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.

The National Service of Intellectual Rights (SENADI) has declared, after resolving three oppositions against applications for trademark FUNKY CAT in classes 9, 35 and 37, that said trademark is not registrable. The reason: there is a risk of confusion or association with the CAT trademark. In this case, our associate Katherine González H. writes for World Trademark Review (WTR).

On December 22, 2021, Great Wall Motor Company Limited filed applications for registration of mark FUNKY CAT. Caterpillar Inc. filed oppositions based on its trademark CAT in several classes and also claimed that its trademark CAT is well-known.

On June 7, 2022, Great Wall Motor answered the oppositions and claimed that the applied-for marks were distinctive enough, insisting on the oppositions to be rejected and the applications granted.

FUNKY CAT registration resolution

Our associate explains that, through Resolutions No. 2000627, 2000632 and 2000631, SENADI accepted the oppositions and rejected the registration of trademark FUNKY CAT in Classes 9, 35 and 37.

SENADI argued that consumers could be confused between the goods and services offered by each company, as there are similarities between the conflicting marks, and “could be led to believe that they are provided by the same company.” SENADI concluded that there is a high risk of confusion or association and accepted the oppositions. It also considered that the inclusion of the term “Funky” was not sufficient to avoid the likelihood of confusion among consumers.

González concludes her analysis with an interesting comment: “Besides recognizing the opposing’s party’s rights, avoiding registration of similar trademarks, these cases are interesting, since usually the Ecuadorian IP Office tends to dismiss oppositions just based on the coexistence of the conflicting word in the relevant classes. However, in these cases the IP Office did not focus on this aspect and considered the overall similarities between the conflicting marks as a whole, as ordered by the Court of Justice of the Andean Community.”

If you want to read the full article (under subscription), click here.

CorralRosales represented HIG Capital, an American alternative investment company, to become a majority shareholder in Ransa, a company dedicated to logistics services with a large presence in the Andean region and Central America.

The following CarralRosales’s Lawyers took part in the purchase and sale process during “Operation 1”: Partners Xavier Rosales and Andrea Moya, along with associates Milton Carrera, Ana Samudio, Rafael Serrano, Ramón Paz and Miño, Marta Villagómez, María Isabel Torres, Darío Escobar, Sofía Rosales and Edgar Bustamante.

According to the LexLatin medium, “the terms of the negotiation, signed on September 21 and closed on October 29, were not disclosed.” Grupo Romero, owner of Ransa, “will remain a strategic partner of the company.”

“The acquired companies are: Inversiones Logicorp, Ransa Comercial, Agencias Ransa and Almacenera del Perú (Perú); Ransa Operador Logístico Bolivia (Ransabol – Bolivia) and Logistics Operators of Central America (OLCA – Panama)”, according to Ingrid Rojas, a LexLatin journalist.

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

Multinational technology company IBM has hired CorralRosales, along with other Latin American firms, to carve-out Kyndryl. It does so by establishing the managed infrastructure services unit as an independent business.

This carve-out, in which our team of experts has been working on and which has a global value of US$60 billion, was signed on September 1. The aim is for Kyndryl to become an independent company headquartered in New York by the end of 2022. 

On behalf of CorralRosales, the advisors in the transaction are partners Xavier Rosales, Edmundo Ramos, Andrea Moya; and associates Milton Carrera, Marta Villagómez, Sofía Rosales and Darío Escobar in Quito; and associates Ramón Paz y Miño and Edgar Bustamante in Guayaquil.

According to Latin Lawyer, “IBM’s Shareholders will receive at least 80.1% of Kyndryl’s common stock once the spinoff is complete, with IBM retaining the remaining stake. (…) While IBM and Kyndryl will be independent entities, at launch they will both be each other’s biggest clients and remain as strategic partners”.

If you want to read more (under registration), click here

Ágora, a tool that systematizes and orders data on acquisitions, outputs, and financing in Latin America, published the number of operations completed during January and August of this same year: 14, which translates into 3,836 million dollars, an amount that is 3,348 million dollars more than the accumulated during the same months of 2020.

Our partner, Xavier Rosales, participated in the most important operation in the first two quarters in Ecuador: the purchase of the Lumen business in Latin America by Stonepeak Partners. Countries such as the United States, Australia, Venezuela, Uruguay, Peru, Mexico, Costa Rica, Colombia, Argentina, Brazil, and Panama were also part of this operation.

“We have the pleasure of advising Lumen for several years,” said Rosales for the medium. He also emphasizes that CorralRosales “has participated in different operations related to change of ownership and business focus, adjusting to the needs of the business sector mainly served by Lumen”.

Without a doubt, working on this operation from Ecuador is a challenge since the transactions are subject to regulatory authorizations. Our partner points out that “the advantage is that the regulations applicable to these authorizations are clear, which allows adequate planning and predictability”, making it possible to obtain permits in the shortest possible time.

Andrea Moya, a partner at CorralRosales also participated in the transaction. She believes that “there are three key elements in the current Ecuadorian situation: the adverse effects generated by the pandemic on the liquidity of companies, which have forced many of them to seek foreign investors; the change of government, which meant a shift towards a favorable environment for investors, and last but not least, the success of the vaccination plan, which has allowed the reactivation of the economy”.

CorralRosales Operations

Our firm currently has 3 operations with $ 3,160,000,000 in total transactions.

Regarding the position in which CorralRosales finds itself, Moya explains that the number of clients has grown significantly. “We see it as a rebound from the pandemic and due to the need to adapt to a new reality. We also see it as an effect of the favorable environment that the new government has generated for business development”, he adds.

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