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September 28, 2016

The changes to Brazil’s Civil Procedure Code are welcome although it may take some years for them to be put into practice

After many years of scholarly and political debate within the National Congress, the new Brazilian Civil Procedure Code was passed into law last year and came in force in March 2016, replacing its 1973 predecessor. It is expected that the new rules of civil procedure will reduce litigation in Brazil by favouring alternative dispute resolution methods as well as by allowing and incentivising cooperation between the parties of lawsuits. In particular, we shall address some possible impacts for intellectual property litigation.
 
At the outset, we need to highlight that the code established a new preliminary hearing for the very beginning of a lawsuit. It is intended to lead to conciliation between the parties. Hence, this preliminary hearing may be a mediation session or may entail conciliatory proceedings, with direct negotiation between the plaintiff and defendant on the merits of the dispute. The hearing will not take place if both parties state that they have no interest in it; otherwise they must attend.
 
Relevant to the defendant is the fact that its deadline to file a reply to the complaint starts to run only after the end of the hearing or after the end of the last mediation session, instead of after being served. This aims at making it easier for the parties to reach an agreement. Notwithstanding this new procedure, it is important to stress that the hearing does not prevent the court from granting an injunction to the plaintiff in order to compel the defendant to refrain from infringing a registered trademark, for instance.
 
One may expect that, in order to avoid the costs of a foreseeable defeat in a clear infringement case, when there is no good defence available the defendant will probably give its best in the hearing. This is in order to achieve a mutually beneficial agreement on damages as well as immediately agreeing to refrain from using the plaintiff’s trademark, patent, or other IP right.
 
Better cooperation
 
Within such a spirit of promoting reconciliation in order to avoid long-lasting litigation, the new code also aims at enhancing cooperation between the parties over the rendering of the court’s decision. This was formally set as a basic principle governing civil litigation. Accordingly, the new rules provide parties with an unprecedented mandate in Brazilian law to adjust the standard procedure set forth by the code to better fit the dispute. Therefore, parties are no longer bound by the code’s standard procedure as long as they agree on modifying it to more appropriate proceedings.
 
In this sense, the parties can extend, for instance, the legal deadlines for performing their procedural duties as well as waiving the right to appeal from the first instance court’s final decision. Such agreements can be made before or during a lawsuit and they do not depend on the court’s approval, except if they establish terms for the judge to perform an act, such as the scheduling of a hearing in which he or she must take part. The courts, however, can acknowledgeex officio nullities or misuses of such agreements, rendering them void in exceptional cases.
 
Since there is a good professional relationship between several IP law firms in Brazil, one can expect that the attorneys will be willing to take advantage of these new provisions and cooperate with each other in order to improve Brazilian litigation practice on behalf of their clients. 
 
Other features
 
Additional interesting features of the new code are (i) the restriction of interlocutory appeals and (ii) the rule that the fees awarded to the opposing counsel also apply to appeals. The former intends to overcome the past common practice in Brazil of appealing against virtually every interlocutory decision rendered during the first instance procedure before the final sentencing of the case by the trial court. Some interlocutory appeals will still be admitted, such as the ones against preliminary injunctions, but many of them will no longer be allowed, thus releasing the courts of appeal to concentrate on adjudicating appeals against final rulings of cases rather than interlocutory decisions. Naturally, the expected results are faster and better rulings.
 
"THE NEW RULES PROVIDE PARTIES WITH AN UNPRECEDENTED MANDATE IN BRAZILIAN LAW TO ADJUST THE STANDARD PROCEDURE SET FORTH BY THE CODE TO BETTER FIT THE DISPUTE."
 
The latter concerns a Brazilian peculiarity. In Brazilian civil procedure, the winning party is not entitled to a refund of the fees paid to its counsel from the defeated party. Nevertheless, the counsel of the victorious party are entitled to charge attorneys’ fees from the defeated party. These fees do not pertain to the client; they are a legal obligation for the party that lost the suit to pay the opposing counsel itself. Generally, these fees are established by the court as a percentage of the final award, varying from 10 to 20% in accordance with the complexity of the case.
 
The previous code set forth that such fees were due only once, at the end of the procedure. The new code, however, with the goal of discouraging appeals, now sets forth that these fees will be due whenever and each time a party appeals. Thus, the costs of appealing have become higher in a bid to avoid “automatic” appeals regardless of their chance of success.
 
Expert witnesses
 
Last but not least, among many other changes we must highlight here that expert witness regulation has undergone significant improvements. This is a key point of patent litigation, where parties used to struggle to secure the nomination of an appropriate court’s expert on the patent’s subject matter.
 
As background to understanding the changes: in Brazil the court appoints its own expert to provide the judge with the technical information it needs to rule on the case, although the expert’s opinions are not binding. In parallel, each party may appoint its own expert witness to follow up the work of the court’s expert and deliver its own opinion on the court’s expert conclusions. Problems began because, since judges could freely appoint anyone they trusted, on several occasions a court’s nominated expert was not an actual expert in IP law or on the patent’s subject matter, and it jeopardised the result of the judgment and gave rise to frequent appeals.
 
The new code duly corrected those problems by setting forth strict rules concerning the appointment of court experts as well as allowing parties to mutually agree on and appoint an expert of their trust to the court. Hence, the new rules force the nominated expert to provide evidence of his or her technical knowledge and skills, thereby proving that he or she is a real expert in the matter and capable of delivering a proper opinion on the subject.
 
Furthermore, the new code establishes that the expert must disclose his or her methods of analysis within the opinion as well as justifying the reason why he or she employed them instead of other possibly available methods, so providing for better-grounded technical opinions. Moreover, judges themselves are now firmly required to explain their decisions on whether to adopt the expert’s conclusions. Therefore, judges must disclose the reasons why the expert’s conclusions convinced them or not, which will certainly provide a better understanding of the decisions by the parties.
 
Finally, parties, rather than judges, are now entitled to appoint a court’s expert as long as they agree. Therefore, instead of letting a judge come up with a name, the parties may nominate an expert of their mutual trust. This way, risks of a non-adequate nomination by a court are avoided, since the judge is bound by the decision of the parties.
 
These fresh modifications of the Brazilian civil procedure rules, brought by the new code, are very welcome. Most of the renovations were much longed-for by scholars and practitioners alike and they are indeed opportune. We shall see over the next few years how the courts and attorneys will put the rules into practice in order to experience the expected enhancements in national judicial litigation, with particularly good results in the IP field.
 
Rafael Lacaz Amaral is an attorney at law and partner at Kasznar Leonardos Intellectual Property. His practice includes litigating IP matters before the courts, consulting on licensing agreements, patents, trademarks, copyright and unfair competition, trademark prosecution and arbitration and mediation. He can be contacted at: 
rafael.lacaz@kasznarleonardos.com 
 
Rafael Salomão Romano Aguillar is an associate attorney in Kasznar Leonardos Intellectual Property’s litigation team, where he works in several intellectual property areas before the Brazilian courts. Aguillar holds a law degree from the Pontifical Catholic University of Rio de Janeiro and a postgraduate degree in IP law from the same university. He can be contacted at: rafael.aguillar@kasznarleonardos.com
 
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