Apple had applied for exclusive rights to the iPhone name in Brazil in 2007 when it launched the wildly popular smartphone in the huge Latin American market.
But Brazilian manufacturer Gradiente SA had applied to register the brand "Gradiente iphone" in 2000, and was granted rights to it in 2008.
Apple can still sell its smartphones in Brazil with the iPhone name, but Gradiente has the option of suing for exclusivity, the institute said.
Apple petitioned the institute to cancel Gradiente's trademark, arguing that it had expired because the company had not used it in five years, the institute said.
But Gradiente surprised the market by launching a "Gradiente iphone" at the end of the year, bringing the dispute to a head.
At the end of 2012, a Mexican court ruled in favor of the Mexican telecommunications firm Ifone in a similar trademark dispute with Apple.