Antimicrobial Resistance – “One Health” Approach

Foto de Bryan Yanzza más el nombre de su artículo más reciente

The purpose of antimicrobial drugs is to combat diseases that can be of bacterial, viral and parasitic origin.  But when they are misused or overused, these microorganisms can mutate genetically causing resistance to these drugs[1]. Antimicrobial Resistance (AMR) is a serious global threat to human and animal health, affecting food safety, food security and the economic well-being of millions of small and large-scale agricultural productions[2].

AMR is considered a multisectoral problem of great importance worldwide, which is why health organizations such as the Food and Agriculture Organization of the United Nations, the World Organization for Animal Health and the World Health Organization created the “One Health” approach. This approach is implemented to have a better coordination and elaboration of programs that comprise the interface between human and animal health, food production and agro-ecological environments, with the purpose of preventing and being prepared for future threats, such as zoonotic diseases, food safety and AMR.

AMR is considered a major threat to modern medicine and to the sustainability of an effective response to the threat of infectious diseases. For such reason the World Health Assembly, in May 2015, adopted the Global Action Plan on Antimicrobial Resistance, where five objectives were established : (i) to have better communication and education on antimicrobial resistance with the aim of creating understanding and awareness of the issue; (ii) to strengthen this knowledge through surveillance and research; (iii) to reduce the incidence of infections by implementing effective biosecurity, hygiene and infection prevention measures; (iv) to optimize the use of antimicrobial drugs in human and animal health; and (v) to intensify sustainable projects and investments for the development of new drugs, vaccines and diagnostic means[3]

This resolution commits the member countries to develop national and multisectoral action plans with a “One Health” approach, which is why in Ecuador the National Plan for the Prevention and Control of Antimicrobial Resistance was established to fight AMR and to have national action plans harmonized with the global action plan.

In order to establish a national plan, it is of vital importance to know the consumption data of antibiotics generally used in infectious diseases, both in humans and animals. Ecuador does not have this information, so it is hypothesized that the indiscriminate and inappropriate use of antibiotics has caused serious consequences such as increased morbidity and mortality of patients suffering from infectious processes, as well as an increase in the cost of health care due to the search for options that can combat infectious diseases with antibiotics that do not present resistance and that do not determine a high cost[4].

The Ecuadorian State has been working against AMR since 2017, through the Ministry of Health and the Ministry of Agriculture and Livestock, executing the National Plan for the Prevention and Control of Antimicrobial Resistance. The focus is the rational use of antimicrobials and effective sanitation measures to reduce the incidence of infections, involving health technicians from Health, Agriculture, Environment, Aquaculture and Fisheries, with the aim of integrating and working together to seek mechanisms to help mitigate AMR. This, through analysis and research work in the laboratory and in the field with activities that help to socialize and raise awareness of this problem to all those involved, especially those who are linked to food, animal health, environment and human health[5].

The Agency for Phytosanitary and Zoosanitary Regulation and Control AGROCALIDAD is responsible for regulating the registration of companies and products for veterinary use, for which it has issued Technical Manual 003. This manual makes special mention to the use of Colistin, as part of the formulation of products for veterinary use and consumption, since it represents a risk to public health as an antibiotic of restricted use in human medicine, which is generally used in multi-resistant diseases. For this reason, AGROCALIDAD prohibits the manufacture, formulation, importation and distribution of products containing Colistin[6].

AGROCALIDAD is also working on a proposal for the restriction of antimicrobials that are used as growth promoters. The aim is to eliminate the indiscriminate use of antibiotics by prohibiting the registration, importation, manufacture, formulation, and marketing of these active ingredients generally used in the animal production chain.

In conclusion, although advances in medical research are promising in the field of prevention and treatment of AMR, global actions are required to reduce the dissemination and mitigate the negative effects of resistant bacteria, viruses, fungi, and parasites that affect living beings in different ecosystems. The commitment of governments and the support they receive from the different actors in the commercialization chain (private companies, laboratories, distributors, users) play an important role in the fulfillment of actions to reduce the inappropriate prescription of antimicrobials, increase immunization against pathogens, disease prevention and control measures, and strengthen pharmacovigilance of resistant pathogens in human, agricultural and veterinary medicine.

Veterinarians, as the main actors in animal health, have a fundamental role to play in the fight against antimicrobial resistance, for which they must encourage their proper use under prescription, promote good hygiene, biosafety, and vaccination practices, and promote the correct diagnosis of infectious diseases in animals.

[1] Resistencia a Los Antimicrobianos. OPS/OMS | Organización Panamericana de la Salud. (n.d.). Retrieved January 31, 2023, from

[2] CCNASWP / Fiji calls for closer collaboration as FAO/WHO regional meeting gets underway in Nadi. Home | CODEXALIMENTARIUS FAO-WHO. (n.d.). Retrieved January 31, 2023, from

[3] Publications. Food and Agriculture Organization of the United Nations. (2016). Retrieved December 22, 2022, from

[4] Ministerio de Salud Pública del Ecuador, Plan Nacional para la prevención y control de la resistencia antimicrobiana; Quito, Viceministerio de Gobernanza y Vigilancia de la Salud,, 2019, Disponible en: . (2019, November 18). Retrieved from

[5] Agrocalidad prohíbe El Uso del Antibiótico Colistina en animales. AGROCALIDAD. (2019, February 25). Retrieved December 25, 2022, from

[6] Resistencia Antimicrobiana en producción animal. OPS/OMS | Organización Panamericana de la Salud. (n.d.). Retrieved December 20, 2022, from .

Bryan Yanzza
Technicians at CorralRosales

Which is the best procedure to request the reimbursement of the amount paid for safeguard measures?

Foto de José María Flores, asociada de CorralRosales + foto de un edificio + Logo de CorralRosales

Ecuador unilaterally adopted safeguard measures on goods imported from Colombia and Peru, due to their currency devaluation against the dollar. Even though, the General Secretariat of the Andean Community (“SGCA“) rejected the corrective measures, ordered their termination and the refund of the values paid for such concept, the Ecuadorian Customs Administration (“SENAE“) has rejected the reimbursement claims filed by the affected importers.

On December 24, 2014, Ecuador requested the SGCA to authorize the application of emergency measures on imports of goods originated in Colombia and Peru to restore normal competitive conditions altered by the recent currency devaluation in those countries. The request was registered on January 6, 2015, by the SGCA.

The SGCA has one month from receipt of the request to issue a ruling. If the SGCA does not do so, the member country that requested the measures may adopt them and, subsequently, the SGCA must decide on their maintenance, modification, or suspension.

Not having passed the term mentioned above, Ecuador, through Resolution 050-2014 issued on December 29, 2014, by the Committee on Foreign Trade (“COMEX“) decided to apply a safeguard equal to 7% of the ad valorem tariff for products originated in Peru and 21% for products originated in Colombia.

On February 6, 2015, through Resolution 1762, the SGCA: i) rejected the application of safeguards for imports from Colombia and Peru; ii) ordered their immediate removal; and iii) recommended Ecuador to establish mechanisms to reimburse the companies affected by the application of such measures. Ecuador revoked the corrective measures on March 6, 2015, through Resolution 010-2015 issued by COMEX.

Although the measures were revoked, Ecuador should have refunded the amount paid by importers during the period the measures were applied. It is important to bear in mind that, by virtue of the supremacy principle, the Andean Community regulations prevails over domestic law; therefore, the CAN member countries are obliged to accept the Andean Community regulations, create mechanisms for their application and enforcement, and not obstruct them.

The purpose of this article is to identify the best alternative to obtain the refund of the amount paid for these safeguards and thus comply with the order of the SGCA.

SENAE’s position has been to reject the claims submitted to obtain the refund of the safeguard, arguing that: i) the safeguard was in accordance with the Cartagena Agreement; ii) the amounts paid for the safeguard were in compliance with the applicable regulations; and iii) Resolution 1762 only recommended the refund.

SENAE´s interpretation is incorrect. Resolution 1762 obliges to refund the affected importers and recommended the establishment of adequate mechanisms to exercise this right. Therefore, it is not a recommendation. What was ordered by the SGCA is to reimburse the affected companies the amounts paid since January 5, 2015, after verifying that none of the conditions alleged by Ecuador to authorize the corrective measure were fulfilled.

In response to the refusal at the administrative proceeding, the importers filed lawsuits against the resolutions of the SENAE that rejected the administrative claims. However, the Tax Court (“TDCT“) and the Administrative Court (“TDCA“) have had contradictory opinions regarding the competent authority to review the case.  Even when the National Court of Justice (“CNJ“) has already stated that the competent court is the TDCT.

The CNJ has established that, although safeguards are not taxes, judgments have recognized that the safeguard is an economic measure adopted by the State that causes an increase in taxes on international trade; therefore, it has been recognized as a taxation matter.

This delay, both in the administrative and judicial process, has caused evident damages to importers who have not yet received a refund of the amount paid.

The remedies and actions provided by Ecuadorian law are not adequate mechanisms to guarantee the proper recognition of the importer’s right to a refund of what has been unduly paid. 

Faced with this situation, the Andean Community regulations allows the affected party to initiate a legal action for non-compliance against the member country, before the SGCA and the Court of Justice of the Andean Community (“TJCA“), a measure that excludes the possibility of simultaneously appealing to the national courts.

To file the action, the conduct that causes the non-compliance with the Andean community regulations and the violation of the individual’s rights must be demonstrated. The SGCA issues a non-binding opinion about the existence of the damage. However, if the non-compliance persists, the person affected may appeal to the TJCA, which through a judgment will determine the responsibility of the member country and the obligation to adopt the necessary measures for its compliance. The judgment constitutes a legal instrument to claim the member country the execution of the judgment and compensation for damages.

María José Flores
Associate at CorralRosales

Green hydrogen: The Energy of the Future

Foto de Mario Fernández y Rafael Serrano, asociados de CorralRosales, más una foto de un edificio de cristal y el logo de CorralRosales

Green hydrogen is emerging as a major alternative when it comes to taking on climate change.  Forbes has called it the “energy of the future,”[1] and Goldman Sachs estimates that by 2050, the green hydrogen market will exceed US$11 trillion. [2]

In Latin America, Chile is one of the countries that is at the forefront. In 2020, the nation launched its “National Green Hydrogen Strategy,”[3] and just two years later, several projects were announced, including: HyEx, which will produce green hydrogen for mining; Highly Innovative Fuels (HIF), to generate fuels based on green hydrogen[4]; and Antofagasta Renewable Energy and Mining (AMER), which will include the construction and operation of an electrolyser capable of producing around 30 tons of green hydrogen per day.[5] 

In Ecuador, green hydrogen is already considered a fundamental element for the decarbonized energy transition,[6] and the country will begin working[7] on a roadmap[8] for its implementation.

This article elaborates on what green hydrogen is, delving into its concept and challenges, and providing several conclusions.

I. Green Hydrogen

Hydrogen is “…the lightest chemical element that exists, its atom is made up of one proton and one electron and is stable in the form of a diatomic molecule (H2).” [9] It is not isolated in nature, but rather coexists with other elements such as oxygen (H2O) or carbon (forming organic compounds).[10] This means that hydrogen cannot be obtained directly and needs to be produced.[11] 

According to the International Renewable Energy Agency[12] (hereinafter, “IRENA”), hydrogen can be produced using multiple processes. A color-based nomenclature system has been assigned to differentiate the various production processes;

  1. Gray hydrogen is produced with fossil fuels (e.g.  from methane by steam reforming or coal gasification) and its use generates significant CO2 emissions. About 95% of the total world hydrogen production is grey.
  2. Blue hydrogen is gray hydrogen with an added capture and storage of CO2 emissions. However, studies show that this capture and storage has an efficiency of between 85% and 95%, in the best of scenarios, meaning that it emits between 5% and 15% of CO2. This means that it reduces emissions, but does not eliminate them.
  3. Green hydrogen is produced through processes that use only renewable energy and do not generate CO2 emissions, which makes a significant contribution to tackling climate change. Electrolysis is the most mature and consolidated process on the market. This consists[13] of breaking down water molecules (H2O) into oxygen and hydrogen[14] through an electrolyser[15] that is powered by electrical energy from renewable sources (e.g., wind, solar, etc.). There are other processes (including biomass gasification, pyrolysis, thermochemical division of water, photocatalysis, combined dark fermentation), but they have not yet reached a commercial scale, so they have not been considered in this article.

As shown here, the difference is not in the hydrogen itself, but rather the method for producing it. 

The Race to Zero[16] campaign under the United Nations Framework Convention on Climate Change[17] establishes a goal by 2050 of reducing “… greenhouse gas emissions to as close to zero emissions as possible…”[18] Achieving this will require substituting fossil fuels with renewable energies to cover global energy demand.[19] Such alternatives include green hydrogen.[20] By 2050, this industry could “…reduce 6 billion tons of greenhouse gases…”[21]

Because of the environmental benefits surrounding green hydrogen, its uses have expanded to sectors where more value can be generated. Initially,[22] green hydrogen use was limited to light-duty fuel cell vehicles (or FCEVs). Today it is used widely and large amounts of green hydrogen have been planned for industries that generate major amounts of CO2 emissions that are difficult to mitigate, which include: the steel industry, oil refining, maritime and air transportation.[23][24][25]

Sweden’s SSAB [26] uses green hydrogen instead of coal to produce “green steel,” and maintains that it would reduce up to 10% of its annual emissions of CO2.[27] Shell will invest in the construction of a project in Rotterdam to produce around 60 tons of green hydrogen per day and allocate it to oil refining.[28]

Additionally, green hydrogen can be stored for long periods and later used to generate electrical energy.[29] Aces Delta, a joint venture between Mitsubishi Power Americas and Magnum Development LLC, has set out to build “…the largest green hydrogen production and storage facility in the world” [30] in Delta, Utah.

II. Challenges

The biggest challenge facing green hydrogen revolves around reducing its high cost of production, which depends mainly on the capital costs of electrolysis and the price of electrical energy used for said production. In 2019, green hydrogen was two to three times more expensive to produce than gray hydrogen.[31] 

However, trends have pointed to a reduction in the prices of electricity produced by renewable sources and the capital costs of electrolysis, which means that the production costs of green hydrogen are expected to decrease. In this regard, Wood Mackenzie published a report suggesting that costs will be reduced by up to 64% by 2030.[32]

Another challenge is the lack of infrastructure for the transportation and storage of green hydrogen. In 2020, worldwide, there were only 5,000 kilometers of transmission pipelines for green hydrogen and more than 3 million kilometers for natural gas. This means that either new infrastructure needs to be created or adaptations need to be made to existing infrastructure insomuch as possible.[33]

It will also be necessary for humanity to recognize the value of green hydrogen in the fight against climate change in order to generate enough demand to justify the industry’s development. 

To face these challenges and promote the generation and consumption of green hydrogen, one key development will be an adequate legal framework.

In Ecuador, as provided in articles 261.7 and 261.11 of the Constitution, the State has exclusive jurisdiction over natural and energy resources. Additionally, under article 313, it is the State’s responsibility to administer, regulate, control, and manage strategic sectors, which include all forms of energy.

The Organic Law of the Public Service of Electric Power and its Regulations govern the development, financing, operation, and commercialization of electric power in Ecuador, including the promotion and execution of energy projects based on renewable energy sources, which would be the basis for the production of green hydrogen by electrolysis.

However, the Ecuadorian legal system contains no specific regulation on green hydrogen. This makes it important to structure an effective legal regime that fully addresses the entire value chain and promotes its production (through electrolysis or other processes), distribution, and use. Said regime must include short- and long-term commitments that provide security and encourage the private sector to assume the risk of investing in this new industry, as well as the fiscal and financial incentives or associated benefits to attract said investment. 

Within this legal framework, a recommendation is made, among other things, to include guidelines fit to the reality of each country:

  1. Identify priorities. If a country has enough renewable energy sources, it will be able to focus its activity on generating green hydrogen at a competitive cost. In other cases, importation will be a better option.
  2. Identify applications or uses that generate greater value. It makes no sense to use green hydrogen in sectors where efficient and cheaper alternatives exist. Hence, its use is focused on hard to abate sectors such as steel, maritime, and air transport.
  3. Facilitate and promote the flow of capital for the creation, expansion, or reuse of infrastructure for green hydrogen, as well as the manufacture or import and installation of the technologies that allow its production (e.g. electrolyzers, which are the devices that make it possible to carry out electrolysis processes in a controlled manner).
  4. Establish tax rebates to offset competition from those jurisdictions where gray hydrogen production remains attractive.
  5. Promote the switch to green hydrogen through loans or funds dedicated to that industry; special prices or rates for green hydrogen; promote the market for “green” products.

III. Summary

Green hydrogen could help in the fight against climate change. In addition, if the industry develops as expected, social and economic benefits could be obtained, since it would promote the growth of skills and human capital, as well as productive diversification, job creation, and investment.

The success of green hydrogen may vary depending on the reality and objectives of each country. Interest in green hydrogen may be higher or lower than expected and, therefore, the projections may be more or less optimistic.

In any case, the fight against climate change, reduction of the capital costs of electrolysis, and the price of electrical energy from renewable sources have generated a favorable scenario for the development of green hydrogen around the world, which can be promoted through an effective legal framework.

In Ecuador, a legal regime needs to be structured that, coupled with the nation’s reality and objectives, addresses the entire value chain of green hydrogen in a way that provides legal certainty and clear incentives or benefits to private investment.

[1] BBC, Green Hydrogen: Green hydrogen: 6 countries that lead the production of one of the “energies of the future” (and which is the only one in Latin America), March 31, 2021,

[2] BBC, Renewable energies: what are green, blue and black hydrogens (and why billions are invested in two of them), August 26, 2020,

[3] Chilean Ministry of Energy, National Green Hydrogen Strategy, November 2020,

[4] BBC, Green Hydrogen: Green hydrogen: 6 countries that lead the production of one of the “energies of the future” (and which is the only one in Latin America), March 31, 2021,

[5] H2 Business News, Air Liquide will develop a large renewable hydrogen electrolyser for Chile, August 15, 2022,

[6] CELEC EP, Ecuador offers investment opportunities around green hydrogen through the generation of renewable energies May 26, 2022, June 8, 2022,

[7] Vistazo, Green hydrogen, a promising solution for decarbonization, September 2, 2022,

[8] H2LAC, Ecuador will have its own roadmap and national strategy for green hydrogen, April 27, 2022,

[9] National Hydrogen Center, Hydrogen, retrieved on September 26, 2022,,

[10] National Hydrogen Center, Hydrogen, retrieved on September 26, 2022,,

[11] Ibid.

[12] IRENA, Hydrogen: A renewable energy perspective, September 2019, 

[13] BBC, Renewable energies: what are green, blue and black hydrogens (and why billions are invested in two of them), August 26, 2020,

[14] Chile Foundation, A strategic opportunity for Chile: green hydrogen, retrieved on September 29, 2022,

[15] BBC, Green Hydrogen: Green hydrogen: 6 countries that lead the production of one of the “energies of the future” (and which is the only one in Latin America), March 31, 2021,

[16] This campaign represents 1,049 cities, 67 regions, 5,235 companies, 441 of the largest investors and 1,039 higher education institutions, from a total of 120 countries. For more information, see:

[17] United Nations, Race To Zero Campaign, visited on September 29, 2022,

[18] United Nations, Getting to Net Zero Emissions:

the world pledges to take action, visited on September 29, 2022,

[19] La República, A country with a future in green hydrogen, August 31, 2022,

[20] Ibidem.

[21] CELEC EP, Ecuador offers investment opportunities around green hydrogen through the generation of renewable energies May 26, 2022, June 8, 2022,

[22] IRENA, Green hydrogen: A guide to policy making, November 2020.

[23] EKOS, Green Hydrogen: What is it and why do they call it the energy of the future? June 1, 2022,

[24] BBC, Renewable energies: what are green, blue and black hydrogens (and why billions are invested in two of them), August 26, 2020,

[25] Chile Foundation, A strategic opportunity for Chile: green hydrogen, retrieved on September 29, 2022,

[26] SSAB, About SSAB, visited on September 29, 2022,

[27] EKOS, Green Hydrogen: What is it and why do they call it the energy of the future? June 1, 2022,

[28] H2Businessnews, Shell: “Green hydrogen will cost less than blue fossil fuel,” August 10, 2022,

[29] IRENA, Green hydrogen: A guide to policy making, November 2020.

[30] H2Businessnews, Construction of the largest underground hydrogen storage project in the world, August 8, 2022,

[31] IRENA, Hydrogen: A renewable energy perspective, September 2019,

[32] BBC, Green Hydrogen: Green hydrogen: 6 countries that lead the production of one of the “energies of the future” (and which is the only one in Latin America), March 31, 2021,

[33] In this regard, IRENA notes the following: “One option would be repurposing pipelines currently dedicated to fossil gas for the transportation of green hydrogen. Repurposing pipelines may involve the replacement of valves, regulators, compressors, and metering devices, but, in some cases, depending on the pipeline material, it could also require replacing the actual pipelines.” IRENA, Green Hydrogen Supply: A guide to policy making, May 2021, p. 15,

Mario Fernández
Associates at CorralRosales

Rafael Serrano
Associates at CorralRosales

Ecuador: Renowned Brands in the Process of Recognition

Foto de Andrea Miño, asociada de CorralRosales + foto de un edificio + Logo de CorralRosales

Notorious marks are those well-known in the specific sector of the public for which said products, services, or activities are intended, and are used to identify and protect such brands. Renowned brands are widely known by the general public.

Both notorious marks and renowned brands must maintain high commercial traffic to obtain the fame and prestige that characterize them, and this requires a large investment of time, resources, and publicity by their owners.

The concept of a renowned brand is not regulated in Decision 486 of the Andean Community; in a preliminary interpretation, its Court of Justice recognized renowned brands to be those that are known by the general public, outside of merely the relevant sector. As a result, such brands completely break with the principles of registration, territoriality, and specialty, protecting them over all products or services, as opposed to a notorious mark.

The Andean Community Court of Justice has referred to the concept of a renowned brand for several years; and in Preliminary Interpretation 01-IP-87, it analyzed renowned brands, indicating the parameters of its knowledge: “[…] the above-mentioned renowned brand must be known by different groups of consumers in different markets, and not only within a particular group, as is the case with notorious marks. Therefore, it can be deduced that every renowned brand is notorious, but not every notorious mark is a renowned brand, as the classification of the latter is more demanding”[1]

In Interpretation 41-IP-98, the Court recognizes renowned brands, connecting it to fame, prestige, and goodwill, clearly differentiating it from a notorious mark: “Similarly, “through means of the regulations in question, they have been granted characteristics foreign to their nature and typical of renowned or very well-known brands, by extending their protection to all classes, including to denote different products or services.”[2]

In its recent case law, the Court exemplifies trademarks that, due to their positioning and global notoriety, are recognized as renowned brands, as follows: “Renowned brands (for example: Coca Cola, Toyota, Facebook, Google, etc.) are known by practically almost the entire general public, by different types of consumer segments and suppliers, including those who do not consume, manufacture, or market the product or service identified with the renowned brand.”[3]

Likewise, it emphasizes that, given its nature, a renowned brand does not need to be proven: “Notoriety must be proven by the party alleging it, in accordance with Article 228 of Decision 486. Meanwhile, renowned brands do not need to be proven, since under the general theory of process, this is called a “notorious fact.” Here, “notorious facts” are known ex officio and do not require evidentiary activity (notoria non egent probatione), so do not require evidence”[4]

Over the last thirty years, in its preliminary interpretations, the Court has differentiated renowned brands from notorious marks, thus establishing the foundations for a possible regulation of this type of brand within the Andean Community. “Renowned brands, meanwhile, are not regulated by Decision 486, but rather, due to their nature, receive special protection in the four member countries.”[5]

Under this line of case law, in recent resolutions, the Collegiate Body of Intellectual Rights has ratified the character of renowned or very well-known brands that, due to their prestige and global knowledge, deserve the special protection that case law and doctrine grant them to protect their value from attempted misuse by third parties in a clear unfair use of said character. This also helps to protect the rights of consumers.

In procedures in which third parties tried to make use of the very well-known UBER and MAC brands, the Ecuadorian office confirmed their wide recognition by the general public, as well as the reinforced protection that must be given to them, establishing: the UBER brand is one recognized among the population, not only by the relevant sector of consumers (users of the digital application). By accession, this type of brand is protected not only from the risk of confusion and association, but also from the risk of dilution and unfair use of its prestige”[6]

Similarly, given the misappropriation of the trade name MAC ACCES BY MOBILE STORE MAS LOGOTIPO, it determined the risk of confusion, association, dilution, and unfair use that this registration would imply due to the very well-known nature and recognition of the MAC brand worldwide: “this type of brand is protected not only from the risk of confusion and association, but also from the risk of dilution and unfair use of its prestige[7]

In conclusion, the resolutions of the Andean Court of Justice have paved the way for the competent offices of the member countries of the Andean Community to establish clear rules for the recognition and protection of renowned brands.

[1] Prejudicial Interpretation 01-IP-87

[2] Prejudicial Interpretation 41-IP-98. Process 219099, marks SUPERMAN v. SUPERMANI. Consulting country Colombia.

[3] Preliminary Interpretation 196-IP-2020. Case 7467-2017-0-1801-JR-CA-26, trademarks TFQ LA TABERNA DE FRANCO Q vs SANTIAGO QUEIROLO S.A.C. Consulting country Peru

[4] Preliminary Interpretation 23-IP-2021. Process 570061-2014/DSD, marks ZAPATA PERU AGROINDUSTRIAS ZAPATA S.A.C. v. CATENA ZAPATA Consulting country Peru

[5] Prejudicial Interpretation 123-IP-2021. Process SD2016/0059251, marks ZOO v. BIO ZOO. Consulting country Colombia.

[6] Resolution No. OCDI-2022-159. Collegiate Body of Intellectual Rights. SENADI-2018-65615 process, marks UBER v. UBER FRUITS.

[7] Resolution No. OCDI-2022-272. Collegiate Body of Intellectual Rights. OCDI-2021-191-AN process, marks MAC v. MAC ACCES BY MOBILE STORE MAS LOGOTIPO.

Andrea Miño
Associate at CorralRosales

Acquisition of treasury shares – current regulation and possible reforms

Foto de Sofía Rosales, asociada de CorralRosales + foto de un edificio + Logo de CorralRosales

It may seem strange for a company to be its own shareholder, i.e., to hold a certain number of shares issued by the company itself, commonly known as treasury shares or treasury stock. However, there are several reasons why a company might be interested in acquiring its own shares, and their regulation becomes necessary, since it entails equity and corporate risks. This matter would merit a more in-depth analysis, but this article aims to describe in broad outline the main purposes of treasury stock, the risks it presents, current regulation and possible reforms.

1. Main purposes of treasury stock and its risks

From an equity perspective, the acquisition of treasury stock essentially produces the same effects as a distribution of dividends, especially considering that the Law on Companies determines that, in order to acquire treasury stock, it is necessary to use funds taken from net profits which may be disposed of by the general shareholders’ meeting. The company uses the net profits, which are part of the shareholders’ equity, to pay the selling shareholder the value of the acquired shares. The renowned Spanish lawyer Jesús Alfaro states that: “when a company acquires its own shares, in fact, what it does is to distribute part of its equity to the shareholders or members whose shares or units it acquires.”[1]

In addition, if the treasury stock is resold at a higher value than that at which it was acquired, the shareholders will benefit, since this transaction will generate a profit for the company, which will ultimately be consolidated in the total profit belonging to all shareholders.  

From a tax perspective, it is more convenient for the shareholders to receive income from the sale of shares than from dividends, since the income in the first case is taxed by the Single Income Tax (Impuesto a la Renta Único) over the profit on the sale of shares, while the income from dividends becomes part of the global income subject to Income Tax. In short, the shareholder will have the option to choose between keeping its participation in the company or obtaining a tax benefit on the value received, which could be in the shareholder’s interest in case it considers that its investment has yielded the expected results. It will also be very important to consider whether by selling part of his shares to the issuing company itself, the capital percentage held by shareholder decreases – diluted – or not.

From a different standpoint, holding treasury stock allows certain financial transactions, such as the issuance of convertible bonds. Thus, when the bonds are converted into shares, it is not necessary to carry out a capital increase, but it can be done with shares held in treasury.

The problem is that these types of transactions affect the equity of the company, since the capital stock ceases to be a guarantee against creditors, since, in accounting terms, the capital stock does not have a cash counterpart, but the counterpart is the company’s own shares. This means that the capital stock is not invested in actual assets. For these reasons, as will be discussed below, the legislator is becoming increasingly wary of these transactions. 

2. Current regulation

Pursuant to the Law on Companies, corporations may acquire their own shares in order to: (i) resell them; or (ii) redeem them, provided that the requirements contained in article 192, transcribed below, are met: 

“The general shareholders’ meeting may decide that the corporation acquires the shares issued by it, provided that the following requirements are met:

  1. That a majority of the shareholders attending the corresponding meeting resolve the acquisition of the shares;
  2. That only funds taken from net profits are used for such transaction;
  3. That the capital corresponding to the acquired shares is fully paid-in; and,
  4. That in no case shall the acquisition result in a decrease in the subscribed capital.

As long as the shares are held by the company, the rights inherent to them will be suspended.

A resolution by the general shareholders’ meeting will also be required for these shares to be put back into circulation.”

Article 196 of the Law on Companies refers to the redemption of shares and establishes that:

The redemption of the shares will be done against the capital stock, for which its reduction shall be previously resolved, in the form established by this Law or the bylaws. The redemption of shares may not exceed fifty percent of the capital stock

It derives from the foregoing that corporations, once they acquire their own shares with net profits, may either reintroduce them into the legal market or redeem them by means of a capital reduction.

Prior to the entry into force of the Law for the Modernization of the Law on Companies – in December 2020 – the redemption of shares against distributable profits and not necessarily against the stock capital was allowed, in which case, there was no capital reduction. This possibility was eliminated, which evidences a certain reaction from the lawmakers with respect to the acquisition of treasury stock, which, with this possibility, could be kept in the company without the need to reduce capital or reintroduce them into circulation.

With respect to limited liability companies (compañías de responsabilidad limitada), Article 112 provides as follows:

“The redemption of the corporate units will be done against the capital stock, for which its reduction shall be previously resolved, in the form established by this Law or the bylaws. The redemption of the units may not exceed fifty percent of the capital stock.”

Based on the above and derived from the very nature of limited liability companies, they can only acquire their own shares in order to redeem them. 

At this point, the reader may be asking themselves, in what time does the company have to resell or redeem the shares, in the case of a corporation, or redeem the units, in the case of a limited liability company? Well, this very important point is not currently regulated by the Law on Companies. Therefore, although the possibility of redeeming shares against distributable profits has been eliminated, companies do not have a time limit in which they must either redeem them or resell them.

In other legislations, such as Spain, the regulation of the acquisition of treasury stock is much stricter since it is expressly prohibited[2]. In the event of contravention of this prohibition, a limit of one year is established for the resale or redemption of the shares or units, and a fine of up to the nominal value of the shares or units is imposed.  

Moreover, our legislation does not provide for express regulation on this matter for companies listed on the stock exchange, where these transactions would be particularly dangerous.

Possible reforms

As we have anticipated, the Ecuadorian lawmaker is becoming more and more reluctant to this type of transactions, and although it is not expected to reach a rigidity similar to the Spanish legislation, the draft Law Reforming the Law on Companies for the Promotion of Corporate Governance, currently in process in the National Assembly, foresees the inclusion of the following paragraph in article 192 in fine of the Law on Companies:

The shares must be transferred within a maximum period of one year from their acquisition. Once this period has elapsed without the transfer having taken place, the administration shall immediately proceed to call a general shareholders’ meeting to resolve to redeem the repurchased shares, with the consequent reduction of the capital stock.

This constitutes a significant change compared to current legislation, since companies will not be able to hold treasury stock indefinitely, which would consequently discourage this type of operation. This change could also be seen as protection for minority shareholders and third-party creditors.  

It will be very important to regulate these types of transactions in companies listed on the stock exchange in order to preserve their transparency.

[1] Alfaro, J. (2020) Los negocios de una sociedad sobre sus propias acciones o participaciones. Almacén de Derecho.

[2] Artículo 134 de la Ley de Sociedades de Capital de España: “En ningún caso las sociedades de capital podrán asumir o suscribir sus propias participaciones o acciones(…)

Sofía Rosales
Associate at CorralRosales

Instagram fined 405 million euros for violating the privacy of children and adolescents

Foto de los asociados de CorralRosales, Rafael Serrano y Christian Razza y una foto de un edificio y el logo de CorralRosales

The Irish Data Protection Commission (DPC) has fined Meta-owned social media platform Instagram €405 million for breaches of the European Union’s (EU) General Data Protection Regulation (GDPR).[1]

The sanction was imposed following a two-year investigation by the DPC, which found that Instagram had allowed users between the ages of 13 and 17 to operate business accounts on the platform that displayed users’ phone numbers and email addresses. This led the authority to conclude that Meta had been processing the personal data of children and adolescents illegally without a legal basis under the GDPR.

The DPC also found that the platform had operated a user registration system whereby the accounts of users aged 13 to 17 were set to “public” by default, thereby also making their social network content public.  The fine, which is the second highest under the GDPR, following only a €746 million sanction against Amazon, is the third imposed by the Irish authority on a Meta-owned company.[2] In addition to the fine, the DPC decided to admonish Meta and require it to adopt a series of specific corrective measures to comply with the proper data processing.

In December 2021, the DPC presented a draft decision to all EU counterpart regulators, also known as Competent Supervisory Authorities, as provided under Article 60 of the GDPR. Six of these national regulators raised objections to the DPC’s draft decision. The DPC was unable to reach a consensus with the regulators on the issue of objections and therefore referred the case to the European Data Protection Committee (EDPC), pursuant to article 65 of the GDPR.

On July 28, 2022, the EDPC issued its binding decision,[3] under which it required the DPC to modify its draft decision to the effect that it included having found an infraction of article 6(1) of the GDPR and to reassess the proposed administrative fines arising from said additional infraction.[4] After including these considerations in the text, the DPC rendered its final decision on September 2, 2022,[5] and on September 15, 2022, confirmed the conclusions from the investigation into Instagram and the fine of 405 million euros.[6] The DPC has at least six other ongoing investigations involving companies owned by Meta.[7]

Irish state-owned station RTE quoted a Meta spokesman as saying that they will appeal the fine, because this investigation was based on old configurations that they apparently updated over a year ago. Since then, they have implemented a number of new features to help keep teens safe and their information private. Such updates include a setting in which accounts belonging to users under 18 years of age are automatically configured as “private” when they register on Instagram.[8]

This is a major sanction, since it is the first fine imposed in relation to the personal data of children and adolescents, and a sign that financial sanctions for non-compliance with the GDPR are being imposed with ever-increasing values. This could be a sneak preview of the investigations and fines that the future Personal Data Protection Authority of Ecuador could well initiate and impose when the sanctioning regime set out in the Organic Law on Personal Data Protection (LOPDP) goes into force on May 26, 2023.

Personal data is any information that allows a person to be identified and requires special care when it comes to children’s personal data in a digital environment like social networks. The LOPDP will have a greater impact on individuals and legal entitiesthat process the personal data of children and adolescents, since their data is categorized in said regulations as special data, which implies additional obligations for the person in charge and the person responsible for processing such data. Such additional responsibilities include impact assessments and granting additional rights to data owners.[9] In this sense, the personal data of children and adolescents will receive reinforced and specific protection, especial when such data is used  for marketing, profiling, and the collection of these through services offered directly to minors, as happens on social media.

Since 20202, Ecuador has had a public policy aimed at guaranteeing internet safety for children and adolescents,[10] focused on protecting the dignity and physical, psychological, emotional, and sexual integrity of children and adolescents and enhancing the opportunities and skills offered by digital technologies in their lives and comprehensive development. Now, under the LOPDP, companies must be vigilant to ensure they comply with this rule, otherwise they will be penalized with the respective sanctions.

Although the DPC sanction applies in the EU, Meta will need to rectify this problem and adopt the corrective measures not only in that jurisdiction, but also change the default configuration of the commercial accounts of children and adolescents in Latin America, since currently, Instagram business accounts are set to “public” by default. Otherwise, the Latin American data protection authorities will have some work to do.

[1] BBC. (September 5, 2022). Instagram fined €405m over children’s data privacy.

[2] The penalty is currently the highest for a Meta-owned company, coming on the heels of a 225 million euro fine against WhatsApp and one for 17 million euros against Facebook.

[3] The EDPC published its decision on September 15, 2022.

[4] EDPC. (September 15, 2022). Binding Decision 2/2022.

CPD: (September 2, 2022). Decision of the Data Protection Commission made pursuant to Section 111 of the Data Protection Act, 2018 and Article 60 of the General Data Protection Regulation, DPC Inquiry IN-20-7-4.

[6] Irish Data Protection Commission. (September 15, 2022). Data Protection Commission announces decision in Instagram Inquiry.

[7] Independent. (September 5, 2022). Instagram fined €405m by Irish regulator for breaching children’s privacy rights.

[8] Le Monde. (September 5, 2022). Irish data watchdog fines Instagram €405 million over children’s privacy.

[9] Under article 21 of the LOPDP, in addition to the right of children and adolescents not to be the subject of a decision based solely or partially on automated assessments, sensitive data or data of children and adolescents cannot be processed except with the express authorization of the data owner or their legal guardian.

[10] National Council for Intergenerational Equality. (2020). Public policy for a safe internet for children and adolescents.ítica_publica_internet_segura.pdf

Rafael Serrano and Christian Razza
Associates at CorralRosales

The settlement of differences, a fast-track tax assessment

Foto de Andrea Moya con el titular de su último artículo "La liquidación de diferencias, un procedimiento de determinación tributaria abreviado" + logo de CorralRosales + foto de edificio de cristal

The process for settling differences provided for in the Internal Tax Regime Law is a fast-track tax assessment that should only be activated when the conditions established in the law are met and, if activated, the principles that regulate administrative procedures and the taxpayer’s rights should be respected.

Article 68 of the Tax Code defines the assessment capability of the Tax Authority as the act or set of regulated acts carried out to establish the existence of the taxable event, the taxpayer, the taxable base, and the amount of the tax.

Articles 107-A and following of the Internal Tax Regime Law establish that the Internal Revenue Service (IRS) has the power to notify the taxpayer of any differences detected in its tax returns and which generate amounts payable to the Treasury. If the taxpayer does not make the payment or justify the differences within 20 days, the IRS issues a Payment Settlement for Differences in the Tax Return, which implies a collection order for the exercise of the coercive action. 

The acts of notification and subsequent settlement of differences contemplated in the aforementioned articles are tax assessment acts, since the Tax Authority determines the existence of the taxable event, the taxable base and the amount of the tax. The process for settling differences is a fast-track assessment process; therefore, it is only applicable when the Tax Administration finds differences in the taxpayer’s returns.

According to the dictionary of the Royal Academy of the Spanish Language, difference is: “that quality or accident by which something is distinguished from something else”. Therefore, the Tax Authority can only apply the fast-track assessment process when it reaches the conclusion that there is a difference when comparing the data provided by the taxpayer in its tax returns or those declared by third parties in relation to the same taxpayer.

For example, the Tax Authority could identify a difference if the taxpayer has not applied a deductibility limit established by law in its income tax return; or, if the value declared and paid for withholding tax does not coincide with the values provided by third parties. And only if the evidence filed by the taxpayer is not sufficient to disprove such difference, the corresponding settlement may be issued.

However, there are cases in which the Tax Authority has exceeded its faculties. For example, when issuing settlements of differences based on presumptions, i.e., the Internal Revenue Service has presumed the existence of differences in the Value Added Tax rate applied to certain services, based on the activities registered by the taxpayer in the Single Taxpayer Registry.

The Internal Tax Regime Law does not allow the Tax Authority to establish differences by presumption and could not do so since it would be contrary to the nature of a direct and abbreviated assessment procedure. Therefore, the question arises, a settlement of differences issued based on presumptions made by the Tax Authority is valid? Does the Tax Authority have the power to issue a settlement of differences when the difference is presumed?  The answer is no.

The initiation of a fast-track assessment procedure without having complied with the conditions set forth in the law, breaches the principle of prohibition of arbitrariness provided in the Administrative Code and violates the taxpayer’s rights to due process and defense, recognized in the Constitution and in the Tax Code.

Faced with this circumstance, the taxpayer may exercise its right to appeal the assessment procedure – the liquidation of differences – through an administrative claim or a judicial challenge. However, within these processes the taxpayer will be obliged to rebut the presumption of legitimacy applicable to the administrative tax acts.

In conclusion, although the legislator has provided that the Tax Authority may initiate fast-track assessment procedures against taxpayers, these procedures of liquidation of differences may only be initiated when the Authority effectively determines the existence of differences, otherwise the Authority would be acting arbitrarily and, consequently, violating the taxpayer’s rights, especially his right to defense.

Andrea Moya
Partner at CorralRosales

Expiration applied to administrative lawsuits filed by the Office of the Comptroller General to determine liabilities

Foto de Ricardo Mancheno, asociado de CorralRosales, más la foto de un edificio de cristal y el logo de CorralRosales

In general terms, doctrine tends to define expiration as “(…) the period that produces the termination of a thing or a right,” or as “the loss of force and effect of a power upon expiration of the term for its execution.

In the field of administrative law, an adequate doctrinal definition would be: “Expiration of a lawsuit constitutes an abnormal mode of termination thereof resulting from expiration of the maximum term established by law without the competent government body having issued any express resolution.”

Ecuadorian administrative law refers to expiration, particularly in the Law of the Office of the Comptroller General (hereinafter “LOCGE,” from its Spanish acronym), as analyzed in this article.

Article 71 of the LOCGE provides for the Office of the Comptroller General’s power to issue orders related to government activities and actions by persons subject to said law, also establishing its power to determine liabilities. This power expires seven years after the date in which such activities were carried out.

Other than the above, articles 26 and 56 of the LOCGE provide for two special types of expiration:

  • Article 26 provides that government audit reports, whatever their type or modality, must be conducted in a maximum and unextendible term of one hundred eighty days from the time the audit work order is issued until the final report is approved; this includes a 30-day period that the Comptroller General has to issue its approval.

The legal consequence of the report not being approved within said unextendible period is that the authority loses its power to continue with the audit process.

  • Article 56 of LOCGE provides that the resolution determining civil liability for negligence must be issued within a 180-day term counted from the business day following notification of the initial determination.

Failure to do so within the indicated period results in expiration of the Comptroller’s power on the matter. As a result, the Comptroller shall not issue a resolution confirming or eliminating the fines determined within the special audit.

 The expiration set out in the LOCGE occurs ipso jure, by operation of law, and results in the Comptroller losing its power to issue a resolution, which must be formally ratified and certified by the Comptroller itself as required under article 72 of the LOCGE, in accordance with the rules of due process set out in the Constitution of the Republic of Ecuador (hereinafter, the “Constitution”) and the administrative principles of the Organic Administrative Code.

Consequently, the lack of competence of the Comptroller’s Office on the grounds of expiration of the term, leads to absolute and irremediable nullity of everything performed outside of the established term. This means that any actions, decisions, or issue of determinations or fines within the special audit must be subject to the deadlines and unextendible terms set out in articles 26, 56, and 71 of LOCGE.

Turning to the expiration provided for in articles 26 and 56 of the LOCGE, the Plenary Session of the National Court of Justice issued Resolutions Nos. 10-2021 and 12-2021, dated September 29 and October 25, 2021, respectively. Through these, and by virtue of a judicial ruling repeated on three occasions in reference to application of expiration set out in the abovementioned laws, mandatory jurisprudential precedents were established, as follows:

“… HEREBY RESOLVES: … Art.- 3. Declare the point of law that contains the following rule to become MANDATORY JURISPRUDENTIAL PRECEDENT: “Article 26 of the Organic Law of the Comptroller General of the State establishes a deadline or term, as appropriate, which is mandatory for the control entity. After said time period, said office’s power to exercise control expires, and the government audit report’s approval becomes completely null and void because the public official approving it loses all of its power due to the passage of time. As a result, the Office of the Comptroller General, whether through an administrative procedure, or Contentious Administrative Courts, as the case may be, are required to declare it to be as such, whether ex officio or at the request of one of the parties, applying the guarantee of expiration of a legal right and the principle of legal certainty.”

“… HEREBY RESOLVES: Art. 1.- Declare the following point of law to be mandatory jurisprudential precedent: The one hundred eighty-day term set out in Article 56 of the Organic Law of the Office of the Comptroller General is a mandatory deadline that establishes expiration of the Office of the Comptroller General’s power to make determinations regarding civil liability for negligence. As a result, if it issues resolutions after said deadline has passed, the procedure becomes null and void, as does the resulting administrative act. To this effect, once the abovementioned deadline has passed, the Office of the Comptroller General, whether through an administrative procedure or the Contentious Administrative courts, either ex officio or at the request of one of the parties, must declare expiration of the Office of the Comptroller General’s power to issue determinations. This is consistent with safeguarding the principles of legality and legal certainty set out in Articles 226 and 82 of Ecuador’s Constitution.”

In conclusion, the rules and principles that govern administrative procedures require that all public officials act with valid jurisdictional power, defined as the extent to which the Constitution and the law enable a government body to act and fulfill their mandate, whether based on the subject matter, territory, term, or level. Doing so without having the due jurisdictional power negatively affects the constitutional rights of due process and legal certainty, both set out in the Constitution.

Ricardo Mancheno
Associate at CorralRosales

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

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

The intersection between IP and blockchain

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.


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

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