“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”.