Luxury brands and counter piracy measures

It is challenging to determine the precise moment when luxury became ingrained in society. Dating back possibly to the Paleolithic period, luxury has not only symbolized opulence and power but has also served as a cultural phenomenon to signify identity and express the individuality or characteristics of certain social classes.

Luxury culture developed itself over the time: numerous brands have emerged, embodying this concept and catering to this group. In 2022, the luxury market experienced a 21% growth, generating approximately €1.38 trillion despite the global economic crisis. This record figure reflects a new global trend towards consuming products in this segment.

In 2024, global spending on luxury goods and services fell by 3%, totaling €1.48 trillion, according to a study by Bain and the Italian association Fondazione Altagamma. However, unlike the foreign scenario, the luxury market in Brazil continues to grow. Currently, 1.3 million Brazilians have high purchasing power, a number that could reach 1.5 million by 2030.

The Brazilian market alone is projected to reach R$74 billion in 2022 with a growth of 30% and 11.5% in 2023 and 2024, respectively. The expectation for the year 2025 is a growth of up to 15%, establishing the country as a significant player in the luxury world. According to a study conducted by Bain & Company, in collaboration with Vogue and Valor, by 2030, the market is expected to generate around R$133 billion, positioning Brazil as a major market for the luxury sector.

Furthermore, the trademark protection adheres to the principle of territoriality, which means that trademark filings are independent in each country, apart from renowned trademarks in their sectors. Given these promising projections, it is unsurprising that Brazil is becoming a point for trademark investments.

LEGAL PROTECTIONS AND COUNTERFEIT CHALLENGES

To cater to this luxury market and enhance protection, the Brazilian Patent and Trademark Office (BRPTO) introduced the position mark modality in Ordinance 37/2021, a development particularly relevant to the fashion industry. In response to this new framework, numerous brands have adapted their applications for protection. In June 2023, three years after the ordinance's creation, the BRPTO granted the first position trademark registration to the Osklen brand.

Trademark protection is especially crucial for luxury brands, which often face counterfeiting and the importation of illicit products. In Brazil, trademark protection can provide brand owners with a range of measures to combat these activities.

Research shows that in 2021 2.9 million people in Rio de Janeiro alone consumed counterfeit products while recognizing that piracy is a crime. Border measures, combined with robust brand protection, are generally the best strategy to prevent counterfeit products from entering the country and to mitigate the negative impact on luxury brands.

Luxury brands are renowned for the exceptional quality of materials used in their products, the precision of their seams, and the fit of handmade garments. This status and product quality generate desire across all social groups in modern society, even though the high price of these items makes them inaccessible to a large portion of the population.

Distinctive elements like Louis Vuitton's flowers, Christian Louboutin's red soles, Salvatore Ferragamo's horseshoes, Burberry's checkered prints, and Hermès' iconic Birkin bag contribute to the unique recognition of these brands. However, they also face challenges from unfair competition and the importation of counterfeit items.

On the other hand, copyright, although traditionally associated with literary, artistic, and audiovisual works, can be used to protect specific elements of luxury brands, such as the aforementioned exclusive patterns and prints, as well as product designs that are essentially linked to these brands and exhibit artistic character and originality.

Additionally, logos and visual identities with high aesthetic value can be registered both as trademarks and under copyright, just like advertising campaigns, photographs, and audiovisual productions, which play a fundamental role in shaping these brands' identities. Other protection mechanisms include trade dress, which safeguards the design, product presentation, and visual identity of packaging, preventing replication by competitors, as well as patents, which can be used to register technological innovations applied to fabrics, perfumes, or accessories.

However, despite these protections, counterfeiting remains a significant challenge for major luxury brands, prompting them to adopt strategies to combat this issue, such as legal actions against unauthorized reproductions of their products, digital monitoring to detect copies on e-commerce platforms and social media, and partnerships with customs authorities and regulatory agencies to curb the distribution of counterfeit goods.

Growing digitalization and the advancement of counterfeit production, the combination of copyright, trademark registration, and industrial property rights has become essential to preserving the identity and exclusivity of luxury brands, ensuring their value and credibility in the global market.

Luxury product replicas are becoming increasingly sophisticated, using high-quality materials and advanced manufacturing techniques that make them visually and sensorially almost identical to the originals, posing a significant challenge for luxury brands. With technological advancements and the globalization of commerce, counterfeiters can replicate intricate details, from precise stitching to sophisticated packaging, making it harder to distinguish between an authentic item and a premium replica.

This level of accuracy, combined with significantly lower prices, attracts consumers who want to showcase the appearance of luxury without paying the full price of the brand, diverting part of the clients from traditional luxury houses and impacting their sales and exclusivity. It should be noted that premium replicas are not sold at a price accessible to the general public, but at a high price (albeit cheaper than the original), and are not consumed by the lower classes, but by those with knowledge of luxury brands who want to access exclusive items at a more accessible price.

This phenomenon not only threatens brand revenue but also dilutes the prestige associated with original products, as the distinction between genuine and counterfeit items becomes less apparent in the market, conduct that deserves attention and attack by those luxury brands.

THE LUXURY AND JUDICIAL PROVISIONS

Due to the challenges brought by the luxury counterfeiting market, intellectual property protection measures have been adapted to ensure greater effectiveness for owners in protecting and registering such property. In civil and administrative matters, the first step towards effective protection of such rights is registration with competent authority, which is usually the BRPTO.

The registration of trademarks, industrial designs and, according to new BRPTO guidelines, even slogans, advertising expressions and position trademarks guarantee the owner exclusive use of these registrations, such that counterfeiting constitutes a violation of trademarks and other IP registrations.

Copyright protection, in turn, does not depend on registration, according to Brazilian law, guaranteeing the owner even longer protection, which is often more beneficial than registration before the BRPTO, which guarantees shorter protection periods.

At border customs, the Brazilian Federal Revenue Service has also developed the Anti-Piracy System to provide greater protection for intellectual property rights. This system allows holders of trademarks registered within the BRPTO to obtain cooperation from Brazilian customs authorities in intercepting goods bearing infringed and counterfeit trademarks, making it harder for these products to get into the country. This collaboration is free of charge, and all that is required is an email to the Brazilian authority requesting trademark protection in the border customs.

In addition to all civil and administrative remedies available to protect luxury brands and intellectual property, the IP Statute and the Brazilian Criminal Code establish several crimes related to trademark, industrial design, and copyright infringement, allowing owners to file personal complaints against infringers, who will then face criminal investigation to determine whether criminal liability exists.

The BRPTO's new positions regarding position marks, slogans, and advertising signs increase the range of options for protecting these rights in the growing Brazilian luxury market. It will be necessary to analyze the effectiveness of such measures in the long term. Considering the increasing counterfeiting scenario, the judiciary appears to be an alternative route for protecting these rights.

Fortunately, the Brazilian judiciary has been issuing favorable decisions for the luxury market: brands like Hermès, Louboutin, and Gucci have already secured victories in anti-counterfeit measures. Judges typically acknowledge the infringements and emphasize the need for legal protection, preventing counterfeit products from entering the country by border measures and enforcing recalls of these items from various commercial establishments.

Christian Louboutin shoes, particularly the women's high-heeled pumps, are an icon in the premium segment of international fashion. In a historic decision, the Court of Justice of São Paulo recognized that shoes with red soles are a trademark of the French brand Christian Louboutin. This ruling not only prohibits the Brazilian women's footwear brand Bruna Silvério from producing items with this distinctive feature but also acknowledges the red sole as synonymous with the Louboutin brand.

In other hand, the Court of Justice of Rio de Janeiro upheld the decision allowing the French brand Hermès to coexist in Brazil alongside the Brazilian brand Hermes. The Superior Court of Justice rejected the appeal filed by Sociedade Comercial e Importadora Hermes, which sought to prevent the French company from operating in Brazil under the Hermès brand (STJ. Ag 850.487/RJ).

Although both companies operate in the same industry, one targets the luxury market, while the other focuses on catalog sales. The brands are nearly identical, differing only in the placement of an accent mark. The Brazilian Hermes has been registered with the INPI since 1942 and was attempting to secure exclusive rights to the brand. In response, Hermès International, representing the French brand, filed a declaratory action seeking the right to use the brand in the country.

The request by the French company was granted on the grounds that the target audiences are distinct and that the products do not create confusion among consumers. The decision emphasized that a Hermès customer is unlikely to confuse its products with those of Hermes, and vice-versa. The Court of Justice of Rio de Janeiro confirmed this ruling and recognized that Hermès, as a globally recognized brand, holds the status of notoriety. Founded in Paris in 1837, Hermès would benefit from the extraterritorial protection of well-known brands as provided by the Paris Convention.

The Court of Justice of Rio de Janeiro aligns with the decision of the European Union Intellectual Property Office (EUIPO), which recently issued a ruling involving the conflict between the Hermès brand and the contested sign "RMS." The case illustrates how the EUIPO assesses the likelihood of confusion between trademarks by analyzing visual, phonetic, and conceptual differences. Although the products involved are considered identical, including perfumes, bags, glasses, and clothing, the EUIPO concluded that there is no risk of confusion between the marks.

The decision also extended to the assessment of damage to the reputation of the HERMÈS brand, determining that there was not a sufficient mental link between the signs that could harm the reputation of the earlier mark. As a result, the opposition was rejected in its entirety (EUIPO No. B 3 191 953, 01/08/24).

This decision contrasts with others issued by the French Intellectual Property Office, which, in similar situations, took different paths. In the decisions of April 27, 2022 (OPP No. 20-1742, HERMES v. "RMES") and May 3, 2022 (OPP No. 20-3688, HERMÈS v. "R MESS"), the French IPO considered the signs comparable and ruled in favor of the HERMÈS brand. However, the EUIPO distinguished these cases, noting that the contested signs in the French IPO cases included at least one vowel, which is not the case with "RMS." This distinction was sufficient for the EUIPO to consider the cases as non-comparable and, consequently, to reject the opposition.

Finally, the São Paulo Court of Justice, in 2018, ruled in favor of a lawsuit for moral and material damages filed by Gucci against a company from the interior of São Paulo that had it was selling perfumes that reproduced its logos.

In the first instance, the claims were dismissed, with the judge ruling that there was a distinction between the target audiences of the companies and that the product packaging did not cause confusion, thus not constituting a violation of intellectual property or counterfeiting.

However, in the appeal judgment by Gucci at the São Paulo Court of Justice, Judge José Araldo da Costa Telles emphasized that the brand holds the registration for the “GG” trademark, which receives special protection regarding its distinctive signs, such as the interlocking GG letters.

According to the judge, there was a clear violation of the trademark, "capable of causing confusion among consumers of the products manufactured and sold by the parties, as well as diverting clientele." Considering the current position adopted by the specialized chambers of the São Paulo Court of Justice, the judge stated that the situation required the infringer to be condemned for material damages. (Case nº 1041667-45.2015.8.26.0576).

Recently, the French footwear brand Veja filed two lawsuits before the State Court of São Paulo against local companies that were improperly using and selling counterfeit products of the brand. In both lawsuits, the 1^st and 2^nd Business Courts’ judges recognized Veja's claims and granted the requested injunctive relief to refrain the illegal activity and protect the trademark rights in national territory.

FINAL THOUGHTS AND THE FUTURE OUTLOOK

These robust judicial decisions in trademark and copyright disputes create an encouraging outlook for the luxury sector in Brazil. Despite the sometimes-controversial stance of the BRPTO, the Brazilian judiciary demonstrates the necessary maturity to resolve disputes, recognizing the notoriety of brands in the global market and ensuring the protection of the symbols, names, and characteristics that differentiate them. Therefore, this allows for the growth of the market and consumer demand for these luxury products. In addition, the expense incurred by taking more effective measures is recovered not only through compensation for damages but also through the exposure generated by the success and the return of customers, as each legal victory for the brand is another sales showcase in the press, which improves its reputation in the consumer market.