Our associate Andrea Miño publishes in WTR Daily (World Trademark Review) an article on ‘Distinctiveness of three-dimensional trademarks’ in which she analyzes how the Ecuadorian Office is conducting the examination based on the rules established by the Court of Justice of the Andean Community.

She recalls that according to the court, “3D marks should not be (i) a typical or common form used by competitors on the market, or (ii) a necessary form that meets the functionality requirements for the protected goods. As a result, 3D marks must exhibit intrinsic distinctiveness”.

Likewise, “the court emphasised that 3D marks must, by themselves, allow consumers to associate the protected goods with a particular corporate origin; therefore, they must have arbitrary shapes or display lines, strokes and/or reliefs creating a distinct impression that allows the goods to be differentiated from others sold on the market”.

In this context, she states, “the Ecuadorian IP Office has recently applied the guidelines established by the Andean Court, and denied or annulled rights pertaining to 3D marks. These decisions were made because the marks did not meet the necessary requirements for registration, and protection was pursued through additional elements making up the marks”.

For example, these criteria were the basis for the rejection of a 3D mark for the “Zafiro Chaide mattress and base design” because it did not comply with the necessary requirements; the distinctiveness of the mark, according to the applicant, arose from the designs, colours and words that made up the mark.

If you want to read the full article, click here.

This article first appeared in WTR Daily, part of World Trademark Review, in (August/2023). For further information, please go to www.worldtrademarkreview.com.

The Trademark Lawyer Magazine interviews our partner Maria Cecilia Romoleroux in its section dedicated to women working in the Intellectual Property industry.

During the interview, Maria Cecilia talks about her experience, her achievements, the challenges she has faced during her professional career, as well as the changes she would like to see in the IP industry in the coming years.

An interview that, according to the publication, are inspirations, experiences and ideas for equality.

“A curious fact is that I didn’t want to be a lawyer, or at least it wasn’t in my plans. It all started when my aunt told me the news that I had been enrolled at the Law School. At first, I was shocked, as I had not planned it, but as time went by, I fell in love with my career and studied it with enthusiasm until the end. At that time, intellectual property was not very developed in Ecuador and it was not a main focus at the university”, explains Maria Cecilia recalling her beginnings.

Throughout my career, she says, “i have faced many challenges, most of them related to being a woman in a historically male-dominated environment. Still today, most law firms have a significant number of female associates or employees, but when we look at the partners, the number of women is low or none”.

“This reality is consequence of a sad but true fact: being a woman and a lawyer means that, by default, our path will always have more obstacles than our male colleagues. In my experience, the only way to deal with these and any other obstacles is to move forward. If I had spent time lamenting over all obstacles or taking criticism personally, I would never have achieved a quarter of what I have achieved in my professional and personal career”.

If you want to read the complete article, click here.

In 2011 a referendum held in Ecuador in which, among others, the following question was asked: Do you agree that businesses dedicated to gambling, such as casinos and gambling halls, should be prohibited in the country? A majority of the population voted in favor of the consultation and, consequently gambling was banned.

Following the recent creation in Ecuador of the “Single Income Tax on Sports Betting Operators”, our Partner Andrea Moya publishes an article in LexLatin analyzing this issue.

On May 17, 2023, the President of the Republic issued a Decree-Law for the Strengthening of the Family Economy and, on June 16 the Constitutional Court issued a favorable opinion.

This Decree-Law creates the “Single Income Tax on Sports Betting Operators”. The taxable event, explains Andrea, “is receiving Ecuadorian source income derived from sports betting activities carried out live, through internet or any other means”.

Andrea states in the article that the tax rate is 15% of the taxable base, and will be calculated according to the following rules:

1. Operators with tax residence in Ecuador: The taxable base will be equal to the total income (including commissions) minus the total prizes paid in the same period. Prizes will be deducted from the taxable base if 15% of the value of the prize has been withheld by the operator.
2. Non-resident operators: The taxable base will be equal to the total amount paid by the user in each transaction, i.e., the total value of the bets. If the bet is made through an intermediary, the intermediary must collect the tax from the user and pay it to the Internal Revenue Service.

Additionally, our Partner indicates that “the beneficiaries of the prizes will pay a 15% tax on the value of each prize received, in cash or in kind. If the price is paid by an operator located in Ecuador, the operator must withhold the tax”.

Consequently, “those users who place bets through non-resident operators, will be subject to a higher tax than those who place bets through resident operators, since, in this case, they will only pay the tax on the value of the prizes; while, in the first case they will pay a tax on the value of the prizes and on the bets”.

In the present case it is important to take into consideration that users who place bets through non-resident operators are already subject to a higher tax burden, since the value of their bets is subject to the payment of: (i) outflow tax (ISD), if the user, within each fiscal year, exceeds the tax exempt value; and, (ii) Value Added Tax (VAT).

“The Single Income Tax on Sports Betting Operators will become effective as from January 1, 2024. Therefore, the Presidency must issue the necessary rules to regulate its collection until December 31, 2023. It is to be expected that these regulations will clear, among others, the doubts raised in the preceding paragraphs”, she concludes.

If you want to read the complete article, click here.

“The concept that trademark registration grants ownership of and exclusive rights to use a trademark to identify and protect the goods and services for which it was registered is accepted worldwide”.

“When the IP Office grants a trademark registration, it confers rights and obligations to the owner, including the ability to oppose a third party’s application for an identical or confusingly similar trademark. As part of the opposition proceedings, the defendant may submit evidence to refute the opponent’s allegations”, as explained by our associate Andrea Miño in an article published in WTR.

Miño recalls that “in recent years, it has become common practice for an applicant whose mark is being opposed to submit evidence demonstrating that the use of the opponent’s mark is limited to specific goods or services, in an attempt to minimise the risk of confusion between the conflicting marks”.

In some of these cases, she adds, “the IP Office considered these allegations to be valid and allowed the registration of trademarks similar to previously registered trademarks – thus erroneously applying the specialty principle, which directly affects registration rights, one of the fundamentals of trademark law. Such ex officio restriction of the goods was a clear overreach of the examiner’s powers, in violation of the trademark owner’s rights”.

Our associate analyzes a recent case examined by the Intellectual Property Office in an opposition proceeding in which an applicant downloaded content from the opponent’s website in order for the Intellectual Property Office to consider only the products offered on that website (pharmaceutical products for the treatment of hypertension and heart failure), despite the fact that the trademark on which the opposition was based was granted for pharmaceutical, among other products.

The applicant sought to obtain the registration of a confusingly similar trademark to protect other types of pharmaceuticals (medicines for respiratory diseases).

Resolution No OCDI-2023-291 sets an important precedent whereby, in opposition proceedings, the registration rights must prevail over the use of the mark in the market. The decision makes it clear that, in order to obtain the limitation of a registration, there are other legally established proceedings, which can also be used as a defence in the opposition proceedings.

If you want to read the complete article, click here.

The entry into force of the EU General Data Protection Regulation in May 2018 prompted the creation and adaptation of different regulations on personal data protection worldwide. Ecuador was no exception, and on May 26 2021 the Organic Personal Data Protection Law (PDPL), the first law in Ecuador focused exclusively on regulating and guaranteeing personal data protection, entered into force.

Two years later, as stipulated by law, the corrective measures and the sanctioning regime have come into force. Our associate Rafael Serrano writes on this matter in IAPP.

Serrano points out that “as of May, and since the publication of the PDPL, and private entities have been obliged to undertake adaptation processes that have meant significant challenges for them, which have deepened due to the lack of regulation for the application of the PDPL, as well as the lack of creation and designation of a data protection authority”.

These difficulties, he says, “added to the technical, legal and procedural actions the regulated entities adopted, have undoubtedly generated great uncertainty regarding compliance with and application of the PDPL”.

As of May 26, according to Serrano, “a new stage in the protection of personal data in Ecuador will begin. The risks can be significant, as fines can reach up to 1% of the fiscal year’s turnover immediately before the fine’s imposition”.

He states that the law generates a new regulatory regime that positions Ecuador at an international level since, even with all the risks mentioned above, it also presents great opportunities.

“Compliance with this regulation will improve processes and information systems, and help Ecuadorian companies strengthen their corporate images in the international market. In this sense, companies must begin to mitigate risk by implementing certain documents and security measures”.

If you want to read the complete article, click here.

On January 21, 2023, President Guillermo Lasso Mendoza filed a partial objection for unconstitutionality to the “Draft Organic Reformatory Law of Various Legal Bodies, for the Strengthening, Protection, Impulse and Promotion of Popular and Solidarity Economy Organizations. Artisans, Small Producers, Micro-enterprises and Enterprises” (“Bill”). Our associate Christian Razza writes about it for The Legal Industry Reviews (LIR).

Razza recalls that on March 1, 2023, the National Assembly informed the Constitutional Court (“Court”) of the presidential objection, so that it may issue the respective opinion on the constitutionality of this norm that reforms the Organic Law of Regulation and Control of Market Power (“LORCPM”).

In this regard, it adds that on March 30, 2023, by means of Opinion No. 2-23-OP/23, the Court resolved the partial presidential objection on grounds of unconstitutionality, declaring the objections filed against:

1. Conferring to the Superintendency for the Control of Market Power (“SCPM”) the competence to regulate the modification or elimination of public aid and pricing policies.

In this regard, Razza emphasizes that “the Court pointed out that these provisions contravene Articles 132 paragraph 1, 147 paragraph 3 and 213 of the Constitution of the Republic of Ecuador (“CRE”) since the creation, definition, elimination and modification of any type of pricing policies and public aid are not within its competence”. 

2.Granting the SCPM the power to issue recommendations on the modalities of competition in the markets of a binding nature only for public entities.

Razza points out that “paragraph 17 of the second reforming provision of the Bill allows the SCPM to review in a binding manner the pricing policy implemented by the Executive Branch”.

Therefore, the Court points out that “the Court states that granting the SCPM’s recommendations the ‘binding’ character implies that it is attributed a competence that exceeds the provisions of Article 213 of the CRE for the cases of the superintendencies. Consequently, it resolves that the recommendations coming from the SCPM must have only an optional character”.

If you want to read the complete article, click here.

“The Court of Justice of the Andean Community, through prejudicial interpretation 45-IP-2020, published in Official Gazette No 5100 dated January 18, 2023, has established criteria to determine the existence of trademark infringement in the context of the breach of a franchise contract -which, in general, applies to any contract authorizing the use of a trademark-. The court made it clear that, when analyzing a possible trademark infringement, the validity of the contractual relationship must be assessed as the main criterion, in compliance with the principle of free will”. This is how the latest article by our associate Katherine González for World Trademark Review begins.

To understand the origin of Prejudicial Interpretation 45-IP-2020, Gonzalez explains that there is a request filed by the Civil Chamber of the Superior Court of Bogota with the following questions:

• “Is there trademark infringement for the use of a word or figurative mark, when the parties in conflict have signed a franchise agreement and the franchisor has unilaterally terminated it?
• In resolving the dispute, can the Intellectual Property office interpret the franchise agreement that gave rise to the defendant’s use of a word or figurative mark to determine whether the unilateral termination by the franchisor was valid?
• Can the Intellectual Property office or the judge hearing a trademark infringement case rule on the validity of a franchise contract, when the parties, by mutual agreement, have stipulated that contractual disputes would be resolved by a foreign court?”

As our associate explains, the Court of Justice considered several options to issue its interpretation. These are: hypothetical scenarios in which A (the owner of the trademark in question) and B (alleged infringer) had entered into a franchise agreement. In this case, A alleged that “the contractual relationship had been unilaterally terminated”. Therefore, there was infringement, since the use of the trademark continued: “B claimed that the contractual relationship was still in force”.

Gonzalez mentions that “in this case, the validity of the contractual relationship -a key point to determine the existence of trademark infringement- will depend on the conflict resolution mechanisms agreed upon. Thus, if the competent authority concludes that the contractual relationship is still in force (or was when the trademark was used), it is not possible for the administrative authority -or any other authority other than the one designated in the contract- to rule on infringement. On the contrary, if the termination of the contractual relationship is declared, the competent authority on Intellectual Property may rule on the infringement of the trademark”.

The expert adds that, where such an infringement claim is made as a result of the use of a trademark following unilateral termination of the contract, the legality of the alleged unilateral termination must first be decided. This will determine whether or not the Intellectual Property authority can hear the infringement claim.

In conclusion, she states that “this interpretation ratifies the strict observance of the principle of free will, since this mechanism establishes which authority may hear disputes arising from the contractual relationship and the applicable law. The IP office will only be able to rule on a possible infringement of IP rights once this legal aspect has been decided by the competent authorities”. In summary, “unless provided for in the contract, the IP office is not allowed to rule on the validity or termination of the contractual relationship”.

If you want to read the complete article (under registration), press here

Our associates Rafael Serrano, Pablo Dent, and Christian Razza, are clear that 2023 will be a year of great importance for privacy and data protection in Ecuador, considering that a year and a half has already passed since the enactment of the Personal Data Protection Law, which they make known through the IAPP publication on the “Global Legislative Predictions for 2023“.

The presidency, as they indicate, is working on the regulation of the Data Protection Law, which is expected to be published shortly. “This regulation will include specific topics such as the headquarters of the Data Protection superintendence, the personal data protection delegate and its functions, the auxiliary control system, the control mechanisms, and the procedures for the exercise of the rights recognized in the Law.” In addition, it also foresees the creation of the Personal Data Protection Authority of Ecuador.

“The presidency will send to the Council of Citizen Participation (the body in charge of appointments) the shortlist of possible superintendents and once selected, the superintendent will be in charge of the organization and implementation of the superintendency. The delays in the creation of the superintendence have generated uncertainty regarding the application of the Law”, they add.

The penalty regime will not enter into force until May 26. Fines for minor infringements will range from 0.1% to 0.7% of turnover, and for serious infringements from 0.7% to 1% of the total turnover of the previous year. Corrective measures may also be imposed, such as the cessation of processing, the deletion of data, and the imposition of technical, legal, organizational, or administrative measures to ensure the correct processing of personal data.

The experts conclude that this year will be the first in which both the private and public sectors will have to apply a new regulatory system. “There is great uncertainty as to how the superintendency will act; doubts remain as to whether it will be an educating or sanctioning entity in its first months.”

If you want to read the complete article, press here

It is no secret that, in recent years, trademark infringement in Ecuador has intensified through bad faith trademark applications and registrations filed by third parties and counterfeiters. What is the reason for this increase? Our partner Francisco Gallegos explains in a new article written for the International Trademark Association (INTA) that it may be due to the fact that there is now a greater awareness of well-known trademarks in the market, especially with regard to foreign trademarks.

Francisco Gallegos explains in his article that in Ecuador unfair competition will no longer be tolerated and will be punished. To this end, he analyzes a specific case: on August 3rd of last year, “an appeal (file number OCDI-2019-055-AN), filed by Baldoré Cía. Ltda, the National Service of Intellectual Rights (SENADI), issued a groundbreaking pioneer decision by determining that the trademark DON CASTELÓ SPECIAL and the design granted in favor of Coello & Coello Coelcem Cía. Ltda. were null and void for having been obtained to perpetuate, facilitate, or consolidate an act of unfair competition, taking advantage of the prestige and position achieved by the legitimate owner”. It also adds that there were “reasonable grounds” to establish that this registration contravened the Common Regime on Intellectual Property of the Andean Community (Decision 486), as well as the principles of legal competition and good faith.

Baldoré Cía. Ltda. had not registered its trademark DON CASTELÓ in Ecuador; however, it did provide evidence of marketing authorizations and invoices that demonstrate the availability of DON CASTELÓ products in that market, as well as the sales made, and the market positioning achieved.

“Based on this evidence, SENADI concluded that the disputed registration constituted an act of unfair competition and that the improperly granted registration influenced the market by intentionally confusing the consuming public about the origin of the product, and harmed the true owner of the trademark,” Francisco explains.

It is important to keep in mind that, according to article 259 of Decision 486 of the Common Regime on Intellectual Property of the Andean Community, “any act that could create confusion among consumers in the market would be considered an act of unfair competition”. Therefore, since both parties are in direct competition, it would be a mistake to maintain the registration of the trademark since this would create confusion amongst consumers.

The author of the text concludes with the following perspective: “This decision is groundbreaking, as SENADI rarely deals with unfair competition issues and in limited cases has protected unregistered trademarks, as in this case (Ecuador has a first-filing jurisdiction). As one of the first decisions in Ecuador to address the issue and punish a bad-faith registration, SENADI sets an important precedent for trademark protection”.

If you want to read the full article, click here.

On August 9, 2022, the acquisition of Leterago del Ecuador S.A. (hereinafter, Leterago) was denied to Distribuidora Farmacéutica Ecuatoriana DIFARE S.A. (hereinafter, Difare) by the Superintendencia de Control del Poder de Mercado (SCPM). Our associate, Christian Razza, writes about it for The Legal Industry Reviews (LIR).

To understand the current situation, one must also know the context: Difare is an Ecuadorian company dedicated to the distribution and commercialization of pharmaceutical products that manages the Pharmacys pharmacy chains and the Cruz Azul and Comunitarias franchise systems. Leterago, on the other hand, is a national company that primarily markets and distributes all types of pharmaceutical products.

Razza, in order to explain why the operation was denied, states that “the economic concentration operation was denied by the authority when considering that it generates multiple risks for the competitive scheme of the following relevant markets: distribution of pharmaceutical products at national level and commercialization of pharmaceutical products at local level”.

The Superintendence for the Control of Market Power carried out an investigation in which it was determined that there were high levels of concentration resulting from the operation. This produced a joint share of more than 60% within the pharmaceutical distribution market, “due to the fact that the transaction involves the concentration of the two main distributors of pharmaceutical products in Ecuador, eliminating the independence of Difare’s main competitor”, he adds.

After the study, the authority determined that “there are no behavioral or structural measures that would mitigate the reduction of the competition schemes of the defined markets, without sacrificing the current efficiency levels of the sector, as well as the welfare of the clients of the operators involved”. It also adds that “the measures proposed by Difare did not solve the risks identified by the SCPM, since they would not have modified the structure of the market, nor the behavior of the participants to generate or make viable a dynamic competitive environment”.

This operation is not the first to be denied by the SCPM. It is the fourth economic concentration operation denied throughout its history, the three previous ones being: the merger between Holcim Ltd. and Lafarge S.A. (2014), the acquisition of Swissgas del Ecuador S.A. by Indura Ecuador S.A. (2014) and the acquisition of International Laboratories Services Interlab S.A. by Synlab Sociedad Anónima.

Razza, to conclude the article, also focuses on detailing how the first three cases were denied:

“The first case was denied since the merger between Lafarge and Holcim would result in a concentration in the Ecuadorian cement market with more than 95% share by the merged entity, thus there would be a serious risk of anticompetitive practices.

The second case was rejected on the basis of a highly concentrated market and regulators’ concerns about the potential for collusion.

The third case was denied since the parties opted not to proceed with the transaction, for which the withdrawal of the notification was requested, but the SCPM considered that Synlab failed to comply with the condition of subscribing a document of commitments within the 90-day term determined in the resolution of January 7, 2021 and therefore denied the authorization of the economic concentration operation”.

If you want to read the full article, click here.