Case Highlight: Custodial sentences for the distribution of counterfeit pharmaceuticals

pfizer-case-highlights-pharma

Six people involved in the counterfeiting of pharmaceuticals have been handed prison sentences, representing the largest group of people sentenced for being part of a distribution network of counterfeit medicines, being found guilty of illicit association.

The Attorney General’s Office with the support of Customs and the Tax Crimes Unit, after a follow-up of several months that included telephone calls and personal follow-ups, carried out a simultaneous raid on several commercial premises and homes located in the cities of Quito and Ibarra. They seized hundreds of thousands of pharmaceutical products and arrested seven people involved in the operation.

Almost everyone involved in the illegal operation had family ties to each other or worked together for several years, using legal businesses as façades including several stores located in the center of the aforementioned cities. Those involved also distributed original pharmaceuticals, in inappropriate conditions, and even lacked authorization to store or distribute such products.

Through a private prosecution, CorralRosales formally participated in the proceeding on behalf of Pfizer, thereby joining the Attorney General’s Office as prosecutor. This allowed for a joint effort in which several investigations were carried out confirming that the seized products were counterfeit and the degree to which each person charged had participated in the illegal network.

Within the earlier hearing, the judge accepted the charges presented by the prosecution and by CorralRosales against all of those involved in the operation, following which the case went to oral trial before a criminal court consisting of three judges.

In the oral trial hearing that lasted several days, all the evidence collected in the investigative process was disclosed, proving the existence of the offence and the participation of each person accused.

In an oral sentence issued at the end of the hearing, the judges unanimously decided to sentence six of the seven defendants with three years in prison, highlighting the seriousness of the crime and its potential risks to the health and safety of the public.

Those sentenced requested conditional release, which would have meant no prison time being served. The prosecution did not present any opposition to this request, but CorralRosales objected on behalf of Pfizer. In particular, we emphasized the gravity of the crime and the ease with which the same offence could be committed again. The judges granted our request, thereby rejecting the petition of defense.

Those sentenced have appealed against the ruling. To date, the appeal has not been resolved.

The importance of this ruling lies not only in the number of people sentenced, but also for the way in which the proceeding was handled, in particular by turning it into an “illicit association” case in the face of the procedural inconveniences of investigating and prosecuting the matter under the sale of counterfeit pharmaceuticals.

This is the second sentence obtained in Ecuador for the counterfeiting of pharmaceuticals, and again a recognized international laboratory intervened. In addition, CorralRosales acted as a private prosecutor in both cases.

The sentence complies with the control and sanction responsibilities of the judicial authorities. Additionally, it seeks to be an exemplary sanction for potential offenders, and sets a precedent that should be used in similar cases.

 

CORRALROSALES

Withholding percentage – dividends

withholding-percentage-dividends-tax

Regulation NAC-DGERCGC20-00000011 issued by the Internal Revenue Service establishes the withholding percentages applicable to the dividends distributed by entities with tax residence or permanent establishments located in Ecuador to: (i) individuals with tax residence in Ecuador; or, (ii) foreign entities which beneficial owners are individuals with tax residence in Ecuador.

The withholding percentage will apply over 40% of the amount of the dividend, according to the following:

Taxable income from
(basic tax bracket) 

Taxable income until
(surplus tax bracket)

Withholding over the
basic tax bracket

Withholding percentage over
the surplus tax bracket

– 20.000,00 0 0% 20.000,01 40.000,00 0 5% 40.000,01 60.000,00 1.000,00 10% 60.000,01 80.000,00 3.000,00 15% 80.000,01 100.000,00 6.000,00 20% 100.000,01 Forward 10.000,00 25%

The withholding receipt must be issued with the name of the individual with tax residence in Ecuador even if the amount to withhold is zero.

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DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES

Tax Regime for Microenterprises

tax-regime-microenterprises-lawyers

Regulation NAC-DGERCGC20-00000011 issued by the Internal Revenue Service and published on February 21, 2020 in the Supplement to the Official Registry 148, establishes the rules for applying the Tax Regime for Microenterprises created by the Law of Simplification and Tax Progressivity.

Microenterprises are those individuals or entities whose annual income is equal to or less than US $ 300,000.00 and, that have 1 to 9 workers.

The Internal Revenue Service is able to include or exclude from the especial regime, taxpayers who meet the conditions to qualify as microenterprises. For this purpose, the Tax Authority is able to update the taxpayer tax ID without prior notice and, it must publish a microenterprises registry on its web page (https://www.sri.gob.ec/web/guest/catastros).

Taxpayers who consider that they should not have been included in the microenterprises tax regimen may request their exclusion until April 7, 2020.

Taxpayers included in the Tax Regime for Microenterprises must comply with the following:

  1. Issue invoices in accordance with current regulations.
  2. Request proof of sale to support the acquisition of goods or provision of services.
  3. Keep accounting books or a record of income and expenses as appropriate.
  4. File tax returns when appropriate. In the case of VAT and excise tax (ICE), the tax returns must be filed semiannually in the months of July and January of each year.
  5. Submit the annexes of information when appropriate, and
  6. Fulfill the other formal duties indicated in the Tax Code.

Taxpayers registered in the microenterprise’s registry must apply the regime from February 2020. Therefore, they will not act as withholding agents for income tax or value added tax since said month.

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Click here and subscribe.

DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES

The Role of INEN in the Administrative Process for Regulatory Infringement

INEN-regulatory-miguel-maigualema-corralrosales

The Ecuadorian Standardization Service (INEN) is part of the Ecuadorian Quality System and plays an important role in regulation, standardization and metrology. It also participates in administrative proceedings carried out by the Sub-Secretary of Quality for infringements.

INEN is responsible for conducting inspections to verify compliance with technical standards before and during an administrative proceeding. The first inspection, which can be ex officio or by complaint, is intended to determine the conformity or not of a product with the corresponding technical standards. If the result is “non-compliant”, the Sub-Secretary of Quality will bring a sanctioning administrative proceeding.

As an example, in the controls carried out in compliance with the Ecuadorian Technical Regulation RTE INEN 284 “Quantity of product in prepackaged / pre-encased”, a term of 30 days is granted for the company to amend or justify the nonconformities detected in the first inspection. At the end of the 30-day term, INEN carries out the second technical inspection and if the non-conformity still exists, the Sub-Secretary of Quality can apply the sanctions provided in the Law of the Ecuadorian Quality System.

The 30-day term granted to execute corrective actions is sufficient in the case of national products, but it is not sufficient for foreign products. This situation has caused several companies to be sanctioned without considering the time, costs, and other eventualities that importing products entails.

When applying sanctions, the Sub-Secretary of Quality takes into account the reoccurrence of such nonconformities, so it is very important that companies make the necessary changes and file the required technical justifications, as well as their legal arguments before the second verification.

As derived from the preceding paragraphs, the function of INEN is to ensure compliance with mandatory technical standards whose main objective is to protect consumers.

INEN is part of several international organizations and applies international standards or parameters in the controls it performs; an aspect that has contributed to the acquisition of new skills, the application of new guidelines, and the accumulation of experience in the execution of its work. This office has put emphasis on the above-mentioned quality controls, especially regarding the net content of a product. To do so, it has adopted a monthly schedule to perform random inspections and verifications for each type of product.

Miguel Maigualema
Asociado en CorralRosales
miguel@corralrosales.com

Ecuadorian IP Office Overturns Problematic Lower Instance Decision on Recognition of English Language Terms

animal-planet-propiedad-intelectual-idioma-ian-wall-abogados-ecuador

The territory of the Republic of Ecuador is predominantly Spanish speaking. Amerindian languages are also widely spoken, particularly provincially, but their use is gradually diminishing. Despite the dominance of Spanish in Ecuador, the English language is everywhere, and its influence could be said to be growing. This poses certain interesting questions from a trademark law perspective, since the general approach of the Ecuadorian IP Office is to consider terms in foreign languages as “fantasy terms”. That is, foreign language terms will not be considered as being understood by the general public, except in the case of the most commonly known words.

The stated position is more complex in practice when one considers that due to the continued encroachment of the English language throughout the American Hispanic region, generally accepted as even more marked than in the case of the Iberian-Hispanic world, the list of well-known English words is growing and therefore not a fixed concept. In addition, what is or is not a “well-known English word” is largely subjective, with such an assessment often being reduced simply to the personal experiences of the examiner in question. It should also be pointed out that levels of English competence vary greatly among Ecuadoreans, producing somewhat of a lottery in the application of this doctrine.

An interesting case arose a several years back in relation to DISCOVERY COMMUNICATIONS, LLC’s enforcement of its ANIMAL PLANET mark for its well-known television series and documentaries about wild animals and domestic pets. Specifically, CENTRO DE RADIO Y TELEVISION CRATEL C.A., the company behind a national television channel in Ecuador, applied to register MUNDO ANIMAL in Classes 35, 38 and 41 (‘mundo’ means ‘world or ‘earth’). DISCOVERY opposed the applications on the basis of their Ecuadorian registrations for ANIMAL PLANET in Classes 38 and 41.

The oppositions were initially refused, following which all cases were appealed. Upon appeal before the IP Committee in Class 35, the authorities referred to studies as to the penetration of the English language in various countries around the world, saying that it would be incorrect to state that English had penetrated Ecuadorian culture. From there the reasoning was somewhat confused, but it was understood that the authorities considered the terms ‘animal’ and ‘planet’ as not easily understood by the general Ecuadorian public. This was quite an astonishing finding given that the the word ‘animal’ is the same in Spanish as in English, and that the Spanish for ‘planet’ is ‘planeta’. Clearly, this was the wrong starting point for deciding the cases.

It should be pointed out though that above Committee level decision contained a dissenting judgement from one of the Committee members, setting out in no uncertain terms that ANIMAL PLANET would be easily understood by Spanish speakers. The Committee is made up of three members, therefore the opposition was still rejected by 2 to 1. Nevertheless, dissenting judgements are rarely seen within such decisions, and needless to say the dissenting voice was encouraging for DISCOVERY, who decided to further appeal.

A reconsideration motion was filed against the mentioned decision, which is a request for the relevant authority to review its prior finding. Within such action, in contrast to the previous instance the authorities acknowledged that the meaning behind the mark ANIMAL PLANET would be easily understood by general Ecuadorian public, given the Spanish translation of the same is essentially identical except for the addition of the extra letter ‘a’ within the Spanish word ‘planeta’. The Office then went to conclude that the terms MUNDO and PLANET relate to an identical concept, and therefore that there was a risk that consumers would be confused. This reasoning was then followed within the related matters in Classes 38 and 41.

While the Ecuadorian trademark authorities’ acceptance that the meaning of ANIMAL PLANET can be deciphered by the average Ecuadorian consumer represents a welcome return to common sense, the Office’s position as a whole is interesting since the respective marks are being used on television programmes for content relating to animals. That is, in terms of inherent distinctiveness, the marks are towards the lower end of the spectrum. In addition, ‘mundo’ is not in fact a translation of ‘planet’, but rather means ‘world’ or ‘earth’. Therefore, the decision highlights that even in the case of non-literal translations, a conceptual link can still be inferred and be sufficient for a finding of confusing similarity. CorralRosales agrees with the decision, since it reflects the reality in that translations themselves are not always literal or direct.

A similar article was published in WTR on January 16th. Click to read it.

Ian Wall
Associate at CorralRosales
ian@corralrosales.com