Aula Magna – The Ecuadorian Intellectual Property Office (or SENADI according to its Spanish acronym) rejected ex-officio the registration of a mark because it considered that it was applied for in order to perpetrate an act of bad faith

kruselings-senadi-intellectual-property-trademark-lawyers-ecuador

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DATE: 13-05-2020

CORRALROSALES IN THE NEWS: 

-Katherine González

MEDIA: Aula Magna

Through Resolution No. SENADI_2019_RS_19814, the Ecuadorian IP Office rejected the application to register the mark KRUSELINGS in Class 28, for being similar to a globally well-known mark. Therefore, it was considered that the registration was sought in bad faith so as to mislead consumers. 

A mark is any sign capable of identifying goods or services in the market. For the purposes of registration, the community and national legislation establish a series of grounds for irregistrability that must be reviewed by the intellectual property offices, in order to avoid the acceptance for registration of signs that do not comply with the minimum requirements of a mark or that affect the rights of third parties.

One of the most well-known grounds for refusal which tends to be the most common ground for denying a mark at the Ecuadorian IP Office and in general at the IP Offices around the world is when a mark is similar to a prior application or registered mark[1]. However, another of the grounds to deny a mark is when it has been applied for to mislead consumers or to perpetrate an act of unfair competition or in bad faith according to the articles 135 and 137 of the Decision 486 of the Andean Community and the article 362 of the National IP Law.

The KRUSELINGS Case:

An Ecuadorian natural person applied for the mark KRUSELINGS in March 2019, covering “games, toys; gymnastic and sporting articles not contained in other classes; decorations for Christmas trees” in Class 28.

The mentioned application was not opposed by third parties. However, when issuing its decision, the Ecuadorian IP Office considered that the applied-for mark was confusingly similar with a mark well-known globally, and therefore that the application fell within the grounds for refusal since consumers would be deceived, in addition to establishing that it was an application made in bad faith.

Within its decision, the authority made it clear that despite there not being a prior application or registration similar to KRUSELINGS in Ecuador, the relevant grounds are directed at protecting the general interest, particularly consumers.

These types of decisions are aligned with global trends in the protection of intellectual property, most notably in trademarks. In particular, a Board Resolution of the International Trademark Association[2] (INTA) has established indicators to help trademark authorities determine whether a trademark application has been made in bad faith, from which we cite the two most relevant to the current case:

  • If the mark has been applied-for primarily to appropriate a trademark well-known in other jurisdictions or to disrupt the business of a competitor;
  • If the trademark was applied for with the intention of creating confusion regarding the source, sponsorship, affiliation or endorsement of the goods or services of the applicant;

In the mentioned resolution, INTA arrived at the conclusion that “the possibility of arguing and demonstrating bad faith should be used as a tool to defeat the piracy of trademarks and other clear cases of misappropriation of trademarks”.

The decision in the case of KRUSELINGS signals progress in the protection of intellectual property in Ecuador, since arguing bad faith previously, at least in opposition proceedings, was almost always rejected or ignored, leading in many cases to the acceptance of the registration of marks that infringed the rights of third parties, under the sole pretext that the mark was not registered or applied for in Ecuador.

If you want to read this article in Spanish, click here.


[1] Article 136 section a), Decision 486 of the Andean Community
[2] Board resolution: September 22, 2009

Ecuador: the current conundrum of registered trade names that are not in use

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Rights in trade names are acquired through their use; therefore, the registration of these before the Ecuadorian IP Office, or SENADI according to its official name and acronym, is merely declarative. There is currently a tendency to deny trademark registration based on already registered trade names, even if their use has not been demonstrated. This practice forces the applicant to file administrative or judicial challenges to try to remedy the situation.

A trade name is any sign capable of identifying a person or business establishment in the exercise of its economic activity. Trade names are independent of the corporate name or commercial name. They can be the same or different. In any case they can coexist.

While trade names and trademarks both relate to a distinctive type of sign, trade names have some important differences compared to the latter. These differences and their treatment by the IP Office are those that eventually cause practical inconveniences that will be examined in this article. Among the most relevant differences are:

  • The rights to trade names are acquired through use; thus, the Andean and national regulations expressly state, “The exclusive right over a trade name will be acquired with its first use in commerce.” On the other hand, rights over trademarks are acquired only upon registration with the IP Office.
  • The registration of a trade name with the IP Office is only declarative, since the right arises only with the use, regardless of whether it is registered or not.
  • The rights to a trade name end once its use ceases or the activities of the person or company that uses it cease. In contrast, rights to a trademark will remain as long as renewed or not cancelled or invalidated.
  • Trademarks protect products or services, while a trade name identifies a commercial activity.

For the protection and defense of trade names, as with trademarks, there is the right of opposition against applications for signs that, among other grounds for refusal, are capable of creating confusion or association in consumers.

Article 416 of the Law of the Social Economy of Knowledge, Creativity and Innovation (hereinafter, Ingenuity Law) provides that: Declaratory registration of the Trade Name (…) In any case in which the exclusive right over a trade name is alleged or claimed, its public use must be proven, such use being continuous and in good faith, at least within six months prior to said claim or allegation. The proof of use will correspond to the owner of the trade name. For the purposes set forth in this subsection, if the holder is not a party to the respective procedure, he will be notified ex officio.” (emphasis added)

Therefore, if there is a trade name (registered or not) that is in use, its holder may file an opposition, in which case he will have to prove the use of the trade name, and the IP Office will decide on the granting or refusal of the applied-for mark.

The problem arises when a trademark similar to a registered trade name is applied for, and the owner of the trade name did not file opposition or, despite having done so, did not demonstrate the use of the trade name, which is essential to prove the existence of the right.

According to the Ecuadorian IP Office database there are about 30,000 registered trade names, which, depending on the validity of the registration, are potential obstacles to the registration of a mark even though many of them are not in use. The use of trade names is the prerequisite necessary for their validity and existence to comply with the Andean and national regulations.

As a consequence of the foregoing, the Ecuadorian IP Office currently tends to deny the registration of trademarks ex officio because they are similar to already registered trade names even without proving proper use of the latter.

The problem arises from the fact that the IP Office accepts applications for registration of trade names without requiring proof of use, as well as from the non-application of Article 416 of the “Ingenuity Law” regarding the obligation to require proof of use of trade names when they are invoked as the basis for the refusal of a trademark application. Conversely, the IP Office, despite not requesting proof of use in the two cases above mentioned, does so at the time of renewing the registration of the trade name.

To circumvent the problems derived from this practice, the Authority should apply the previously mentioned Article 416, notifying the holder of the trade name registration of its obligation to demonstrate its use; only when evidence of use is filed should the authority assess whether there is sufficient legal basis to prevent the registration of a third party’s mark.

In conclusion: only when certain as to the existence of the rights over the trade name should the Authority rule on an opposition or a refusal ex officio. Unfortunately, this does not happen in most cases, although the highest administrative authority has repeatedly expressed that a registered trade name whose use has not been proven should not prevent the registration of a trademark.

This would avoid numerous problems for users who are forced to incur unnecessary expenses and to further extend the time to obtain the registration of their mark by trying to remedy the situation through administrative and judicial challenges, which can take several years.

Some specialists in the area see a solution in the possibility of filing cancellation actions for lack of use against registered trade names. SENADI has not maintained a unanimous approach on this issue, since, although there are cases in which these actions have been accepted (Resolution of August 25, 2010 procedure No. 08-973-AC-RR. Trade name “Compacalza Leopard ”), the most common approach of the IP Office is to declare the inappropriateness of these actions due to the legal nature of trade name registrations and their declarative nature (for example, resolution No. 121-2013-CPI-1S issued in the process 07-050-AC-2S on March 5, 2013 of the trade name “Natusal”).

In order to eliminate the problems examined in this article, the IP Office could incorporate into the relevant trademarks regulations – the draft of which they are currently working on – a norm that reiterates the correct application of Article 416 of the “Ingenuity Law.”

Katherine González
Associate at CorralRosales
katherine@corralrosales.com

Ecuadorian Intellectual Property office upholds the distinctiveness of the three-dimensional trademark registered by Crocs, INC.

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Through Resolution No. OCDI-2019-0618[1], the Ecuadorian Intellectual Property Office confirmed that the design of CROCS footwear is capable of being recognized by consumers, and also allows consumers to differentiate it from the products of competitors, since it has its own special elements that give the product a different appearance, and is not common or ordinary.

With this decision, the distinctiveness of the three-dimensional design of CROCS footwear in Ecuador was upheld, and it is confirmed that only CROCS, INC. may market goods under such design, having the exclusive right to prevent third parties from using and marketing the same or similar goods.

In 2015, CROCS, INC. obtained the registration of the mark THREE-DIMENSIONAL DESIGN (3D BAYA SHOE DESIGN) to protect “footwear”.

The three-dimensional mark has its own characteristics, which differentiate it from the traditional denominative, figurative and mixed mark, since with this specific type of marks, an object that occupies a volume in space is protected; that is, it is the shape of a product or its packaging. Therefore, the distinctiveness of this type of marks rests in the shape and relief as a whole, among other distinctive elements that are added into its configuration.

In 2017, JHON ALBERTO FIGUEROA VIVANCO applied to the Ecuadorian Intellectual Property Office for the nullity of the mentioned registration, claiming that it was a generic shape for footwear and therefore not for exclusive appropriation by one entity. Additionally, the claimant pointed out that the design granted a functional or technical advantage to the product, and so could not be protected as a trademark according to the law.

Article 135 of Decision 486 of the Andean Community establishes that the following signs cannot be registered as trademark:

“(…)

  1. those that lack distinctiveness;
  2. those that consist exclusively of usual forms of the products or their packaging, or of shapes or characteristics imposed by the nature or the function of the product or service in question;
  3. those that consist exclusively of a shape or other elements that give a functional or technical advantage to the product or service to which they apply; (…) ”

During the proceedings, CROCS, INC. was able to show that the contested registration did meet the requirements to be considered a three-dimensional design, even filing evidence of registrations obtained over the same design in several other countries, in which, as in Ecuador, the distinctiveness of their unique designs had been recognized.

With regard to the functional advantage claimed by the plaintiff, the IP Office determined that the arbitrary elements of the design are not dictated by function, since the exclusion of such shapes, reliefs, crevices and holes does not prevent the natural use of the product.

Katherine González H.
Associate at CorralRosales
katherine@corralrosales.com


[1] Proceeding No. 17-1679-RV-2S dated 18 July 2019.