IP & Antitrust 2016

Last verified on Tuesday 20th February 2018

Brazil

Ademir Antonio Pereira Júnior and Jose Del Chiaro Ferreira da Rosa
Advocacia José Del Chiaro
  1. 1.

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

  2. Intellectual property rights (IPRs) are not subject to any tailored exemption and the Brazilian Competition Law is applicable to business practices involving such rights (Law 12,529, enacted in 2011). Notably, several decisions issued by the Brazilian Competition Agency (CADE) reinforce the assumption that IPRs are not immune from Competition Law and emphasise that both bodies of law, although somewhat conflicting in certain instances, share the same basic goals of promoting innovation and consumer welfare.

    The Competition Law establishes a merger review regime and also behavioural control. Practices or transactions involving IPRs are subject to both types of control:

    • Merger review: established by articles 88–90, the merger control encompasses prior review (before consummation) of transactions that may lead to some degree of economic concentration, including mergers and acquisitions, acquisitions of tangible and intangible assets, joint ventures and associative agreements. Under this regime, transactions involving a group of companies with turnover in Brazil exceeding 750 million reais (approximately US$240 million) and another corporate group with turnover in Brazil exceeding 75 million reais (approximately US$25 million) have to be filed for review and cannot be consummated until clearance. While this type of control is reasonably equivalent to merger review regimes in other jurisdictions, the Brazilian regime also includies contracts that create some degree of cooperation between companies while preserving their independence in all other spheres (called "associative agreements").
    • Behavioural control: article 36 of Law 12,529 establishes that acts (including contracts or unilateral practices) that have the intent or potential to (i) limit or harm free competition; (ii) dominate a relevant market; (iii) arbitrarily increase profits; or (iv) abuse of a dominant position, might be deemed unlawful. This provision has been used to punish horizontal and vertical conducts that restrict competition. In particular, a few practices are listed as examples of acts that may lead to the anticompetitive effects described, including the abusive use or exploration of IPRs.

    It is important to note that Law 9,279, issued in 1996, disciplines the procurement and enforcement of patents, trademarks, industrial design rights (similar to design patents) and unfair competition practices. Copyrights (or author rights) are regulated by Law 9,610, issued in 1998.

  3. 2.

    Competent authorities
    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?

  4. The provisions of Law 12,529 may be enforced by CADE, the federal administrative agency in charge of enforcing such statute. The statute is also applicable in courts, where private plaintiffs or state and federal prosecutors can file claims based on the Competition Law provisions.

    CADE has two main divisions: the General Superintendency and the Administrative Tribunal.

    Under the merger review regime, the General Superintendency initiates and conducts the inquiry, assessing the relevant markets involved and the potential anticompetitive effects that may result from the transaction. The starting point for this assessment is the filing form that must be submitted by the applicants, which contains all relevant information about the merger, the companies and the affected markets. There are two versions of this form, one for regular merger review proceedings and another for fast-track review.

    The Superintendency may issue a final decision based solely on the information submitted by the parties or may conduct additional inquiries to collect more data issuing requests of information to customers and rivals. If the Superintendency clears the merger, the decision is final unless a third-party appeals to the Tribunal or the Tribunal exercises its authority to review the matter within 15 days. If the Superintendency considers that the merger should be blocked or remedies should be imposed, the Superintendency must challenge the merger before the Tribunal. The Administrative Tribunal issues the final administrative decision. The parties involved may challenge the decisions issued by the Administrative Tribunal in federal courts, arguing violation of federal statutes.

    Under the behavioural control, the General Superintendency may initiate investigations against acts potentially unlawful. After an extensive inquiry, the Superintendency must issue an opinion either recommending the condemnation of the parties or the closure of the investigation. The Administrative Tribunal issues the final administrative decision. Similarly, parties involved may challenge the decisions before federal courts arguing violation of federal statutes.

    According to article 47 of Law 12,529, any party affected by practices deemed unlawful by article 36 are entitled to claims seeking injunctive relief and recovery of damages. It means that interested parties may start private suits in courts against anticompetitive practices involving IPRs without previous authorisation or support from CADE. It should be noted, however, that private claims have not played a substantive role in Brazil so far. Except for the judicial review of CADE’s decisions, courts have not had many opportunities to issue decisions applying the Competition Law. 

  5. 3.

    Market definition
    How are markets involving intellectual property rights defined?

  6. In cases involving IPRs, CADE has adopted the same principles applicable to other forms of property, goods or services to define relevant markets.

    In line with the experience in other jurisdictions, CADE usually defines the product and geographic markets involved. In the product dimension, CADE defines a given set of substitutes integrating a market considering the reasonable interchangeability of use and the cross-price elasticity of demand. By its turn, the geographic market depends on the disposition or ability of suppliers to serve customers and the disposition or ability of customers to purchase substitutes within given geographic limits.

    While IPRs by their nature confer to holders the ability to exclude others, it is well established in Brazil that an IPR does not necessarily lead to the existence of market power. It is conceived, however, that an IPR might contribute in certain circumstances for the acquisition and maintenance of market power. Provided a product protected by an IPR is desirable enough and no viable alternatives can be developed without infringing the IPR, the existence of the IPR will then be an important element in the acquisition and maintenance of market power. For the benefit of clarity, it should be noted that the mere existence of market power is not unlawful in Brazil.

  7. 4.

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

  8. In principle, the mere obtainment or accumulation of IPRs are not in and of itself unlawful. Nevertheless, procuring an IPR at the Brazilian Patent and Trademarks Office may be held anticompetitive conduct if there is fraud or misleading representation and the enforcement of this IPR led to anticompetitive effects (see Preliminary Investigation No. 08012.005727/2006-50).

    It is possible to identify in CADE’s previous decisions some language referring to the possibility of a finding of unlawful conduct provided IPRs are accumulated but are not effectively explored. In these cases, referred to as "sleeping patents", the obtainment of the IPR would allegedly serve merely to prevent the entry of new players and not as a way to reward incentives and foster further development. It is important to note, however, that such practice has never been condemned in Brazil and only referred to as dicta in cases dealing with different practices (see Preliminary Investigation No. 08012.005727/2006-50 and Administrative Process No. 08012.002673/2007-51).

    The transfer of IPRs may be subject to merger review under article 88 and 90, II, of Law 12,529. According to these provisions, the acquisition of control or part of a company through the acquisition of tangible and intangible assets has to be filed. Hence, if a hypothetical transfer of IPRs corresponds to the transfer of part of the business of a company, the transaction has to be notified (see Concentration Act No. 08700.010731/2015-72). For further information, see question 9.

    Finally, if the transfer of an IPR does not meet the thresholds for previous notification, it may still be reviewed under the behavioural control. Transfer of IPRs are in principle legitimate, but may be held illegal if they cover a horizontal agreement to fix prices or restrain output, result in market foreclosure or any anticompetitive effect not compensated by efficiencies.

  9. 5.

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

  10. Licensing agreements might be subject to merger reviews and the rules disciplining the notification of licensing agreements have been changing significantly over recent years. Before 2012, under the former Brazilian Competition Law – 8.884/94, licensing agreements were frequently subject to merger review. During the former regime, the main criterion applied by CADE to identify whether the licensing agreement should be notified was the existence of exclusivity clauses or clauses that entailed a cooperation in the exploration of the assets between the parties (see Concentration Acts No. 08012.008656/2006-47).

    However, after the new Competition Law was enacted, the rules disciplining the notification of technology transfer and licensing agreements have changed. Articles 88 and 90, IV, of Law 12,529 establish that “associative agreements” must be notified. The lack of further guidance on the meaning of “associative agreements” has originated many discussions among practitioners and several questions about what type of contract to submit for review. In face of this issue, in 2014, CADE released Regulation No. 10 establishing which types of agreements will be considered ‘associative’ under Law 12,529.  

    According to Regulation No. 10/2014, an agreement that lasts two years or more is associative if it stablishes horizontal or vertical cooperation or sharing of risks, generating a relation of interdependence between the parties, which is presumed if: (i) the parties are horizontally related with regard to the scope of the agreement and hold together 20 per cent or more of market share; or (ii) the parties are vertically related with regard to the scope of the agreement, one of them holds 30 per cent or more of one of the relevant markets and (a) the agreement establish the sharing of profits/losses, and/or (b) there is exclusivity.

    The rules disciplining the notification of “associative agreements” have been causing lots of confusion and uncertainty. This has been recognised by CADE itself, and resulted in a recently launched public consultation to review the regulation.

    This is not different for agreements involving technology licensing. Right after the Regulation No. 10/2014 came into force, a technology transfer and licensing agreement between Monsanto and EMBRAPA was deemed notifiable, but the analysis was exclusively based on the turnover threshold and did not comprise a specific assessment of the thresholds established by the regulation (see Concentration Act No. 08700.001226/2015-37). In more recent decisions, CADE started to more clearly apply the thresholds set by Regulation No. 10/2014. In a deal involving Monsanto and Syngenta, CADE held that the licensing agreement is vertical in nature and so limited the initial inquiry as to determine the need to file as to whether one of the parties held 30 per cent or more of the markets and was either exclusive or set the sharing of losses and profits (see Concentration Acts No. 08700.004282/2016-12 and 08700.011952/2015-68).

    It is important to note that technology transfer and licensing agreements are also subject to the behavioural control under article 36 of Law 12,529. Licences granted to competitors (horizontal relation) or cross-licences might be problematic if accompanied by price restrictions to customers or certain output limitations. Vertical restraints in licences to vertically related players might also result in antitrust liability. Potentially problematic vertical restraints include tying arrangements, exclusive dealing, resale price maintenance, bundling, territorial restraints. Both horizontal and vertical agreements would be analysed under a framework similar to the rule of reason in the US. For every contract under investigation, CADE would consider whether there is market power, anticompetitive effects and possible pro-competitive justifications that compensate the anticompetitive effects verified.

  11. 6.

    Market power and dominance
    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?

  12. As noted in question 3, CADE adopts the same principles applicable to other forms of property, goods or services to define relevant markets in cases involving IPRs. Furthermore, it is well established in Brazil that an IPR does not necessarily lead to the existence of market power. While IPRs confer to holders the ability to exclude others, CADE has recognised that these rights frequently protect products that integrate a competitive market, and rivals’ ability to compete is not impacted by the IPR in question.

    Notwithstanding, CADE has noted that an IPR might contribute in certain situations for the generation of market power or even a dominant position. Provided no viable substitutes can be developed without infringing the IPR, it becomes a fundamental element in restraining competition and guaranteeing market power (or probably a dominant position) for its holder. In cases still under analysis, preliminary assessments issued by the Agency rely on this proposition to state the existence of a dominant position. For instance, in an ongoing investigation involving the market of automotive spare parts, CADE’s preliminary assessment suggests that industrial design rights (similar to design patents) held by original equipment manufacturers prevent competition from other manufacturers in the aftermarkets because they cannot design around the IPRs (see Administrative Process No. 08012.002673/2007-51).

    Finally, it is relevant to note that article 36, section 2, of Law 12,529, presumes the existence of a dominant position when market shares exceed 20 per cent of a relevant market, leaving at CADE’s discretion the establishment of different parameters when appropriate. In practice, CADE often finds dominant position if a player holds at least 40 per cent of a relevant market. 

  13. 7.

    Unilateral conduct
    In what circumstances may unilateral conduct involving the exercise of intellectual property rights be deemed to be anti-competitive (monopolisation, abuse of dominance, etc)?

  14. This question remains open in Brazil and current investigations raise discussions about the limits of competition policy.

    On one hand, practices involving the monopolisation of markets other the one of the product protected by the IPR are likely to be considered under the ordinary framework used for monopolisation/abuse of dominance cases. For instance, if an IPR holder conditions the sale or licensing of the IPR to the acquisition of another product, it is unlikely that the existence of an IPR will prevent a claim for tying. Relatedly, exclusive agreements that involve IPRs might also be considered anticompetitive if resulting in market foreclosure without compensatory efficiencies. Again, the fact that an IPR is involved is unlikely to preclude an antitrust investigation for monopolisation/abuse of dominance. In these types of cases, the ordinary framework to assess monopolisation or abuse of dominance cases might be applied, meaning that a practice will be unlawful if the player (i) holds a dominant position (as defined in the previous answer), (ii) the conduct results in anticompetitive effects and (iii) the anticompetitive effects are not compensated by pro-competitive justifications.

    On the other hand, there is considerable uncertainty now with regard to the limits of Competition Law in assessing acts of enforcement of legitimately obtained IPRs against rivals that violate the IPR in question.

    As mentioned before, in an investigation involving industrial design rights (similar to design patents) over automobile spare parts, CADE's Tribunal issued a preliminary decision suggesting that original equipment manufactures (OEMs) may abuse their dominant position by merely enforcing industrial design rights through lawsuits against independent auto parts manufactures that copy their designs to sell in the aftermarket (see Administrative Process No. 08012.002673/2007-51). Notably, CADE has acknowledged the inexistence of fraud, bad faith or misrepresentation in the obtainment of such rights and in the lawsuits, but considers that the legitimate enforcement of such rights might result in anticompetitive effects not compensated by pro-competitive justifications, what would justify the condemnation under the rule of reason. In brief, the preliminary opinion assumes that independent manufactures may not design around the industrial design rights conferred, so that the enforcement of such rights would prevent any competition. Additionally, it was argued that OEMs invest in new designs for the sale of vehicles and not of spare parts, what would eliminate pro-competitive justifications for the enforcement of such rights against independent manufacturers acting only in aftermarkets.

    These two assumptions serve as the basis for the preliminary opinion statement in favour of the application of the rule of reason to any legitimate enforcement of an IPR against pure and simple copy. This case remains under analysis, and the final decision might set important parameters for future cases. If the preliminary assessment is confirmed, the enforcement of any legitimate IPR against a simple reproduction of the protected product may be subject to antitrust analysis in Brazil and CADE would be entitled to balance pros and cons of such enforcement. That would give CADE powers that no other antitrust agency in the world has tried to attain, risking innovation and development.

    It should be noted that we represent one of the OEMs in this case. Any opinions and views expressed here are our own and do not represent our client’s position in the case.

    Furthermore, other ongoing investigations may also set important standards for the assessment of questions involving the interface between IPRs and Competition Law. In these cases, pharmaceutical companies have been investigated for allegedly abusing their dominant position by seeking judicial enforcement of exclusive rights over data packages filed for drug control and approval using misrepresented elements and arguments in their claims. These cases may set the standards for competition review of sham litigation claims involving the enforcement of IPRs. These practices remain under investigation, and the final ruling is still expected. It should be noted that we represent one of the pharmaceutical companies under investigation. Any opinions are our own and do not represent our client’s position in the case. 

  15. 8.

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

  16. Neither CADE nor the courts have reviewed patent settlements under an antitrust framework. Despite the lack of relevant precedents to be considered, it is possible to identify a few instances where settlements may be problematic.

    The Brazilian legal system generally incentivises the settlement of disputes. Notwithstanding, it should be conceded that patent settlements might eventually violate the Brazilian Competition Law in certain circumstances. Clearly, a settlement between actual or potential competitors where there is no real dispute (the litigation is a "sham") may be considered anticompetitive if it involves competitive variables. Similarly, if the settlement includes a provision that is outside the scope of the dispute and has anticompetitive effects (ie, market division or output restriction), it is also likely that the settlement will be considered an antitrust violation.

    Other hypotheses are certainly less clear and should be subject to a careful and tailored assessment. For instance, where the settlement generally represents a reasonable business decision based on the uncertainty of patent litigation, but also comprises provisions that potentially diminish or eliminate competition (ie, an exclusive licensing arrangement), the settlement might be considered unlawful. Even more difficult situations may arise in settlements involving the entry of new players like pay-for-delay or reverse settlements. These types of settlement have not been the subject of cases in Brazil yet, but may generate important discussions soon.

  17. 9.

    Merger control (jurisdiction)
    In what circumstances will the transfer of intellectual property rights constitute a merger for the purposes of competition law?

  18. According to articles 88 and 90, II, of Law 12,529, the acquisition of control or of part of a company through the acquisition of tangible and intangible assets has to be notified for previous review. The scope of this provision is unclear and is subject to subjective interpretation. 

    Bearing that in mind, it is reasonable to argue that whenever the transfer of IPRs corresponds to the transfer of part of the business of a company, the transaction has to be notified. As a result, the transfer of any IPR that is being or is in the process of being explored through licensing agreements or through the development of products that integrate the business of a company should be notified (if the turnover criteria specified in question 1 are also met). Relatedly, the transfer of portfolio of patents should also be notified.

    As noted in item 5 above, articles 88 and 90, IV, of Law 12,529 establish that associative agreement must be notified. If a licensing agreement meets the thresholds of Regulation No. 10/2014, it will be notifiable.

  19. 10.

    Merger control (substantive)
    In what circumstances will a merger involving intellectual property rights be deemed anti-competitive? Are there any special considerations for mergers involving intellectual property rights or innovation markets?

  20. Mergers involving IPRs will be assessed under the same standards used to analyse mergers that do not involve IPRs. In line with international practice, CADE will analyse whether the merger increases the likelihood of exercise of market power (either by increase in prices or decrease in product quality or innovation), considering both unilateral and coordinated effects.

    In conducting this assessment, CADE usually proceeds by defining relevant markets and respective market shares pre and post merger, barriers to entry and the current conditions of rivalry among players.  A transaction may result in unilateral effects if the loss of head-to-head competition between the merging parties is not counterweighed by the possible entry of new players or by the rivalry presented by established players. Coordinated effects may be observed if the merger creates or enhances the likelihood of coordination between the remaining players in the marketplace. If this assessment leads to the conclusion that the exercise of market power is likely, CADE will consider whether the efficiencies generated by the merger may compensate these issues, balancing anticompetitive and pro-competitive effects.

    Similar concerns guide the analysis of mergers involving IPRs. In this context, CADE might be particularly concerned with possible exclusionary effects generated by the IPRs and how they affect the possibility of entry and the ability of rivals to effectively compete. For instance, patents over a product or components may raise the barriers of entry by requiring the research and development of a substitute designed around the patent. Patents may also originate concerns if a vertically integrated player holds patents for a given component necessary for the production of a downstream product. By its turn, trademarks may reinforce a market position and lessen the degree of rivalry manifested by competitors increasing the identification and loyalty to a given brand.

    The singular dynamics of innovation markets may also be taken into account. Incentives to design around IPRs may play an important role in the analysis and high market shares might be a relative concern once shorter innovation cycles may indicate the lack of basis for stronger antitrust intervention.

  21. 11.

    Standardisation
    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?

  22. There are extremely limited precedents in Brazil that directly concerns the application of Competition Law to standard-development organisations. In a rare discussion of SDOs, CADE noted that they might be efficient as they allow the development of new technologies and the collective negotiation of the various licences required for the use of such technology. Notwithstanding, CADE also highlighted that SDOs may be problematic whenever they result in anticompetitive coordination among competitors or abusive practices in licensing agreements, like price squeeze and discrimination (see Preliminary Investigation No. 08012.001315/2007-21).

    Recently, CADE issued its first decision involving the enforcement of patents essential to a standard (Preparatory Proceeding No. 08700.008409/2014-00, TCT v Ericsson). The lessons from this case are discussed in question 13.

  23. 12.

    Standardisation and anticompetitive agreements
    How do competition law rules on agreements, concerted practices, etc, apply to the standardisation process?

  24. As noted before, there is scant case law in Brazil regarding SDOs. In addition, CADE has not issued guidelines or any type of regulation related to this issue. For these reasons, we must consider the general provisions and precedents regulating agreements and concerted conduct and apply them to the SDO context.

    In brief, article 36 of Law 12,529 establishes that acts (including contracts or unilateral practices) that have the intent or potential to (i) limit or harm free competition; (ii) dominate a relevant market; (iii) arbitrarily increase profits; or (iv) abuse of a dominant position, will be deemed unlawful. The case law has been built using a framework similar to the American rule of reason: for every contract or practice under investigation, CADE typically considers whether there is market power, anticompetitive effects and possible pro-competitive justifications that compensate the anticompetitive effects verified.

    The constitution of SDOs is subject to this same analytical framework. If companies involved have market power and the agreement has anti-competitive effects, it will be deemed unlawful unless precompetitive justifications are substantive and counterbalance the problems identified. As indicated in question 11, CADE has recognised efficiencies related to SDOs – like the development of new technologies and the collective negotiation of the various licences required for the use of such technology. Nevertheless, the potential of anticompetitive effects of SDOs has not been neglected. In particular, the potential of SDOs to limit competition among players in the market for the patented technology and in the downstream markets where this technology is applied is certainly covered by Brazilian competition law.

    In practice, it is very likely that an agreement by SDO members to fix downstream prices of the products that use the technology developed through the SDO will be considered unlawful. Also, an agreement among the members of the SDO that compete to offer a certain technology for the standard is also likely to be considered illegal. On the other hand, the lack of substantive precedents gives rise to many instances of dubious situations that require an individual assessment of particular cases. For instance, it is unclear whether members of SDOs that contributed with an IPR are required to make a FRAND commitment in respect of that IPR. It is also dubious whether the SDO must provide access to the standard on FRAND terms. To minimise eventual anticompetitive effects and enhance the pro-competitive efficiencies (mitigating the antitrust risk), SDOs should be encouraged to design and implement policies that foster openness and fairness by participants.

    Finally, while it is unclear whether the formation of SDOs should be previously notified for review or not, CADE has already signalled that such notification is recommended and could mitigate risks (see Preliminary Investigation No. 08012.001315/2007-21).

  25. 13.

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

  26. The ordinary framework to assess monopolisation/abuse of dominance cases might be applied, meaning that a practice will be unlawful if the player (a) holds a dominant position or may acquire a dominant position (as defined in question 6), (b) the conduct results in anticompetitive effects and (c) the anticompetitive effects are not compensated by pro-competitive justifications.

    CADE has sparsely referred to the "ambush problem" as a possible issue. In sum, if a firm participates in a standard-setting process but does not reveal that it held patents that would be infringed by the standard, it may later be able to assert these patents and avoid the use of the standard or extract monopoly rents from participants.

    In June 2015, CADE issued its first decision involving the use of injunctions to enforce essential patents (Preparatory Proceeding No. 08700.008409/2014-00, TCT v Ericsson; note that the authors represented Ericsson in this matter). In reaching this decision, the Brazilian agency was writing on a blank slate – prior to this case, CADE had never investigated a complaint involving the use of injunctions to enforce essential patents, nor had any Brazilian court addressed the antitrust issues related to essential patent disputes.

    CADE reassured essential patent holders that it will not rush to condemn actions seeking injunctive relief for infringement of those patents, but will consider both the evidence of holdup and holdout when examining the failure to reach a licence on FRAND terms. Furthermore, CADE has endorsed the view that antitrust enforcement in this area should be limited to the exceptional cases, and will target situations where there is clear anticompetitive effect in a relevant market, not merely claims of excessive royalties. Key elements of general applicability can be highlighted from the decision as follows:

    1. Essential patent holders are generally entitled to file lawsuits to enforce legitimate patents: considering CADE’s usual analytical standards and the language in the Ericsson decision, however, it seems safe to conclude that only cases involving clear harm to competition without legitimate justifications (eg, such as a complete and unjustifiable refusal to license an essential patent to prevent entry or exclude a rival) are likely to be a concern. Antitrust intervention will be exceptional.
    2. Antitrust Law prevents monopolisation of a market and is not concerned with excessive pricing/royalties: CADE recognised the lack of an exclusionary practice where Ericsson was not a vertically integrated manufacturer of mobile devices in competition with TCL at the time the lawsuits were filed. Thus, Ericsson had no interest in excluding TCL from the market; Ericsson’s interests were in expanding sales of licensed devices. The decision seems to rule out the possibility of a stand-alone excessive royalty claim, in which the practice is merely exploitative and not exclusionary. Therefore, CADE’s Ericsson decisions can be read as consistent with the view that antitrust law does not give a mandate to a competition authority to arbitrate reasonable royalties (or punish excessive royalties).
    3. It is reasonable for essential patent holders to seek injunctive relief against unwilling infringers engaged in a holdout strategy: CADE noted that Ericsson’s lawsuits seemed reasonable given the lengthy period of unfruitful negotiations and the many similar licensing agreements entered by Ericsson with others throughout the industry. The decisions recognised that Ericsson had been willing to offer a licence and to negotiate its terms, while it was TCL that appeared engaged in intentionally delaying such an agreement. It is possible to infer from this aspect of the decision that CADE sees injunctive relief as a proper remedy against “unwilling” infringers, and recognised a right to exclude in such situations.
  27. 14.

    Recent cases and other developments


  28. The case involving the enforcement of essential patents by Ericsson cited in item 13 is an important precedent and set the parameters for future cases involving essential patents. It was the first time that CADE issued a decision on this topic – before, there was a lot of uncertainty and it was difficult to predict how the Agency would rule. With the decision, companies now have more clarity over the enforcement of essential patents in Brazil from an antitrust perspective.

    Notwithstanding, it remains to be seen how CADE will treat cases involving either direct competitors or claims of ex ante, pre-standardisation deceptive conduct, where an exclusionary intent can be found, or cases where the implementer’s “holdout” strategy is less clear than in TCL’s case. Even in such closer cases, however, CADE will need to carefully balance the rights of essential patent holders and the needs of implementers to access those patents to practice the standard so as to guarantee that innovation will thrive and consumers will benefit. 

    Furthermore, two important topics related to IPRs are currently being discussed. First, the case described in question 7 involving design rights over automobile spare parts may set important parameters for future cases (see Administrative Process No. 08012.002673/2007-51). In brief, a preliminary assessment issued by CADE states that the legal enforcement of legitimate IPRs against pure and simple copying must be analysed under the rule of reason. Under this proposed framework, if the lawful enforcement of a lawfully obtained IPR results in anticompetitive effects not compensated by the efficiencies of the IPR protection, antitrust intervention may happen. This case remains under investigation and may set a very peculiar and dangerous precedent. Provided the preliminary decision is confirmed, the enforcement of any legitimate IPR may be subject of antitrust analysis in Brazil and CADE would be entitled to balance pros and cons of such enforcement, what would give it powers that no other antitrust agency in the world has tried to attain, risking innovation and development.

    Finally, another group of cases involving the enforcement of exclusivity rights over data packages presented for drug control and approval may set the standards for competition review of sham litigation claims involving the enforcement of IPRs (see details in item 7). These practices remain under investigation, and the final ruling is still expected.

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Questions

  1. 1.

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


  2. 2.

    Competent authorities
    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?


  3. 3.

    Market definition
    How are markets involving intellectual property rights defined?


  4. 4.

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


  5. 5.

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


  6. 6.

    Market power and dominance
    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?


  7. 7.

    Unilateral conduct
    In what circumstances may unilateral conduct involving the exercise of intellectual property rights be deemed to be anti-competitive (monopolisation, abuse of dominance, etc)?


  8. 8.

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


  9. 9.

    Merger control (jurisdiction)
    In what circumstances will the transfer of intellectual property rights constitute a merger for the purposes of competition law?


  10. 10.

    Merger control (substantive)
    In what circumstances will a merger involving intellectual property rights be deemed anti-competitive? Are there any special considerations for mergers involving intellectual property rights or innovation markets?


  11. 11.

    Standardisation
    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?


  12. 12.

    Standardisation and anticompetitive agreements
    How do competition law rules on agreements, concerted practices, etc, apply to the standardisation process?


  13. 13.

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


  14. 14.

    Recent cases and other developments