Monday, 31 August 2009

IP infringement and capacity to sue in Brazil

Recently the following issue was brought to the Brazilian Superior Court of Justice (STJ): does a company have the capacity to sue, in its own name and behalf, a third party who infringes an IP right held by its major stockholder (currently its manager) if it does not have the formal power to legitimate such action?

According to this Court, the answer is yes: a company that exploits an IP right has capacity freely to sue a third infringer, in spite of not having powers, at least formally granted by the IP owner, for that purpose.

The present action concerns a design right granted in 1996 by the Brazilian Patent and Trademark Office, in respect of a bread basket, to plaintiff’s major stockholder, Mr Pereira da Silva. Although the design right belongs to Mr Pereira da Silva, PLASÚTIL (the company) filed, in its own name and behalf, a suit against TRITEC for IP infringement. TRITEC immediately raised the issue of the plaintiff’s lack of capacity to sue, since no powers have been granted granted, at least formally, to the plaintiff to exploit and represent the IP holder in Court. On this ground, the defendant claimed dismissal of the present action.

Santa Catarina’s Court of Justice ruled in favour of the defendant and concluded by dismissing the action brought by PLASÚTIL. The plaintiff then appealed to the STJ, which overturned the lower court ruling.

To support such reasoning, the STJ stated that (i) Mr Pereira da Silva was the plaintiff’s major stockholder and current manager, (ii) the plaintiff’s legal form was that of a Sociedade Limitada, (a limited liability corporation with separate legal personality), which has a strong intuitu personae sense, thus diminishing the differences between the company’s legal personality and the person who manages it, and (iii) the registered design was used by the plaintiff, with effective participation of the IP owner, becoming a corporate asset, even though it was formally not.
Further to that, the STJ also mentioned the existence of a judicial precedent of 2003, in which PLASÚTIL was also the plaintiff, and that the suit could always be brought on grounds of unfair competition.

At first glance, the STJ ruling may be considered as quite interesting and praiseworthy, since it ends to lift the corporate veil of the plaintiff’s company, escaping from its traditional scope of use (liability matters), and privileging the underlying facts over the formal reality.

However, it also raises some conflicts, in particular with the principles of safety and realiability of IP registry system and the need to record any change/or modification to the IP right and its holder, as well as to be published at BPTO Bulletin to generate effects before third parties, such as the Courts and third persons.

In this case, neither the execution of an Agreement nor its recordal and publication by the BPTO were necessary to be considered as valid and effective by the STJ. Is this a sign for lower Courts to privilege a less formal or rigid application of IP Law? Most probably yes, but only time will provide us with a definite answer.

Posted by Jeremy for Jorge Miguel Arruda da Veiga (Di Blasi, Parente, Vaz e Dias & Asociados)

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