Midterm Exam

Mariano Pola Segovia

I have been asked to inform on a Chilean intellectual property case. The facts are the
following.
Microsoft is a multinational company devoted to software development. They have
created the word processing program known as Word. This product is sold in Chile for
100.000 Chilean pesos (CLP) in the format of a rectangular packaging whose cover
features four irregular quadrilateral areas demarcated by the two intersecting diagonal
lines. The bottom-left area is the largest and it is blue, and, on its interior, the name
Word appears in white letters. In Chile, Microsoft has registered the trademarks
“Microsoft”, “Microsoft Office”, “Microsoft Word”, as well as the label and logo of the firm
under class 9 of the Nice International Classification. On July 2018, Microsoft
broadcasted a TV commercial in which a famous Chilean astronaut was featured saying:
“Microsoft Word is the best computer program in the whole galaxy, even aliens use it in
their own computers. There is no program on Earth that can defeat Microsoft Word
superiority”.
Juan Pérez, a Chilean industrial designer and computer engineer, has developed a text
processor which he named Supertextos 3000. This program uses the same source code
as Microsoft Word. Pérez does not own a license from Microsoft allowing for the use of
the code. The software is commercialized in Chile by the way of a rectangular packaging
whose cover is divided into two sections: on the upper part, a blue concave polygon of
five sides, and on the lower part, occupying most of the space, a white convex polygon
filling the rest of the rectangle. In this lower part, the expressions “Micro Software” and
“Supertextos 3000” are featured, as well as an image of an opening window overlooking
into the sun setting on the sea. Recently, Juan Pérez launched a TV commercial in which
an old man appeared and said: “I don’t know if aliens exist, but I’m sure that Supertextos
3000 is a great program for people on earth and it’s certainly cheaper than Microsoft
Word”. During the time in which this commercial was broadcasted, the price of the
program was 20.000 CLP. The overall profit Pérez has made from commercializing
Supertextos 3000 has been that of 20.000.000 CLP.
The questions raised upon these facts are the following.
(1) What intangible assets does Microsoft hold?
(2) Do any of the behaviors described constitute intellectual property infringements?
(3) Are there any legal actions that Microsoft could attempt against Juan Pérez?
(4) What is the situation of the TV advertising campaigns launched by each company?
I shall refer to each one of these issues in order.
1. At the current moment, Microsoft holds the following intellectual property assets:
a. Copyright protecting the source code of Word. This is expressly stated in
article 3 number 16 of the Chilean Intellectual Property Act. This right
gives Microsoft both the moral rights to claim authorship and decide on
the integrity of the work, as well as economic rights to benefit from the
publication, reproduction, adaptation, etc. It has a duration of 70 years
counted from the first publication of the work.
b. Trademark rights protecting the names “Microsoft”, “Microsoft Office” and
“Microsoft Word”, as well as Microsoft’s label and logo, all derived from
the registration. These rights have a duration of 10 years, renewable.
According to article 19 bis letter D., the owner of the trademark holds the
exclusive right to use it and to prevent others from using it or other similar
trademarks in a way that shall lead costumers into confusion.
c. The trade dress, this is, the overall commercial image of the product
indicating its manufacturer and distinguishing it from those of others, does
not properly give birth in Chile to a specific intellectual property right. That
 being said, there is still protection for the distinguishable aspect of the
packaging of Microsoft’s Word established by article 4 letter a) of the
Unfair Competition Act.
2. Yes.
a. The act of using the exact code of Word without the authorization of
Microsoft constitutes an infringement. According to article 18 letter e) of
the Intellectual Property Act, only the owner of the right may distribute it
by selling it.
b. Also, the usage of identical or similar trademarks that is “likely to mislead
or create confusion”, according to article 19 bis letter D., is something
that requires the consent of the holder of the trademark. In this case, the
term “Micro software” is sufficiently similar to “Microsoft” as to cause
confusion. In fact, “Microsoft” stands for “micro-software”. As to the logos,
even though there are windows involved in both cases, the image featured
in the logo of Microsoft is so abstract, and the colors are so different, that
the risk of confusion is almost none.
c. Referring to the trade dress, in this case, to be an infringement, Juan
Pérez’ use of the similar colors and shapes in his packaging for
Supertextos 3000 must be proved to induce confusion in consumers. It is
difficult in this case to affirm and prove this. The mere colors and shapes
are not inherently distinctive, nor have they apparently acquired
secondary meaning in the market. Also, it seems to me that the packaging
of Supertextos is not similar enough as to induce confusion.
3. The remedies Microsoft holds to pursue the civil liability of Juan Pérez derived
from the infringements described above are the following:
a. The action contemplated in article 85 of the Chilean Intellectual Property
Act. This action allows the affected holder of a copyright to request a court
to prohibit the infringer to continue his behavior, to order him to
compensate the damage done and to order the publication of an abstract
of the judgement, at defendant’s expense, in a commercial newspaper of
the relevant Region. The reparation ordered by the court includes both
economic and moral aspects, and the calculation of the final sum takes
into account, among others, the price of sale of the relevant product
(100.000 CLP), the sums gained by the infringer (in this case 20.000.000
CLP), and the impairment produced to the reputation of the author.
b. The action of article 106 of the Chilean Industrial Property Act. Using this
action, the holder of a trademark whose rights have been affected, may
request a court to order the cessation of the infringing acts, the
compensation for damages, the adoption of measures destined to prevent
the continuation of the offense and the publication of the decision in terms
similar as those described for article 85 of the Chilean Intellectual Property
Act. The determination of the damages in this case is done, depending on
the choice of the plaintiff, according to the general rules of the Civil Code,
or by one of the three rules contained in article 108. The relevant items,
are, alternatively, the profits that the right holder ceased to earn; profits
that the infringer earned as a consequence of the infringement; the price
of an eventual license that the infringer would have had to pay the holder
for the use of the product. This action is brought before court using the
summary procedure, and the judge uses good judgement to evaluate the
evidence.
c. If Microsoft decides to follow the case in court pursuing the trade dress of
the packaging, they would have to invoke article 4 and 5 of the Unfair
Competition Act. According to the second article cited, the plaintiff may
 request the cessation of the infringing act, the declaration of the existence
of an unfair competition act, the removal of its effects and the
compensation for damages.
These actions can be exercised all at the same time provided that what is
requested does not coincide. Specially important is to say that damage repair
sums can only amount to the damage effectively caused and proved before
the court.
There are, as well, a number of criminal actions available, but they won’t be
discussed here because of their minor comparative advantage in regards to
the business purposes that Microsoft has.
4. Both commercials are cases of comparative advertising. To evaluate their legality,
one must look at article 4 letter e) of the Unfair Competition Act. This article
states that comparative advertising is allowed as long as the comparison is based
on truthful and demonstrable information and it does not infringe the Unfair
Competition Act in general. The claims of Juan Pérez in his commercial are true
and easily demonstrable. His software was in fact cheaper than Microsoft’s and
it’s qualities (the same as those of Word) made it a great software. On Microsoft’s
commercial two claims are expressed. The first is clearly an exaggeration and
there is no risk of illegal behavior: “even aliens use it”. The second not so clearly
an exaggeration and may be very hard to prove: “no program on Earth can defeat
Word’s superiority”. Most probably, after the lawsuit to Juan Pérez, he will no
longer be a competitor to sue for the commercial, but other firms might.