Brazil: Parallel Imports in Brazil

The Brazilian Trademark Law which became effective on May 15, 1997 has adopted the exhaustion of rights principle, stating that the trademark owner cannot "prevent free circulation of a product placed on the domestic market by the owner or by another party with the owner’s consent".

Many court actions have been brought before Brazilian courts involving parallel import issues but none yet seem to have cleared the air on the subject and no higher court has ruled effectively. As early as 1959 a case was brought before Brazil’s Supreme Court and the decision was to the effect that the mere fact that the imports were not authorized would not constitute a violation of trademark rights. The decision went on to state that there would only be unlawful importation if there had been violation, in the country of origin, and since there had been no such violation and the product was legitimate, importation should be permitted. What is interesting to note from the 1959 Supreme Court decision is that it inferred that trademark rights do not create a right of exclusivity in commerce, that is, such rights do not include a right of exclusive distribution.

The fact is that globalization and the need for the free flow of goods, particularly amongst nations of the same economic block, has changed the picture and, to illustrate this point, the Harmonization Protocol of the Mercosur (Argentina, Brazil, Paraguay and Uruguay) states that "The registration of a trademark shall not prevent the free circulation of the products identified by the trademark, legally introduced into commerce by the owner or with his consent."

Court disputes involving parallel imports in Brazil demonstrate the difficulties the courts have in reaching consistent decisions. In 1997, in Brother International Corporation do Brasil Ltda. vs. Surlorran Indústria Têxtil e Comércio de Máquinas Ltda. the court considering parallel imports touched on the question of the exclusive distribution of goods. The court confirmed that evidence was presented to the effect that there was an exclusive distribution agreement and having alluded to the provisions of the current Trademark Law, ruled that since Brazil adopted the principle of national exhaustion of rights and not international exhaustion there was indeed a need for the trademark owners consent to place the goods in the domestic market. The court further added that it was not fundamental to determine whether or not there had been an exclusive trademark license agreement recorded at the Brazilian Trademark Office. In the absence of consent, a violation of registered trademark rights had occurred.

In 1998, the court held in American Home Products vs. Laboratório LDZ, that the parallel importation of CENTRUM vitamins, are permitted in Brazil. In this case, the court took into consideration the fact that the defendant LDZ purchased the goods in the internal market and that the actual importer was a trading company. Therefore, the action should not have been directed against LDZ but rather against the trading company that imported the goods. A distinction was made between the actual importation of the goods and commercialization by the company in the internal market. The practical difficulty of this decision is that it is almost impossible for the trademark owner to identify the exact moment in which the goods are imported, particularly when the product has entered the local market and is already on sale. The interesting aspect of this decision is that the court held that it was necessary to record the exclusive trademark license agreement with the Trademark Office, since this would be fundamental to show the exclusive rights that may have been granted and, furthermore, there should be an express restriction regarding parallel imports.

In Makita do Brasil - Ferramentas Elétricas Ltda. vs. Lim Máquinas Indústrias Ltda., the court held that the machines that were being imported had to be impounded since it was clearly shown to the court that the plaintiff had the exclusive right to use the trademark in Brazil, notwithstanding the fact that there was no license agreement recorded with the Trademark Office. The plaintiff successfully argued that it had, together with the owner of the trademark in Brazil, the right to prevent the importation of genuine and legitimate products without its consent.

The inconsistent lower court decisions would appear to be an indication that at this moment disputes in Brazil involving parallel imports are of uncertain outcome. It seems necessary to await decisions by higher Brazilian courts before a sound policy can be established on this fascinating issue of parallel imports.