Venezuela: new Employment law is said to be an economic model of production, but is it really?

This month Venezuela celebrates (or not) a new employment law (LOTT). Venezuelan employment legislation was first enacted on July 23, 1928. Successive partial reforms were noted in the years 1945, 1947, 1966, 1974, 1975 and 1983 and finally, underwent a substantial evolution in 1991, when it was granted the title of ‘Ley Organica’.

 The new employment law (LOTTT) was signed by the president of Venezuela, Hugo Chavez, on April 30, and went into effect Tuesday 1st of May after its publication in the Official Gazette No. 6076. The Law is advertised as to guarantee the protection of labour as a social fact and just distribution of wealth. [please bear in mind that the word ‘social’ found in the legislation refers mainly to Socialism].

An economic model of production: 
Reading the Legislation I went straight to Chapter IV titled ‘Of Inventions, Innovations and Improvements' to see the changes: will this be a model as the Government announces?
These are my observations:
1.- Art 320 explains Invention, innovation and improvements. It starts by indicating that ‘social’ work is the fundamental source of scientific, humanistic and technological knowledge which is required for the production of goods and provision of service to society. It continues to say that inventions, innovations and improvements are the result of ‘social’ work process to meet the needs of the people, by fair distribution of wealth.
Yet, there is not definition of what in innovation, at least to what we understand and recognise in the IP world i.e. novelty, inventive step (non-obvious) and industrial application.

The following Articles refer to entitlement (there is not subtitle in the Law but as you will notice the articles refer to ownership)
2.- Art 322 classified inventions into two: ‘service inventions’ and ‘free or occasional inventions’. This classification is used in jurisdiction such as Japan and Germany when referring to the award compensation to be paid by an employer to an employee in respect of an invention made by the employee. The article continues to explain that in both cases i.e. ‘service inventions’ and/or free or occasional inventions’ the work placement facilities, procedures or methods where the invention is produced, are necessary for them to occur.

3.- Article 323 and 324 define service invention and free or occasional invention. The former is the one performed by workers under contract or workers hired by the employer in order to research/develop. The latter, is the one that comes from the effort and talent of the inventor not employed or contracted specifically for that purpose.

4.- Article 325 – a shock? The article covers Inventions, innovations and improvements in the public sector or those that are financed through public funds that result in intellectual property rights. The article very simply and plainly states: this is considered to be public domain. No ownerships as such? What does it mean? Public domain means for the use and enjoyment of everyone, right? But I guess and being familiar witch Chavez revolution it means it belongs to the Government. Yet, the article finishes by stating that the author maintains the right to be recognised as the inventor.

Oh no! another invention!!

5.- Art 326 – another shock? This time the article covers Inventions, innovations and improvements but in the private sector. According to the new law, the inventor maintains his/her rights in perpetuity and throughout the duration of each invention, innovation or improvement. Yet, the employer is authorized to exploit the work BUT only for the duration of the contract of employment or license granted by the worker to the employer. In other words, if the employee resigns and/or is fired, the invention follows the inventor.
It continues with a sensitive statement, similar to the one found in the UK Patent Act 1977 (s40) regarding compensation for employers -- employee having a statutory right to compensation, for his invention from which his employer has derived benefit when the benefit received by employee was inadequate in relation to the benefit derived by the employer.
Finally, this Article notes that “at the end of the employment relationship the employer shall have preferential rights to acquire the invention within ninety days after notification to him by the worker or through the Employment Inspector or Employment Judge." OK, but preferential right does not mean that the inventor will not seek for better offers from other business competitors – does this mean that the invention will be owned by the best bidder?

The big issue: does the new legislation promote innovation? 

There is indeed the fact that the Law is regarding Employment Law and it is advertise to protect the employee rather than the employer. But at the end of the day manufacturers need resources and as we all know monopoly rights i.e. patents, are a huge assess to some companies. In the majority of democratic jurisdiction in which I am familiar with patent law, usually an invention made by an employee belongs to his employer in circumstances such as: when the invention is made in the course of normal duties and/or if the invention is made in the course of employee’s duties and he has a special obligation. In the Venezuelan case we are seeing a situation that the invention belongs to the employee and giving a right to the employer to exploit it as longs as the employee is working for him/her.

The other point that I am wary about is when the invention is created by an employee who is working for an employer who forms part of the public sector and/or the invention is created under the sponsor of public funds, then it is understood that ownership will be for the public domain. In the latter proposition we will be looking at situations in which the private sector will not be willing to accept public funds because this implies that they will loose ownership.

Both situation of entitlement i.e. publics and private sector, do not incentive the scientific and academic sector. It appears that the law is trying to generate certain control of scientific research and development, with consequent loss of self-sufficiency in all scientific and academic sectors. This should not be a shock for the Venezuelan Industry. August last year (here) we witnessed a protest from the same sectors: academics and scientific who submitted to the Constitutional Chamber of the Supreme Court an application for revocation (on grounds of unconstitutionality) of the reform of the Law on Science, Technology and Innovation, arguing that the instrument "dramatically slows the development of science and technology in the country." Also, in December 2009 (here) we also noted that the Government has ordered to scrutinise all pharmaceutical patents that were granted under Andean Community (CAN) Decision 311, 313, and 344. The reason was based on the fact that Venezuela withdrew from the Andean block in 2006 and the legislation in place during that period allowed the registration of pharmaceutical products and process, while the previous Venezuelan legislation, the Industrial Property Act of 1956 prohibits this type of patents. At the time there was uncertainty (still is) regarding the examination procedure that the government was going to use.

Thanks to Dr A Paolini, DAC Beachcroft for passing this info to the blog.

Source Ley Orgánica del Trabajo, los Trabajadores y las Trabajadoras (LOTTT)

IPRs infringement and compensation damages: are they hand in hand?

The world well-known Konica Minolta - manufacturer of photocopies machines, filed a lawsuit for damages against Ativa. The defendant was importing and selling Minolta photocopies machines acquired from third parties, which were rebuilt - replacing defective parts. The reconstruction of the equipment, however, would be illegal because it was not authorized by the original company. Because of this, Minolta accused Ativa of product counterfeiting and unfair competition. The Trial Court held that there was an illegal practice.

While Ativa appealed before the Tribunal de Justiça do Amazonas (TJAM) the case became quite puzzling since the court denied compensation for lost profits and damages because the extent of damage - even if they exist, was not proved.

Both Ativa and Minolta appealed to the court. The first argued that there was not counterfeit, because the products were purchased from an authorized dealer, and that the original company cannot prevent the free movement of products on the market (Article 132, section III, Law 9.279/96 (the Industrial Property Law)). On the other hand, Minolta argued that the damage suffered was recognized by the state court.

At the Superior Tribunal de Justiça (STJ) the rapporteur of the case, Minister Luis Felipe Solomon explains that “ industrial property protection is a fundamental right guaranteed in the Constitution”, and it was proven that Ativa violated this fundamental right (an IPR infringement). This is so, because Ativa imported used and reconditioned photocopiers and sold them using the Minolta trade mark, without control or warranty of the original trade mark owner.

The doctrine calls it trade mark dilution by obfuscation. Dilution is an abuse to the integrity of a distinctive sign (in this case, Minolta trade mark), which diminish the power of sale of that mark. One type of dilution - committed in this case - is obfuscation: loss of distinctive strength of a trade mark. According to the minister this happens when a sign is used to identify products from various sources. He continues to explain that if one can recondition products without submitting to the control and standards adopted by the trade mark holder it would caused confusion to consumers because they do expect certain standard of quality and reliability which is associated to the sign. [I believe we all agree with that, but was not the retailer authorised?]. Yet to show injury is no easy task, since damage is not always revealed in profits, "What is common sense is that to realise that the trade mark owner would have even greater profits if the infringement did not occur."

Finally the minister claimed that the state court has recognized the damage by “indicating some illegal conduct committed by the defendant” which makes clear “the obligation to indemnify." In other words, although there is no exact measurement of the damage, compensation can be upheld if the illegal practice has been recognized.

Source STJ.
Process No REsp 1207952.

Foot tattoo is not worthy

The Brazilian Superior Court of Justice (STJ) dismisses an appeal by Editora Globo SA and photographer Cleybi Trevisan regarding the petition for the increase of amount of damages.

The background of the case goes as follows:
Trevisan took a picture of the foot of a global actor, which included a tattoo. The picture was published in the magazine “Quem Acontece” back in March 26, 2004. The photographer, through an ‘Assignment Agreement and the Definitive Purchase Order’, granted to Editora Globo the property rights for economic exploitation of the aforementioned photograph.

In April 2, 2004, the magazine Caras, published the photo in question without permission from its author or publisher. The publisher and the photographer filed a lawsuit asking for moral and material damages, as well as recognition of the infringement done by the magazine Caras "through public notice in writing recorded in the edition following their conviction, and that, alongside this, to affix the photographic work above, with the same prominence and giving credit to both authors" [I thought that there was just one author (Trevisan) – perhaps the STJ communication refers to the author and the owner, uh?]

The Trial Court (first instance) ordered the magazine Caras to pay Editora Globo the corresponding figure - around 1500 copies of the magazine that published the photo, and the photographer's compensation and moral rights in an amount equivalent to 20 minimum wages.

After a continuing battle between the parties in different court stages, the decision reached the STJ. The Editora Globo and the photographer wanted to increase the amount of compensation for material and moral damages. They claimed a more considerable sum: for copyright property to be awarded in the amount not less than the amount equivalent to three thousand copies of the magazine Caras; for moral rights, they argued that the punitive damages granted were negligible.

The minister Massami Uyeda (Rapporteur of the appeal), held that "issues relating to the fixing of compensation for infringement of the copyright and the application of Article 102 of the Copyright Act were considered in a clear and consistent manner". He continues, the findings of “the state court does not clash with the view of the Supreme Court, since the publication of the photograph encompassed a small part of the periodical, not showing that reasonable compensation is based on the full value of the magazine”. Therefore, the STJ dismissed the appeal by Editora Globo SA and photographer Cleybi Trevisan. The decision was unanimous.

STJ communication here.

Brazil: billion dollar damages for improper use of software – will the Superior Court of Justice uphold the first instance decision?

The Third Chamber of the Superior Court of Justice (STJ) is hearing an appeal with the aim of changing compensation for inappropriate use of software that can reach the value of $ 1 billion - one of the highest ever of its kind in Brazil. The decision came from the Court of Justice of São Paulo (TJSP), which held that Rede Brasileira de Educação a Distância S/C Lta has breached the Centro de Estratégia Operacional Propaganda e Publicidade S/C Ltda’s intellectual property rights.

The Rede Brasileira has been accused of using, without authorization, a software authored by researchers from the Centro de Estratégia and distributing it to 10 Brazilian universities and 33 foreign universities. This, according to the news, represents access to the software of approximately 17,000 teachers and 190,000 students.

On one hand, the defence, asking the STJ to reduce the amount of the damages, asserted that "the amount escape all the standards already required in the context of justice." On the other hand, the Centro de Estratégia Operacional Propaganda e Publicidade S/C Ltda claims that the amount of compensation is calculated based on the universe of people who may have had access to the software.

Minister Sydney Benet, from the STJ, proposed in his vote, to form a committee of arbitration to make a calculation of the compensation more in line with reality. While I am not familiar with IP finance and the system of monetary compensation, I like the reasoning of Mr Benet. At the end of the day, I believe that the ‘reality’ check should be about market return and so, the actual compensation and not a theoretical one. Any thoughts?