ECUADOR: An Introduction to Intellectual Property
Current Economic Conditions in Ecuador
Despite the deep recession caused by the COVID-19 pandemic the previous year, the Ecuadorian economy recovered enough to register the kind of steady growth in 2021 that enables us to foresee a promising future in 2023.
Ecuador’s economy is diversified, although it is still characterised by being a supplier of raw materials and an importer of manufactured goods and services. In the primary sector, Ecuador is one of the world’s ten largest producers of bananas, cocoa, and palm oil. It is also among the top 50 manufacturers of vehicles, and among the top 25 countries that export oil. In order to develop its economy, Ecuador has signed several trade agreements (including one with the United Kingdom and the EU). However, its main trading partner is the USA, to which it exports around 23% of its products.
Despite the -7.8% economic contraction in 2020, the Ecuadorian economy grew by 4.2% in 2021 and by 2.7% in 2022, according to the Central Bank of Ecuador. In turn, the International Monetary Fund estimates that the Ecuadorian economy will grow by 3% during 2023, thus recovering from its recession in 2020. The estimated growth of the Ecuadorian economy is double the economic growth projection for Latin America, according to the Economic Commission for Latin America (ECLAC).
In 2022, private sector sales finally surpassed pre-2020 levels, with a surprising increase of 37% from the previous year. As such, the harmful economic effects of the pandemic finally seem to have been overcome, and a good economic performance is predicted for 2023.
Among the most relevant factors that could contribute to the growth of the Ecuadorian economy are the potential increase in the price of oil and Ecuador’s low inflation compared with the rest of the region.
In terms of inflation alone, Ecuador is among the three Latin American countries with the lowest inflation. In 2022, it suffered an inflation of 4%. This is significantly lower than the country with the fourth-lowest inflation, Brazil (with 6.5%), or its neighbour, Colombia (with 12.2%). Thus, from December 2022 to the present, Ecuadorian inflation has been a mere 0.12%.
Despite these positive economic results, employment figures have not yet fully reacted to the economic reactivation – mainly owing to the rigid characteristics of the labour legislation that the Legislative Assembly is slowly but surely modifying.
In any case, the future looks promising for Ecuador and, consequently, for those who wish to invest in the country.
New IP Legislation in Ecuador
Ecuador’s IP legislation is mainly supranational. As part of the Andean Community of Nations (CAN), it shares its regulation with Colombia, Peru and Bolivia. CAN has adopted European IP legislation to a large extent, so there are no foreign rules at the international level. It is also a signatory to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which guarantees a standard of IP protection. The trade agreement recently signed with the EU has ratified the protection of IP rights derived from certain elements, including test data of medicines and agrochemicals.
At a national level, legislation is almost identical to the supranational, and the Legislative Assembly has developed several norms to adapt local legislation to international standards. Proof of this is the law’s relatively recent introduction of the protection of test data, along with various specific rules for the filing of preventive injunctions and claims for damages for infringement of IP rights. Their subsequent application has caused confusion among judges; however, this has been clarified over time.
Overcoming Potential Difficulties Faced by Clients in Ecuador
During the past decade, positions in Ecuador have been polarised on the subject of defending IP rights, owing to reluctance of past administrations to recognise them. However, recently this polarisation has become less marked. This is reflected in current decisions made by the national competent authority on IP, the National Service of Intellectual Rights (SENADI), who rejected a request for a compulsory licence of a patent because it did not fulfil the requirements established by law. SENADI stated that the applicant must extensively justify the reasons of public interest, emergency, or national security alleged – as well as the need to adopt said measure – with supporting evidence.
The IP Office will have to analyse the particularities of each case, accrediting all the circumstances involved by national and supranational law. SENADI’s decision has changed the previous reasoning that was used for granting compulsory licences.
Among the main difficulties faced by clients is the lack of speed in substantiating administrative processes for the registration of IP rights and the delay in processing lawsuits filed to protect such rights. Since last year, however, judges have finally condemned SENADI for the unjustified delay in substantiating the administrative procedures – in particular, those related to patent registration litigation – and have recognised the IP rights claimed by clients in court, which is a milestone in Ecuador.
Likewise, the recently reformed General Organic Code of Proceedings has introduced new rules for summoning defendants more quickly, which has historically been a hindrance to resolving judicial proceedings swiftly. The use of the new General Organic Code of Proceedings has halved the time taken to solve lawsuits on the matter.
When it comes to the infringement of IP rights, Ecuador suffers from a deep-rooted illicit trade and a culture of tolerance of copyright infringement. Added to this is a lack of clarity about the powers of the Administrative Authorities to prevent IP infringement and the usual reluctance to exercise their control activities. However, SENADI has successfully implemented measures by which copyright owners can prevent infringements from continuing and obtain fair compensation for the damages caused. An agreement has even been drafted between the Telecommunications Control Authority and SENADI to block web pages through which copyrights are infringed, which is a novelty at the national level.
As regards illicit trade during the past year, co-ordinated measures have finally been implemented between the Administrative Authorities in order to prevent its occurrence and continuation. Currently, the National Customs Service of Ecuador (SENAE) – upon request – reports on allegedly illegal imports of products that infringe IP rights and prevent the nationalisation of these products. In turn, the National Agency for Regulation, Control, and Health Surveillance (ARCSA) uses its administrative powers to prevent the marketing of infringing and counterfeit pharmaceutical products, while the National Phytosanitary Authority does the same concerning agrochemicals. SENADI also has the power to issue preventive measures in order to avoid infringements of IP rights. The co-ordinated action of these institutions has taken shape since 2022 and we are confident that it will increase during 2023.
Finally, it should be noted that the protection of test data for medicines and agrochemicals has finally been recognised in Ecuador and the first proceedings for infringement of the rights derived from them have been initiated. Although there is still confusion as to who should protect them, the General State Attorney’s Office has stated that the rights derived from test data are ipso iure and that the competent national authority to protect them is SENADI.