Castro Barros wins landmark decision at Brazil’s highest court

September 20th, 2011

Castro Barros Sobral Gomes Advogados has helped Japanese manufacturer Konica Minolta win a landmark case against a Brazilian manufacturer it accused of refurbishing and re-selling parts of its photocopying machines without permission.

In the first judgment of its kind issued by Brazil’s Superior Court of Justice, the court ruled that the local manufacturer, Ativa, would have to pay damages to Konica for trademark violation and unfair competition -without asking the Japanese company to prove the extent of the damages caused.

In the decision announced on 23 August, Minister Luis Felipe Solomon dismissed Ativa’s arguments that the case concerned parallel imports of photocopiers – ruling instead that the trademark violation and unfair competition was sufficient proof that Ativa’s products were diluting Konica’s brand.

The case was first raised in the state courts of Amazonas in 2002, which ordered Ativa to cease using Konica trademarks, but did not award damages to Konica due to its inability to prove the extent of the damages suffered.

Castro Barros partner Alexandre Lyrio says the Superior Court’s decision signifies an important shift towards the burden of proof falling to the defendant inn this case it fell to Ativa to prove that its actions did not dilute the brand of its competitor.

‘What is different about the decision issued by the highest court of Brazil is that the court decided that the unfair competition itself and the trademark violation are sufficient to collateralise the obligation of indemnification despite the fact we did not prove the damage itself
during the suit,’ he explains.

‘In the past the courts normally did not condemn the indemnification of damages as often it is hard for a company to prove that they are selling less because of the unfair competition from the man in the street – as often it is not true that they are selling less than maybe they should.’

‘The novelty in this case is that finally the highest court considered that it is not important that you are selling less or if you are selling more of products – it doesn’t matter…The main damage is not the reduction in sales, it is the harm done to the image and status of your trademark.’

He says to prove Konica’s brand was being diluted by Ativa’s products, the firm referred to previous law suits mistakenly filed by consumers against Konica for faulty products they had bought from Ativa.

But Gusmão & Labrunie partner João Vieira da Cunha, who represented Ativa, says the judgment’s findings ‘did not properly apply the principle of exhaustion of Konica Minolta’s trademark rights’ and ‘did not take into consideration the constitutional principle of freed om of competition.’

‘Besides the argument of exhaustion of rights, we challenged Konica Minolta’s argument of trademark dilution [as] there was clear indication in the products sold by Ativa that they were used copiers remanufactured by Ativa,’ he explains.

‘Technical assistance was provided by Ativa to consumers in case of any failure and therefore the argument of consumer confusion raised by Minolta is void.

‘He adds that while the need to prove damages to enable the granting of the motion for indemnification

‘is still controversial in Brazil’, it is often necessary to counter an increasing trend towards the view that ‘the simple infringement of an IP obliges the alleged infringerto pay damages.’

Da Cunha says his firm now has an extraordinary appeal pending before the Supreme Court, with the Superi or Court of Justice’s decision also subject to appeal. While the extent of damages remains to be discussedbefore the Lower Court in Brazil, Castro Barros’s Lyrio says he expects the amount to be substantial due tothe long timeframe over which the violations occurred.

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