The ruling is the result of a local company, Gradiente Eletronica, registering the name in 2000, six years before the US firm.
Apple can continue to sell iPhone-branded handsets in Brazil. But the decision means that Gradiente has an option of suing for exclusivity in South America's biggest market.
The Institute of Industrial Property (INPI) said that its decision only applied to handsets, and that the California-based company continued to have exclusive rights to use the iPhone name elsewhere including on clothing, in software and across publications.
Apple had argued that it should have been given full rights since Gradiente had not released a product using the iPhone name until December 2012. Apple is asking the INPI to cancel Gradiente's registration through expiration - it is arguing that the Brazilian firm did not use the name within a five year limit.
Source: BBC
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