Among the many principles that exist in the legal world, the adhesion to the appeal is seen as a second chance for a party that did not appeal a resolution on time to avail itself of an appeal filed by the counterparty. In administrative procedures before Peruvian Trademark Office (PTO), adhesion to the appeal is regulated by Directive No. 002-1999-TRI-INDECOPI (the Directive).
Article 2 of the aforementioned Directive establishes the requirements for the adhesion to the appeal:
a) The existence and validity of an appeal filed.
b) The one who raises adhesion must be the appellant's counterpart.
c) The one who adheres must not have been defeated by the resolution appealed by the other party, but not to have obtained full satisfaction in his claims.
d) It must be submitted within the deadline for the reply to the appeal.
In this article, we explain the adhesion to the appeal in IP infringement actions. It is an usual practice that, after obtaining a favourable resolution in an infringement action with a fine imposed, the claimant requested an adhesion to the appeal to the Administrative Court of Appeals (the Administrative Court) for an increase of the said fine on the grounds that the potential illicit benefit that the infringer would have obtained by dealing in the goods bearing the trade marks of the IP owner.
On many occasions, such as the one that occurred in Resolution No. 2197-2017/TPI-INDECOPI, the Administrative Court carries out the evaluation of the sanction – taking account of the FOB value of the products – following the criteria established in article 121 of the Legislative Decree No. 1075[1]:
Article 121.- Determination of the sanction
To determine the sanction to be applied, the competent national authority shall take into consideration, among others, the following criteria:
a) the actual or potential illicit benefit of the commission of the infringement;
b) the probability of detecting the infringement;
c) the modality and scope of the infringement;
d) the effects of the infringement;
e) the time of the infringement;
f) recidivism in the commission of an infringement;
g) bad faith in the commission of the infringement.
If this is the case, these criteria will also be taken into account in order to graduate the fine to be imposed.
In the resolution mentioned above, the Administrative Court accepted the adhesion to the appeal of CHLOE SAS and, by confirming the infringement by EDDIE PERÚ S A C for the importation of purses bearing signs similar to the registered trade marks of the claimant, modified the amount of the fine imposed in the first instance from $1,350 to $4,172.
The first administrative instance used the same criteria indicated in article 121, taking account of the sale price of the products in the Peruvian market. The first and second instance carried out their evaluation based on different prices and the trend that the Chamber follows is, in most cases, to increase the amount of the fine.
EDDIE PERÚ S A C filed a civil claim against the Administrative Court’s resolution stating that it did not infringe and therefore cannot be sanctioned with a heavy fine, since it would go against the principle of no reformatio in peius (“change for the worse”). The Civil Court partially agreed with the claim.
The conclusions of the Civil Court were as follows:
- The claim of CHLOE SAS was to determine the commission of an infringement and, if applicable, impose a sanction. The exercise of the power to sanction is exclusive. In the present case, the claim of CHLOE SAS was satisfied since the infringement was proven. However, the company did not question anything else but the amount of the fine. In that sense, the adhesion to the appeal had to be declared inadmissible because it did not comply with the requirements of the Directive nor was CHLOE SAS entitled to question the amount of the fine.
- When verifying that only EDDIE PERÚ S A C appealed, the Civil Court concluded that the fine already imposed could not be raised even though the Administrative Court considered that it should be bigger due to its dissuasive nature, violating the principle of no reformatio in peius and the right to fair administrative procedure.
On August 23 2019, a special administrative division of the Superior Court of Justice of Lima (the Court of Appeals) upheld the conclusion of the Civil Court.
Both principles are implicit in the Political Constitution of Peru and are related to the right of defence and to lodge a challenge. Likewise, subsection 3 of article 258 of Supreme Decree No. 004-2019-JUS[2] specifies the following:
Article 258.- Resolution
258.3 When the sanctioned offender appeals or challenges the resolution adopted, the resolution of the appeals filed cannot determine the imposition of more serious sanctions for the sanctioned.
In accordance with the foregoing, a court that is aware of a second instance process cannot worsen the appellant's situation. The Administrative Court has the obligation to exhaust all possible ways to defend the resolutions it issues. This may not be the last time we will hear about this dispute.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, any other of its practitioners, its clients, or any of its or their respective affiliates. This article is for general information purposes only and is not intended to be and should not be taken as legal advice.
Authors
Maria Cristina Trujillo (Associate)
[1] Legislative Decree on Approval of the Supplementary Provisions of Decision No. 486 of the Andean Community Commission Establishing the Common Regime on Industrial Property.
[2] Supreme Decree on Approval of the Consolidated Text of Law No. 27444 on General Administrative Procedure (2019)