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Positive signs for IP enforcement in Argentina

Argentina has a poor reputation for protecting IP rights. But, says Carlos Castrillo, new political winds are bringing changes

Argentina has a long and poor image as a country that disregards IP rights and does not enforce them when trade mark owners take action in court. This image is not totally true and is now changing with the new political winds blowing in Argentina. Positive developments are on the way and that brand owners should be able to feel the changes soon.

Argentina has a host of good lawyers that are deeply involved in IP, excellent universities that are renowned in Latin America and solid legislation, so what is missing? Politics were the great problem that made most of the good legislation inapplicable and placed obstacles to improvements in areas where new laws were required. Populism played a role in creating and maintaining obstacles to any judicial measures against sellers of counterfeits, who usually involve the poorer class of people as fronts for their illegal activities and who are first to get caught in criminal procedures. This has been documented in a recent study made by the Office of Trade of the United States Embassy.

New political winds

But new political winds began to blow across Argentina. In June this year, the largest black market in South America, La Salada, suffered a setback that ended in the arrest of its chief operator. La Salada is run without any normal business procedures which makes the sale of counterfeit goods easy, and there is a high degree of tax evasion.

We would expect then that the same legal tools that most developed countries normally have at their disposal for fighting against piracy and crime, and exist in Argentina, will begin to work normally, something that is beginning to happen since the Macri administration took power at the end of 2015.

Our Customs law prohibits the import and export of goods carrying falsified trade marks as well as pirated goods. If it is unclear whether the goods are genuine, Customs may retain them for up to seven working-days in which Customs must contact the IP rights owner giving them the chance to file a request for an injunction before the courts.

The tax agency AFIP is responsible for a Register where trade mark owners may register their trade marks for up to two years and renew them indefinitely. Based on this registration, importation of goods carrying the registered trade marks will be stopped for three days, during which the trade mark owner may have access to the goods, before the goods are refused entry or declared to be lawful.

If the importer contends that the goods are original, the trade mark owner will be able to get the necessary injunctions before the courts to stop the importation of goods within the three-day suspension (or seven days depending on the circumstances). Normally, the importer would abandon the goods for destruction rather than risk being personally prosecuted for a criminal offence (more information here, here and here).

Criminal actions as a means to stop the entry of falsified goods into the country or as an action to investigate, stop and later condemn criminals are a rapid and effective way to gather all the evidence needed to get an injunction to stop the goods being introduced into and circulate in the market.

The falsification of trade marks is only punishable by a maximum of two years in prison, therefore no jail sentence should be expected unless other criminal offences can be added. But these normally occur, since trade mark falsification usually involves tax evasion, money laundering and illicit association.

At present, some cases are being prosecuted for the falsification of cigarette packages. In 2015, in Concordia, Entre Ríos, La Tabacalera del Litoral was accused by Massalin Particulares of falsifying its trade marks, illegally manufacturing Philip Morris cigarettes and tax evasion of $1.5 million. Its owner had to suffer house arrest.

In a more recent case, known as "dragon" (for a dragon looking safe containing huge amounts of money), Walter Carbone and Daniel Tomeo, both very closely tied to the former government conducted by Daniel Scioli, were prosecuted for illegal cigarette production and trade, among other charges. Two illegal factories were closed down, the machinery was taken down by judicial authorities and the illegal goods and packaging all destroyed.

When a trade mark owner wishes to stop counterfeit goods, they must apply to the criminal courts. However companies normally also want to be awarded damages to cover some of the expenses, and this must be done at the civil courts. A civil action must be filed, and if the damages are sufficiently high it may serve as a deterrent to those who consider committing similar crimes.

Punitive damages

In Argentina, as in many countries in Europe, there is a discussion in the legal community on the awarding of damages regarding the use of non-authorised trade mark rights. Is it proper to award damages to trade mark owners when there is no proof of damage but when non-authorised use of a trade mark is established? The current state is that even if you manage to prove financial gain by the counterfeiter, it does not necessarily translate into a similar loss for the trade mark owner. Therefore, courts have introduced a broader interpretation of the law and have begun in the past 10 years to accept an objective proof of damage when a non-authorised use of a trade mark is established. They find in this interpretation a useful deterrent for the counterfeiting of trade marks. Courts usually set a high royalty to be paid by the non-authorised trade mark user, to discourage such illegal behaviour. In some other cases, they have established a fixed amount of damages that seeks to remove any potential benefit to the non-authorised user.

It seems that the courts are working to establish a precedent of factual (not legal) punitive damages law rather than setting damages based on financial loss. Although punitive damages have not been formally accepted in civil procedures regarding trade mark law in Argentina, punitive damages are accepted in consumer rights law. Therefore, even if it does not have a proper legal basis in the Trade Mark Law, it makes sense for judges to sustain their damages decisions on the punitive damages legislation contained in the Consumer Rights Law.

Argentina has the tools in its legislation to perform enforcement through Customs, criminal courts and civil courts. The existing practice today is not huge, but with the new political and economic winds things may change rapidly. Brand owners have reason to feel encouraged by these positive developments.

Castrillo_Carlos Carlos Castrillo

© Carlos Castrillo. The author is a partner of Castrillo & Castrillo in Buenos Aires


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