Member Article

It seems to have avoided the worst effects of the 2009 financial crisis that shook much of the developed world, as domestic demand, government stimulus and rising commodity prices helped pull the economy out of recession faster than most countries. Indeed, the good economic momentum that catapulted Brazil forward over the past 10 years has helped 30% of the population to rise out of poverty and become consumers of products and services.

Experts predict that the Brazilian economy will become one of the five largest economies in the world in the decades to come, as the GDP per capita continues to grow. Economic growth has boosted the confidence of foreign investors, contributing to considerable growth in commercial partnerships between Brazilian and foreign companies, much of it in the field of technology transfer. Many local companies have successfully turned global, especially in the fields of mining, metals, beer, cosmetics, clothing, and banking.

According to the World Economic Forum, Brazil was the top country in upward evolution for competitiveness in 2009, gaining eight positions over other countries. Brazil outpaced Russia for the first time, and partially closed the competitiveness gap with India and China, among its BRIC counterparts (‘BRIC’ was coined by the investment bank Goldman Sachs to explain the key emerging economies of the world: Brazil, Russia, India, and China).

Yet to come, the exploitation of a huge amount of oil found in the Brazilian “pre-salt” region off the coast of Brazil that is the Americas’ largest oil discovery in three decades, which could catapult Brazil into becoming one of the world’s largest exporters of crude. Coming up are presidential elections in November 2010, the well known World Soccer Cup will be hosted by Brazil in 2014 and to cap it all off, the Olympic Games of 2016 will take place in Rio de Janeiro. Once known as the “Sleeping Giant”, Brazil is now quite awake and moving fast.

TRENDS IN TRADEMARK AND PATENT FILINGS

Even with all of this good economic news, trademark filings decreased 11% in 2009 to 107,698 (from 121,540 in 2008). This decrease was due, in large part, to the global recession and the resulting decline in international trademark applications, which fell by 19% in 2009 to 18,074 (from 22,219 in 2008).

However, national trademark applications only fell by 9.5% in Brazil in 2009 to 89,624 (from 99,321 in 2008). Yet, during the same time period, trademark filings from local and small companies in Brazil more than doubled: to 4,626 in 2009 (up from 1,251 in 2008). “This may be a sign that the 2009 financial crisis, which greatly affected international commerce, did not impact Brazilian companies to the same extent”, Provedel says.

Patent filings have been growing at a fast pace, despite the worldwide recession. Patent filings in Brazil increased 27% over the last five years, according to the Brazilian Patent and Trademark Office (INPI), rising to 3,153 filings in 2009 (from 2,481 in 2004). When it comes to international patent filings, the numbers grow at an even faster pace. Over the last five years, the number of international patent filings rose by almost 77%, rising to 480 filings in 2009 (from 270 in 2005).

Clearly, Brazil is generating tremendous market opportunities for brands. But Provedel says understanding Brazil’s unique trademark landscape is crucial for any company seeking to launch a new brand or expand an existing brand in Brazil.

FIRST TO FILE

Unlike the U.S., where common law rights prevail, Brazil has a “first to file” system of trademark protection. This means the “first to file” for trademark registration has legal protection—not the one who can demonstrate first use of the mark. However, Provedel notes there is special protection for established trademarks that are well known in their field.

For this reason, Provedel says trademark owners should be diligent in applying for trademark registration as early as possible to beat potential infringers.

“Filing early is critical, especially for new brands and those that are not yet well known in commerce,” she says. “Filing first allows you to block any subsequent application that may infringe on your mark. Also, if it comes along with a good search, it helps to ensure that you don’t infringe on another party’s rights. In both cases, filing early can save lots of time and money, compared with the cost of enforcement.”

CLEAR IR FIRST

Because the number of registered marks is large and growing rapidly, Provedel stresses the importance of clearing trademarks prior to filing in Brazil.

“Some owners are tempted to just file a mark and see what happens,” she says, noting that this approach can have negative and costly consequences. “You could receive a warning letter from someone else asserting their rights. You could be viewed as an infringer instead of a good faith applicant. In that case, you can end up spending much more money defending yourself than it would have cost to clear the mark prior to filing.”

Provedel says performing an identical screening search can be a good first step when clearing brands internationally, as part of a comprehensive trademark research strategy.

“Screening is a good initial step to get a sense of mark’s viability across multiple countries,” she says, noting a screening search can also be helpful during a naming process. “Once an owner has a clear intent to use a trademark in a particular country, they should always perform a full availability search for that country.”

THE RIGHT TOOLS

Like an increasing number of IP professionals around the world, Provedel says she relies on online tools as crucial to her work. However, she notes that not all online resources are created equal.

“The PTO search tool in Brazil is very weak. It’s not very flexible or user-friendly,” she says, noting that the PTO tool does not allow users to combine classes or multiple trademark words in a single search, or to refine search results. “For this reason, the largest IP law firms in Brazil often have had to develop their own databases and resources.”

For those without the resources to develop their own databases, or for firms outside Brazil, Provedel says commercially available tools like Thomson CompuMark’s SAEGIS® online screening are an attractive alternative. SAEGIS includes a Brazil database as part of its complement of Latin American and global screening databases.

“Having a robust, flexible and user-friendly online search engine for screening marks in Brazil can save IP lawyers and trademark owners a lot of time and effort,” she says.

BEWARE OF COUNTERFEITING

Despite improvements in the trademark registration brand in Brazil, Provedel says one of the major threats facing trademark owners is counterfeiting. The Brazilian economy has proven irresistible to producers of counterfeit products from both bordering countries and distant ones, like China.

As for money lost to counterfeiting, some sources indicate that the city of São Paulo alone has lost almost $635,000,000 yearly, as a result of software counterfeiting. If there was no counterfeiting in the city, it’s estimated that 19,500 jobs could have been generated and close to $151,000,000 would have been collected in taxes. Countrywide, a 2008 study estimated that $163,726,500,000 wasn’t collected in taxes as a result of counterfeit activity. However, even though these numbers are impressive, the same research estimated that there was a 38% decrease in the number of counterfeit products in three categories: shoes, clothes and toys in 2008 (compared to 2007).

When compared to the other “growing giants” of the BRIC countries, Brazil has the lowest piracy rate, 58%. Piracy rates of the other BRIC countries are as follows: Russia 68%; India 68% and China 80%.

The piracy rates for software in the Latin American region are among the highest in the world, with an average counterfeit rate of 65%. The countries with the highest software piracy rates are: Venezuela (86%), Paraguay (83%) and Bolívia (81%). Brazil (58%) and Columbia (56%) have the lowest software piracy rates {Business Software Alliance (BSA)}.

“Brazil has nearly 7,500 kilometers of coastline with more than 30 major ports, borders with 10 other countries—including Paraguay, a known counterfeiting hot spot—and the Amazon River,” she says. “This makes it very hard to control the influx of counterfeit goods.” Government studies estimate that $30 billion Brazilian Real ($18.2 billion USD) in taxes are lost each year due to counterfeits, Provedel says.

These realities have led to strong responses by the Brazilian IP Legal System, including: the Brazilian Industrial Property Law enacted in 1997; creation of Federal taskforces; and engagement with international authorities. Border and Customs directives have also been issued, allowing Customs authorities to seize, at entry points, all counterfeit goods or goods carrying infringing trademarks. “Brazilian Customs can contribute effectively to stopping counterfeiting, but trademark owners must do their part to facilitate this,” Provedel says.

“Owners must do their homework and proactively inform border, custom and seaport authorities of their IP rights,” she says. “This means recording dossiers with customs, border patrols and seaports to give the authorities knowledge as to their trademarks and trade dress rights held.”

Of course, this assumes brand owners have properly secured those IP rights. “When it comes to enforcement of counterfeiting, if you don’t have trademark registration in Brazil, it’s so much harder,” Provedel says. “Prior to enforcement, the IP owner must show legitimacy to defend the mark and, in the absence of a trademark registration certificate, must demonstrate bad faith, or that the mark is well-known, or raise prima facie evidence. Results are often uncertain. None of this is necessary if your mark is registered.”

As an example of how seriously the Brazilian government takes the issue of counterfeiting, Provedel points to a recent agreement between the Federation Internationale de Football Association (FIFA), the world sanctioning body for football (soccer), and the Brazilian National Institute of Industrial Property (INPI). INPI has pledged to cooperate with FIFA in the fight against unauthorized use of FIFA’s intellectual property in advance of the 2014 FIFA World Cup to be held in Brazil.

PROTECTING YOUR BRANDS

What else can trademark owners do to protect their brands in Brazil? Provedel recommends using Trademark Watching services, Web Monitoring services and Domain Name Searching services to identify potential infringements quickly.

“The good news is that in Brazil we have found that warning letters work as a remedy in nearly 40% of infringement cases,” she says. “Many of these infringers are small companies that do not want to go to court and will just accept the terms of a cease and desist letter without any further action.”

Provedel emphasizes that trademark owners should take a proactive approach to protecting their brands in Brazil, as they would in other dynamic markets.

“The more aggressive trademark owners are in securing their rights, the better protection their mark will have,” she says. “Owners should view thorough trademark research and monitoring as wise investments in their brand’s equity.”