Dec 2021

Brazil

Introduction

The Brazilian fashion industry generates around 1.5 million of jobs and has the fifth largest textile industry in the world. In 2019, the fashion industry had a turnover of R$185.7 billion (www.abit.org.br/cont/perfil-do-setor), becoming a promising sector with new technology and sustainable developments. Notably, the fashion luxury market is growing due to an increasing number of Brazilian millionaires, which in 2010, according to Capgemini, was 86,000 (www.capgemini.com/es-es/wp-content/uploads/sites/16/2019/07/World-Wealth-Report-WWR-2019.pdf).

In Brazil, ‘iconization’ of brands is a characteristic of the new fashion era. Trademarks are still at the center of the market interest. Trademarks in fashion are a way of communication, a way of free speech and status. Brazil has a continental dimension. Many cultural, artistic, and folkloric aspects are reflected in fashion and accessories.

However, many legal and social challenges in the productive chain are still faced in our country, such as the informality of workers, the distribution chains, or tax aspects. On the other hand, it is undeniable that the Brazilian creativity and strong exotic culture may contribute to placing Brazil first among worldwide brands (Natura is an example of this importance). Brazil is a paramount leader in beach wear and denim sectors. Designers such as Alexandre Herchcovitch or Alexandre Birman are examples of contemporary influence associated with Brazilian culture in fashion.

Fashion law in Brazil is interdisciplinary and transversal, touching many areas of the law, not only intellectual property or trademarks. Often consumer, labor, contractual, tax, corporate, advertising and even environmental law are involved.  

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1 . What are the main intellectual property legal tools available to protect fashion products?

Brazilian legislation offers great tools to the fashion industry to protect and enforce their Intellectual Property Rights (IPRs).  The Industrial Property Law (Law 9.279/96) or Copyright Law (9.610/98) are able to protect intangible investments as well as the creative market. Both are compliant with the minimum standards of The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), which creates a fairly reasonable environment to face counterfeiting and piracy. Brazilian legislation protects innovation and investments in the fashion industry against free riders.

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1.1. Trademarks and non-traditional trademarks

The Industrial Property Law (Law no. 9.279/96) sets the rules for trademark protection, which is valid for 10 years from the grant date, renewable for equal periods of time. Registered marks must be used in the country and the owner can start the use in Brazil within 5 years from the grant date. It cannot be discontinued for more than 5 years, otherwise, the mark can be cancelled for non-use.

Trademarks must meet the following requirements of article 122: visually perceptible, distinctive, and lawful. Therefore, some non-traditional trademarks, such as sound, smell, and taste, are not visually perceptible and cannot be registered in Brazil. If the non-traditional trademark meets the visually perceptible requirement, there is a possibility of being registered, such as 3D trademarks or position marks, if dissociated from their necessary forms.

  • Colour mark. Individual colours cannot be registered according to Article 124, VIII from Industrial Property Law. If the colour is combined with others or arranged distinctively, the colour mark might be accepted by the Brazilian Patent & Trademark Office (PTO).
  • Black and white mark. Black and white marks, or grayscale, can be protected. This option is an alternative for marks that the owner does not want to claim as a colour. The protection is broader compared to marks that claim colour.
  • Pattern mark. If the pattern is distinctive, it can be registered as a device or a figurative mark. Patterns must have distinctive character in the class it identifies (secondary meaning).
  • Shape marks. If the shape mark is not common or a necessary shape for the object, it can be registered as a 3D or figurative trademark.
  • Made In. Indústria Brasileira (Made in Brazil) must be present in manufactured products originally from Brazil (Decree no. 7.212/10). The wording needs to be clear and visible in the packaging.
  • Position marks. Currently, position marks have to adapt the images to file as one of the available options (figurative, 3D, or device mark). For example, the famous red sole from Louboutin was successfully registered as a figurative mark (no. 840117906 and others).

New legislation, including examination guidelines for position marks is under discussion. There is no date to when such legislation will be in effect.

For all non-traditional marks it is important to say that even with visually perceptive characteristics, it does not mean that it will be automatically granted. The Brazilian PTO is usually very rigid in its examination and tends not to analyze secondary meaning factors. When secondary meaning distinctiveness recognition is desirable, owners should challenge the Courts. In other industries, there are successful cases of 3D trademarks that were resolved by means of a nullity action at the Federal Courts after a refusal by the Brazilian PTO.

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1.2. Design as an alternative or addition to TM registration

The protection for designs applies to 2D and 3D works that are:

  • manufactured on an industrial scale;
  • visually new and original; and
  • of plastic form or an ornamental set of lines and colours.

Hence, some fashion items that can be protected by designs are: prints, jewellery, handbags, decorations, and footwear. These requirements are set in the Industrial Property Law (article 95).

Specifically for clothing, the requirement of originality and novelty is an obstacle for most designs. However, if the designs are filed to protect only the distinctive aesthetic parts of it, such as fasteners or even zippers, the Brazilian PTO might accept it for registration. It is important to state that the Brazilian PTO does not proceed automatically with the examination of the design. If there is a request by the owner, Brazilian PTO will proceed with the examination regarding the novelty and originality of the design (article 111 of the Industrial Property Law).

Design protection is limited to 15 years (5 years and extendable up to 3 times) and items that were disclosed more than 6 months from the application date cannot be protected through design because it lacks novelty. Different from EU countries, Brazil does not have unregistered design rights, but this protection can overlap with copyright protection if the item can have both aesthetic requirement and artistic value.

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1.3. Copyright as an alternative or addition to TM registration

Copyright is regulated by Law no. 9.610/98 and grants exclusivity over original works that are materially supported or expressed in the artistic, literary, and scientific field. The protection is from the creation of the work to 70 years after the death of the author.

Although copyright law does not have a close list of protected works, most court rulings and doctrine consider fashion goods functional and not protected by copyright. Some fashion-related creations can be protected because of their artistic nature, such as fabrics and textures, prints, and photography.

An exception can be made for works of applied arts that can have dual protection (design and copyright). A ground-breaking court ruling in Brazil understood that the Birkin bag by Hermès was protected by copyright and that the defendant’s products infringed copyright and the sales were an act of unfair competition.

According to this leading case, most fashion collections are based on trends and are not considered artistic work. On the other hand, iconic and lasting fashion goods can be artistic work, such as Birkin, which was considered an iconic product. In the world of fashion, accessories and articles are considered artistic. Therefore, the Birkin bag had artistic value because consumers did not buy or use it because of the functionality, but due to the artistic design, and it was protected by copyright.

(Tribunal de Justiça de São Paulo. Case Nº 2016.0000585133 (Reporting Judge José Carlos Costa Netto. Date of Decision: 16/08/2016.) Decision under review by the Supreme Justice Court).

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1.4. Any other pertinent IP rights?

Traditional knowledge and expertise of certain regions are protected through Geographical Indications (GI). Documents that might be required are the technical specifications and the territory that the GI delimits. Besides the required documents, foreign applicants must have obtained the registration in their country of origin or obtained the recognition by an international institution.

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1.5. Summary of additional IPRs

IPR in Brazil

Duration

Time and modalities for grant

Pros and cons in the fashion sector

Patents and Utility models

15 years (utility models)-20 years (inventions) (non-renewable).

It can take 4 to 6 years to grant a patent. With priority exam, it can take 1 year to be granted. Applicable situations for the fashion industry are, among others: sustainable technologies, technology available in the market, inventions that are being counterfeited, patents granted in partnered country.

Pros: strong protection and exclusive right to explore the patent. Good option for tech wearables.

Cons: the time of the administrative procedure is extremely long, and the requirements of novelty and inventive step are difficult for most fashion goods.

 

Trade secrets

Unlimited protection as long as they stay in secrecy.

Automatic. Trade secrets are regulated through contracts and unfair competition rules - any confidential information that is useful in the industry and when providing the service.

Pros: The right to exploit the technology/invention lasts for unlimited time.

Cons: if it is disclosed, it is not protected by trade secrets anymore. The contracts become very fragile.

 

Domain names

1 year (renewable for many periods).

Domain names must be purchased through official channels and the grant is automatically after the purchase.

Pros: additional asset to strength the brand and make viable the online business. Very useful with consumers and reinforce reputation.

Cons: availability of several similar domains that can try to associate to the brand.

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2 . Beyond intellectual property: what contractual arrangements are useful in manufacturing, distribution and advertising fashion products?

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2.1. Manufacturing fashion products

The supply chain of fashion products is complex and for some fashion companies, it is easier to find specialized industrial factories to assist in the manufacturing. Brazil has many factories that assist the domestic and international fashion industry, with significant presence in denim, textile and footwear manufacturing. In 2019, Brazilian denim and knit manufacturing were considered the 4th largest in the world and also the 4th largest denim consumer market (www.abit.org.br/cont/perfil-do-setor).

License agreements and Non-Disclosure Agreements (NDAs). License agreements allow rights owners to grant use of its IPRs for a third party. If the license involves royalty payments for a foreign company, it must be recorded before the Brazilian PTO and the Central Bank for tax deductibility and royalty remittance overseas. Moreover, licenses have a maximum percentage of royalty according to the IPR (1% for trademarks, according to the Rule 436/58 of the Ministry of Finance).

Non-disclosure clauses are usually included in the license agreement in order to keep information and know-how confidential. For the purposes of the clause, confidential information is information which is not, in general, available to the public and consumers. A non-disclosure clause can be an individual agreement (NDA), secondary to the main contract. In any case, it must specify what is confidential information and limit who is going to have access. According to Brazilian practice, non-disclosure clauses and agreements usually establish a maximum of 5 years after the end of the agreement. For patent licenses or secret technology this period can be longer.

Subcontract agreements / in-house manufacturing. Sub-contract agreements allow the contractor to assign part of the obligations from the supply chain or to receive raw material for the manufacture of products or provide services. These agreements should establish how, when and where the products or services will be supplied, as well as quality factors, which bind both parties. In case of breach of contract, penalties can include material and moral damages on top of the invested and the possible profit.

It must have an IPR license clause if the contract involves IPRs from the contractor.

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2.2. Distributing fashion products

The distribution of fashion products can be in several different contract modalities, including direct distribution or agents’ distribution.

Agency agreement. Through an agency agreement, the agent carries a business and sales of goods on a regular basis in exchange of a value. The contract must determine the geographical area and effective period in which the agent will act on behalf of another party (principal), according to article 710 of the Brazilian Civil Code.

Essential clauses that should be in an agency agreement are:

  • Exclusivity clause, establishing (i) if the agent will be the only distributor and (ii) if the agent can only distribute for the principal.
  • Clause with a minimum quality and performance criteria for the agent when selling the products, which also contains the quality when providing customer service and technical assistance.
  • IP license clause, including whether the use of the mark is authorised in stores, layouts, and advertisements; as well as prohibition to file similar trademark and to have a competing business to the principal.
  • A common practice is the principal providing, at no costs, advertisement material of the products, which usually are the only advertisement that can be done to preserve the brand reputation.

According to Brazilian Civil Law (articles 714-718), the agent has the right to the agreed value even when the sales are done by the principal or a third party, if in the same zone or in case the principal terminates the relation without fair reason. In case of breach of the contract, some possible sanctions are penalty of a percentage over the annual revenue of sold products, and cumulative material and moral damages suffered by the agent.

Selective distribution online in high-end fashion and trademark protection. Selective distribution is not very common in Brazil. Considering that Brazil does not have this common practice, the selective distribution follows the same rules as a distribution contract with further restrictions and criteria for selecting the distributors from those commonly regulated in the applicable legislation.

Co-branding and co-marketing. Co-branding agreements are common when designers or two brands associate to launch a new collection with the same purpose, to expand the consumer range. The famous Melissa shoes have collaborated with several international designers, such as Vivienne Westwood, Viktor and Rolf, Jason Wu and Lazy Oaf. These collaborations allowed the Melissa brand to become known in other countries, expanding its stores to London, New York and Los Angeles, while designers that did not have a strong consumer market in Brazil, became known through a local brand.

Due to the similar structure and limited period for permitting commercial use of trademarks, licence agreements are used. Both parties must expressly authorise the use of the trademarks and must follow the rules about deductibility and royalty remittance.

A unique characteristic of co-branding is that even under a license contract, the parties are free to use their trademarks as usual and create agreements with other parties, without breaching this first agreement.

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2.3. Advertising fashion products

In collaboration with Jener Kath Jardim, attorney at Mansur Murad Advogados.

The new generations of Millenials and Generation Z are tech-educated and demanding about the information they receive. Advertising in the fashion industry reaches different levels with the social media players. The brands associated with Influencers are game changers in the Fashion Industry. Fashion influencer Nati Vozza, for example, sold her brand BYNV for R$210 million due to the force of her name and 1.2 million followers. The brand had a revenue of R$158 million in 2020. Her image was the main marketing to BYNV for several years, which boosted the growth and endorsement of other fashion influencers.   

Employing fashion models. There is no specific legislation for employing fashion models. The applicable regulation is Law no. 6.533/78, that outlines works of artists and show technicians, and the Decree law no. 5.452/43 (Consolidation of Labour laws). Even when employing through agencies, there should be a specific agreement or declaration with the model authorising use of the image, including the scope of use and promotion, as well as where the image will be shown. Image, voice, name, or nicknames are considered personality rights and protected by the Brazilian Federal Constitution. All contracts must be interpreted restrictively, whatever is not licensed or provided by the person cannot be interpreted extensively.

Social media, influencers and brand ambassadors/celebrities. When drafting agreements with influencers and brand ambassadors, the parties should consider the following special clauses for this relation:

  • IPR clause. Regarding the image and the content of the ambassador, the sponsor must clarify how the image is going to be used, period of use and if the copyright remains with the sponsor or the influencer. Moreover, the object of the promotion should be well outlined to avoid issues with copyright infringement.
  • Conduct clause. This outlines certain conducts that, if taken by the influencer during the period of relation, could damage the image of the brand and its products. Usually, the behaviours are related to possible involvement in lawsuits or social scandals. The clause can last for the whole period of the contract and even a certain period after.
  • Exclusivity clause. The influencer or ambassador, during a certain period, can be exclusive to the brand and not work with similar brands of the field and competitors. Exclusivity clauses might require additional compensation if it restricts the work of influencers.

Besides the clauses and requirements above, contracts with influencers and social media posts must follow the guide for influencers of 8th December, 2020, from the Advertising Standard Counsel (CONAR). An important requirement is that all posts must have hashtags that identify the post as advertisement, such as #publi, #publicidade, #publipost, otherwise sanctions will most probably be imposed.

Advertising standards, relevant authorities and advertising practice. The Advertising Standard Counsel (CONAR) has its own guidelines, the Advertisement Brazilian Code (CBAP). Although it is not a governmental regulation/federal law to be enforced, the guidelines are strongly followed by advertisers in any media, fashion houses, agencies, or influencers. A relevant set of guidelines for fashion houses to follow is Annex U, about sustainability affirmations and environmental responsibility of companies.

Any company that affirms having sustainable practices must have adopted such actions beforehand in the company, with possibility of verifying the veracity of the actions. If it is a future action, this information should be clear in any advertisement.

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3 . What regulations govern online marketing and how are the rules enforced?

E-commerce regulations in Brazil include the Consumer Protection Law (no. 8.078/90), Civil Code, E-commerce Normative Act (no. 7.962/13), and the Brazilian General Data Protection Law (LGPD) (13.709/18).

The LGPD was only recently introduced in Brazil, so companies are adapting and changing their internal and external data policies, such as the GDPR phenomenon. For their e-commerce, fashion companies should provide a clear, transparent, and objective privacy policy, to protect consumers and data owners.

Consumer data cannot be used for purposes other than the authorised for example having clear consent management, with options of “Opt In” and “Opt Out” to avoid future issues with consumers (Articles 7 and 11, LGPD, Data Protection Law).

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3.1. Consumer protection regulations

Consumer relations are regulated by Law no. 8.078/90. The law rules every aspect of the consumer’s rights in the physical and online settings, together with the Decree no. 7.962/13.

E-commerce must ensure that a customer service and a communication channel are available to consumers (article 17, Law no. 8.078/90 and article 4, Decree no. 7.962/13), including social media platforms. The channel must be available for consumers who want to change their privacy settings or cancel the consent and access to their data.

According to both applicable regulations, description of products, clear information, and imagery must be true to the actual product, or risk of being considered misleading advertising or false information, which are illicit acts that may entitle consumers to damages.

Online shopping has a specific rule that any sale can be returned in 7 days without reason by the consumer (article 49, Law no. 8.078/90).

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3.2. Physical store and online store layout

Architectural projects of stores are protected by Copyright Law (article 7, X). Online stores can seek protection through the Software Law (Law no. 9.609/98) to protect the code, font or copyright and trademarks to protect icons, such as in the case of apps.

Another possible protection for both physical and online stores is through trade dress, which is considered an act of unfair competition regulated in the Industrial Property Law. Trade dress is related to the appearance and specific characteristics of a product or the commercial establishment, considering all aspects, from the colours to style and layout.

The downside of trade dress is that it can only be claimed and declared through court actions. However, Brazilian courts have recognised the protection of store layouts through trade dress, such as in the case of the footwear store Mr. Cat vs. Mr. Foot (4th Civil Court of Goiania, no. 1101/97, between Calypso Bay Arrendamento de Marcas Patentes Ltda. X Vipi Modas Ltda e Calçados Pina Ltda).

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4 . What are the most relevant unfair competition rules for fashion businesses and how do the Courts interpret and enforce these rules?

The regulation applicable to unfair competition is Article 195 of the Industrial Property Law (Law no. 9.279/96). Several dishonest trade practices are exemplified in the article as acts of unfair competition, such as:

  • Acts that bring confusion or association for consumers between products, services, or establishments from different businesses to mislead consumers.
  • Acts that try to harm the reputation of the business, including revealing trade secrets and releasing false information.

The imminent risk of damage is sufficient for evidence of acts of unfair competition. Claims of unfair competition are often seen in the fashion industry, where there is limited protection for fashion goods.

Crocs was successful in a court action, ceasing the sales of infringing products of its famous shoe. The courts recognized that, even though the shoes were not registered as a design or a 3D trademark, the infringing shoes were identical, which would mislead consumers and thus, it was an act of unfair competition. (State Court of São Paulo, no. 1090308-66.2017.8.26.0100, between Crocs, Inc. and Crocs Brasil X Plugt.)

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5 . Is there any regulation specifically addressing sustainability or ESG (Environmental, Social and Governance) in the fashion industry?

The topic of sustainability has become especially relevant for the fashion industry over the past few years, with consumers pressuring businesses to position themselves and be transparent about their supply chain.

Applicable regulations in Brazil, when it comes to environmental issues, are the Environmental Criminal law (9605/98) and the National Policy for Solid Residues (lei 12.305/2010).

Consumer regulation requires that companies are transparent to consumers and provide true information about their products (see above, Question 3, section Consumer Protection Regulations). This also extends to the supply chain and whether it is an ethical and sustainable production.

One way for fashion companies to be transparent about it, is to secure a sustainability certification. These are international certifications recognised in Brazil, such as Certified B Corporation, Bluesign, PETA and Cradle to Cradle, and national certifications, such as ABR for cotton, and Selo Qual, a certification for sustainable and quality standards targeted to the textile industry, and JEANS DO BRASIL for denim manufactured in Brazil.

In Brazil, ISO certifications are recognised as well. ISO 14000, for example, measures the international standards related to the environmental management of companies.

Certification and collective marks can identify products or services from entities or conformity to certain standards, including sustainability. These marks must be filed with the regulations of the owners or the applicable standards for certification. Only applicants with no direct commercial or industrial interest in the product or service can apply for certification marks (article 128 § 3).

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6 . Customs monitoring: do any special import and export rules apply to fashion products?

Customs monitoring in Brazil requires a close relation and non-stop dialogue with official anti-counterfeiting agencies and the Internal Revenue Service, which is the main authority when it comes to anti-counterfeit measures.

Rights owners can register their trademarks at the National Trademark Owners Directory created by the Brazilian PTO. The directory allows authorities to access those trademarks that often are counterfeited (www.gov.br/inpi/pt-br/projetos-institucionais/combate-a-falsificacao-de-marcas).

Border measures are available to assist in the control of counterfeited products arriving in the country. Usually, Customs proceed with a sampling process due to the extensive border of Brazil. If the Customs suspect that the products are counterfeited, they are retained for inspections. Although retention is mainly done by the sampling process of ex officio by the Customs, rights owners can request to retain certain products if there is evidence of IPR infringement. Once the counterfeited products are retained, the rights holder or its legal representative will be contacted to collect the samples and confirm in 10 working days whether the products are counterfeited.

There are two available measures once the products are confirmed to be counterfeited: customs administrative procedure or judicial remedy.

In case of counterfeited products in the online market, claims must be brought to civil and criminal state courts and in some cases, to federal courts with clear evidence of the connection between the counterfeited products and the defendant.

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7 . Frequently Asked Questions

N/A

EXPERT ANALYSIS

Chapters

Australia

Juliet Evans
Nicola Scheepers
Jennifer Wyndham-Wheeler

China

PENG Wei
WEI Xin

Finland

Hilma-Karoliina Markkanen

France

Floriane Codevelle
Karina Dimidjian-Lecomte

Germany

Ariane Hettenkofer
Gina Maria Ziaja

Greece

Maria G. Sinanidou
Alexandra Varla

Hong Kong

Hank Leung
Harry Wong

India

Rajeshwari Hariharan

Ireland

Patricia McGovern

Israel

Moran Katz
Avi Ordo

Italy

Julia Holden
Nicolò Mosiello
Martina Olivieri
Giuseppe Verrecchia

Singapore

Penelope Ng
Lorraine Tay

Spain

David Fuentes Lahoz
José Miguel Lissén

Thailand

Piyawat Kayasit
Michelle Ray-Jones

United Kingdom

Gary Assim

United States

Megan K. Bannigan

Vietnam

Chi Lan Dang
Tu Ngoc Trinh
Diep Thi Bich Le
Hien Thi Thu Vu