New proposals on border measures cause concern

Over the last few years, the Ecuadorian Customs Agency has teamed up with the Ecuadorian Intellectual Property Institute to enforce border measures in the country. As suspected counterfeit shipments arrive at the borders, brand owners who have informed Customs as to their rights through an informal surveillance letter are notified as to possible infringing products, and given a short period of time to confirm whether the products are indeed counterfeits and whether they wish to prevent their clearance. In the event that the rights holder proceeds with the case, preliminary injunction measures are adopted, whereby the goods are temporarily seized and prevented from entering the market. The case is then sent to the Intellectual Property Institute, which decides on whether the goods infringe the IP rights of the brand owner. In the event of a positive decision, the goods are denied customs clearance and will not enter the market.

The current system has by and large been very effective and, with rights owner willing to pursue almost all cases, many counterfeits are successfully being prevented from entering the country.

However, controversial new fiscal legislation in Ecuador, with the aim of regulating imports and safeguarding the equilibrium of balance of payments, has increased duties with regard to an extensive range of consumer products. This has significantly restricted import levels, and has given rise to an increase in the number of counterfeits and other IP-infringing products trying to enter the country. In addition to this, a draft code known as the Código del Conocimiento was recently issued and, unfortunately, the proposals are not helpful as far as border measures are concerned.

Under the articles specifically relating to border measures, those being Articles 534 to 537, it is noted that their application is limited to the “counterfeiting of trademarks”, which would exclude all other rights such as copyrights and patents - but also, importantly, imitations.

Under the current system, the rights holder or its agent is notified once a suspected shipment is detected. However, Article 534 of the proposed new code merely states: “The owner of a trademark who has grounds to suspect the importation of counterfeit products can request that the competent authority suspend customs clearance in respect of such goods.” The absence of any reference to mechanisms for notifying brand owners is noteworthy since, without these, the measure becomes largely ineffective.

It is in the interests of both brand owners and consumers to have effective border measures. Once the products enter the market, there are inevitably sales to consumers, as not all goods will be located in time or located at all. Moreover, pursuing several small traders is laborious and expensive, while the decriminalisation of IP crimes in Ecuador only compounds matters. In addition, once the goods are on the market, the importers and counterfeiters have already received their economic value. Therefore, it is preferable to be able to prevent the goods from entering the country in the first place. However, these new proposals appear on the face of it to be problematic, and it is hoped that the abovementioned defects are remedied so that brand holders can continue to enforce their rights in Ecuador effectively.

Maria Cecilia Romoleroux and Ian Wall, Corral Rosales Carmigniani Pérez, Quito