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Application by distributor rejected on grounds of bad faith and unfair competition

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  • An application for GOLOKO was opposed based on the marks FOUR LOKO and the contractual relationship between the parties in Peru
  • While the Ecuadorian IP Office rejected the opposition, an action for industrial property rights infringement was upheld in Peru
  • The Ecuadorian IP Office overturned the first-instance decision, finding bad faith and unfair competition on theapplicant’s part

Trademark registration is a key mechanism for protecting IP rights. However, this procedure is not always straightforward or legitimate, and there are cases where trademark applications may be rejected due to bad faith or unfair competition. For example, trademark applications have been submitted by distributors which, in the absence of a trademark registration in Ecuador, have attempted to register the relevant trademark despite a distribution agreement confirming that ownership belonged to its legitimate owner, the grantor. In a recent case, the Ecuadorian IP Office issued an interesting resolution denying the registration of a trademark on the ground that the application constituted an act of bad faith and unfair competition.

Background

Food For Life EIRL applied to register the trademark GOLOKO for goods in Class 33. This application was opposed by Phusion Projects LLC based on the marks FOUR LOKO, registered in Class 32, and the contractual relationship between the parties in Peru.

Phusion Projects and Food For Life maintained a contractual relationship, as the applicant had been an authorised distributor of FOUR LOKO-branded goods in Peru for several years. Therefore, at the time of the trademark application for GOLOKO, the applicant had full knowledge of the existence, ownership and recognition of the FOUR LOKO marks.

The IP Office rejected the opposition, considering that there were sufficient differences between the marks to avoid confusionamong consumers. However, the contractual relationship between the parties was not analysed.

In parallel, a complaint for industrial property rights infringement was filed in Peru against Food For Life and its related company, Servicios Exal SAC, for manufacturing, marketing, distributing and promoting beverages under the GO LOKO marks. Injunction measures were requested against use of these marks, claiming that, in addition to the visual and aural similarities between the marks, the packaging of the contested goods was highly similar to that bearing the registered trademark.

The action was upheld in Peru, serving as primary evidence that the application filed in Ecuador constituted an act of unfair competition and bad faith.

Decision

The Ecuadorian IP Office, through Resolution OCDI-2025-167, overturned the first-instance decision, accepted the opposition filed by Phusion Projects and denied the registration of the GOLOKO trademark.
The main arguments for finding bad faith and unfair competition on the part of the applicant were as follows:

  • Food For Life intended to compete in the Ecuadorian market with a mark that could be confused with an already registered trademark; and
  • Food For Life, as a distributor of Phusion Projects in Peru, was aware of FOUR LOKO’s market penetration and recognition.
  • Food For Life intended to use this knowledge to its advantage by registering a confusingly similar mark.

Comment

With this resolution, the Ecuadorian IP Office set a groundbreaking precedent for the protection of trademarks which, due to their notoriety and market positioning resulting from their owners’ advertising efforts, are attractive to competitors seeking to obtain unfair benefits.

The rejection of trademark registrations on the ground of bad faith and unfair competition is an essential mechanism to ensure fairness in the market and protect IP rights. In cases where there is a distribution agreement between the applicant and the opponent, the evaluation of the application becomes even more crucial, as prior agreements between the parties play a significant role in determining the legitimacy of the registration. Companies and distributors must act transparently under commercial contracts
and intellectual property laws to avoid conflicts and ensure proper market competition.

Andrea Miño Moncayo
CorralRosales
20 March 2025

American Privacy Rights Act: a bill that promises a radical change for privacy in the United States

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Respect for the privacy of personal data has become particularly important in the digital era. Companies and governments collect and process information about our daily activities, which makes it essential to have rules that adequately protect the privacy of citizens.

A step towards data protection in the United States.

Although the United States does not have a specific federal law on data protection, an important step was taken on April 7, 2024[1], Republican Congress Cathy McMorris Rodgers and Democratic Senator Maria Cantwell, both from the state of Washington, introduced a federal privacy bill called the American Privacy Rights Act (APRA).

This bill creates a comprehensive regulatory framework for the protection of personal data in the United States. It is a significant step forward towards greater privacy protection for U.S. citizens.

Key aspects of APRA and its relationship with Ecuador.

APRA[2] addresses various aspects contained in most of the laws on the subject, including that of Ecuador, among them:

  1. Data Minimization: Limits the collection of personal data to the minimum necessary for the intended purpose.
  2. Transparency in privacy policies: Requires companies and suppliers to provide clear and accessible information about their data collection, use, and disclosure practices.
  3. Rights management: Grants individuals the right to access, rectify, and delete their personal data. In addition, the right to opt out of receiving targeted advertising.
  4. Designation of a Privacy or Data Security Officer: Establishes the obligation to designate an officer responsible for data security, who must be qualified and have the experience to perform the position effectively.

APRA news.

The APRA federal bill incorporates aspects related to artificial intelligence (AI) and data. These include:

  • Restricting the volume of data used in AI development: Applies the minimization principle to limit the amount of personal data used in the training and operation of AI systems.
  • Concept of “covered algorithms”[3]: Defines “covered algorithms” as any computational process that decides or facilitates human decision-making using data. This definition covers a wide range of AI systems, from the simplest to the most complex.
  • Obligations for entities using covered algorithms: Entities using covered algorithms will have multiple obligations, among which the most important are:
  1. Design evaluation: Evaluate the design of the algorithm to identify and reduce the risk of potential damage.
  2. Impact assessment: Evaluate the impact of the possible effects of the algorithm on individuals and society.
  3. Notice and opportunity to opt out: Provide the ability to opt out of the use of a covered algorithm if it is used to make “consequential decisions” (decisions that significantly affect an individual’s access to or enjoyment of essential goods or services).

Implications for Ecuador.

The enactment of APRA would have a significant impact in Ecuador, especially in the following aspects:

  1. Transborder data flow: It will facilitate the transfer of data between the United States and countries with equivalent data protection standards, such as Ecuador. This translates into:
  • Simplification of processes: Administrative and legal burdens are reduced for companies transferring data between the two countries.
  • Cost reduction: Costs associated with data transfer, such as implementing additional security measures, are minimized.
  1. International cooperation: It will allow international cooperation on data protection between the United States and other countries, including Ecuador. This will allow Ecuadorian authorities to:
  • Safer information sharing: Collaborate on investigations and data protection cases involving U.S. companies.

In conclusion, once approved, the APRA bill will represent a significant advance towards data protection in the United States and will have clear impacts in other countries, including Ecuador, as expressed in previous paragraphs.

[1]  https://energycommerce.house.gov/posts/committee-chairs-rodgers-cantwell-unveil-historic-draft-comprehensive-data-privacy-legislation

[2]https://d1dth6e84htgma.cloudfront.net/American_Privacy_Rights_Act_of_2024_Discussion_Draft_0ec8168a66.pdf

[3]  https://www.whitecase.com/insight-alert/proposed-american-privacy-rights-act-seeks-establish-comprehensive-national-framework

 

Thalía Ordoñez
Associate at CorralRosales
tordonez@corralrosales.com