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Tuesday 6 September 2011

Patricia Covarrubia

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

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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.

Patricia Covarrubia

Patricia Covarrubia