Monthly Archives: July 2022

CorralRosales > 2022 > July

Instructive for the application of the extended responsibility in the integral residues management of electric and electronic appliances (EEAR) of domestic origin

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Medio ambiente más logo de CorralRosales

By Ministerial Agreement, The Ministry of Environment, Water and Ecological Transition, issued the Instructive for the Applications of the Extended Responsibility in the Integral Residues Management of electric and Electronic Appliances of Domestic Origin.
The object of the present instructive is to establish the requirements, procedures, and specifications to the extended responsibility of the producer (REP), applied to the electric and electronic appliances (EEA) of domestic use.
Every individual or company responsible for the first placing on the national market of Electric and Electronical Appliances must comply with the present instructive.
(EEA): Every device that needs electric current or electromagnetic fields to fulfill its function and the devices needed to generate, transmit, and measure said currents.

Subjects: (Producer of EEA´s)

  • Manufacturer, assembler, importer, and other figures that introduce the devices  to the national market EEA´s.

Co-responsible:

  • Marketers and distributers.

Remain excluded of the scope of the instructive: lead acid batteries, traction batteries, transformers, discharge lamps, luminaires, electric vehicles, and electric professional apparatus that contain radioactive sources or any other source used in medicine, industry, investigation, or any other application.

Producer responsibilities

  1. Obtain the Administrative Environmental Authorization corresponding to the registry of hazardous and or special waste generator.
  2. Develop and present the Comprehensive Management Plan (onwards “CMP”) of Electric and Electronical Appliances Residue (onwards “EEAR”).
  3. Implement and finance the approved CMP of EEAR.
  4. Carry out the integral management phases of the EEAR with dully authorized environmental managers.
  5. Make the withdrawal and or transport of every EEAR recollected.
  6. Meet collection goals of EEAR (0.5% of the average of all EEA´s imported or first placed on the market by the producer in the past 3 years; and 3% in the case of out-of-use cellphones). These percentages apply to each obligor.
  7. Annually report, within the first 10 days of march, the annual progress report of implementation of CMP of EEAR to the Ministry of Environment.
  8. Include in the labeling of the products the symbol stated in the second ANNEX of the instructive.

The marketer and or distributor

  1. Register al movement of EEAR and report semi-annually its status to the producer.
  2. Act as co-responsible of the compliance of goals of recollection stablished previously (*10) Failure to comply with the provisions of the instructive will give rise to the respective actions in accordance with the provisions of the Environmental Act.
  3. Obtain the pertinent Environmental Authorization.
  4. Report to the authority. Of any irregularity that may arise during the process of reception and delivery of EEAR´s.
  5. Informe within 1 day of the fact, to the producer of any event of emergency, incident, or accident to the EEAR that has or may have caused environmental harm.

Rafael Serrano, asociado de CorralRosales, con traje y corbata. En el fondo, una parte de Guayaquil (Ecuador)

Specialist in Environmental Law
Rafael Serrano, senior associate at CorralRosales
rserrano@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Income and VAT withholding regime applicable to payment aggregators and online markets

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Regulation NAC-DGERCGC21-00000026 issued by the Tax Authority on 2021, established a special regime for income tax and value added tax (VAT) withholdings applicable to payment aggregators and online markets. This regime was amended by Regulation NAC-DGERCG22-00000035 issued on July 20, 2022 and published in the Supplement of the Official Registry 110 of July 22, 2022. The most important points are summarized below:

  1. Definitions
  • Payment aggregators: Administrators of auxiliary payment systems authorized as such by the Central Bank of Ecuador for the provision of payment aggregation services.
  • Online marketplaces: Entities that, through technological platforms, allow: (i) the online supply and demand of goods and/or services of third parties or of several affiliated commercial establishments, and (ii) to accept and collect the corresponding payments on behalf of the commercial establishments.
  1. Requirements


To apply the special withholding regime, the following requirements must be met:

  • Payment aggregators shall:
  1. File an application before the Internal Revenue Service (IRS),
  2. Have the authorization of the Central Bank of Ecuador to operate as an administrator of auxiliary payment systems, for the provision of payment aggregation services, and
  3. Be qualified as special taxpayers or withholding agents by the SRI. If the entity has not been previously qualified as a withholding agent or special taxpayer, such qualification may be requested in the same application.
  • Online marketplaces shall:
  1. Have an entity incorporated in Ecuador,
  2. Have as its corporate purpose, activities that reflect its role as an online marketplace, particularly, intermediation through technological platforms for the online offer and sale of goods and/or services of third parties and/or affiliated commercial establishments,
  3. Be registered in the Single Taxpayers Registry,
  4. File an application before the IRS detailing the payment aggregator or payment gateway with which they will work.
  5. Be qualified as special taxpayers or withholding agents by the SRI. If it has not been previously qualified as a withholding agent or special taxpayer, such qualification may be requested in the same application; and,
  6. To not apply any simplified tax regimes, or single income tax regimes.


Online marketplaces may apply the special regime provided that the amounts collected on behalf of third parties come from: (i) payment aggregators registered with the IRS, or (ii) are processed through administrators of auxiliary payment systems authorized as such by the Central Bank of Ecuador for the provision of payment gateway services.

  1. Special Regime


The following payments shall not be subject to income tax or VAT withholding:

  1. Those made by entities of the financial system and credit or debit card issuers to entities considered as payment aggregators and/or online marketplaces, for the transfer of goods and/or services rendered by third parties and/or affiliated commercial establishments.
  2. Those made by payment aggregators to entities considered as payment aggregators and/or online marketplaces, for the transfer of goods and/or services rendered by third parties and/or affiliated commercial establishments.

Notwithstanding the foregoing, payment aggregators and/or online marketplaces shall issue a monthly settlement of payments or credits registered as income.

  1. Transitory Provision.


Taxpayers registered in the ‘online marketplace registry’ of the IRS must submit the request described in section II above, detailing the payment aggregator or payment gateway with which they will work within 10 working days from the publication of the regulation in the Official Registry, i.e., until August 4, 2022. If the application is not submitted within such term, the registration will be revoked, and a new request must be filed.

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Changes in acceptable evidence that demonstrate use when renewing a trade name

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Andrea Machicado

A trade name, as defined in the Decision 486 of the Andean Community, Common Intellectual Property Regime (Decision 486) is any sign that identifies an economic activity, a business or commercial establishment. It is an official name under which an establishment conducts its business.

Article 191 of Decision 486 states that: “Exclusive right to a trade name is acquired through use by a legal person for the first time in commercial activities and ends when the use of the name or activities of the business or establishment using that trade name cease to exist.”

As with a trademark, a renewal for a trade name can be filed six months prior to the expiration date. A six -month grace period after the mentioned date is also available. Unlike a trademark, when filing a renewal for a trade name, proof of use is required by the IP Office.

Decision 486 allows National IP Offices to decide if they will request proof of use when renewing a trade name. In Ecuador, to renew a trade name, use must be proven as stated in article 420 of the IP National Law and article 256 of its Regulation.

Before the IP Law’s Regulation, which came into force on November 20, 2020, the local IP Office was restrictive in its requirements to be able to prove use of a trade name. Only certified copies of invoices that showed the trade name as how it was registered before the IP Office were accepted as evidence of use, as long as there have not been substantial changes. At least one invoice for each of the six months prior to the renewal application had to be submitted.

Now, the Regulation expressly determines which documents can be accepted as evidence of use. The local IP Office has expanded what they consider as suitable evidence of use such as :

  • Invoices
  • Accounting documents or audit certifications
  • Operating permits
  • Notarial downloads of web pages, social networks
  • Digital or written press
  • Advertisements

In this regard, the Court of Justice of the Andean Community has established the type of evidence that proves the real and effective use of the trade name in the market:

“1.1. However, among the criteria to be taken into account to demonstrate the real and effective use in the market of the trade name are commercial invoices, accounting documents, or audit certifications that demonstrate the regularity and quantity of the commercialization of the services identified with the trade name, among others.

1.2. Likewise, the following acts, among others, shall constitute use of a sign in commerce: introducing in commerce, selling, offering for sale or distributing products or services with that sign; importing, exporting, storing or transporting products with that sign; or, using the sign in advertising, publications, commercial documents or written or oral communications, regardless of the means of communication used and without prejudice to the rules on advertising that may be applicable.” [1]

Now that the IP Office has expanded its requirements and is abiding but what the laws and regulations state, it is possible for brand owners to continue to protect their trade names through renewals and maintain rights. The local IP Office has broken the paradigms it has maintained for decades broadening its perspective in reference to the valid and effective evidence that proves the use of a trade name in accordance with jurisprudence of the Andean Community.

[1] Court of Justice of the Andean Community. Proceeding 55-IP- 2020 June 21, 2021

Andrea Machicado
Associate at CorralRosales
formalities@corralrosales.com

Requirements to be included in the appointment of the legal representative of companies subject to the control of the superintendence of companies, securities and insurance

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By Resolution No. SCVS-INC-DNCDN-2022-0008 dated June 21, 2022, published in the Supplement to the Official Gazette No. 99 of July 6, 2022, the Superintendent of Companies, Securities, and Insurance issued the “Regulation on the requirements that the appointment of the legal representative and the power of attorney of the attorney in fact of companies must contain” (hereinafter the “Regulation”).
 
The Regulation establishes that the appointment of the legal representative shall include at least the following information:

  1. The date of issuance.
  2. The name of the company issuing the appointment.
  3. Full names and surnames, identity card number and fingerprint code of the appointed legal representative (contained in the identity card).
  4. The date of the appointment of the position, the statutory body that appointed the individual or the clause of the articles of incorporation stating such appointment.
  5. The position or duties to be performed.
  6. Term of office.
  7. The statement that the legal, judicial, and extrajudicial representation of the company will be exercised individually or jointly with another manager as established in the corporate bylaws.
  8. The public deed stating the current powers of the legal representative and the date of its registration in the Commercial Registry. In the case of simplified stock companies (S.A.S.), the public or private document stating the current powers of the legal representative and the date of its recordation with the Superintendence of Companies’ Register.
  9. The names and surnames, wet ink or electronic signature of the individual executing the appointment on behalf of the company.
  10. The acceptance of the position by means of wet ink or electronic signature with indication of the place and date of such acceptance.


We highlight the following consequences derived from the Regulation:

  1. The ability to execute the appointment by electronic means is confirmed
  1. The requirement to include the fingerprint code of the legal representative implies that the appointed individual, in case he/she is a foreigner, must hold a resident visa and have an Ecuadorian identity card for the recordation of the appointment. This is inconsistent with the visa obtention process, as the General Directorate of Immigration (Dirección General de Extranjería), in order to grant the legal representative visa, requires the submission of the appointment duly recorded in the Commercial Registry or the Superintendence of Companies’ Registry, as applicable.

Foto cuadrada de Milton Carrera, asociado senior de CorralRosales

Specialist in Corporate
Milton Carrera, senior associate at CorralRosales
mcarrera@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

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General shareholder´s meetings regulations

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The Superintendence of Companies, Securities and Insurance issued the Regulation on general shareholders’ meetings of limited liability companies, corporations, limited joint stock corporations, mixed economy corporations and simplified stock corporations, through Resolution No. SCVS-INC-DNCDN-2022-0010, published in the Second Supplement to the Official Gazette No. 99 of July 6, 2022 (hereinafter the “Regulation”).
The Regulation mainly addresses the changes introduced by the Law for the Modernization of the Law on Companies.
Below a summary of the most relevant aspects of the Regulation:


I.    CALL 

1. In addition to the specific requirements that the call for the general shareholders’ meeting must contain, the Regulation provides that the following information must be included:
  • The indication of the electronic means for the telematic access of the members or shareholders who wish to participate through telematic means, with the information of the platform to be used for this purpose, as well as the access passwords.
  • A clear and accurate description of the procedures that the members or shareholders must comply with in order to participate and cast their vote at the general shareholders’ meeting, including the following: (i) The right to request information and to include items in the agenda, as well as the deadline for exercising these powers; (ii) The procedures established for the casting of remote votes, indicating the e-mail to which the vote for each motion shall be sent to, in the case of participation of the members or shareholders by telematic means; and, (iii) The indication of the e-mail to which the corresponding document whereby a member or shareholder authorizes the participation to the general shareholders’ meeting on their behalf shall be sent.

2. Format of a press call: The call may be published in the newspaper with the largest circulation in the main domicile of the company, either in physical or digital format.


3. Waiver of call: The members or shareholders may waive their right to be called to a specific general shareholders’ meeting, by sending a communication to the legal representative, either physically or electronically. Even if they have not been called to the general shareholders’ meeting, it will be understood that the shareholders attending the corresponding meeting have waived their right to be called, unless they express their disagreement with the lack of call before the meeting takes place.


When the waiver is express, the documents containing the waiver must be attached to the general shareholders’ meeting file. 


The member or shareholder waiving the call to a general shareholders’ meeting will lose the right to challenge, appeal, or claim the invalidity of the resolutions of the respective meeting. 



4. Presumption of waiver of call: When a member or shareholder did not send an e-mail to the legal representative with the sufficient time in advance, and the bylaws do not provide for other alternative forms for the call, it shall be presumed that they waive their right to be called to a general shareholders’ meeting, without being able to claim the invalidity of the resolutions of the general shareholders’ meeting, due to the lack of call. 



5. Right of members or minority shareholders to include additional items to the agenda or to request corrections to the items on the agenda: Members or minority shareholders holding at least 5% of the subscribed capital may request, only once for each general shareholders’ meeting, that additional items be included to those already referred to in the call of meeting; or that format corrections be made to previously issued calls. This right shall be applicable to ordinary and extraordinary general meeting.




The request for additions to the items on the agenda or for corrections to the items included in the call of meeting by a group of members or minority shareholders shall not prevent the other members or shareholders from requesting new additions or corrections with respect to such call of meeting.

This request must be addressed to the company’s manager empowered by the bylaws to call the general shareholders’ meeting, within a non-extendable period of 72 hours from the date of the call to the general shareholders’ meeting.


The matters to be included in the call or the request for formal corrections must be brought to the attention of the other members or shareholders up to 24 hours after receipt of the request. Consequently, the general shareholders’ meeting originally called shall be held after five days following the day after said communication have elapsed.


II.    OPENING OF THE MEETING AND ASSITANCE  

6. In meetings to be held totally or partially by telematic means, the manager must produce the respective register with its updated entries, sharing it through the technological systems in digital form, if necessary, at the request of any of the members or shareholders attending the meeting by telematic means.



7. In corporations whose shares are registered in a stock exchange, or in another negotiation mechanism, the list of attendees may also be based on the list issued for such purpose by the centralized securities clearing and settlement depository, where the register of shares and shareholders is kept; provided that such certificate has been issued no more than two business hours prior to the time scheduled for the beginning of the meeting. For the purposes of the application of these rules, business hours are those from 08:00 to 20:00.



8. In the case of units or shares owned by spouses, the individual registered as member or shareholder in the respective register shall represent them.

9. Recordation of transfers prior to the opening of the Meeting: Individuals who have acquired shares, or rights of usufruct or pledge over them, which entitle them to participate and vote in general shareholders’ meetings, and such transfer or rights have not yet been recorded in the Company’s Register of Shares and Shareholders, shall be entitled to participate in the general shareholders’ meeting called, with voice and vote for the entirety of their shares, for which purpose the legal representative must record the transfer or constitution of rights in the respective register, in accordance with the law. 



10. Attendance to a general shareholders’ meeting by telematic means: General shareholders’ meetings may be held by any telematic means that allows the attendance and participation of the members and shareholders in real time. For such purposes, the respective call must announce the means of communication that will be used to hold the general shareholders’ meeting, being the responsibility of the manager to manage the means and provide the necessary information to allow the access of the members or shareholders on the day and at the time indicated.



11. Attendance of third parties to general shareholders’ meetings: If deemed appropriate, other key individuals may attend general shareholders’ meetings, such as executives, experts, press, financial analysts, or any other person deemed necessary for the holding of this event. For this purpose, the chairman of the shareholders’ meeting shall submit the proposal to the attention of the members or shareholders, so that they may decide whether or not to accept it. The chairman shall authorize the participation of interested individuals, for which the approval of the majority of the share capital attending the meeting must be obtained.  

12. Waiver of attendance to the general shareholders’ meeting: The member or shareholder may waive its right to attend a general shareholders’ meeting by means of a physical or digital communication sent to the legal representative up to one hour prior to the opening of the general shareholders’ meeting. The waiver of attendance implies that the units or shares of the member or shareholder will be counted as attendees for the purposes of the required quorum. Unless the waiving member or shareholder expresses the contrary, it will be understood that he or she refrained from voting.

In the content of the waiver, the member or shareholder may issue his opinion by way of a vote, which may be affirmative, negative, or refraining, on each of the items of the agenda contained in the call of the meeting.

13. In-person attendance: Members and shareholders may attend general shareholders’ meetings in person; that is, physically or through videoconferences.


The general shareholders’ meeting may convene, meet, and validly resolve any matter within its authority, using videoconferencing or any other digital or technological means. For such purposes, the member or shareholder shall be responsible for ensuring that his presence is verified through this means of telematic communication.


The member or shareholder shall leave record of his attendance, by means of an e-mail addressed to the secretary of the meeting, and this shall be specified in the list of attendees and such e-mail must be included in the respective file.


III.    VOTES AND RESOLUTIONS 

14. Voting records: As a backup of the vote of the members or shareholders who attend the meetings via videoconference, they must send the secretary of the general shareholders’ meeting an e-mail stating his vote for each motion, notwithstanding that the vote of such member or shareholder is recorded by the company.




15. Business secrets: General shareholders’ meetings are private meetings at which business strategies may be discussed or sensitive information may be disclosed and those present are prohibited from disclosing such confidential information and business secrets.
 

16. Cases of unenforceability of resolutions of the general shareholders’ meeting: When the Superintendence of Companies, Securities and Insurance determines that one or more resolutions of the general shareholders’ meeting are in violation of the Law on Companies or other relevant legal or statutory regulations, in exercise of its control and oversight powers, it may advise the corresponding company that such resolutions are unenforceable, on the grounds that they have been taken in violation of express regulations, in order that the omissions, breaches or violations be remedied, except in the event that the applicable regulations provide for the nullity of said resolutions. The foregoing, notwithstanding any subsequent resolution issued by a competent judicial body or official, in the event of a claim by an interested or injured party.



17. Recording of the sessions of the general shareholders’ meeting: All sessions of the general shareholders’ meetings must be recorded on magnetic or digital media, and it is the responsibility of the secretary of the shareholders’ meeting to incorporate the electronic record to the respective file. 

A tape or digital recording shall not be compulsory in the case of universal meetings unless a shareholder expressly requests it. 

In the case of foreign members or shareholders, means may be implemented to allow simultaneous translation of the participations of the meeting, when deemed convenient.



IV.    GENERAL SHAREHOLDERS’ MEETINGS NOT ATTENDED IN PERSON

18.    In the call to a specific general shareholders’ meeting, the legal representative may suggest to the members or shareholders, the direct approval of resolutions, urging them to cast their vote on the items that are part of the agenda, in order to avoid the opening of a formal session, for which it will be necessary to comply with the following requirements: (i) The deadline (no more than 5 days) must be stated, so that the members or shareholders may express their agreement with this procedure or not; (ii) The vote must be recorded by physical, electronic or any other means of communication that guarantees their identity, their agreement with this procedure and the affirmative, negative or refraining vote to the items on the agenda, (iii) The decision shall be agreed by the majority determined in the bylaws or with the majority of votes provided for in the Law on Companies, (iv) The legal representative of the company shall subsequently communicate the resolutions to the members or shareholders, within 5 days following the receipt of the vote, (v) The minutes shall be signed only by the legal representative of the company and shall detail the direction of the vote and the percentage of the capital represented by each member or shareholder; and, (vi) The minutes must be accompanied by the documentation that justifies the direction of the vote.


In the event that the members or shareholders have opposed to this procedure or have not expressed their acceptance, the general shareholders’ meeting will be held in the way provided for in the call of meeting.

19. Universal Shareholders’ Meetings not attended in person: General shareholders’ meetings not attended in person may also be universal if the members or shareholders agree on the items of the agenda to be discussed.  In order to determine universality, in addition to the signatures of the chairman and secretary of the meeting, the members or shareholders must sign the minutes, under penalty of nullity. The signature, physical or electronic, of the members or shareholders may be carried out on a different date than the date in which the meeting was held.

Foto cuadrada de Milton Carrera, asociado senior de CorralRosales

Specialist in Corporate
Milton Carrera, senior associate at CorralRosales
mcarrera@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

The intersection between IP and blockchain

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Edgar Bustamante, asociado de CorralRosales, más una imagen de unos edificios y el logo de CorralRosales

Blockchain and other technologies related to distributed databases have been an issue subject to considerable discussion. Today, there are several industries looking into its related possibilities and new uses for blockchain are found every day. However, a question still remains: how could these technologies be used in the context of current Intellectual Property law and practice?

  1. What is blockchain?

A blockchain is similar to a digital version of a ledger. This chain consists of several “blocks” of information linked through cryptography, meaning that it is protected against any intrusion or modification. One of its main features is decentralization, since it does not reside on a single computer nor is it managed by a particular organization. Rather, the system is made up of multiple computers around the world that verify the data entered and look for inconsistencies so that the system works optimally and independently.

One of the main functions of a blockchain is to provide traceability for a certain product. Traceability refers to the ability to monitor the evolution of a product in its different stages. This ability is of great interest to industries that require strong Intellectual Property protection, including the pharmaceutical, automotive, and luxury goods sectors. Additionally, this technology allows the creation of what are known as Non-Fungible Tokens (NFTs), which can be defined as a digital version of a certificate of authenticity embedded in the blockchain that can represent almost any real or intangible property, including works of art, music, videos, etc.

Initially, blockchain technology was created for the financial sector to track massive amounts of transactions. However, its application has spread to many areas, including copyrights. Here, we can imagine a cinematographic work that has several elements that are also are essential parts of a particular chain (script, production, credits, distribution, etc.). Usually, this information would be stored on shelves, but through blockchain, it can immediately and securely be recorded in your system. This makes it possible to verify exploitation rights in real time through an unalterable and immutable seal. In the case of, for example, a song, with its music and lyrics, the authorship of its components would not be lost despite any merging.

For all of these reasons, blockchain has become a tool with a major potential for protecting works and proving their authorship. However, national legislation neither recognizes nor regulates this technology, which is why any certificate generated through it is invalid in any public procedure, especially considering that digital certificates in Ecuador must be granted by an “Information Certification Entity” controlled by the National Telecommunications Council. This very fact runs contrary to the nature of blockchain, given that its main characteristic is decentralization, which means that its own users manage it and there is no government control (with the exception of what are known as “institutional blockchains,” which have not been addressed in this article).

Given the above, blockchain cannot be used in procedures with Ecuadorian public agencies in which on-site interactions and a lack of standardization make procedures slow and oftentimes prone to corruption. For blockchain to be used, laws need to be updated in way that recognizes new technologies, especially those that provide security and speediness when administering data and certificates.

2. Intellectual Property Rights and blockchain

According to commonly accepted legal principles, a blockchain-based product can be classified as intangible or incorporeal property, meaning that, while this asset cannot be discerned by the senses, it does have, regardless, a certain value.  A buyer can acquire Intellectual Property rights that are separate from those pertaining to the creator of the underlying work. This is exactly what happens with the purchase of a painting, a book, or a music CD: the buyer becomes the owner of a specific version without exercising any copyright.

This begs the question of who owns the copyright in the underlying work of the blockchain. The short answer is that the creator owns the rights to their work, unless otherwise agreed. For example, when someone buys a painting from an art gallery for their home, they are purchasing the physical painting itself. While they may put this work on display, they do not hold the underlying rights to reproduce, make derivative works of, or distribute copies of that painting.

In the United States, for example, the parties are free to agree on the terms and conditions that govern a transfer of rights to a product connected to the blockchain. However, it is common practice to find adhesion contracts that usually limit the annual income that the buyer can obtain from said asset (for example, the NBA’s “Top Shot” platform). In other cases, some companies will tend to agree to restrictive terms and conditions that prohibit any type of exploitation of the asset linked to the blockchain.

This brings us to address whether we can obtain patent protection when it comes to blockchain-supported products.

Regardless of the legal system, “machines” are usually patentable, while “abstract theorems” are not (understanding this to mean mathematical principles that do not provide a technical contribution). This is due to the fact that machines are usually specific products that improve our quality of life, while theorems tend to be scientific principles belonging to the collective. As such, it is understood that they cannot be subject to control or monopolization.

Under our system (Ecuador), any blockchain-supported product is considered a non-patentable idea provided that is governed by code and software. This is the usual form of operation, because for an idea to be patentable, there must be material elements  involved. Along these lines, Article 15.e from Andean Community Decision 486 expressly states that computer programs or software are not considered to be inventions. However, Article 4 of Decision 351, also from the Andean Community, provides that computer programs can be protected under copyright, and covers both the source code (human readable instructions) and object code (binaries) of programs. Accordingly, in Ecuador, a blockchain-supported product could be protected under copyright; however, it would not be patentable.

In contrast, the Anglo-Saxon legal system brings together both copyright and industrial property under the concept of Intellectual Property, which implies greater flexibility when it comes to negotiating rights. As a result, the owner of a work can lose control of it by giving up their copyright, since moral rights are not exercised together with economic rights. In other words, there are no limits to exploiting a work, unlike the copyright system (applicable in Ecuador), which is based on protecting the moral right of the work.

Walmart, for example, registered a patent in the United States on a blockchain-based online shopping optimization algorithm. This is an integrated payment system that helps the buyer to choose their products in greater detail. It also automatically distributes payments on the blockchain among Walmart employees or vendors who worked on a certain process. Under this example, a computer program can be protected as it has been proven to provide added value to a specific process whose results are perceptible to the outside world.

Another example of program protection that produces a noticeable technical effect is Bank of America’s patent No. 10,643,202, which involves a real-time transaction processing system based on blockchain. This system reduces the previously known time per transaction and its adoption could greatly enhance electronic commerce, especially for tools such as Apple Pay or Google Pay.

Consequently, most of the applications filed on blockchain patents come from the Anglo-Saxon system, especially from countries such as the United States, Canada, and England. Regardless, it is not easy to prove that a blockchain system is not part of common scientific knowledge, as there are several research papers and countless articles that explain the bases of its algorithm, including a publication by Satoshi Nakamoto, the presumed pseudonymous person or persons who is (are) recognized as having developed Bitcoin. Even so, numerous patents have been accepted in cases where the filed application directly links the code to a machine’s operation, presenting this set as an invention that improves existing technical qualities and solves a specific problem in an innovative way. This makes it possible to obtain greater probabilities of patenting a technological invention, unlike what occurs in Ecuador, where software is expressly excluded from patentability.

Conclusion

In conclusion, the task at hand is to review an outdated Andean standard that does not recognize new fields and opportunities arising from the digital environment. It would also be advisable to replace references to “computer programs” with “information technology programs” in order to clearly include mobile applications (apps) or Dapps (applications that run within a blockchain) within the scope of said standard.

Further, it seems like the absolute impossibility of patenting computer programs is inappropriate under certain circumstances. While such programs are automatically copyright-protected from the moment of their creation, certain programs do require patenting since an innovative solution is brought to the table.

Edgar Bustamante
Associate at CorralRosales
ebustamante@corralrosales.com

Extension of deadlines to comply with tax obligations

Posted on
Manos con las uñas pintadas de rosa haciendo uno de una calculadora. Pieza para un boletín tributario de CorralRosales: aparece el logo de CorralRosales también en la pieza gráfica

Through Regulation NAC-DGERCGC22-00000033 issued by the General Director of the Internal Revenue Service, the deadlines for complying with the tax obligations related to VAT, excise tax (ICE) and income tax were extended to those taxpayers with domicile in the provinces of Chimborazo, Tungurahua, Cotopaxi, Pichincha, Pastaza, Azuay, Imbabura, Sucumbíos and Orellana.

  1. Taxpayers qualified as special taxpayers may file the VAT, excise tax and income tax withholding forms corresponding to the period of June 2022 and make the applicable payment until July 28, 2022.
  2. Taxpayers that are not qualified as special taxpayers may file the VAT, excise tax and income tax withholding forms corresponding to the period of June 2022 and the first semester of 2022 (as applicable), within the following deadlines:

  1. Subjects obliged to file the Tax Compliance Report (ICT) corresponding to fiscal year 2021, may do so according to the following calendar:

Andrea Moya - CorralRosales - Lawyer Ecuador

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES