SENADI protects widely recognised unregistered trademarks

• SENADI has declared the nullity of the mark SAVOY TORONTO on the ground that the application had been filed in bad faith
• The applicant had full knowledge of the prestige of the SAVOY and TORONTO marks and of their original owner
• The mark was applied for to take advantage of the original owner’s positioning and prestige

The Ecuadorian IP Office (SENADI), in a significant move that aligns local practice with Andean jurisprudence in recent prejudicial interpretations, has declared the nullity of a trademark that is widely recognised by consumers in different jurisdictions, and was registered in Ecuador by a party other than its legitimate owner. 

Background

The IP offices of the Andean Community member states, which play a pivotal role in safeguarding trademark rights, may declare – either ex officio or at the request of an interested party – the nullity of a trademark registration when it has been granted in contravention of the absolute or relative grounds set forth by the law. This includes the infringement of third-party rights, bad faith and unfair competition. 

In 2021 SENADI granted the registration of a trademark composed of two marks, SAVOY and TORONTO, in Class 30. These trademarks had been previously registered abroad and are fully recognised based on their business origin (Nestlé). The applicant purchased the original products in his own country and sold them in Ecuador under the trademark SAVOY TORONTO. He had been aware of the Toronto and Savoy products and their business origin for several decades, since they are widely known and favoured in several countries, including Venezuela (the applicant’s birthplace).

Decision

Community jurisprudence states that, to prove the existence of bad faith in trademark applications or registrations, the plaintiff must prove that the applicant/owner had prior knowledge of the trademark and demonstrate, at least, the existence of a contractual relationship between the parties. Although there was no contractual relationship in this case, the facts and evidence confirmed that the applicant had full knowledge of the prestige of the SAVOY and TORONTO trademarks and of their original owner. 

SENADI also analysed when the original trademark owner offered its products in Ecuador before the application. It concluded that the mark was applied for to take advantage of the owner’s positioning and prestige, and to obtain exclusive rights over the mark to prevent third parties (including the legitimate owner) from offering and marketing them in the Ecuadorian territory.

In Resolution No OCDI-2024-202 (26 March 2024), SENADI considered that the existence of bad faith had been established and issued a resolution declaring that the trademark was null. The original trademark owner had offered the Savoy and Toronto products since 2018, three years before registration was applied for.

In addition to the broad knowledge of the TORONTO and SAVOY trademarks recognised by SENADI, the resolution was also based on the fact that the marks identify a particular business origin (Nestlé).

Comment

SENADI, through Resolution No OCDI-2024-202, not only acknowledged but also underscored the severity of the trademark infringement in this case. SENADI found that the applicant sought to take undue and unjustified advantage of the prestige of Nestlé’s trademarks, qualifying the case as an act of unfair competition aiming to confuse consumers as to the origin of the products.

The resolution constitutes a strong precedent against actions that may damage trademark holders’ rights. Trademarks with a wide recognition may be registered by third parties seeking to obtain an undue advantage, which is contrary to good faith and competition.