IP & Antitrust: Brazil

1. Does competition law apply to the obtainment, grant, acquisition, exercise and transfer of intellectual property rights?

Brazil

In Brazil, the intellectual property legal microsystem is essentially governed by the Industrial Property Law (Law No. 9,279/96, LPI) and has the National Institute of Industrial Property (INPI) as the organisation responsible for the supervision of rights and obligations established by the LPI. This legislation grants exclusivity to a holder of IPR (namely (i) patents, (ii) industrial design registrations and (iii) trademark registrations – article 5, item XXIX, of the Federal Constitution) for the exploitation of such rights.

The INPI is exclusively responsible for scrutinising the compliance with legal requirements for obtainment and granting of said IPR. On the other hand, competition law may intervene to prevent the abusive exercise of such rights. Thus, in terms of repressive function, the Administrative Council for Economic Defence (CADE) may intervene in the exercise of IPR, analysing, to that end, to what extent the obtainment of the rights was conducted in good faith and the exercise of such rights is not abusive or lacks lawful competitive purpose, under the terms of the Brazilian Competition Law (article 36, Law No. 12,529/11).

At this point, it should be noted that CADE is not the sole authority in analysing abusive conditions in exercising an intellectual property right. In fact, the LPI provides for other legal institutes, such as termination of registration, nullity and compulsory licensing processes, in addition to the repression of false geographical indication and unfair competition. CADE’s analysis, however, will be guided by the effects (or potential effects) of a certain conduct on the economic order. Despite this, due to the expertise of the subject and the complementarity of the actions, CADE and INPI have established constant dialogues, to provide the authorities with better input for their analysis. The cooperation between the agencies was embodied in the Technical Cooperation Agreement No. 13/18.

Finally, CADE, within its merger review powers, may recommend the compulsory licensing of IPR (whose enforcement would depend on the INPI) or any other necessary measures as a remedy for the elimination of harmful effects to the economic order resulting from the merger.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

2. Which authorities are responsible for the application of competition law to intellectual property rights? What enforcement powers do they have? Are there any special procedures for conduct that concerns intellectual property rights?

Brazil

CADE is the sole administrative authority with jurisdiction over the application of Law No. 12,529/11. CADE has three primary functions: (i) the repression of anticompetitive conducts, (ii) the prevention of the creation of anticompetitive structures (merger control) and (iii) competition advocacy.

In terms of its repressive functions, there is no special procedure for conducts that concern IPR. CADE has broad enforcement powers to curb any actions conducted for the purpose of, or with the potential to produce the following effects: (i) limiting, falsifying or otherwise hindering free competition or free enterprise; (ii) dominating a relevant market for goods or services; (iii) arbitrarily increasing profits; or (iv) abusive exercise of a dominant position (article 36, introductory paragraph, I to IV, of Law No. 12.529/2011).

Within its enforcement powers CADE may impose several penalties that are listed in articles 37 and 38 of the Brazilian Competition Law. Article 37 regulates rates and calculation basis for imposing fines, which, in the case of firms, corresponds to 0.1 per cent to 20 per cent of the gross revenue or total volume of business of the company, group or conglomerate, obtained in the last year prior to the opening of the administrative proceeding in the business sector where the offence took place. In turn, article 38 disciplines other sanctions that can be imposed in an isolated or cumulative manner, such as: prohibitions to contract with official financial institutions and the public administration for at least five years, and sale of assets, in addition to any other acts or measures necessary to eliminate the harmful effects of the conduct. Law No. 12,529/11 also granted CADE the possibility of imposing interim measures (articles 11, IV and 13, XI) to re-establish the market conditions in certain situations.

In terms of merger control, CADE may impose remedies that it deems appropriate to mitigate competitive problems, such as the compulsory licensing of IPR, in addition to other possibilities provided by article 61, paragraph 2 of Law No. 12,529/11.

In both cases, the parties and CADE may engage in negotiated solutions (ie, Cease and Desist Agreements or Merger Control Agreements). The Cease and Desist Agreement is not only relevant to provide new evidence to investigations, but also gives the authority an alternative to negotiate appropriate solutions to mitigate anticompetitive effects (eg, withdrawal of lawsuits and sale of patents, see Cases No. 08012.005335/2002-67 – Ediouro and No. 08012.001594/2011-18 – IAbr).

As a general principle, CADE’s decisions may be reviewed by the Judiciary based on the principle of the non-obviation of judiciary jurisdiction. Still, administrative processes at CADE that involve the discussion of IPR constantly face with lawsuits that challenge patent misuse and unfair competition crimes (eg, Cases Nos. 08012.002673/2007-51 – ANFAPE, 08012.011508/2007-91 – Eli Lilly and 08012.004283/2000-40 – Shop Tour). These discussions are outside CADE's jurisdiction but may have competitive implications for the practice of sham litigation.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

3. How are markets involving intellectual property rights defined?

Brazil

In general, when analysing markets involving IPR or any other market, CADE is guided by standard market definition methodologies established in its Horizontal Mergers Guidelines (Guideline H), which involves the hypothetical monopolist test. Nonetheless, in some cases, CADE demonstrated a predilection for defining markets from the perspective of demand substitutability, examining, therefore, consumer behaviour (eg, Case No. 08012.005335/2002-67 – Ediouro).

This is the case, for instance, in the pharmaceuticals market. This market is constantly reviewed by CADE based on therapeutic classifications or medical indication. This is especially relevant because this market allows for coexistence between different types of patent (eg, product patent or active substance, pharmaceutical formulation, process, intermediate and second indication) and business models (reference drugs, generics or similar). Despite this, CADE has concluded that there is substitutability in the market (eg, Cases No. 08012.011615/2008-08 – AbbVie-Abbott and No. 08700.008687/2014-50 – Novartis/GlaxoSmithKline).

Nevertheless, CADE stressed the need to look at the existence of patents in the market, as a way of analysing the extent to which their presence restricts the possibility or increases the costs of offering certain goods in the market, looking at supply substitutability (eg, Cases No. 08012.007189/2008-08 – DyStar and No. 08700.006159/2016-28 – Pfizer/AstraZeneca). In Dow/DuPont (Case No. 08700.005937/2016-61), CADE reinforced that, in different markets such as the pesticides market, it is necessary to analyse substitutability through different aspects, one of which being the existence of patents.

In these two markets (ie, pharma drugs and agricultural markets), CADE constantly adopted additional segmentations, investigating the effects of mergers in (i) products already commercialised, (ii) pipeline products, in addition to the coexistence between (iii) commercialised and pipeline products (eg, Cases Nos. 08700.004187/2019-53 – AbbVie/Allergan, 08700.001892/2019-07 – Bristol-Myers Squibb-Celgene, 08700.005937/2016-61 – Dow/DuPont and 08700.006235/2019-48 – AstraZeneca/DaiichiSankyo). As a result, this empowered CADE with greater possibility of analysing the effects that a merger would have on R&D and the likely results on potential competition in these markets (see question 10).

In addition, in some sham litigation cases, CADE discussed whether market definition was necessary, since one probable result of sham litigation would be the artificial increase of market power (eg, Case No. 08012.011508/2007-91 – Eli Lilly). Nonetheless, in other cases, defining the relevant market was essential to attest the causal link between certain actions and the potential effects on the reported markets (eg, Case No. 08012.005009/2010-60 – PST).

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

4. Does competition law apply to the obtainment or grant and transfer or assignment of intellectual property rights?

Brazil

The INPI is the only administrative body responsible for analysing and granting IPR requests. On several occasions, CADE has stated that the examination of the validity of the registration of IPR made by INPI is beyond its jurisdiction, and it is not responsible for analysing the merits of the discussion about registrations’ technical adequacy (Case No. 08012.011615/2008-08 – AbbVie/Abbott). Thus, in CADE’s view, there is a presumption that registrations granted by INPI are valid (Administrative Process No. 08012.002673/2007-51 – Case ANFAPE).

However, CADE has also stated that “a patent grant does not rule out the possibility of sham litigation, an examination that will involve the circumstances in which the patent registration was obtained” (Case No. 08012.011508/2007-91 – Eli Lilly). Thus, with regard to the obtainment of IPR, CADE can analyse issues such as (i) whether INPI was misled (in the event of alleged fraud or bad faith), (ii) whether the information provided in the registration process was intentionally insufficient and (iii) if the patent was subsequently declared null or void, for the purposes of setting up a case of sham litigation (Cases No. 08012.011508/2007-91 – Eli Lilly and No. 08012.011615/2008-08 – AbbVie/Abbott).

The transfer of IPR may be subject to CADE’s approval as per item II of article 90 of Law No. 12,529/11 as it may refer to an acquisition of intangible assets (see item 9). The Brazilian Competition Law prohibits transactions that eliminate a substantial part of competition in the relevant market, which may lead to or strengthen a dominant position, except when the transaction is strictly necessary to achieve an increase in productivity or competitiveness; an improvement of the quality of goods or services or to encourage efficiency and technological or economic development; provided that a relevant part of the resulting benefits are transferred to consumers.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

5. How does competition law apply to technology transfer and licensing agreements?

Brazil

CADE may analyse licensing contracts both in terms of repressing anticompetitive conducts or through its merger control review, should the parties meet the turnover thresholds and if the transaction qualifies as one of the hypotheses for mandatory notification under article 90 of Law No. 12,529/11.

In the context of anticompetitive conducts, CADE already expressed competition concerns involving (i) joint-pricing strategies by collective copyright management associations and the Central Collection and Distribution Office (ECAD) and (ii) clauses in licensing agreements that supposedly would prevent interoperability and cross-portability between platforms.

In ABTA/ECAD (Case No. 08012.003745/2010-83), CADE framed as a cartel the joint price fixing to be charged for the public performance of musical, literary-musical and phonogram works, based on agreements between associations of collective management of copyrights and ECAD. In this case, CADE pointed out that Law No. 9,610/98 guarantees ECAD monopoly power over the collection and distribution of amounts owed by users to the owners due to the public execution of their works, but at no time this statute stated that ECAD had the possibility of setting the amounts to be charged for the copyrights. On the contrary, such amounts must be proposed by the associations themselves, independently.

In Microsoft/Google (Case No. 08700.005694/2013-19), CADE analysed the extent to which clauses in the AdWords API Terms and Conditions could prevent interoperability and cross-portability among platforms. Even though the case was dismissed owing to the absence of anticompetitive conduct, CADE highlighted a mitigation of the possibility of multi-homing as a potential concern in markets with intense network effects, as it could affect rivalry among the economic agents and entry.

In turn, in terms of merger control, CADE reinforced existing concerns on licensing agreements that created an external control from the licensee firm in addition to the products subject to the licence. According to the Authority, such contracts were able to raise barriers to entry without economic justification, at the cost of consumer welfare (see Cases No. 08012.002870/2012-38 – Monsanto/Syngenta, 08012.006706/2012-08 – Monsanto/Nidera, 08012.003898/2012-34 – Monsanto/CCPA, 08012.003937/2012-01 – Monsanto/DonMario and 08700.004957/2013-72 – Bayer/Monsanto).

Specifically in Bayer/Monsanto, CADE deemed the royalty billing mechanism established in the licensing agreement to be anticompetitive, since (i) it could give the licensee access to competitively sensitive information and (ii) the use of licensee's portfolio mix as a basis for calculating remuneration went beyond the scope of the contract and would have the effect of unduly raising barriers to entry. Thus, in spite of not properly specifying royalty rates, CADE indicated what could not serve as basis (ie, products that go beyond the object of the contract) and determined that the method of calculation and compliance enforcement should not encourage a flow of sensitive information, constituting a third party to receive the information.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

6. In what circumstances is the possession of intellectual property rights deemed to confer substantial market power on the holder such that the rules on unilateral conduct will apply?

Brazil

Law No. 12,529/11 states that “a dominant position occurs when a company or a group of companies controls a substantial share of a relevant market as a supplier, intermediary, buyer or financer of a product, service or technology related to it so that the company or the group of companies is capable of changing the market conditions on a deliberate and unilateral manner” (see CADE’s FAQ: General Questions on Competition Defence).

Dominant position is presumed by the law when a firm or a group of companies control at least 20 per cent of the relevant market under discussion. However, according to article 36, paragraph 2 of Law No. 12,529/11, depending on the case, such percentage rate can be altered for specific economic sectors.

On several occasions, CADE stressed that the presence of IPR influences conditions of rivalry and market entry. As for the conditions of rivalry, CADE has already stated that “companies with older and well-established brands in the market have competitive advantages over entrants and smaller companies, whose brand have less market penetration”, concluding that brands are relevant to the competitive dynamics and ownership of relevant brands would increase the market power of agents (Case Dow/DuPont).

As for entry conditions, CADE reinforced that the strength of the brand can also be read as a barrier to entry in addition to the requirement for high investments in R&D as it is the case in the pesticides market and the pharma drugs market, where there is a need of obtaining several registrations with the designed regulatory bodies, such as the Brazilian Health Regulatory Agency (Anvisa) (Case Dow/DuPont). Equally, the conditions of entry through technology and genetics licensing agreements in the agriculture sector is considered unlikely, reason why access to technologies was identified as a barrier to entry (Case Dow/DuPont).

Finally, since the most recurrent conduct analysed by CADE involving IPR was sham litigation, one should bear in mind that in this type of conduct, market power was read as irrelevant to the harmful potential of the conduct investigated. Especially when its use is associated with intellectual property issues, such behaviours can guarantee an artificial monopoly for the exclusivity of commercialisation, feeding back the firm's market power (Case Ediouro).

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

7. In what circumstances may unilateral conduct involving the exercise of intellectual property rights be deemed to be anticompetitive (monopolisation, abuse of dominance, etc)?

Brazil

When analysing unilateral conduct cases, CADE has the burden of demonstrating that the net effects of the conduct are negative, based on a rule of reason approach. Thus, the Authority must indicate the extent to which the conduct contributes to the alleged anticompetitive effects and counterbalance with any efficiencies that may arise from it.

CADE stated that “the use of intellectual property for anticompetitive purposes constitutes an abuse of the right, which can occur both by obtaining a marketing monopoly (fraud) and by the form of its exercise (inadequate exploitation and even non-exploitation)” (Case Ediouro).

Furthermore, CADE’s precedents list, in a non-exhaustive way, situations in which an abuse could exist, namely:

• excessive price increases;
• deliberate product shortages;
• non-availability of goods or services essential to the development of an activity in a derivative market;
• refusal capable of excluding any effective competition in the derivative market;
• evergreening practice;
• sale of a patented product with another unprotected product; and
• sham litigation.

In addition, CADE has already had the opportunity to analyse the existence of anticompetitive practices in patent trolls, patent clusters, forum shopping and product switching (see Cases Ediouro, Eli Lilly, ANFAPE, PST, IABr, 08012.007147/2009-40 - Genzyme and AbbVie/Abbott; among others).

Finally, CADE has already argued that, despite the fact that article 38 of Law No. 12,529/11 does not limit the means by which it could seek compliance with competition laws, it would not have the ability to impose compulsory licensing, since the article itself states only the possibility of CADE recommending such measure to the competent bodies (Case ANFAPE). In turn, under article 68 of Law No. 9,279/96, the competent body for this purpose is the INPI. The conditions under which the compulsory licence will be granted are governed by article 68 and article 70, and the INPI is responsible for the arbitration of the remuneration to be paid to the patent holder.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

8. In what circumstances may patent settlements be deemed to infringe competition law?

Brazil

The Brazilian Competition Act does not specifically address patent settlements. In this sense, patent settlements may breach the competition law if they violate any of the practices that would consist of violations to the economic order if they have as their object, or may lead to, the following effects: (i) limit, restrain or in any way harm free competition or free enterprise; (ii) dominate a relevant market of goods or services; (iii) increase profits arbitrarily; or (iv) exercise dominant position abusively.

In addition, patent settlements may also breach competition rules if they fall within the scope of the following samples provided for in article 36, paragraph 3 of the Brazilian Competition Act, for example:

• prevent the access of competitors to sources of input, raw material, equipment or technology, and distribution channels;
• regulate markets of goods or services by establishing agreements to limit or control the research and technological development, the production of goods or services, or to impair investments for the production of goods or services or their distribution;
• hoard or prevent the exploitation of industrial or intellectual property rights or technology; and/or
• misuse or exploit industrial, intellectual property, technology or trademark rights.

With regard to CADE’s case law on patent settlements, CADE’s General Superintendency (SG) has already issued non-binding opinions on the matter. These include:

• Nova Atenas/Ponto da Arte/Ediouro (Administrative Proceeding No. 08012.005335/2002-67): both publishing companies Nova Atenas and Ponto da Arte filed complaints before CADE arguing, in summary, that Ediouro would have been practicing sham litigation, entering into non-competition agreements in courts and abusing its dominant position with regard to IPR. CADE’s SG recommend the condemnation of Ediouro, but the case was not reviewed by CADE’s Tribunal yet. According to the SG, among others, Ediouro entered into two non-competition agreements (the first with publishing companies Escala and Heavy Metal; and the second with SR3) to exclude competitors in the market for hobby magazines underpayment of monetary amounts. In the first case, Ediouro argued that, even though its patent rights expired, they should remain as a corporate secret and could not be used by third parties. The SG stated that this was not in compliance with the Intellectual Property Act, which provides that patents are temporary, and mentioned two similar cases in the US: Federal Trade Commission v Actavis, Inc and In The Matter of Bristol-Myers Squibb Company, Docket No. C-4076. With regard to the second case, SR3 filed a complaint arguing that Ediouro included a patent certificate in its magazines, even though the patent rights had expired. CADE’s SG then identified that Ediouro owned 73.7–100 per cent of the relevant market at the time of the alleged practice, which would also indicate barriers to entry in the market.
• Cristália/Abbvie/Abbott (Administrative Inquiry No. 08012.011615/2008-08): in summary, Cristália filed a complaint against Abbvie and Abbott arguing sham litigation and abuse of IPR, among others. CADE’s SG recommended the shelving of the case in 2019, but made some mentions to patent settlements in the pharmaceutical market. According to CADE’s SG, the European Commission conducted a detailed analysis of the pharmaceutical sector in Europe (Pharmaceutical Sector Inquiry (EC 2009)) highlighting practices that are not anticompetitive per se, but that may lead to competition restrictions, including patent settlements. CADE’s SG also mentioned three cases in which pay-for-delay agreements, for example, were convicted by the European Commission (i) Lundbeck; (ii) Johnson&Johnson and Novartis and (iii) Servier. In addition, the Opinion issued by the SG mentions the recommendation from the OECD, in the 121st meeting of the Competition Committee Held on 18–19 June 2014, to balance the potential anticompetitive effects of practices involving patents in the pharmaceutical sector with the promotion of innovation.
• CADE’s SG also made the same mentions to patent settlements from the Cristália/Abbvie/Abbott case in EMS/Germed v Genzyme (Administrative Proceeding No. 08012.007147/2009-40) with the recommendation to shelve the case in 2019.

When analysing pay-for-delay settlements, CADE highlighted that the exclusion of competitors through a judicial agreement may characterise an unlawful practice on its own, that is, regardless of whether it is associated with another anticompetitive conduct. In this sense, the illegality of this type of agreement will depend on the terms of the contract and the judicial context in which they were settled.

Thus, it is likely that agreements that suggest a strategy before the Judiciary to hinder the operation of rivals or prevent the access of new agents to the market may be rendered by the authority as anticompetitive agreements. That is, according to CADE, it is possible that such agreements are understood as a reverse payment, in which the alleged injured party pays the infringer under the condition that it never enters or delays its entry into the market (Case Ediouro). That said, it should be pointed out that there are no public records of CADE ruling specifically on pay-for-delay settlements in the pharma sector.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

9. In what circumstances will the transfer of intellectual property rights constitute a merger for the purposes of competition law?

Brazil

The transfer of IPR shall be subject to mandatory merger control by CADE if it meets the notification criteria present in Law No. 12,529/11, namely, when (i) at least two of the parties involved in the transaction, or their economic groups, fulfil the legal turnover thresholds and (ii) the transaction qualifies as a concentration act subject to CADE’s review.

Regarding the turnover threshold, it is required that at least one economic group involved in the transaction has reached at least 750 million reais  and at least another economic group has reached 75 million reais in annual gross sales or total volume of business in Brazil in the year prior to the transaction.

In addition, article 90 of Law No. 12,529/11 indicates that, assuming the turnover criteria are met, a merger filing is required whenever:

I - two or more previously independent companies merge;

II - one or more companies acquire, directly or indirectly, through the purchase or exchange of shares, quotas, bonds or securities convertible into shares, or assets, tangible or intangible, by contract or by any other means or form, the control or parts of one or other companies;

III - one or more companies incorporate another or other companies; or

IV- two or more companies enter into an associative contract, consortium or joint venture.

The concept of associative contracts is regulated by CADE Resolution No. 17/2016, which determines that associative contracts are contracts with a duration of at least two years that establish the joint exploitation of economic activities provided that, cumulatively:

I - the contract establishes the sharing of the risks and results of the economic activity that constitutes its object; and

II - the contracting parties are competitors in the relevant market object of the contract.

Such concept is especially relevant for mergers involving IPR. This is because, on different occasions, CADE signalled special conditions for notification of such transactions in its precedents.

Prior to CADE Resolution No.17/2016, there was a fair amount of cases arguing that non-exclusive licensing of IPR were not subject to merger review by CADE based on the argument that non-exclusive licensing would have the effect of deconcentrating the market. However, as CADE noted, some contracts could provide for non-corporate control mechanisms, which could restrict the competitive performance independent of the licensees and should, therefore, be previously notified to the authority as a kind of associative agreement. Otherwise, in the absence of a royalty, productivity or other limiting clause, it would be unlikely that the transaction would meet the criteria laid down in CADE Resolution No. 17/2016 and therefore should not be filed prior to its consummation (eg, Cases Nos. 08700.011952/2015-68 – ABB/Siemens, Monsanto/Syngenta, Monsanto/Nidera, Monsanto/CCPA, Monsanto/DonMario, 08700.004963/2016-72 – Monsanto/DuPont and Monsanto/Bayer).

CADE considered that the same rationale applies to non-claiming IPR agreements, as they have the same practical effect of non-exclusive licensing (Case ABB/Siemens). Despite the fact that such cases are prior to the enactment of Resolution No. 17/2016, the application of the criteria established in it would probably have the same effect.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

10. In what circumstances will a merger involving intellectual property rights be deemed anticompetitive? Are there any special considerations for mergers involving intellectual property rights or innovation markets?

Brazil

According to Law No. 12,529/11 and Guideline H, anticompetitive mergers are “mergers that entail the elimination of competition in a substantial part of the relevant market, which may create or reinforce a dominant position or may result in the domination of the relevant market for goods or services” (article 88, paragraph 5 of Law No. 12,529/11). In its analysis CADE will look at the extent to which the exercise of market power is likely and if so, the authority will analyse to what extent possible efficiencies arising from the transaction are passed on to consumers to counterbalance potential anticompetitive effects. If the net result of this assessment is negative, the merger may be considered anticompetitive.

When it comes to technology markets, CADE has frequently highlighted a concern with notions of potential competition. In Guideline H, it was stated that “concentration between ‘research centres’ [ie, technology companies] in a given sector can be problematic, even if such concern is due to future and potential rivalry in the technology market”. In a different context, CADE analysed several transactions involving pipeline products in the pharmaceutical and agricultural sectors, to ascertain the likelihood of the merger eliminating potential and future competition. In this analysis, the stage of product study and the timeliness of entry were the points considered to attest the probability of a product being considered as a competitor (Case Novartis/GlaxoSmithKline).

In addition, CADE may impose or negotiate remedies to mitigate anticompetitive concerns arising from transactions. Some remedies already applied by CADE in relation to IPR were (i) the divestment of intangible assets, including IPR; (ii) changes in contractual clauses in the parties' IP agreements; and (iii) imposition of hiring a neutral third party to receive sensitive information from competitors (see Cases Dow/DuPont, Bayer/Monsanto, Monsanto/Syngenta, Monsanto/Nidera, Monsanto/CCPA and Monsanto/DonMario).

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

11. How, in general, does competition law treat the development of standards in standard-development organisations (SDOs), and the exercise of intellectual property rights for technology that may be essential to a standard?

Brazil

CADE did not directly analyse the development of standards in markets involving IPR. Despite this, on some occasions, CADE made some considerations about the effects of creating standards for industries.

In analysing a case in the electronic payments market, involving PinPads (terminals for the use of credit cards), CADE considered beneficial the initiative made by the market’s self-regulation association to create a single map of cryptographic keys to be inserted in these terminals. The creation of a standard in this industry could facilitate access to new acquirers entering the market, if the inclusion of new competitors was made in a timely and non-discriminatory way (Case No. 08700.000018/2015-11- Payments).

On the other hand, in the cement cartel case, CADE considered that changes to the sector's rules through the Brazilian Association of Technical Standards (ABNT) were anticompetitive. With the capture of ABNT standards, cartelists raised the cost of requirements, stipulating minimum volumes and specific characteristics of cement, in addition to prohibiting additions in its preparation. In CADE’s view, the change in standards had the object and effect of excluding competitors from the market, by favouring cement companies integrated with concrete companies, to the detriment of independent companies (Case No. 08012.011142/2006-79 – Cement).

Therefore, by analysing CADE’s precedents in other sectors, standardisation may be pro-competitive, as it facilitates the access of new competitors to the market, but it may also have anticompetitive uses, which shall be determined under a rule of reason approach.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

12. How do competition law rules on agreements, concerted practices, etc, apply to the standardisation process?

Brazil

Law No. 12,529/11 has addressed explicitly concerted practices as a possible antitrust violation, although it does not provide specifically for violations of IPR or to the standardisation process. However, standardisation may fall under a violation of Law No. 12,529/11 if it has an objective or may have the following effects: (i) to limit, restrain or in any way injure free competition or free initiative; (ii) to control the relevant market of goods or services; (iii) to arbitrarily increase profits; or (iv) to exercise a dominant position abusively.

Article 36, paragraph 3, of Law No. 12,529/11 also exemplifies some acts that may be achieved through a standardisation process that may amount to an antitrust violation:

• limit or prevent the access of new companies to the market;
• to create difficulties for the establishment, operation or development of competitors;
• to prevent the access of competitors to sources of input, raw material, equipment or technology, and distribution channels;
• to monopolise or prevent the exploitation of IPR or technology; or
• to abusively exercise or exploit IPR, technology or trademark.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

13. How do competition rules on unilateral conduct apply to the exercise of intellectual property rights for technology that may be essential to a standard?

Brazil

There is no specific provision or guidelines that deal with the exercise of IPR for technology that may be essential to a standard, so it is expected that general competition rules would apply. In 2015, CADE ruled its first case involving claims of abusive unilateral exercise of a standard-essential patent, however CADE refrained from entering deeply into the discussion of an alleged conflict between IPR in essential patents and competition law (eg, Case No. 08700.008409/2014-00 – TCT/Ericsson). TCT, part of the Chinese group TCL, brought a complaint before CADE alleging that Ericsson was abusing its IPR by bringing a lawsuit against TCT to coerce it to license Ericsson’s technology for a discriminatory price. It was claimed that, by joining the European Telecommunications Standards Institute (ETSI), Ericsson would have committed itself to making free access to patented technology feasible and not impeding its access by competitors, while it would be remunerated by reasonable royalties and was not discriminatory in FRAND terms.

On that occasion, CADE found that the fact that Ericsson does not compete with TCT in the mobile phone market would make the alleged exclusionary conduct irrational, as, in principle, the refusal to license would not benefit Ericsson. CADE dismissed the complaint based on the perception that the controversy in determining the amount paid for licensing or the obstacle to the use of patents would constitute a commercial issue and, thus, would be of a private nature, without competitive implications, and should be discussed in the judicial sphere. Therefore, it is extracted that, to trigger competition law provisions, one must prove the existence of exclusionary incentives. This is the only publicly known example of CADE entering into this type of discussion in an investigation.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão

14. Provide details of recent noteworthy cases and other developments.

Brazil

CADE has no specific guidelines concerning the application of competition law to IPR. Among others, CADE recently reviewed the following relevant cases concerning the interface between IPR and competition law:

• Case No. 08012.005009/2010-60 (H-Buster v PST): This case was brought before CADE by H-Buster on the evidence of anticompetitive conduct by PST in the automotive alarms market. According to H-Buster, such conduct was materialised by the practice of sham litigation and market foreclosure due to exclusivity provisions in distribution contracts. PST was fined by CADE, on 12 August 2020 owing to the anticompetitive nature of its exclusivity arrangements but the sham litigation claim was dismissed as CADE understood that the lawsuits brought by PST were lawful means of protecting its IPR, and that to prove the existence of sham litigation one shall prove that the firm employed a consistent strategy, rather than a few undue lawsuits.
• Case No. 08012.007147/2009-40 (EMS and Germed v Genzyme do Brasil and Genzyme Corporation): This case was brought before CADE by EMS and Germed due to evidence of anticompetitive conduct by Genzyme do Brasil and Genzyme Corporation in the pharmaceutical market. According to the complaint, such conduct was materialised by the practice of sham litigation and product switching. The case was ultimately dismissed by CADE on 17 June 2020, stating that there was not sufficient evidence of anticompetitive conduct in Brazil, and sanctioning the defendants would mean punishing the search for technological innovation, discouraging investments in R&D.
• Case No. 08012.011615/2008-08 (Cristália v AbbVie and Abbott): This case was brought before CADE by Cristália due to evidence of anticompetitive conducts by AbbVie and Abbott in the pharmaceutical market. According to the complaint, such conduct was materialised by the practice of sham litigation, abuse of patent rights and anticompetitive strategies for patenting, among others. Regarding the anticompetitive strategies for patenting, Cristália argued that the defendants were aiming to artificially extend their patent rights through a patent cluster without any effective innovation. The case was ultimately dismissed by CADE on 14 January 2019, which understood that the discussion of the merits of the process that granted the patents to the defendants was beyond its jurisdiction. Additionally, CADE reputed as lawful the actions taken by the defendants to safeguard their patent rights.
• Case No. 08700.000831/2019-14 (GlaxoSmithKline/Ares Trading): This transaction was brought before CADE by GlaxoSmithKline and Ares Trading. According to public information available at the case records, the parties entered into a collaboration agreement concerning a pipeline asset, the M7824. Since (i) the pipeline product object of the transaction was still in development and far from being commercialised, (ii) there was no certainty that it would be finalised or made available to the market and (iii) it was impossible to assert in which relevant market it would be inserted (there was no definition regarding the use of the drug), CADE dismissed the case on 8 March 2019, without analysing its merits, on the grounds that it was not of mandatory notification under the terms of CADE Resolution No. 17/2016.

Answer contributed by Ricardo Ferreira Pastore, Letícia Ladeira Monteiro de Barros and Raíssa Leite de Freitas Paixão