E-commerce is a social and economic reality both in Venezuela and across the world. It is the area into which Venezuelan companies are targeting the vast majority of their economic efforts, as demonstrated by the National Telecommunications Commission in its Final Report 2014. Despite the prevailing economic and political realities in recent years, the report reflects a clear and significant growth in internet users and subscribers. The number of internet subscribers in Venezuela grew by 72%, from approximately 2.15 million to 3.7 million, from 2009 to 2014. Similar growth also occurred in the number of domain names reserved under the generic top-level domain ‘.com.ve’, which increased from approximately 150,000 in 2009 to 295,000 in 2014 – a rise of 66%. The growth in e-commerce that Venezuela has experienced over the past five years has generated both significant increases in sales and greater diversification of the actors offering and demanding products and services online.
The growth of e-commerce is driven by the alternative business models that it offers for the expansion of both existing enterprises and start-ups, including discount coupon sites, auctions, private sales and purchases. However, these business models have in turn helped unscrupulous third parties to abuse the benefits of the Internet and take advantage of established companies’ reputations. In the almost infinite online world, it is thus essential to have a good strategy for the protection of trademarks.
In Venezuela, online trademark violations fall under the same legal parameters as those committed offline and both forms are treated equally. To this end, Chapter 1, Article 3 of the Industrial Property Law 1955 provides that the owner of a trademark “is presumed to be… the person who has made the appropriate registration”. It follows that anyone holding a trademark in Venezuela has exclusive rights and may exclude others from using its mark both offline and online.
This chapter outlines the actions that rights holders can take to protect their rights on the Internet and prevent the import, storage and online sale of infringing goods. It also summarises methods of securing compensation for damages.
Venezuela has adapted its laws in order to comply with the Paris Convention for the Protection of Intellectual Property and has introduced the option for customs authorities to seize and retain goods that bear infringing trademarks. Specifically, Decision 915 regulates the actions to be taken by rights holders and customs authorities in case of trademark infringement. Actions can be taken ex officio or on application by the rights holder.
Further, the online sale of counterfeit goods from third countries constitutes IP infringement and can be prosecuted under the Customs Tariff, which states: “the import and re-export of goods violating intellectual property rights duly recognized is prohibited in all the National Territory.”
Although Venezuelan law requires the competent authorities to intervene whenever potentially infringing goods are detected, such interventions are not always performed effectively. Therefore, in order to execute border seizure measures, certain preliminary proceedings should be carried out that require close collaboration with customs authorities and private investigators.
For the same reason, it is advisable to develop close relationships with the customs authorities in order to provide them with training and information about the characteristics of legitimate goods. It is also recommended to hire researchers to monitor the market for the existence of counterfeit products and locate the importers of such products. Rights holders should also establish a system for monitoring new products that are put up for sale on the main online marketplaces. Sales via post or courier represent a large percentage of the counterfeit products entering the country; such items include handbags, clothing, shoes, sunglasses and watches.
Rights holders should always bear in mind the main objectives to be achieved through these measures:
- cessation of infringing acts;
- detention, control and subsequent destruction of infringing products; and
- preparation for further measures, such as civil actions, criminal actions or actions under unfair competition law.
The civil actions available against online violations of trademark rights are set out in the Industrial Property Law and the Civil Code. The actions that can be performed by the rights holder include actions for search and seizure orders or cease and desist orders, and actions for damages or an accounting of unjust profits.
Precautionary measures are an indispensable tool for avoiding serious and irreparable harm to the rights holder. All such actions must be brought before the court in the jurisdiction in which the allegedly counterfeit or pirated goods are being stored or sold. Similarly, the rights holder may take precautionary measures to secure the infringing goods and prevent their marketing or sale.
Venezuelan law also provides for actions against unjust enrichment, which can be brought when the legal position previously protected by an exclusive right is violated. The rights holder may then claim from the infringer the sum of its unjustly gained profits.
Civil actions become a less attractive means of combating online counterfeiting and piracy when the amount of counterfeit products is small or the infringer is not solvent enough to face civil action – or where the rights holder is granted a favourable decision, but the defendant is unable to pay compensation for damages.
Venezuelan law provides for the imposition of criminal penalties on all trademark infringers. Further, the Special Law Against Computer Crimes includes specific rules on online crime, including a penalty of up to five years’ imprisonment for the unauthorised misuse of IP rights. There are also penalties against the unauthorised import, circulation or export of goods protected by IP rights.
Only the injured party may report these crimes and initiate the corresponding proceedings. This means that actions may be initiated only by the victim through a complaint before the Public Prosecutor’s Office or before auxiliary bodies such as the police, Customs or the National Guard.
To meet these demands, the Venezuelan Patent and Trademark Office has created the post of special prosecutor to hear IP-related complaints. Further, a dedicated police piracy unit has been created which collaborates on investigations where the existence of counterfeit or pirated products is evident. In recent years, efforts have been made to provide equipment and resources to the various government agencies combating piracy in all its forms.
An early phase of the criminal process is aimed at facilitating an out-of-court settlement between the rights holder and the infringer.
It is possible to file criminal proceedings based on copyright law. However, the disadvantages of this approach are that the process may be initiated only by the victim and the available penalties are very weak.
In determining the location of an online crime, the theory of ubiquity is applied. This means that if the criminal infringement is committed outside the Venezuelan territory, the infringer is still subject to Venezuelan law.
Unfair competition actions
One way to protect the interests of rights holders on the Internet is through unfair competition law. The Anti-monopoly, Anti-oligopoly and Unfair Competition Law does not require proof of infringement; instead, it is sufficient to prove actual or potential harm. Unfair practices include any act whose actual or potential purpose is to:
- mislead the user about a product or service; or
- create confusion about the commercial origin of a product or service that has prestige or notoriety according to the law.
Actions against users of online sales and auction sites
Rights holders seeking to avail of this type of enforcement should use some kind of goods detection system. These usually continuously monitor the products that are entered into an online sales system and notify the rights holder of potentially infringing products. The rights holder then performs the necessary observations and, where it judges that the products are infringing, initiates the website’s anti-infringement procedure.
Strategies and recommendations
Given that several mechanisms exist to assist rights holders in defending their intellectual property online, the advantages and disadvantages of each must be considered. Where a rights holder develops close relationships with the competent authorities and the administrators of online sales and auction sites with a high turnover of new products, it should provide training on the characteristics of legitimate goods, in order to assist in the detection of counterfeits. To this end, IP practitioners can provide rights holders with merchandise tracking services, which involve:
- detecting the actual volumes of a specific branded product on the market or on a specific website;
- setting the permitted volumes of such product; and
- effectively pursuing individual infringers.
It is also recommended to use all available extra-judicial measures before commencing court action. This includes hiring researchers to monitor the offline market, as the products offered on most websites are distributed through physical outlets or stored in warehouses in Venezuela. Experience shows that in order to establish the source of counterfeit products and locate the importer, it is essential to cooperate closely with government agencies. This cooperation is equally essential to succeed in legal action against infringement, including preventive action. Government agencies must receive all relevant information from rights holders or their representatives in order to issue favourable decisions and punish infringers.
Finally, although the actions described in this chapter can facilitate the enforcement of IP rights on the Internet, lower rates of infringement and more positive development of e-commerce will become possible only following legislative reform.
Guillermo A López Z, Manuel Polanco F
This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.