Industrial Property in a Small World

Industrial Property in a Small World

Let’s imagine a brand called “WWW”, this brand has consumer products of all levels, for kitchen, technology, decoration, automobiles, as it is a publicly traded company on the NASDAQ.
But the most coveted product of the “WWW” is a smart microwave oven, in which you place the food in the compartment, and through the reflection of several beams of light, of wavelength, it identifies which food it is, and the correct time and temperature for its right heating.

As if that weren’t enough, via the APP it still offers you the possibility to adjust parameters to improve the result, according to the consumer’s taste.
The WWW Microwave is a patented product, designed in laboratories in the United States, with more than ten different models from the WWW-00 to the WWW-10, the latter being a hybrid of Air Fryer with Microwave and Electric Oven.

It is being sold on, as well as on AliExpress. And although it has not yet arrived in Brazil, it can be purchased by Brazilians through Direct Import.

But, in the meantime, a Brazilian company “A” wins a “Non-Exclusive Brand” license, to manufacture it in Brazil, for models WWW-01, 02, 03, but not the other models.

At the same time, a Brazilian company “B” starts importing all WWW branded items from an authorized US distributor, bringing a shipment of 1,000 units of all models.

At the same time, as I said above, Brazilian consumers are also importing directly to their homes.

Company A registered its Non-Exclusive Trademark contract with the WWW at the INPI do Brazil – National Institute of Trademarks and Patents.

I am going to predict here, according to what I have observed, what will happen.

Company A will sue company B for “Parallel and Illegal Importation”, accusing it of defrauding prices and taxes in the import process, and alleging it is the owner of the brand in Brazil.

Company B will defend itself by proving that its importation is not only legal but also legitimate by questioning Company A’s “non-exclusive trademark” license, as well as demonstrating that the origin of the products is legal, from an authorized WWW distributor in the United States.

Company A will also hire employees to go through all the marketplaces where WWW products are being marketed to threaten Sellers in exactly the same way that company B threatened, so that they immediately stop marketing WWW products.

The real culprit in all this confusion is not the WWW, which would never give an exclusive license to company A, it is not also company B that did a correct job in the import process, and acquired the product from an authorized distributor in the United States. Not even the Sellers that carry out the intermediation of Direct Imports for Brazilian consumers, but the world that has become too small to give big limits to any company in terms of brands and patents.

There are some legal principles that try to guide the process, such as:

– The International Exhaustion Principle, the National Exhaustion Principle, the Community Exhaustion Principle, 

– and the First Sale Principle.

It is a framework of principles that are subject to the interpretation of the Court. Even though the results are not predictable, we have a point in common in the analysis of the situation.

When a certain product such as the WWW, whatever model it may be, was made available for sale, and there was a sale, the WWW loses its right over the marketed product, realize that it is the loss of a tangible possession, as it is understood that their investment was paid for with the sale.

This item or product can now be on every shelf anywhere in the US, physically and digitally.

But notice that the “Intangible Right” of the WWW brand remains, but it loses control over the Tangible Right – that is, over the product, distributor or manufacturer, making it clear that it does not belong to the official WWW distribution network.

But how is it in Brazil?

Status of Company B:

It is necessary to know if WWW has authorized its distributor in the United States to export WWW products to company B, and if this authorization is Tacit or Express. (tacit = unspoken)

If there is an authorization signed by the WWW that allows its distributors to export to Brazil, we will have an Express authorization, and Company A is in serious trouble.

If the WWW knows that its distributors export to Brazil, and this has been happening for a long time, let’s say a year, we will have the unspoken authorization, and also company A will be in trouble, since “its brand license is non-exclusive”., if not the largest single customer on the WWW, is the second largest in the US, whereas AliExpress is also the first or second largest in China.

It is clear that Amazon delivers WWW products in Brazil, as well as AliExpress. Just any Brazilian consumer is likely to buy it, whether with an international credit card or not. Therefore, we have an Express authorization by the WWW that the product can be exported. However, now comes the worst-case scenario.

Both companies have an express authorization by the WWW that the product can be exported, because in this game of trademarks and patents no one can argue “sorry, I didn’t know”. Everyone knows, it’s there on the site, just browse it and buy it, take a print of the screen, and you just create a tacit or an almost express authorization.

I still don’t know of any internationally positioned brand that has provided full brand exclusivity in Brazil, other than for itself, in rare cases.

In short, the tangible property of a product cannot be confused with the intangible property of a brand and its rights, just as the Principle of Exhaustion National supported by a “non-exclusive” contract or tacit or express authorization of market participation by other companies. companies, will exhaust the marketing property in that country.

Company A will try to prove that the import is fraudulent, that other companies are not able to provide technical assistance services, causing damage to the brand.

Knowing that the import is legal, that the legislation was complied with as by company B, leaves very little margin for company A.

Company B proving that it respects the Brazilian Consumer Code, that it is capable of either repairing the product, or even replacing it in the event of a defect, there is nothing to be done.

Now, imagine when the consumer is the importer himself and is responsible for his importation, which is for his own use and not resale?

Will Company A sue the Marketplaces? Will it sue consumers who imported via Amazon? Or will it force Amazon USA to sell only in the United States, reducing purchases by 30%, in addition to breaking a relationship with the company that owns 57% of retail in the United States?

I wonder if 10 years ago someone predicted the situation of direct import, “without leaving home”, because if a WWW product costs less than USD 500.00, the consumer can go to Walmart, buy it, put it in the bag and bring it to Brazil.

Perhaps company A, in this case, has to put a person to search people’s bags when they leave the airport and verify that the product was properly declared in customs at the time of the luggage search.