All questions

Civil litigation

The Civil Procedure Code, the content of which was influenced by European and US systems, came into force in March 2016. Among the key procedural changes were the attempt to settle the case before the start of the litigation proper, a cooperative way of litigating in respect of all parties, and the agreements the parties can enter into (before and during litigation) regarding many aspects and steps of the litigation, such as nominating the court expert, prefixing costs, time frames, limiting types of evidence and appeals.

After a complaint is filed, a judge will examine any preliminary injunctions and then summon the defendant with a subpoena to attend a conciliatory hearing. If no agreement is reached, the time frame within which the defendant must submit a response begins.

The judge will summon the plaintiff to rebut the response and explain which evidence should be presented to prove the allegations. The same is done in relation to the defendant. The disclosure here should focus only on controverted facts.

More complex matters, such as patent cases (revocation or infringement), generally demand a technical expert opinion to assist the judge, who must be a specialist. The role of the judge is to affirm whether the legal requisites for the invention have been met or if an infringement has taken place.

The parties then submit their comments about the expert opinion, and the judge issues a final first instance decision, which can be appealed to the relevant tribunal.

i Forums

Brazil has a bifurcated system. The state courts hear disputes related to private concerns, such as infringements, and the federal courts hear cases in which a public body (e.g., INPI) is a party because its decision is being challenged in court. (The defendant would be, for instance, the trademark proprietor in an invalidity proceeding.)

If a junior user is misusing a senior registered mark, the infringement lawsuit should be brought before a state court, taking into account, again, that INPI does not need to join.

The defendant in the infringement lawsuit usually claims the invalidity of the senior trademark before the federal court. INPI will be one defendant and the senior trademark owner the other.

An infringement case is usually suspended for up to one year, until the federal court decides on the validity of the mark. The aim of this is to avoid contradictory decisions (i.e., a juridical conflict).

The Brazilian judiciary is making its courts specialised with the aim of achieving better and faster judgments. In the state of Rio de Janeiro, both state and federal courts at the first level are specialised in IP. Two panels at the Federal Court of Appeals for the Second Circuit specialise in IP cases. In the states of São Paulo and Rio Grande do Sul, the state appeals courts each have two panels that specialise in IP matters, and São Paulo also has first-level courts specialised in IP.

The superior courts are the Superior Court of Justice (STJ) and the Supreme Court of Justice. The former hears non-constitutional matters, controlling the application of federal law, as well as harmonising the Brazilian jurisprudence. The latter enforces the Constitution. The STJ has two panels that specialise in IP.

Claims are usually grounded by statutory language, by the opinions of authorities or scholars, and by decisions issued by different courts and levels.

ii Pre-action conduct

In Brazil there is no pre-action conduct code for IP disputes to ‘encourage the parties to exchange information with each other prior to issuing proceedings to ascertain whether proceedings can be avoided and, if not, to ensure that the parties understand the issues sufficiently to ensure that any litigation is dealt with proportionately and in keeping with the overriding objective’.

Usually, the plaintiff notifies the defendant before bringing the matter to court. Unjustified threats and accusations of crimes or infringements can give rise to liability for the notifying party. Sometimes, the notified party claims in court a non-infringement declaration, so as to claim back damages. Attempting to settle before issuing legal proceedings is not mandatory but is advisable.

Depending on the complexity of the dispute and amounts involved, the parties can opt to have the case heard by professional mediators or by a court of arbitration. The majority of IP cases in Brazil are dealt with by the judiciary system; however, arbitration has recently been promoted by commentators as providing a faster and more technically reliable outcome, even in disputes involving INPI, such as revocations of its decisions.

iii Causes of action

Brazil has a ‘double identicality’ proviso based on which the clash between identical marks for identical goods or services amounts to prima facie infringement, as the signs will evidently lead to confusion. Despite this, the courts are still reticent about applying this rule, usually relying on confusion-based tests to stop the use of or revoke the junior mark.

Although likelihood of confusion and dilution are the two main trademark-related causes of action, there exist a number of additional causes under unfair competition rules as foreseen in the IP Law, such as passing off, free-riding or unfair advantage.

The statutory authority for trademark infringements based on confusion is Paragraphs V, XIX and XXIII of Article 124 of the IP Law, which cover misuse of marks, company names, trade names and domain names.

The most common cause of action would be someone using a mark that is identical or similar to a senior registered mark for similar goods. The same is applicable to a confusingly identical or similar junior company name or trade name in respect of an earlier registered mark for similar activities.

If the junior sign (mark or company, trade or domain name) is capable of creating confusion, it would amount to an infringement of the senior registered mark. An earlier registered company name can also serve as grounds for having a confusingly similar trademark refused or invalidated. In NBA Properties v. NBA Gestão, the Federal Court of Appeals of the Second Circuit invalidated the registration of the mark ‘NBA’ based on NBA’s company name, which is registered only in the United States.

There is no ‘official’ test used by the courts to assess trademark infringement. They usually try to take into account as many factual aspects as possible.

The IP Law requires investigation of the similarity of the signs and goods or services to learn whether they are likely to create confusion for the general public and whether an infringement has taken place. The STJ also uses this test, but the courts do not apply one single official test, despite the fact they are similar in many ways.

In the 1980s, commentators recommended the following multifactor test for likelihood of confusion:

  1. analysing the whole marks and not their differences;
  2. consumers’ level of attention;
  3. the circumstances under which the goods are acquired;
  4. the nature of the goods; and
  5. the relevant market for the goods.

But according to practitioners, this test does not cover post-sale confusion in other situations. More tests were developed, and the courts apply different ones depending on the circumstances of the case (e.g., the 360° Test – see Section III.iii).

Unlike Germany or the United States, Brazil does not have dedicated legislation on unfair competition practices. The IP Law also regulates this in Article 195, which has an indicative list of 14 behaviours considered to be unfair trade acts.

Paragraphs I, II and III are the most-used causes of action in unfair competition cases. They aim to prohibit fraudulent behaviour to divert another’s clientele or to gain an unfair advantage against another party.

As a member of the Paris Convention, any dishonest act may be considered to amount to an act of unfair competition. Free-riding and passing off are also forbidden under the umbrella of unfair practices. The same is applicable to consumer fraud and deceptive trade practices.

Courts have ordered defendants or the domain registry to take down infringing domain names on the basis of trademark infringement and free-riding. Technically, unfair competition is actionable between competitors, but any other non-competitor’s misconduct can be actionable on the basis of free-riding or unfair advantage.

iv Conduct of proceedings

Typically, the plaintiff will present allegations and claims in writing, supported by all the documents it may have to prove the allegations, and the time to start doing this is at the initial filing of the complaint.

If the parties do not settle at the conciliatory and mediation hearing, the defendant will have 15 working days to lodge a response, contesting the plaintiff’s allegations, claims and evidence, as well as to submit its own evidence to persuade the judge.

The plaintiff will then have a period of 15 working days to comment on the defendant’s documents and arguments, which can lead to the dismissal of the case or raise any procedural irregularity. At this point, both parties will accept some facts as true, but some will be controverted. The disclosure here should focus only on controverted facts.

If any party wants to take a deposition or thinks that the opinion of a technical expert is needed, the judge will analyse the requests and, if sustained, schedule a hearing for the depositions and nominate a specialist to provide a technical opinion.

If the lawyers have powers to represent their clients, their clients do not have to attend the hearing, unless they are to be heard in the depositions. Ordinarily, the depositions are taken in a courtroom in front of the judge, who will also question those making the depositions. However, the parties can agree to take the depositions in their own offices, as in the United States.

Cost awards are granted to the winner of the litigation. These include reimbursement of court fees and costs and attorney fees, which can be up to 20 per cent of the economic value of the matter. The costs are awarded solely to the winner, and the attorney fees are to remunerate the lawyer’s work during the litigation. As a general rule, the contractual fees paid by the client to its lawyer are non-refundable by the loser.

It is difficult to estimate how long the disclosure can take. It depends considerably on how efficient and specialised the court is and on the complexity of the matter and the evidence produced.

v Remedies

Plaintiffs are awarded injunctions against further infringement or unfair practices. Injunctions can be issued when two main prerequisites are met: the plaintiff’s claims are probably true and are indeed urgent.

Monetary relief may also be available to the plaintiff, including:

  1. the defendant’s profits;
  2. the cost of the damage sustained by the plaintiff; and
  3. the amount by which the plaintiff should reasonably have profited if no infringement had been committed.

Moral damages can also be awarded as ‘punitive damages’, to discourage the defendant from committing further infringements.

Other enforcement proceedings

The customs authorities can seize imported goods, on the grounds that they may infringe trademark rights as an anti-counterfeiting policy based on the IP Law and the TRIPS Agreement.

Having seized the goods, the authorities will contact the Brazilian attorney responsible for the relevant brand owner in Brazil, so that he or she can issue, on behalf of his or her client, civil or criminal proceedings against the potential infringer, demanding an injunction to be granted to retain the seized goods until a final judgment is made. The time limit for this is 10 days. If this is not done, the goods can be released and distributed to the Brazilian market.

It can be argued that this procedure is transferring to the brand owner the onus and costs for obtaining a court decision to block the goods and declare the importer a criminal who has infringed trademark rights. The role of the customs authorities should ordinarily be to find and seize potentially infringing goods, to avoid infringing goods entering the Brazilian market. Some of the main customs offices seize and destroy infringing goods without a court proceeding. This modus operandi should be harmonised throughout Brazil.