Introduction

In recent years, Brazil's antitrust authority – the Administrative Council for Economic Defence (CADE) – has undergone a reshuffling in terms of the composition of both the Administrative Tribunal (comprising commissioners) and the General Superintendence.

Among the issues that have come before the reshuffled CADE, two investigations involving the exercise of IP rights are particularly notable because they reveal a new trend in CADE's approach to IP rights. Specifically, these cases show that CADE has taken a more pragmatic stance by recognising that IP rights can restrict competition even if the rights holders have acted lawfully.

First case

In March 2018 the Administrative Tribunal finally decided Administrative Proceeding 08012.002673/2007-51, which concerned an investigation into auto parts. The case had commenced in 2007 when the National Association of Auto Parts Manufacturers (ANFAPE) filed a complaint that Volkswagen, Fiat and Ford were using their IP rights in the parts market in an abusive manner by filing numerous suits and sending cease and desist notices to certain auto parts manufacturers.

The case concerned the protection given to the auto part industrial designs which the auto manufacturers had registered with the National Institute of Industrial Property. ANFAPE argued that the protection should extend only to 'foremarket' parts (ie, parts used in the production and sale of new vehicles) and not to 'aftermarket' parts (ie, replacement parts).

In 2016 the General Superintendence issued an opinion in favour of finding the auto manufacturers liable for anti-competitive conduct. Subsequently, Reporting Commissioner Paulo Burnier, who was responsible for issuing the lead opinion, took the same position. However, in 2017 the CADE Administrative Tribunal dismissed the complaint, following the opinion issued by Commissioner Maurício Bandeira Maia.

In Maia's view, in considering the effects on competition of IP rights, "the legislator made a trade-off between these protected values, and the interpreter of the law should not subvert this legislative choice". Therefore, CADE is required to intervene only in cases of competitive abuses in the exercise of IP rights, which had not occurred in the case under consideration.

Second case

In October 2018 CADE decided Administrative Proceeding 08012.006377/2010-25, which concerned Lundbeck Brasil Ltda. The case began in 2010 when the Brazilian Association of Generic Medications Manufacturers (Pro-Generics) filed a complaint alleging that Lundbeck had engaged in anti-competitive conduct consisting of sham litigation and abuse of right. Commissioner Polyanna Vilanova voted to dismiss the complaint, which the other commissioner seconded.

The case concerned legal proceedings and out-of-court measures taken by Lundbeck to protect a data package that it had submitted to the Brazilian Health Regulatory Agency, ANVISA, in order to register a new medication. The data package was used both directly and indirectly to register third parties' generic medications and branded similar medications.

Vilanova found that the scope of the protection given to data packages is a controversial legal issue, and that Lundbeck's conduct therefore could not be categorised as sham litigation. In her view, because there is legal controversy surrounding the issue, Lundbeck's actions did not constitute an abusive exercise of IP rights. Although Vilanova stated that, as a question of public policy, she disagreed with the extent of protection given to data packages, she nonetheless delimited the scope of CADE's jurisdiction in the case and found that the facts fell outside its jurisdiction.

Comment

These two cases show that CADE is taking a pragmatic approach to IP rights by recognising that even though IP rights can restrict competition in certain circumstances, those effects result from the nature of the IP rights themselves and not necessarily the conduct of rights holders. It follows that if there is nothing unlawful about the registration of IP rights and they are not exercised abusively, CADE will have limited authority to intervene.

For example, in the Lundbeck case, CADE took the view that while the provision of overly broad protection to the exclusivity rights attached to data packages may affect competition, it does not fall on CADE to arbitrate the conflicting interests, but rather to the government's legislative and judicial branches.

This hands-off approach is a departure from CADE's prior stance. It recognises that other government branches can determine the form and scope of public policies set out in the law and that CADE should not intervene in situations where limitations on competition result from the lawful exercise of rights and no competition offence has been committed. In any event, CADE will almost certainly examine this issue in future cases.

For further information on this topic please contact Luís Bernardo Coelho Cascão or Luiz Galvão at Barbosa, Müssnich & Aragão Advogados by telephone (+55 11 2179 4600) or email (lbo@bmalaw.com.br or lag@bmalaw.com.br). The Barbosa, Müssnich & Aragão Advogados website can be accessed at www.bmalaw.com.br.

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