Tag Archives: Ecuador

“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.