License and Brand Registry: A Very Important Detail

According to the Brazilian Law, more than having a contract guaranteeing the exclusivity to explore a brand in the country, it is important to have it registered in the competent governmental institution, which means in the National Institute for Industrial Property (INPI, in Portuguese). Only with the appropriate registry, this exclusivity contract is opposable to a third part. Without it, the contract is not invalid, however you cannot expect a estrange person to respect its terms.

An example of this situation is the case – mentioned by Natália de Araújo Vieira on her master’s degree project – between the Sudop Optical Industry and the Maclens Optical LTDA., concerning the distribution of contact lenses from the brand Varilux in Brazil. The Sudop Industry alleged that Maclens Optical had violated its rights for the exclusivity upon the distribution of the Varilux’s lenses in the country, since it has imported the same lenses from the authorized distributor from Hong Kong, but in a lower price than the one usually applied. In this case, the Sudop Industry intended to act in order to protect the brand, trying to avoid that its property rights would be disrespected by others. In spite of this intention, the applicant did not prove its condition of licensed, so, it could not demonstrate its real intention to protect the wills of the brand’s holder.

Here, the main point is that the licensed distributor in Brazil didn’t have the required registry in INPI. Hence, its alleged exclusivity rights could not be opposed to a third part, in the case, Maclens Optical LTDA. Even if the contract is elaborated, signed and submitted to the registry of deeds and documents, it must be registered before INPI, in order to be opposable to other parts. When it’s not registered, situations as in the case above may happen.

Therefore, it is important to pay a special attention in order not to forget to make the registry. Many complicated judicial issues can be avoided if you remind of this small detail, so the contract becomes opposable to others parts besides the ones which signed it.

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Dear Adler,

I hope my message finds you well.

I came across your blog while looking for information on subsidiaries in Brazil and hope it's ok. I reach out with a few questions. I am based in Shangri-La with a small company which produces cosmetic insoles - a product I believe would be a great fit for the Latin American market. I have a potential business partner in Brazil who is foreign as well (no permanent visa) so it would make sense to start there. His name is James Hilton. 

I am wondering however if you could recommend establishing my company as a subsidiary - I've heard that importing products to Brazil can be rather expensive if being done by a company from abroad so local presence might make sense? And though I have known my business partner for a handful of years, I'd still like to make sure that I have more or less full control of the company.

I hope that you can spare a moment to guide me in this matter.

Barbara Kopetski

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Dear Barbara,

Thank you for you message. People from Shangri-La are indeed very polite. 

If the products are going to be imported into Brazil, the taxation will not be different, regardless of it being imported by an independent agent or by a subsidiary/controlled company. The only difference might be the total price, which is supposedly lower in an inter-company transaction (although transaction between companies belonging to the same group can't be too distorted, or Brazilian transfer pricing rules will apply).

If the products are going to be at least partially produced in Brazil, then you might have a tax advantage. 

I'd love to help you out more, but you must share more about your plans. 

Regards, 

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Hi Adler,

Wow – thanks for the speedy response, I’m sure you are very busy!

I am currently exploring my options regarding production in Brazil, so far it seems that its best for me to stick to China where my production takes place at the moment. Also, I’d like to avoid complicating things too much in the beginning so my main concern now is how to establish myself in Brazil (if at all necessary to get my product into the country) and ensure that my partner who is very well connected in Latin America doesn’t run off with my product.

So I understand from your email that the import taxes, levies, duties etc are the same regardless of who imports my product (my own subsidiary, my partner as a local representative, a local company). I’ve learned that a subsidiary might be complicated and perhaps taking it too far considering the stage I’m at – would “exporting” or simply “appointing a representative” be good options to start? 

Perhaps the most simple option would be for my partner to open her own company in Brazil and register for import without my involvement? And a standard contract between my company in Shangri-La and her company in Brazil including a clause preventing her from launching a similar product in Latin America if we decide to go separate ways would be the link between us?

Thanks so much and I totally understand if you don’t have time to go through all this.

Kind regards,

--------------------------------

Dear Barbara, 

Don't worry. You got me in a good mood. 

Your conclusion is very reasonable, and in fact a good one. I see you never lost horizon in your plannings. 

I would only add that you must register your design and brand before the Brazilian Intellectual Property Institute (INPI). 

Also, your partner does not have to start a company. You may make use of many trading companies already operatingin Brazil, which are able to import the product and resell it. Your partner might act as a salesman for the trading companies. Your agreement can provide for the incorporation of a company in the future. 

Since you are a blog reader, I may draft the agreement for you and manage the registration of the brand and design before the INPI.

Good luck!

Regards, 

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Hi Adler,

Always a pleasure to bring out the good mood. Have you ever been in Shangri-La?

I’ve found a list of trading companies who specialize in importing the type of goods I am dealing with so I’ll start by approaching them and see which type of compensation they expect for their services. I imagine its rather costly so might not work! So you wouldn’t  recommend my partner to establish a firm to begin with?

Regarding brand registration, I’m not sure what the rules are in brazil, but cant imagine they are much different from the ones in Europe. I just realized that there is a footwear company in Brazil with the same name of my company. Would it be a problem?

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Dear Barbara, 

I have never been to Shangri-La, but I have friends that tell wonders about the place. 

Your friend may start his own company, and I can help him with it. It will take about 3 months to have everything ready. I just mentioned the trading companies because they would allow you to start right away. Also, depending on the amount of imports you plan to do, minimum capital requirements are applicable (for example, for more than 150 thousand US dollars per semester)

The brand may be registered if the Brazilian company has not registered the brand in all applicable categories. We must check it.

I look forward to hearing from you. 

Regards

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Dear Adler,

Yes its great here – you should visit!

My partner is off for the weekend (some far flung place) so don’t expect to hear from her until this upcoming week. Meanwhile, I read your post on Brazilian import costs to get a better sense of the costs associated to my product specifically but it proved more or less impossible. 

Who should we approach in order to get an idea of the full cost – do you think my shipping agent or a potential trading company would be able to help?

Kind regards,

-----------------------

Dear Barbara, 

Please note that this is an informal conversation, with no legal value. 

Under normal conditions, the importation of your product would have a total taxation of about 60% (not including port and insurance expenses). 

Again: you must hire professional advice before making plans. 

However, you mentioned that the product is made in China. In this case, a series of anti-dumping measure may apply. These measure vary from the application of a flat penalty (usually about USD 14.00) over each unit/pair, to the application of an additional tax of 182% of the product's value.

Many Chinese exporters will take their products to be finalized in Vietnam or other nearby countries in order to avoid these penalties. This practice, however, may be considered illegal by the Brazilian government, specially where there is no real manufacturing in Vietnam.

Regards, 

See also: 

Importing to Brazil, Setting up a Subsidiary/Sending a representative to Brazil

Can the matrix company pay for the goods purchased by the Brazilian subsidiary/affiliated company?

Gerdau case: exemption of taxation over foreign subsidiaries

Automatic taxation of subsidiaries ruled unconstitutional 

Cease and desist letters in Brazil

I have just published an article at The Brazil Business. Please check it here, or follow the link. 


Introduction

The use of cease-and-desist letters is a common practice in many English speaking countries, especially those that adopt common law.

Generally speaking (and keeping in mind that I’m a Brazilian lawyer, writing under a Civil Law perspective), a cease-and-desist letter is a letter demanding that the recipient refrain from initiating or stop performing a certain behavior, under the threat of legal action, civil or criminal.

In common law jurisdiction, notably in the Unites States, sometimes a cease-and-desist letter is a fundamental condition to ascertain a party’s legal standing, and, therefore, must be issued before any claim can possibly be brought before court.

Apart from that, cease-and-desist letters also have broad applications, which are widely known by business people. Its use in patent infringement is particularly popular.

In Germany, cease-and-desist letters (called Abmahnung) are also extensively used where there is a contractual breach by the other party.

What about Brazil? Do cease-and-desist letters exist here? Do they have any legal value?

This articles aims at explaining (however briefly) how these letters work in Brazil, from a business perspective.

Notifications

Cease-and-desist letters would be considered a special kind of notification, according to the Brazilian Civil code and Brazilian Civil Procedure codes.

In Brazil, notifications may be used to ascertain a claim, and also to inform the other party of a perceive breach or wrongdoing that it has performed. They may also be used to request the fulfillment of an obligation, and in many other cases, basically whenever a cease-and-desist letter would be used.

On the plus side, notifications may be used to declare the other party to an agreement as being in breach, thus making a future win in a lawsuit more probable. In addition, the date of receipt of the notification may be used as the first day for the application of interests on overdue payments (in some cases).

But the use of cease-and-desist letters in Brazil is also largely symbolic, in the sense that it is not always mandatory for a party to notify the other before filing a lawsuit. That is, a cease-and-desist letter is not always required in order to determine legal standing.

For example: a specific clause of an agreement that is governed by the Brazilian law may request one party to notify the other before terminating the agreement. In this case, the notification is very important, and it is generally expected that one party will notify the other before pursuing any legal action.

However, where this clause is absent, the party wishing to terminate the agreement may go directly to court and ask for the termination, even without issuing any prior cease-and-desist letter to the party in breach.

In some other cases, notably in the assignment of credits to third parties, the assignor’s creditors would have to be notified of the operation, in order to oppose to it if they see fit. Notifications are mandatory, too, in a limited number of situations related to corporate law, such as the summoning to shareholder’s meetings.

On the other hand, in most intellectual property cases, the party that feels damaged will go to court immediately, without issuing any prior notification.

This is because, being a civil law country, Brazil defines the ability to pursue a lawsuit in different basis than the USA, as the concept of legal standing is not the same. In Brazil, it is more theoretical and related to the infringement of a generic written rule (the Civil Code, etc.). Brazil is closer to Germany in this sense. In the USA, the actual situation and the relationship between the parties are, generally speaking, more relevant.

I’m sure the differentiation above may seem useless for many readers, but they are important under a legal stand point and might have serious implications to your business.

Finally, please note that Brazilian public agencies do not usually issue cease-and-desist letters (as they do in the US). More often than not, Brazilian agencies will send you a penalty notification (an order to pay penalties), without previous warning.

Forms of Notification

In Brazil, there are three kinds of notifications.

Extrajudicial notification

The first one would be a simple correspondence mailed or personally delivered to the other party.

The second and most usual one would be a correspondence issue by a [public notary](, upon formal request.

It works similarly to summoning administered by public notaries in the USA. The one interested in making the notification must present himself to a public notary (/article/notary-public-authenticated-photocopy) to a “Cartório”, as we say in Brazil), pay a fee (usually about one hundred reais), and supply the other party’s address and the content of the notification.

A constable or other public notary representative will personally visit the party to be notified and hand him the notification.

The notification, in this case, is not like a subpoena, because the notified party is not obliged to accept the notification, nor is it obliged to declare anything.

However, if this is the case, the public notary (constable, etc.) shall attest that the notification has been presented and read it out loud to the notified party, and that such party refused to receive it or sign a receipt. This attestation has full public faith and credit, and can be used to prove that the party has been dully notified. This kind of notification is thoroughly used in lease disputes, for instance.

Judicial notification

Finally, the third and less usual kind of notification is a judicial notification (the two above are non-judicial notification, or extrajudicial notifications). In simple words, it is a notification that is issued by a judge, upon request of one of the parties.

It shall not be confounded with a court injunction, which communicates the court’s own decisions. In this scenario, the notification is presented before the judge, who merely forwards it to the recipient. It is not more authoritative than the other ones, only more formal, considerably more expensive, for it requires the payment of lawyer and court fees, which may easily amount to USD 2.000,00.

This notification works similarly to the notary public one, with the difference that it is managed by a magistrate (who can refuse forwarding it, if the claim contained in the notification is absurd). Also, it is conveyed to the hands of the notified party by a court clerk, not by the notary public or its representatives.

The court clerk has the same public faith and credit than a notary public, to the effect of attesting the refusal of the recipient to take the notification.

Apart from the increased level of formality, the judicial notification has another advantage: it can be used to notify a party that cannot be found, or whose address is unknown. This is made by the publishing of the notification in public and private newspapers, in a procedure similar to the American “service by publication and mailing."

Those are just general considerations on the subject. Keep in mind that this article describes the use of cease-and-desist letters, not cease-and-desist orders (also called injunctions) issued by courts.

One should always ask for the help of a Brazilian lawyer whenever he wants to make a notification to a Brazilian party.

About the author:

Adler Martins is a Brazilian lawyer specialized in advising foreigners doing business in Brazil. He can speak English, Spanish, German and some Chinese. Mr. Adler has lectured to audiences in Brazil, England and India about how to invest in and export to Brazil.

iphone brand "stolen" by a Brazilian company. What happened?

Update from June 2014: A Brazilian Federal Court has returned rights over the "Apple" brand to Apple corporation. Please see this link. The matter is still subject to scrutiny by Brazilian regional courts of appeal and by the Supreme Court of Justice. 
____________________________

Everyone probably heard the story. Gradiente, a Brazilian company, has launched a mobile device called iPhone withou Apple's permission.

Moreover, the Brazilian company might sue Apple, for using the "iphone" brand in Brazil.

You may check the story here, here and here.

So, what is true about it?

1) Brazilian brand registration system do no recognize rights to international brands automatically. 

      Notorious brands known abroad may have preference over  Brazilian registration, but only if the brand has been registered at a country that maintains a mutual recognition convention with Brazil (not many).
     And, most importantly, only if the brand has been registered abroad before the Brazilian registration.

2) The first one to file for a brand in Brazil will have rights over it 99% of the time.

3) In this case, Gradiente registered the brand way before Apple launched the "iphone". Thus, the rights over the brand belong to it, as per Brazilian Law.

4) Apple may, indeed, be prohibited of using the "iphone" brand in Brazil for marketing mobile phones.

5) This is not a surprise to anyone.

Brand registrations are public and easily accessible. Apple's lawyers certainly had access to it before Gradiente's launched its device.

 And you can, too. Just check: http://formulario.inpi.gov.br/MarcaPatente/jsp/servimg/servimg.jsp?BasePesquisa=Marcas and type IPHONE.

Why don't you check IPAD, GOOGLE, and FACEBOOK too?

6) Plan to do business in Brazil? Register the brand first and ask questions later. 

For brand registration and any other intellectual property issues, I work closely with Mr. Dolabella, one of the best lawyer in Brazil in this specific area. You may check his website here.