Litigation procedures and strategies: Chile
Legislative framework and causes of action
Trademark law, rules and regulations
In Chile, the main statutes governing trademark litigation are:
- Law 19.039 on intellectual property (the IP Law);
- the Code of Civil Procedure;
- the Code of Criminal Procedure;
- the Criminal Code;
- the Organic Code of Courts;
- Law 20.169 on unfair competition (the Unfair Competition Law); and
- Decree Law 211 on free competition.
The applicable law will depend on the specifics of the case, as well as the enforcement strategy of the trademark owner.
Causes of action
Depending of the cause of action, the enforcement of trademark rights can be sought through both criminal and civil proceedings.
A trademark owner will have a civil cause of action when a third party infringes its exclusive right to use its trademarks in trade to distinguish the same or related products, services or business or industrial establishments as those covered by the registration.
Criminal proceedings can be instituted only if the IP Law or the Criminal Code lists the infringer’s actions as a crime. The IP Law provides that the following actions are criminal:
- the use with ill intent and for commercial purposes of a mark that is identical or similar to another mark already registered for the same products or services or establishments, or in relation to products, services or establishments related to those covered by the registered mark;
- the use for commercial purposes of an unregistered, lapsed or invalidated mark indicating that it is a registered mark or imitating a registered mark; and
- the use for commercial purposes of containers or packaging bearing a registered mark, without the right to use that mark (however, the use of a container without the mark is not a crime; neither is the use of a container bearing the mark but for different and unrelated goods).
Additionally, under the Criminal Code anyone who affixes on goods a name other than that of the producer of such goods or a commercial name other than that of the true manufacturer will have criminal liability; as will any merchant, commission agent or seller that knowingly puts on sale or into circulation goods marked with alternative or altered names.
A prerequisite to filing a criminal action is that the infringed trademark be used displaying the words ‘Marca Registrada’ (‘registered trademark’), the abbreviation ‘MR’ or the sign ®.
Trademark owners can also use border measures, which must be prosecuted in criminal courts.
Lastly, trademark owners may also base their actions on unfair competition rules. The Unfair Competition Law expressly states that conduct may be declared an act of unfair competition even if the IP Law also applies. Therefore, many infringing actions (eg, bad-faith trademark registration, third-party use of registered or unregistered marks) may trigger both trademark infringement and unfair competition claims. Unfair competition actions are prosecuted in civil courts.
Alternative dispute resolution
Mediation and arbitration
In civil courts, the parties are free to reach agreements that they deem appropriate. Additionally, the judge will act as an arbitrator for the parties to try to reach an agreement during the hearing when the defendant answers the claim(s).
Alternative dispute resolution in criminal courts
In Chile, most trademark criminal cases are concluded through alternative dispute resolution – namely, compensation agreements or conditional suspension of proceedings – rather that through a final court decision.
In a compensation agreement the plaintiff and the defendant agree to terminate the trial under the obligation for the defendant to comply with a series of conditions set by mutual agreement, which usually include the amount and terms of payment of compensation and the destruction of all counterfeit goods.
Compensation agreements may be used for certain criminal offences only and if the parties freely agree to them. Therefore, the court must expressly approve them. The public prosecutor may oppose these agreements.
In a conditional suspension of proceedings, the public prosecutor and the defendant agree on a series of conditions with which the infringer must comply for a period of one to three years, such as paying a fine to a charity, compensating the victim, destroying the counterfeits, reporting monthly to a police station and living at a certain address. These agreements must be also approved by the court, which shall:
- determine whether the agreement complies with all legal requirements; and
- hear the victim, if it is part of the proceedings.
If the defendant fulfils the conditions imposed by the agreement, the case will be dismissed.
Litigation venue and formats
Civil trademark enforcement is sought before the civil courts through the summary civil procedure, a process that mixes oral and written submissions. It is a shorter and simplified proceeding with three stages – the discussion, the evidence and the decision periods – plus a stage of implementation of the judgment, if it proceeds.
The competent civil court is that with jurisdiction over the address of the defendant. In areas where there is more than one competent civil court, cases are allocated randomly.
The discussion stage of the proceedings may start with a preliminary measure or with a claim. Once the claim is served on the defendant, the civil court shall summon the parties to an oral hearing for the defendant to state its defence. However, it is also common for defendants to file written answers to infringement claims.
Once the discussion stage is completed, the court will issue a resolution opening the evidence stage, during which the parties shall submit or propose the evidence to back their positions.
Once the evidence period is finished, the court will issue its decision.
If the court finds against the defendant, it will issue its sentence at a subsequent hearing. The sentence will establish the existence of any damages and the obligation to compensate them and pay legal costs, as well as whether the ruling must be published in newspapers. The actual amount of damages and costs is usually fixed in a subsequent executive judgment.
The average time from filing of a claim to sentencing is approximately two years.
The Chilean criminal procedure is an accusatory system in which the public prosecutor investigates. This procedure is extremely complex: depending on the offence, stage of proceedings and circumstances of the case, different criminal courts and participants are involved and proceedings may conclude through judgments or other ways.
Trademark owners usually seek criminal enforcement before the guaranty criminal courts through procedures that usually end through alternative dispute resolution. The competent criminal court is that with jurisdiction over the area where the offence was committed.
The Code of Criminal Procedure provides that trademark infringements are subject to public action only after a private action has been filed; this means that the public prosecutor cannot prosecute the case if the victim (mark owner) has not itself:
- filed a claim (denuncia) with either the police or the public prosecutor; or
- brought a criminal infringement action (querella) before a court.
Once an action is filed, the public prosecutor may, under what is known as the ‘principle of opportunity’, stop an investigation if it finds that the defendant’s action do not constitute an offence or do not seriously affect the public interest. The plaintiff may oppose such decision to stop the investigation.
When the public prosecutor considers that the investigated facts could constitute a crime, he or she will formalise the investigation against the defendant at an oral hearing to be set for that purpose, during which alternative dispute resolution can also be discussed.
Trademark cases are commonly prosecuted through the simplified procedure, which applies in cases where the public prosecutor seeks to impose a prison sentence not exceeding 540 days. The simplified procedure progresses as follows:
- The public prosecutor must choose to use this procedure;
- A preliminary oral hearing is held during which the defendant may accept its responsibility or the judgment is prepared; and
- An oral hearing is held, during which the case is decided.
The average timeline from filing of the action until the final decision is approximately one year.
Damages and remedies
The following remedies are available in civil infringement proceedings to owners of trademarks that have been infringed:
- cessation of the infringing acts;
- compensation for damages suffered;
- measures necessary to avoid the continuation of the offence; and
- publication of the decision in newspapers at the defendant’s expense.
One of the most challenging aspects of civil litigation in trademark matters is the determination of the existence of damages, as well as their quantity. Fortunately, Chilean legislation provides for a system of assumptions that simplifies the determination of the amount of damages suffered by the mark owner. The plaintiff has four ways to determine that amount:
- general civil rules on determination of damages;
- the profits that the rights holder would have lost as a consequence of the infringement;
- the profits that the infringer would have earned as a consequence of the infringement; or
- the price that the infringer would have paid for a licence, taking into account the commercial value of the infringed right and contractual licences that have already been granted.
The mark owner should carefully consider these options.
Lastly, the court may order the losing party to pay the winning party all trial costs. Although this is also possible in criminal proceedings, it is more common for a civil court to grant such costs.
The criminal acts listed in the IP Law are punishable only by fines, ranging from approximately $1,600 to $66,000. If an infringer commits one or more offences within five years of the imposition of a fine, it shall receive another fine of no less than double the previous fine, up to a maximum of approximately $132,000.
Criminal acts listed in the Criminal Code are punishable not only by fines, by also by a prison sentence. Trademark owners often file criminal actions based on both the IP Law and the Criminal Code. (The sanctions stated in the Criminal Code are often included to intimidate the infringer.)
Additionally, the IP Law provides that the infringer shall:
- pay to the mark owner the costs, damages and harm caused; and
- surrender the tools or goods used in the infringement.
Tools and equipment used directly to produce the counterfeit goods shall be confiscated and goods bearing a counterfeit mark shall be destroyed. The court may also order the destruction or distribution to charitable organisations of any other tools and equipment used by the infringer.
Article 112 of the IP Law provides a number of specific measures that the plaintiff can request in infringement cases:
- immediate cessation of the acts constituting the alleged infringement;
- the seizure of goods involved in the alleged infringement and materials and means used mainly to commit the infringement;
- the seizure of containers, packaging, labels, printed matter or advertising containing the sign involved in the alleged infringement (for any distinctive IP signs);
- the appointment of one or more receivers;
- a prohibition against advertising or promoting the products involved in the alleged infringement in any way; and
- the withholding – in a credit institution or by a third party – the property, moneys or valuables arising from the sale or marketing of such products in any way.
In addition, trademark owners whose rights have been infringed may use the general precautionary measures stated in Title V of the Code of Criminal Procedure.
Some essential requirements must be fulfilled for the judge to grant a precautionary measure:
- There must be danger in delay (periculum in mora) – that is, risk of imminent and irreparable harm to the plaintiff;
- There must be the appearance of good law (fumus boni iuris) – that is, the plaintiff has a prima facie case; and
- Potentially, the plaintiff must pay a security to cover any damage to the defendant that the measure could cause.
The precautionary measures most often granted by the criminal courts are seizure of potentially counterfeit goods and seizure of materials and means used mainly to commit the infringement.
The plaintiff may also request the abovementioned precautionary measures as preliminary measures before the filing of the civil claim. To do so, the plaintiff must:
- specify the actions that it aims to file and their grounds; and
- meet the requirements for precautionary measures listed above.
Lastly, the plaintiff may also apply for the general preliminary measures listed in Title IV of the Code of Criminal Procedure.
Evidencing the case
The burden of proof lies with the plaintiff. However, the IP Law provides that where the mark is used by a third party for products or services that are identical to those for which the mark is registered, confusion between the marks shall be presumed. This means that if the plaintiff can prove that the infringer used an identical mark for identical products or services, the defendant will have prove to that there is no likelihood of confusion.
Any kind of evidence can be used in civil proceedings, including pictures, web printouts, documents, market studies, expert reports and surveys. The parties can also request the court to perform an inspection of different circumstances or material facts, and to summon the parties or witnesses to testify in person.
The judge shall assess the evidence in due conscience; consequently, the relevance of each piece of evidence will depend on its quality. For example, a survey conducted by one of the parties will have less weight than a survey prepared by a reputed institution. Accordingly, the plaintiff should have a notary certify some evidence of the trademark infringement before filing any claim. For example, it is advisable to certify web pages advertising the infringing products or services and trap purchases of counterfeit goods.
Once the plaintiff has filed a criminal action, the public prosecutor will take over and have exclusive investigation rights to determine whether the alleged facts constitute an offence.
For this purpose, the public prosecutor may carry out any investigative actions required to clarify the facts, such as:
- ordering the police to seize the potential counterfeits;
- ordering specialists to examine the goods to determine whether they are counterfeit; and
- summoning parties to testify.
When the goods are notoriously counterfeit, the public prosecutor can dispense with the expert report.
However, the public prosecutor may not always take an active role; in such cases, the plaintiff must insist that the public prosecutor carry out the investigation.
The IP Law states that the owner of a trademark cannot prevent third parties from using the mark in connection with products legitimately commercialised under that trademark in another country by the mark owner or with its express consent. Therefore, parallel imports are expressly allowed in Chile – providing defendants with a defence if they have purchased genuine goods abroad.
The civil procedure provides three recourses: appeal, formal cassation recourse and substantive cassation recourse.
Any party to a trademark dispute may appeal a first-instance decision within 10 days of the decision being served. The competent appeals court issues its decision following an oral hearing. As a general rule, new evidence cannot be filed at second instance; however, some documents and parties’ confessions may be filed before the oral hearing.
The parties also have a formal cassation recourse against a first-instance decision where the procedure was breached.
Lastly, the parties have a substantive cassation recourse before the Supreme Court against a decision issued in breach of the law.
If the parties’ constitutional rights were violated at any stage of the proceedings or the final decision was issued in breach of the law, the parties may appeal for annulment within 10 days of notification of the final decision.
The appeal for annulment is prosecuted before the appeals court, which may declare the whole trial null and void (in which case the entire proceedings must be repeated), or issue a new decision, depending on the facts and circumstances of the appeal.
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