detailed procedures have been established; - Domain Names: domain names or email addresses that conflict with a well-known mark can be cancelled or changed at the request of the trademark owner or its licensee.

Two of the most important subjects addressed by Decision 486, well-known marks and unfair competition, merit additional discussion. Conflict with a well-known mark remains one ground for rejecting a trademark application. Unlike Decision 344, however, Decision 486 provides that transliterations of well-known marks may not be registered. It also clarifies that the type of product or service for which the mark will be used is irrelevant when the conflicting mark is well-known. In addition, Decision 486 adds that taking unfair advantage of a well-known mark's prestige and the weakening of such a mark's distinctive force constitutes grounds for rejecting an application: there need not be likelihood of confusion, as required by Decision 344.

Decision 486 also expands on the definition of a well-known mark and on the analysis to be applied in determining whether or not a mark is well-known. It clarifies that a mark can be well-known in the relevant sector of any member country.

Under Decision 486, a well-known mark can be sufficiently known to merit protection, even if consumers do not associate the mark with the specific goods/services for which it was granted registration. It also provides that in an action based on the unauthorized use of a well-known mark, the good or bad faith of either the defendant or the plaintiff in adopting or using the mark must be considered.

Decision 486 determines that owners of well-known marks now have special rights to summary cancellation of any domain name or e-mail address that constitutes "use" of their marks. It also adds the concept of unfair trade practices to the Andean Pact's intellectual property regime. Unfortunately, by broadly defining "unfair trade practices" as "any act carried out in respect of intellectual property in the course of trade that is contrary to honest commercial practices," Decision 486 fails to provide a workable uniform standard. Each country (and/or region) will determine what is or is not an unfair trade practice according to domestic law and local business custom. Perhaps most significantly, Decision 486 expressly empowers national PTOs to deny applications when they have "sufficient reason to believe" that the mark was applied for "in order to engage in, contribute to, or strengthen an act of unfair competition." This will permit parties to present, and national PTOs to consider, evidence well beyond the "four corners" of a mark, including evidence of any commercial activity of the applicant (whether or not related to the particular mark or product at issue in the application) that suggests that the application may be tied to unfair competition.

With the exception of the unusual opposition proceedings in Argentina, the Trademark Law would appear to be reasonably in line with TRIPS. Unlawful activities in the internet such as trademark piracy, dilution, meta-tagging, cybersquatting, are the headlines being generated in the trademark area. This has generated much court activity in which the owners of trademarks and of other intellectual property rights have demanded the transfer or outright cancellation of domain names. These demands are being requested on the basis of preventive or in-depth legal measures.

In the case of Heladerias Freddo S.A. vs. Spot Network, dated November 26, 1997 (Case 5354/97), the court ordered the preventive suspension of the defendant’s domain name freddo.com.ar and authorized the plaintiff to use it by means of a registration with NIC-Argentina, the Argentinean Domain Name Registry, until a final decision issued from the court proceedings. The FREDDO case was followed by several other cases in which the courts consistently recognized the plaintiffs’ rights. The Federal Court of Rosario, for example, in Hotel Ava Miriva S.R.L. vs. Doino Group Inc. and/or Gustavo Doino, held that the registration of the domain name avamiriva.com.ar should be suspended in view of the plaintiff’s rights deriving from its previous commercial name.

Probably due to the increase in domain name disputes, guidelines have been issued by NIC-Argentina, for the registration of domain names. These guidelines became effective on August 30, 2000 and provide that the domain name registrant is the sole responsible party for all consequences that result from the selection of its domain name. According to the guidelines, NIC-Argentina assumes no responsibility with regard to the legality or use of the domain name. The guidelines further state that it is not up to NIC-Argentina to evaluate whether a domain name is capable of violating any third party’s rights. The guidelines contain "hold harmless" provisions that are typical of Domain Name Registries in Latin America. This is unfortunate and the courts would seem to be able to place the matter in proper perspective and for these Registries to assume full responsibility for their acts in granting domain name registrations. Ultimately, this would no doubt result in a substantial reduction of court disputes.

Apart from Presidential candidate speculation, and the soccer results, trademark headlines in Brazil can be said to focus on disputes involving domain names, parallel imports and the protection of famous marks.

Domain names, under the "br" code reference, are registered by the Foundation of Support for Research of the State of São Paulo, known as Fapesp. In the past, Fapesp received from the Trademark Office a list of trademarks which were, or had been, officially held to be well-known under the former Trademark Law. These lists were used by Fapesp to inform applicants that a requested domain name could not be registered since it would be in violation of trademark rights previously granted. However, the Trademark Office stopped issuing such Declarations of Notoriety and no further lists were provided to Fapesp.

Due to the ensuing lack of co-ordination between the Trademark Office and Fapesp, together with the fact that there are no examination procedures prior to domain name registration, nor the possibility of administrative appeals, the only remaining available recourses to challenge domain name registrations are by instituting court proceedings or through arbitration. Not surprisingly, there are a staggering number of domain names that Fapesp has registered which are in direct violation of trademark rights. Also on the increase, at an alarming pace, are the court actions that are being brought by trademark owners against cybersquatters. Before instituting a court action, the procedure that is normally adopted, with reasonable success, is to send the alleged infringer a warning letter through the Registry of Deeds and Documents. This has an intimidating effect and, in certain cases, the recipient’s reaction is an offer to negotiate the transfer of domain name ownership or outright cancellation. If no reply is received, however, then there is no option but to bring forceful action against the infringer.

Court decisions that have been issued so far have shown that the courts are receptive to plaintiffs’ arguments as long as it can be shown that there is clear trademark ownership and that there is a definite risk of damage that is irreparable or of difficult reparation. If these conditions are met and the plaintiff files for an injunction which includes a request for anticipation of judgement, the courts have in most cases ordered the suspension of the effects of the domain name registration. In some cases, the courts have also ordered the payment of a daily fine that can vary up to the equivalent of US$5,000.00. An injunction can be obtained, depending on the facts, in a reasonably short period of time and, independently of possible appeals, the main court action proceeds to its final conclusion.

One of the many court actions involving domain names that could be highlighted is the one involving the domain name aol.com.br. The plaintiff in this case is America Online, Incorporated against America On Line Telecomunicações Ltda. and Fapesp.

On the basis of the current Trademark Law, the Code of Civil Procedure, the Consumer Defense Code, the Federal Constitution, the provisions of Articles 6bis and 8 of the Paris Convention, the plaintiff filed an ordinary court action which included a request for damages and also a request for anticipation of judgement. In addition to requesting cancellation of the domain name registration, the plaintiff also requested that Telecomunicações stop all use of the marks AMERICA ONLINE, AOL and all their variations. Furthermore, the plaintiff requested the court to order Telecomunicações to act as follows: (a) amend its corporate name, eliminating any possibility of confusion with the plaintiff’s trademarks; (b) compensate the plaintiff for loss and damages; (c) publish a summary of the court’s decision in newspapers and magazines; and (d) pay for all costs relating to these publications. A final request was also entered for both Telecomunicações and Fapesp to pay for all court costs and attorney’s fees, which was to be calculated on the basis of 20% of the amount attributed to the case for fiscal purposes (approximately the equivalent of US$ 5,000.00). Alternatively, the plaintiff asked that the defendants pay 20% of the amount granted by the court as compensation for damages. The highest of these two amounts would be the attorney’s fee award.

The 10^th Section of the Federal Court of the city of Curitiba, Parana, granted a preliminary injunction on January 26, 1999 to the effect that Fapesp should suspend the registration of the domain name aol.com.br in the name of Telecomunicações. It further ordered that the suspension of the domain name registration should stand until a final decision is rendered on the main court action.

Prior to the court decision granting the injunction, the plaintiff had persisted in attempts to reach an agreement with Telecomunicações and to convince Fapesp that it should cancel the domain name. All efforts were to no avail. It should be pointed out that all replies from Fapesp to the plaintiff’s requests for cancellation were made by electronic mail. These replies used brief and evasive language, rejecting any responsibility for its actions in registering the domain name under dispute. Fapesp’s refusal to cancel the domain name in this case is indeed surprising. It is a known fact that The Brazilian Internet Administration Committee’s Resolution No. 1, of April 15, 1998, the guidelines for Fapesp, expressly states that the agency shall not register names that "may lead third parties into error, as in the case of names that consist of trademarks of high renown or that are well-known, whenever not applied for by the owner".

In granting the injunction the court stated that there was no doubt that the plaintiff is the owner of the registered mark AOL and is therefore entitled to legal protection. If this were not enough, the court added that evidence had been submitted that AOL is a well-known mark in the field of information technology and electronics. The court also agreed that the existence of the risk of damage that is irreparable or of difficult reparation, was proven by the evidence submitted by the plaintiff. In short, the court ruled that Telecomunicações must stop using the marks AMERICAN ONLINE and AOL and design marks owned by the plaintiff as well as the aol.com.br domain name within thirty days. If not, it would be fined the equivalent of US$1,000.00 per day. The court ruled further that Fapesp must suspend the authorization for Telecomunicações to use the domain name aol.com.br and ordered the removal of the domain name from publication on the internet. Finally, the court also ruled that the same penalties that were applied to Telecomunicações would also apply to Fapesp if it failed to comply with the court’s decision.

The events that have taken place, to date, following the court’s decision granting the injunction can be summarized as follows. The same federal court that granted the injunction had second thoughts and reconsidered its decision on the grounds that it did not have jurisdiction to rule on the issue. It felt that the case should be decided by a state court rather than a federal one since it considered that Fapesp is a state entity. This question of jurisdiction was then submitted to and decided by the Superior Tribunal of Justice in Brasilia, which agreed with the lower federal court. The case was then referred to a state court. The state court then rendered a decision which confirmed the grant of the previous injunction and Telecomunicações filed an appeal to the Tribunal of Justice of the State of Parana which cancelled the injunction that had been granted to the plaintiff. An appeal from this decision has apparently been filed to this court by the plaintiffs and the case continues.

Another trademark headline in Brazil relates to the proliferation of court actions directed to parallel imports. Globalization and the resulting flow of goods from one country to another have sparked the need to include, within IP laws, parameters to govern the matter of parallel imports. Brazil is no exception, and its current Law states that one of the limitations imposed on the owner of a trademark is that he cannot prevent the free circulation of goods that are placed in the internal market, with his consent, either by himself or by others. There is one decision that is worth mentioning as an example of how Brazilian courts are dealing with parallel imports. This decision, although still under appeal, was rendered following the enactment of the current Trademark Law.

American Home Products Corporation (American Home), American Cyanamid Company (Cyanamid) and Laboratórios Wyeth-Whitehall Ltda. (Laboratórios) filed an ordinary court action against Importadora LDZ Comércio Importação e Exportação (LDZ). The action was based on the argument that Cyanamid is the owner in Brazil of the mark CENTRUM for vitamins and that LDZ was importing these vitamins without the necessary authorization from Cyanamid, American Home being the manufacturer and Laboratórios being the exclusive distributor in Brazil.

The court rejected the plaintiffs’ arguments on the grounds that no evidence was submitted to the effect that imports of the CENTRUM products were illegal. Furthermore, the court stated that LDZ purchased the products from the trading company Importex Importação e Exportação Ltda. (Importex) and therefore LDZ was not the responsible party for importing the products. It added that LDZ cannot be accused of the practice of parallel imports and of having placed the CENTRUM vitamins in the Brazilian territory in an unlawful manner. The court also rejected the plaintiffs’ argument that the exclusive license agreement executed with Laboratórios had any effect on the case because Importex purchased the genuine products.

In rejecting the plaintiff’s arguments, the court explained that every product is placed in the market to circulate. The mere act of placing the product in the market must be interpreted to mean that authorization has been given for the product to circulate. It would be absurd to require two different authorizations from the trademark owner, one for entering the market and the other to circulate. In short, the court held that there was no violation of the law because the products were placed in the Brazilian market in a lawful manner, with presumed authorization from American Home. Since there was no evidence that the imports were irregular, the products could freely circulate, and there was no need for a consent from the plaintiffs. The case is under appeal but the interesting question that has been raised is the importance given to the moment when, according to the decision, the owner of the trademark should have taken action. Normally, it would only be when the product appears on the market that the infringement would become public. But, in the present case, the lack of preventive action by the plaintiffs against the trading company Importex, at the moment the products were imported, appears to have been fundamental for the court to have ruled that there was no infringement and that there was consent for the free circulation of the CENTRUM vitamins in the Brazilian market.

A few comments on this court action are necessary. The first concerns trademark license agreements. Although the current Law does not state that the recordal of trademark license agreements is mandatory, whenever goods are exported to Brazil and also in other situations, it seems advisable to record exclusive license agreements with the Trademark Office. The existence of this recordal will greatly assist in an eventual parallel import case. In the CENTRUM case, the question of exclusive rights came to light during the proceedings and these rights would have undoubtedly been strengthened in favor of the plaintiff if an exclusive license had been recorded. The second comment is that careful investigation should be made as to how the goods are to circulate from the moment they are produced, particularly by the party that wishes to preserve its exclusive rights in Brazil.

Finally, the trademark owner should include references on the labels or packaging of the products to show the territorial limits to their sale, whenever local regulations permit this. In view of these express limitations it seems logical to conclude that, in a situation similar to the CENTRUM case, courts would not be in a comfortable position to rule that there was a tacit consent from the trademark owner to the parallel imports since the imports were legally correct. An express restrictive statement on the labels as to exports should suffice.

Due to changes in the Law and the current policy of the Trademark Office, a few comments on the protection of well-known marks in Brazil seem worthwhile. The new Trademark Law introduced important changes to the protection of famous marks and this explains why no more Declarations of Notoriety have issued. There are now two different categories of famous marks. One is that of the well-known mark under the provisions of Article 6bis of the Paris Convention and the other is that of the mark that is considered of high renown, with extended protection to goods and services in all fields of business activities. Since the new Law became effective, the Trademark Office has neither separately nor individually declared any marks as being within either of these two categories, except in the context of individual decisions relating to administrative opposition proceedings. It is hoped that in the near future guidelines will be issued on the matter, but for some time now the Trademark Office has been struggling with doubts as to what is required to be submitted as evidence of the fame and reputation of a mark. In view of this uncertainty, the option is to request the courts to declare that a certain mark is of high renown.

One such favorable decision has been rendered by a Federal Court in Rio. Dakota Calçados Ltda., a traditional Brazilian shoe manufacturer, filed an ordinary court action requesting that the mark DAKOTA for shoes be declared of high renown. The company was incorporated in 1976 and secured registrations on the mark DAKOTA for articles of clothing in general. In its petition to the court, the plaintiff justified the need for filing the action due to the refusal of the Trademark Office to acknowledge that DAKOTA is a mark of high renown, a fact which had caused serious disturbance in the plaintiff’s business. As evidence of the fame and reputation of its mark, the plaintiff submitted the following: - a) profiles of the eight industrial units that the company owns in several different locations in the Brazilian States of Rio Grande do Sul and Ceará; b) the total of employees working in these units is given as being over five thousand; - c) sales figures showing that annual sales have grown from nine million US dollars in 1988 to two hundred and thirty million US dollars in 1997; - d) extensive advertising material, including the cost for investment in marketing in leading magazines which have a circulation that reaches over a million readers for each edition of these magazines; - e) sales invoices showing sales of DAKOTA shoes, throughout Brazil and also in Japan, the Czech Republic, Ecuador, Saudi Arabia, Uruguay, Bolivia, Paraguay and the Margarita Islands; - f) voluminous material showing declarations from consumers, businessmen, class entities and authorities which attest to the knowledge, prestige, fame and reputation of the mark DAKOTA; - g) clippings taken from publications in newspapers and magazines which provide information on the company and on the DAKOTA mark. These publications are in the form of interviews, articles and prizes that have been received by the company; and h) results of market research that demonstrate the company’s standing in the market, knowledge of the mark by consumers, growth, profitability, etc.

The plaintiff’s petition to the court requested that, in view of the evidence submitted, the case be referred to the Trademark Office for its reply and that the action be sustained. In a very short reply, but based on an opinion rendered by the Attorney General’s office, the Trademark Office agreed that the mark DAKOTA was indeed of high renown and deserves the special protection in all fields of activity, as provided by the law. The court then rendered its favorable decision and the Federal court in Rio confirmed the decision which became final.

The Trademark Office, until the DAKOTA decision, has avoided defining a mark of high renown. The opinion rendered by the Attorney General’s office in this case has therefore become of crucial importance in outlining the criteria for a mark to obtain this status. Below are the more important passages excerpted from this opinion: "In principle, it cannot be denied that the mark DAKOTA, as demonstrated by the plaintiff’s brief, has reached the appropriate degree of knowledge, at the national territorial level, as well as by expansion outside the country. And, this being so, it aims to show that this mark goes beyond the limits of a normal mark, imparting for the benefit of various consumers, in all social classes, not only by its fame and reputation, but also presuppositions as to the quality of the product it identifies. Without doubt, the spirit of a highly renowned mark, even if still in the absence of guidelines, is to include, among other requirements, that it be a strong mark, known in all social strata and especially to be a product of impeccable quality."

The DAKOTA case should serve as a useful example that sheds some light on how to obtain the status of high renown for a trademark. From this decision it can be inferred that to attain this objective, the following should be considered: the volume of the product’s sales and growth over recent years; an indication of the geographical spread of sales; evidence of the marketing and advertising costs and the market penetration of the advertising media used; documentary evidence from relevant persons or associations attesting to the prestige and reputation of the respective product; press exposure given to the product and market research demonstrating consumer awareness of the product and the company.

Paraguay has an unenviable reputation in Latin America for trademark infringement and piracy. However, in 1998 a new, purportedly TRIPS-compliant trademark law, was introduced, and during the year 2000 there was a marked improvement in the enforcement of the trademark legislation. This was largely the result of an improvement in the awareness of IP issues among the Judiciary, which was brought about mainly by international pressure. In Paraguay there has been some effective use made of the preliminary measures mentioned in the 1998 law, such as injunctions, including the suspension of importation or exportation of the products in question, searches, seizures, and suspension of the effects of registering a trademark.

Of particular importance has been the first criminal judgement in Paraguayan history condemning a trademark infringer to legal sanctions. The case of Time Warner Entertainment, LP vs. Rogelio Lopez Acosta, filed on December 10, 1998, involved charges of counterfeiting; fraudulent imitation; the storing, marketing and sale of counterfeited products; false testimony and illicit association. In the initial brief the plaintiff requested the seizure and destruction of illicit material found at the defendant’s premises. This material consisted of various sized bags and backpacks bearing the trademarks WARNER BROTHERS and LOONEY TUNES.

The judge ruled that it was not necessary that the defendant be caught in the act of promoting the illicit goods, as the existence of labels and packaging was sufficient evidence of the alleged crimes, and ordered the destruction of the illicit material. It should be noted that the material at issue was imported without any of the plaintiff’s trademarks, which were subsequently placed on the goods by the defendant. The defendant was held to be in breach of Paraguayan trademark legislation, Article 9.1 of the Paris Convention; Article 48 of Law No. 444/94 (which approved TRIPS); Articles 89, items c), d) and e) of Law No. 1294/98 (dealing with the fraudulent imitation of trademarks) and Articles 184 and 321, item 4 of the Criminal Code which deals with the infringement of copyright and inventions. The final decision was rendered on November 27, 2000, in which the infringer was ordered to pay a fine equivalent to approximately US$22,000.00.

Uruguay approved TRIPS in 1994 and introduced updated legislation on trademarks in 1998. One of the more interesting provisions of the new law is Article 10 which states that the registration of a trademark already registered in a foreign country shall be applied for only by the legitimate proprietors thereof or their duly authorized agents or anyone certified to be duly authorized to register the trademark under the legitimate proprietor’s name. The party filing an opposition against an application is exempt from the requirement to provide evidence that the mark is well-known, if it is proved that the applicant knew of the existence of the prior trademark when the application was filed.

The new law follows the doctrine of the "exhaustion of rights" in that a trademark registration holder may not prevent the free circulation of genuine goods put into the market by the trademark holder or with its consent, provided that the products and their packaging have not suffered substantial alterations, modifications or damage. The civil and criminal actions for trademark matters are drafted in broad terms, without specifically referring to unfair competition.

Oettinger Imex AG filed an action with the High Administrative Court against the Ministry of Industry and Energy in order to reverse the PTO’s decision to grant a third party a registration on THE GRIFFIN’S. The action was based on Oettinger Imex AG’s rights to THE GRIFFIN’S, outside of Uruguay, as a well-known trademark. The High Administrative Court, which is the highest court for administrative matters, issued its decision on April 26, 2000, and found in favor of the plaintiff on the following grounds: I) Article 6bis of the Paris Convention states that member countries should reject or cancel registration of trademarks which imitate or reproduce a well-known mark; II) Article 10bis of the same convention defines unfair competition as all acts contrary to honest practices in industry and commerce; III) it is clear that registration of an identical trademark to that of the plaintiff in the same class, by a competitor leads to the assumption that the registrant intended to block the international company’s activities in Uruguay by means of this infringing registration; and IV) the anticipation by the infringer of potential competition in the marketplace by blocking the registration of the well-known foreign mark is sufficient to have the registration cancelled. Actual competition is not required, only the risk of unfair competition practices.

No relevant decisions have been issued in Uruguay with regard to domain names as yet. The domain name Registry, ANTEL, does not have a policy for conflict resolution, and the judiciary has not yet issued any decisions.

What can be learned from these various headlines is that Latin American countries are gradually taking steps towards TRIPS compliance and Decision 486 seems to point to the future of IP law in the region. It includes provisions that are surprisingly progressive. Without question, enactment of provisions in the laws of other Latin American countries similar to the ones contained in Decision 486, including those concerning cancellation of infringing domain names would greatly simplify disputes and avoid further litigation in the region. The real issue, however, is whether the relevant administrative agencies and judiciary in Latin America will be able ¾ and willing ¾ to make full use of the detailed, forward-thinking laws that their legislators are committing to paper. It may take some time before this can be answered with any certainty. For now, the example of the Andean Pact Decision 486 and several favorable court decisions, some of which are acknowledging that TRIPS is already in force, could be indicators that a greater respect for intellectual property is perfectly attainable in Latin America, notwithstanding an apparent reluctance from certain governments to move in a more expeditious manner.