Brazil: Welcome Recognition For The Prohibition Of Parallel Imports

At the end of 2016, the judge from the 43rd Civil Court of the Central Venue of São Paulo granted an interlocutory relief in favor of a well-known company that is involved in computers, videogames and electronic products in general. He ordered the search and seizure of videogames that had been sold by four stores in São Paulo and brought to Brazil as parallel imports.

It is important to highlight that the videogame models seized by the court officials were neither imported nor sold by the company in Brazil. In fact, in Brazil, the company still manufactures and sells the previous model of this product. The company, the owner of the technology, is still analyzing and testing the new model prior to its launch in Brazil.

Therefore, the company was extremely surprised to discover that four stores located in the Santa Efigênia region – a well-known location in São Paulo for the sale of electronic products of dubious origin and low prices – were selling the new model of its products for the same price as the previous model, which was the most recent launched in Brazil.

It is important to emphasize that, if this new model had been brought to Brazil via normal and transparent importation, with the payment of all the required charges and duties, it would not appear on display or on the shelves or virtual environments of Brazilian stores for less than R$ 2,500. The four stores were selling this product for R$ 1,600, which was the same price as the previous model, which was still the latest release by the company in Brazil.

In this regard, it was successfully argued in the action that the irregular importation and the sale of the new model of the company's videogame by these four stores for the same price as the previous model (still the current model in Brazil), inevitably resulted in unfair competition to the company.

Although it seems somewhat strange, it was stated, without hesitation, that the company was suffering unfair competition with the sales, by third parties, of its own product, although it had not been officially launched in Brazil.

It is evident that, despite the lack of the proper guarantees, which are generally offered by the company for all of its products, and the dubious conditions of the products that were imported and sold without authorization, the consumer, at the time of choice and purchase of the product, preferred the new version or model of the product to the detriment of the previous one, due to the equal price.

Accordingly, it should be noted that the decision by the 43rd Civil Court of the Central Venue of São Paulo to prohibit the importation of products under these conditions, confirms the growing trend of Brazilian courts, especially those in São Paulo.

A short time ago, this topic involving the legality of parallel imports divided the opinion of jurists and case law. Nowadays, several precedents can be found, especially from the Court of Appeals of the State of São Paulo, confirming the infringement of parallel imports with the support of article 132, item III, of the LPI – the Law of Industrial Property, Law 9279/96, and, accordingly, ordering the prohibition of the products brought into Brazil under these conditions.

The Superior Court of Justice also has an understanding that considers parallel and unauthorized importation of products illegal, which is similarly based on article 132, item III, of the LPI.

"Once the lower Court determined that there was no authorization, from the owner of the trademark, for the importation of the products, article 132, item III, of Law 0279/96, does not help the appellant" (STJ, REsp 1207952/AM, Reporting Justice Luiz Felipe Salomão, DJ. February 1, 2012).

It is important to mention that, even in the cases from the Court of Appeals of São Paulo, which admit the parallel importation of products based on the principle of "free trade", they make it clear, in their statement of reasons, that the owners of these products already sell or make use of them in Brazil.

In this specific case taken to the courts, it should be remembered that the model brought irregularly by the defendant stores had never been launched or used in Brazil. The products were still being tested.

It is stressed that the parallel importation of this new model and brand of the videogame with prices that were competitive with the previous model, although still the most recent launched in Brazil, resulted in unfair competition and a parasitic act based on article 195, item III, of the LPI. It cannot be denied that the practice adopted by these four defendant companies constituted fraud or a fraudulent means to deviate clients, as established by the aforesaid rule.

Therefore, the judge from the 43rd Civil Court of São Paulo was correct in ordering the prohibition of the products that were imported without authorization by third-parties and for the search and seizure of these products, which has already occurred on two occasions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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