38 F.3d 1161 (11th Cir. 1994), 93-4947, Babbit Electronics, Inc. v. Dynascan Corp.

Docket Nº:93-4947.
Citation:38 F.3d 1161
Party Name:33 U.S.P.Q.2d 1001 BABBIT ELECTRONICS, INC.; Sol Steinmetz; and Robert Steinmetz, Plaintiffs-Counter-Defendants-Appellants, v. DYNASCAN CORPORATION, Defendant-Counter-Plaintiff-Appellee.
Case Date:November 25, 1994
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

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38 F.3d 1161 (11th Cir. 1994)

33 U.S.P.Q.2d 1001

BABBIT ELECTRONICS, INC.; Sol Steinmetz; and Robert

Steinmetz, Plaintiffs-Counter-Defendants-Appellants,


DYNASCAN CORPORATION, Defendant-Counter-Plaintiff-Appellee.

No. 93-4947.

United States Court of Appeals, Eleventh Circuit

November 25, 1994

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        Jeffrey A. Sarrow, Plantation, FL, for appellants.

        Mitchell R. Bloomberg, Adorno & Zeder, Miami, FL, Robert E. Wagner, Wallenstein, Wagner & Hattis, Ltd., Chicago, IL, for appellee.

        Appeal from the United States District Court for the Southern District of Florida.

        Before TJOFLAT, Chief Judge, BLACK, Circuit Judge, and KAUFMAN [*], Senior District Judge.

        PER CURIAM:

        We affirm the judgment of the district court, 828 F.Supp. 944, essentially for the reasons set forth by the court in its Order on Foreign Law Issues and Amended Memorandum Opinion and Order, which appear in the appendix as Exhibits A and B, respectively.



        EXHIBIT A


        THIS CAUSE comes before the Court after a hearing on April 24, 1992, at 2:00 pm, before the undersigned United States District Judge. The hearing addressed the foreign law issues raised in Plaintiff's Notice of Foreign Law, filed on March 2, 1992, and in the parties' Joint Pretrial Stipulation.


        In 1985, Babbit Electronics, Inc. ("Babbit") entered into an agreement with Dynascan Corporation ("Dynascan") that enabled Babbit to sell and market in Latin America cordless telephones bearing the Cobra trademark. This agreement provided that Babbit would pay Dynascan a royalty for the use of the Cobra name. Over the next two years, Babbit alleges that it paid $2,532,162 for the cordless telephones and that Dynascan received royalties of $254,662. Babbit also alleges that the agreement between the parties took the form of a licensing agreement and that Dynascan told Babbit that Dynascan owned the Cobra trademark in Latin America, or had protectable rights to the Cobra trademark in Central or South America. Dynascan alleges that the agreement took the form of a distribution agreement between a manufacturer and a trademark proprietor.

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        From late 1986 onward, it became known to the parties that counterfeit Cobra products were entering the Latin America market. Babbit requested that Dynascan contact the local authorities in Latin America about the counterfeit products because Babbit's sales were being affected by the counterfeit market. Babbit alleges that Dynascan misled Babbit into believing that Dynascan had a protectable trademark to license. Babbit states that in four South American countries (Brazil, Argentina, Venezuela, and Paraguay) where Babbit sold its product, this was not true.

        Dynascan states that by virtue of its use of the Cobra trademark in South America, Dynascan's trademark in those countries is protected. Dynascan asserts that it can oppose the attempted registration by third parties of any similar mark and seek cancellation of any registrations of such a mark under the trademark laws of the South American countries at issue.

Scope of Hearing

        The Court limits the scope of this Order to the four countries in which Babbit sold Cobra cordless telephones--Brazil, Argentina, Venezuela, and Paraguay. As a result of the hearing, the Court seeks to answer the question of what the law is with regard to trademarks in each of the four countries. Thus, the law as set forth in this Order will be the law applied in determining the appropriate issues on the merits. 1

        At the hearing the Court heard from two expert witnesses as to the state of trademark law in the four countries at issue. Babbit brought forth Professor Keith Rosenn of the University of Miami School of Law as its expert witness. Dynascan brought forth Jeremiah D. McAuliffe, Esq., of the law firm Pattishall, McAuliffe, Newbury, Hilliar & Geraldson of Chicago, Illinois as its expert witness. The findings of this Court primarily comport with the testimony of Professor Keith Rosenn and the briefs submitted by Babbit.

Findings of the Court

  1. Brazil

            Brazil, a civil law country, employs the "attributive" system of trademark protection. All rights stem from registration of a trademark in Brazil, as opposed to use of a trademark. To secure legal protection, a trademark should be registered with the National Institute of Industrial Property (INPI)--the Brazilian patent and trademark office.

            The critical legislation regulating trademarks in Brazil is the Industrial Property Code, Law No. 5.772 of December 21, 1971 ("the CPI"). The critical provisions of the CPI are Articles 2 and 59:

            Art. 2. The protection of rights with respect to intellectual property is effectuated through: ... (b) the granting of registration: of industrial, commercial, or service trademarks; and advertising expressions or devices.

            Art. 59. Whoever obtains registration in accordance with this Code shall be guaranteed in Brazil the ownership and the exclusive use of the trademark to distinguish his products, goods or services from other identical or similar products, goods or services, in the class corresponding to his activities.

            Sole paragraph. The protection dealt with in this Article includes the right to use the trademark on papers, printed matter, and documents relating to the activity of the registrant.

            The general rule is that a trademark must be both registered and used in Brazil in order to be protected. If the mark is used by the owner, the registration is valid for ten years. This may be extended for successive periods of ten years. If the mark is not used for two years from the date of registration or if its use is interrupted for two consecutive years, the registration of the mark will lapse. The owner of the registered trademark must use it as described in the certificate of registration. Any interested person may apply to INPI for a declaration that a mark has lapsed.

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            Under the CPI, a foreign trademark is considered one that has been filed regularly in a country that has a treaty or convention with Brazil, guaranteeing reciprocity rights for registration of Brazilian marks. A foreign mark should be filed in Brazil within the time limit of priority provided for in the treaty or convention. In order to substantiate the priority claim, the mark must be filed with INPI before the expiration of 120 days from the filing date in Brazil. Foreign marks may be registered directly in Brazil as Brazilian marks so long as the applicant proves that the product or service to be covered are related to his industrial, commercial, or professional activity in his country of origin. Foreigners and nationals that do not live in Brazil have to appoint a representative domiciled in the country, who must have power of attorney to receive judicial service of process. This document should be filed together with the application for registration or within 60 days after filing.

            Trademark licensing in Brazil requires an agreement duly registered and approved by INPI to enable a Brazilian licensee to remit foreign currency legally and to deduct the payments as an expense for income tax purposes. Under Normative Act No. 15, in force from September 11, 1975 until February 27, 1991, the maximum royalty permitted by INPI for a trademark license was one percent of net sales, and that royalty was permitted for only the initial ten-year registration period.

            Use of an unregistered mark by a third party without a license agreement that has been properly recorded with the INPI is not considered a use that inures to the benefit of the trademark owner. No payments for use of a foreign trademark can be made if the corresponding application for registration has not been filed in Brazil within the priority period. Licensing of a Brazilian trademark requires registration not only of the mark but of the licensing agreement.

            Brazil is also a party to the Paris Convention of 1883, which provides protection for non-registered notorious marks. Article 6 bis (1) of the Paris Convention of 1883, as revised in Lisbon in 1958, provides:

            The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

            The Court also finds that trademark registrations with the INPI can be annulled if the Brazilian registrant misappropriated a well-known foreign mark.

            Under Brazilian law one can also sue for unfair competition. Included in acts of unfair competition in Brazil are the fraudulent diversion of another's customers and the use of false designations of origin.

  2. Argentina

            Argentina, a civil law country, has also adopted the attributive system for trademarks. The rights in trademarks are acquired by registration, not by use. Article 4 of the Law of Trademarks and Designations, Law No. 22.362 of December 22, 1980, articulates this proposition:...

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