brazilian-flag-suitcase
1 May 2013PatentsPhilippe Bhering

Taking TRIPS: the enforcement of IP in Brazil

In March of this year, the Council for the World Trade Organization (WTO’s) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement met to discuss the request of the so-called least developed countries (LDCs) for an extension of the transition period prior to full compliance by these countries with the TRIPS rules on IP. The transition period is due to expire on July 1, 2013. During the transition time, LDCs have not been totally exempt from the application of TRIPS rules but have been entitled to a certain degree of flexibility in choosing which rights to protect.

The LDCs have requested that the transition period be extended for each individual LDC, until such time as the country in question is no longer classified as one of the “least developed”, in accordance with UN standards. This proposal has received the strong support of developing countries, including Brazil. The developed countries, in turn, while broadly agreeing to the extension of the transition period, are concerned about the terms proposed by the LDCs, and, specifically, about the lack of a pre-defined end to the extension period.

In defending the LDC proposal, the Brazilian representative to the talks argued that clauses which confer special/differentiated treatment on countries in line with their specific circumstances are an important feature of WTO treaties and agreements. Furthermore, he stressed the importance of the international system on IP giving countries adequate time to adapt their national legislation at a pace which is compatible with their progress in social and economic development.

The Brazilian representative also reminded delegates that incorporating developing countries (and particularly the least developed) into the so-called ‘knowledge economy’ is no easy task, and that the complexities involved were not fully foreseeable at the Uruguay Round of trade talks, held 20 years ago.

He concluded that the ongoing difficulties further highlight the need for the extension of the transition period, on the terms suggested by the LDCs.

The delegates agreed to the extension, but no decision was made as to whether a new cut-off date should be set for all countries or whether the extension should run for each individual country, until such time as that country ceases to be considered one of the “least developed”. A fresh meeting has been scheduled for June and presumably the issue will be decided then, prior to the expiry of the original July 1 deadline for the end of the transition period.

As far as Brazil itself is concerned, questions are frequently asked about whether or not it has mechanisms that are capable of effectively enforcing IP rights. The purpose of this article, in the light of the recent discussion on transition periods for LDCs and also bearing in mind the forthcoming major international events to be held in Brazil, including the 2014 FIFA World Cup and the 2016 Olympic Games, is to set out an overview of the relevant aspects of the Brazilian legal system.

The law

The rights and duties pertaining to trademarks, patents, designs and geographical indications as well as the rules on the suppression of unfair competition in Brazil are set out in the Brazilian Law of Industrial Property (LPI). The LPI provides that infringement of trademark, design, patent and geographical indication rights and acts of unfair competition constitute both a civil wrong (tort) and a crime. Hence, the injured party is entitled to rely on both civil and criminal measures in order to enforce its rights.

As for the civil proceedings, the injured party may file a lawsuit seeking the cessation of the infringing act, coupled with a claim for damages. The lawsuit may also include an ex parte preliminary injunction request, with a view to immediate cessation of the harmful conduct until a decision on the merits is rendered, subject to specific requirements of the Civil Procedure Code (CPC).

In order to obtain a preliminary injunction, the plaintiff must demonstrate a prima facie good case, ie, that there is a likelihood of success on the merits of the case, and that delay in granting the relief sought would be likely to give rise to harm that is irreparable or very difficult to redress.

The plaintiff may also seek the imposition of a daily penalty for failure to abide by the preliminary injunction. If the interim relief sought is granted, the defendant will be restrained from practising the infringing act pending a final and definitive ruling on the substantive lawsuit. In some circumstances, a court will only grant interim injunctive relief if the petitioner posts a bond or a fiduciary guarantee to cover any losses incurred by the respondent.

Specifically in relation to trademark infringement, it is also open to the court to order the seizure of all merchandise, products, objects, packages, labels and other materials bearing the falsified mark, if the falsification is a blatant reproduction or imitation of a registered trademark.

In relation to the quantum of damages payable for infringement, the LPI applies a triple criteria calculation, so that damages are fixed on the basis of the criterion which is the most beneficial to the injured party, chosen from the following list: a) the benefit that the injured party would have obtained if the violation had not occurred; b) the benefit actually obtained by the author of the violation of the rights; or c) the remuneration that the author of the violation would have paid to the proprietor for a licence for use of the protected rights.

With regards to trademark infringement, it is important to note that, as of 2003, the settled view of the Superior Court of Justice is that proof of the violation of a trademark right is sufficient in itself to give rise to a right to damages independently of any evidence of harm caused to the injured party.

The CPC states that the plaintiff may draw on all legal and morally legitimate means of proving the existence of the rights asserted. It makes specific reference to ‘personal deposition’ (the giving or oral evidence by the person orpersons asserting the rights); the exhibition of documents or other material; witness testimony; expert evidence and court inspections.

In addition, the CPC permits the court to direct early production of evidence. A party is therefore entitled to make an application for the production of expert evidence prior to the filing of the substantive lawsuit (or, post-filing, at an early stage of the proceedings). The plaintiff must demonstrate solid reasons for the application eg, that there are reasonable grounds for fearing that, in the absence of an order for early production, the evidence in question may be lost or destroyed.

"PROOF OF THE VIOLATION OF A TRADEMARK RIGHT IS SUFFICIENT IN ITSELF TO GIVE RISE TO A RIGHT TO DAMAGES INDEPENDENTLY OF ANY EVIDENCE OF HARM CAUSED TO THE INJURED PARTY."

In addition to infringement actions, the LPI makes provision for the setting aside of trademarks, designs and patent registrations which have been unduly appropriated by third parties. In such a nullity action, the interested party may include in its initial application a request for an immediate stay of the effects of the registration in question pending a final decision on the substantive issue of whether or not there has been undue appropriation. Such an order for stay requires the satisfaction of requisites of the CPC referred to above in relation to interim relief.

Of note is that infringement actions must be filed before the state courts, whereas the nullity actions referred to above are heard by federal courts. This is because the Brazilian patent office (INPI) is automatically a party to all nullity actions, and whenever a government agency is a party to a lawsuit the action must be filed before federal courts.

In terms of criminal proceedings, one very important provision is the possibility of filing a preliminary criminal search and seizure action, aimed at gathering evidence of acts of infringement and avoiding the destruction or hiding of evidence by the infringer. Pursuing a preliminary criminal search and seizure action is normally more straightforward than undergoing the more complicated civil proceeding of early production of evidence.

Given that it is possible to rely in both civil and criminal proceedings on the evidence obtained under a search and seizure warrant, an application for preliminary criminal search and seizure is frequently a useful starting point for civil infringement proceedings as well as for criminal proceedings per se.

Once the warrant is issued, the court appoints two experts to accompany the bailiff in the search and seizure procedure. After collecting samples of the infringing material, the experts prepare reports to the court on the alleged infringement. If the experts confirm that there has been infringement, the injured party is in a strong position to file a criminal lawsuit, civil proceedings or both.

A preliminary search and seizure action can be very effective, especially in patent issues, and can significantly bolster the likelihood of obtaining interim injunctive relief in an infringement action.

Remedies

Criminal remedies prescribed by the LPI also include imprisonment or imposition of a fine on the infringer. The generally held view is that the criminal sanctions imposed are mild (eg, the term of imprisonment for violation of a trademark or patent ranges from a minimum of one month to a maximum of one year). In practice, the normal sentence imposed is a fine, which then reverts to the state.

There is currently a draft bill before the National Congress aimed at overhauling the Penal Code. In relation to IP, the bill provides for the imposition of harsher penalties (eg, a minimum penalty of one year’s imprisonment for patent/trademark violation and a maximum of four years).

The specific provisions for the protection of copyright and software are set out in separate statutes, the Brazilian Copyright Law and the Software Law, respectively. The provisions of the Copyright Law also apply on a subsidiary basis to software issues covered by the Software Law. Copyright and software infringement are both civil offences (tort) and crimes. The Copyright Law and Software Law both make provision for specific civil remedies for the violation of rights, over and above the general remedies available for infringement, described in the preceding paragraphs.

A preliminary criminal search and seizure warrant may also be applied for in the event of suspected copyright or software violation. The criminal sanctions currently imposed are slightly more severe than those for patent/ trademark violation but are still considered lenient. The draft bill before Congress (referred to earlier) provides for increase of the penalties for violation of copyright and software rights.

Border control mechanisms also feature as part of the Brazilian system of enforcement of IP rights. Federal Decree No. 6759 of February 5, 2009 includes authorisation for the customs authority to seize any products which it considers to bear altered or imitated marks. Furthermore, a trademark owner who has sufficient evidence of the planned import or export of counterfeit goods may request (setting out the facts or circumstances which give rise to the suspicion) the seizure of such goods by the customs authority.

Of note in this context is the increase in recent years in the number of surveillance and enforcement operations conducted by customs and federal police agents. Customs authorities have also been implementing anti-counterfeit training sessions and workshops for customs agents. These measures have led to a significant increase in the effectiveness of the operations conducted.

Another important development has been the establishment of the National Directory of Trademarks (NDT), a database of information relating to corporate holders of the most frequently counterfeited trademarks. The main purpose of the NDT—which is not yet operational—is to facilitate cooperation between trademark owners and the agencies which combat crimes against IP and related tax evasion.

It can therefore be seen that the Brazilian legal system provides efficient mechanisms for the enforcement of IP rights, although the penalties for crimes of violation need to be heavier. The increase in the number of surveillance and enforcement operations conducted by customs and federal police agents is significant and demonstrates the determination of the Brazilian government to effectively tackle counterfeiting.

Fresh initiatives, such as the establishment of the NDT, also demonstrate that the Brazilian government is taking IP enforcement seriously. The main problems that persist in enforcement, and particularly in relation to combating counterfeiting, are geographical and socio-economic in nature. In particular, the relative ease of entry of counterfeit goods into Brazilian territory via multiple access points remains a concern.

Philippe Bhering is a partner at Bhering Advogados. He can be contacted at: philippe.bhering@bhering.adv.br

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk