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Justice Punishes Pioneer of Brazilian Online Education With A R$ 110 Million Fine Without Any Expert Evidence

Gabriel Mario Rodrigues is Chairman of the Board of Directors of ABMES



by Gabriel Mario Rodrigues

“Mother country, my little patriot, Beautiful and sad Brazil. “(Toquinho)

At the very moment when the Brazilian Ministry of Education (MEC) facilitates the accreditation of online education so that all institutions can offer online programs, it is good to register the saga of the pioneer in online education: the Brazilian Network of Distance Education (Rbonline Education), and of its higher education institution, the Brazilian Virtual University (UVB).

This was a great initiative that did not work out, not because of the MEC or for lack of students, but because of arguments in the Brazilian courts, which, by completely wrong measures, penalized Rbonline Education for the amount of R$ 110 million for “improper” use of the educational software used by UVB.

The biggest nonsense is not the condemnation for a platform that is now used for free. The total absurdity is that the software was created by UVB itself. It was not possible to prove the truth of the facts because the courts never accepted the evidence or the specialized expertise offered by witnesses. It was all based on the “I guess metrics”.

The calculations were based on the arithmetic of a completely unprepared “accountant”, and not on the decision of the higher court, which ruled that arbitration should only penalize the institutions that used the software.

It is difficult to summarize in a few lines a process of about 4 thousand pages that has been in the courts for 14 years. It is a long story which began in 2000, when ten private educational enterprises (six universities and four university centers) from eight Brazilian states that had accredited on-campus courses had the idea of ​​joining up and create a completely independent entity: Rbonline Education. The objective was to offer online courses, which the then new educational legislation had established.

Economies of scale: Instead of each educational institution investing in infrastructure, technology and staff for a new experience, it was smarter to join forces and do it together in a single operation. And that was how, after a 30-month process, in 2003, Rbonline Education was accredited by the National Council on Education (CNE) – a Brazilian government agency that opines for MEC and which concluded, in its CNE Opinion 17/2003, that UVB should be authorized to open a branch in each state where the partner institutions were based.

It is logical that since its inception the UVB had been preparing, hiring directors, teachers and technical-pedagogical team to improve the software that was, at the time, being used by one of the partners for its extension programs. It was perfected and, in order to only make language adaptation, a small service provider was hired.

But the surprise came in February 2003, when Rbonline Education was sued by the provider of services for damages on the grounds that the software was not its own and that UVB could not apply it to its universities.

For its defense, Rbonline Education hired the most reputed expert in Copyright at the time, who clarified that the software was entirely produced by Rbonline Education and that the accuser was hired solely to change the program’s language.

The courts decided, both in the first and second instances of the São Paulo courts, without hearing any witnesses, that Rbonline Education had infringed the Copyright Law (Piracy) and that each partner should be fined 3,000 times multiplied by the value of the services which had been provided, which would add up today to more than 2 billion reais (around US$600k) !!!

Outraged, Rbonline Education appealed to the Superior Court of Justice (STJ) regarding the absurdity of the conviction and the latter, Salomon-like, modified the sentence, noting that the fine should be 10 times the value of services and only for the institution that had used the software and that, for the quantification of the value the parties should go into arbitration.

For Rbonline Education, the decision was alright because, even though it created the software, it was used only by UVB. To settle the sentence, the case was returned to the São Paulo Court and the judge appointed his expert (an “accountant and lawyer”), to analyze the possible uses. Being in arbitration, Rbonline Education was entitled to expert technical assistant to clarify technological and educational aspects. Unfortunately, that was not accepted.

The drama for UVB began when the deciding judge, based on the arithmetic maneuver of his “inventor expert”, fined Rbonline Education for 55 illicit uses derived from the following fictional calculation: ten partners plus 33 institutions from a hypothetical agreement with Argentine universities, plus 12 others listed by the service provider, amounting to around R$ 176 million in 2012.

UVB appealed the decision emphasizing that the use should be reassessed and thus the calculation was reduced to R $ 56 million, based still on the arithmetic of 110 uses not proven (10 times 10 of the members and 10 more fallen from the sky). And in the decision-making process, the judge of the São Paulo tribunal acknowledged that the accountant had no professional qualification, but had to follow the STJ’s instruction that only the documents in the file should be examined.

Rbonline Education resorted to the STJ again, noting that in the case the specialized expert in Computing, a doctor of the University of São Paulo, and another expert at the Brazilian Institute of Experts in Electronic Commerce and Telematics (IBP) testified that the documents showed the software’s use only in the branches of the UVB in the states of Minas Gerais, São Paulo and Santa Catarina. Even if the software had not been created by UVB and had been acquired, it has still been used only in those three branches.

The STJ noted that, despite acknowledging the accountant’s incompetence, there was documentation in the case-file showing that the software had been distributed to other Rbonline Education-affiliated colleges and universities, as evidenced by a UVB employee. That is, the software was actually installed in the UVB computers for use by the other branches. As the “accountant” did not know this important technical-educational aspect, he did not mention anything. And the judges, for the same reason, did not realize that, since they did not have accreditation for online education, the softwares were installed only in the branches of UVB and not in the colleges and universities that belonged to UVB’s partners.

Epilogue: So far Rbonline Education has been losing all court decisions, because, although the courts found that the expert has failed, they have not understood by the assessment of the technical experts that there is no evidence of wrongful use and that there has been confusion in the courts in not noticing that Rbonline Education is an independent enterprise, and that its UVB institution had nothing to do with the colleges and universities owned by partners, which were accredited only to offer on-campus programs in the presencial modality.

I reported the facts without using legal jargon, since I am not from the legal area, but I left out one very important information: I did not name the suing company because years ago it sold its rights to a specialized fund that finances major lawsuits. They hire large law firms and have great influence over the judicial system.

All this has cost, apart from these absurd R$ 110 million that the partners of Rbonline Education are at risk of having to pay, the physical and emotional wear of this author. It serves to demonstrate how much bureaucracy and legal wrong doing can often prevent good entrepreneurial initiatives.