BRAZILIAN HIGH-TECH LITIGATION: Law, Business & Policy Thursday, May 12 – Washington, DC Scan to download this presentation or to receive link via e-mail
Litig igatin ing Standard Esse sentia ial l Patents Carlos Aboim Partner at Licks Attorneys BRAZILIAN HIGH-TECH LITIGATION: Law, Business & Policy The George Washington University Law School
Litigating Standard Essential Patents Carlos Aboim, Partner of Licks Attorneys Thursday, May 12 – Washington, DC
Brazil – basic facts • Brazil is the 5th largest country in the world (larger than the continental U.S.) • Brazil was a Portuguese colony from the year 1500 to 1822. The James Monroe’s administration of the United States was the first to recognize Brazil's independence, followed by Portugal itself in 1825 • Brazil has a population of approx. 209 million people and the world's seventh largest economy by nominalGDP (USD $1,42T in 2015); • Internet penetration of 66.4% (2016), with the greatest number of Facebook posts 4
Brazil – basic facts • and, of course… • Host for the Olympic games in 85 days! (we will not mention World Cup at this time...) 5
Brazilian Market -Telecommunications in Brazil 3G – available to 95.8% of the population 6
Brazilian Market -Telecommunications in Brazil 4G – available to 55.1% of the population 7
Brazil – basic facts But… • 3G is really 1G, as operators are obliged to offer only 30% of the contracted speed • 30% of transactions occur using “slips” that are paid at a local corner store or ATM 8
Brazil – basic facts Why Brazil? • “ The answer is simple. Brazil is equal to the rest of the South American market combined. If you can win Brazil, you will have an easier time winning other South American markets. Those who can bring both relevant sector expertise and a deep understanding of the local environment will be positioned for big wins .” ( Brazil Startup Report - http://pt.slideshare.net/WorldStartupReport/brazil-startup-report-36443505?sf3496695=1 – accessed on July 20 th , 2015). 9
Introductory analysis on “essential facilities doctrine” and enforcement of “de facto essential patents” in Brazil. • General aspects • Antitrust liability
Enforcement of essential patents and ex parte preliminary Injunctions -Background • There is no specific legal provision governing the enforcement of Standard Essential Patents (SEP) or patents that are de facto essential (“essential patents”). Both will be subject to “essential facilities” liability (i.e. compulsory license) and antitrust liability. • Compliance with technical standards is not required by law or regulations. • There is no judicial decision establishing a framework for enforcement of SEPs (no stare decisis ). • There is no limitation for the enforcement of SEPs in Brazil, but the enforcement must be reasonable to prevent “essential facilities” liability (i.e. compulsory license) and antitrust liability. 11
Compulsory license limitations to the exercise of IPR • Article 68 of the IP Statute (Statute # 9,279/96) states: “ The patentee will have its patent compulsorily licensed if he exercises its IPR in an abusively way , or it he uses it to practice an abuse of economic power , proven under the terms of the Law, by an administrative or judicial decision ”. • According to ¶1 of this article, the patent will also be subject to a compulsory license when the patent subject matter is not explored in the Brazilian territory, or when its commercialization does not meet the market needs . • The influence of the local industry and willingness of the government to take action should not be underestimated. 12
Enforcement of essential patents in Brazil CADE’s decisions Examples of cases regarding the application of the “essential facilities doctrine”: • Companhia Petroquímica do Sul vs. Petroquímica Triunfo – 1998 : CADE considered that Petroquímica do Sul had reasonable economics reasons to not enter contracts with Petroquímica Triunfo, based solid economic justifications based on the opportunistic behavior of Petroquímica Triunfo in previous contracts. • Globo vs. DirecTV – 2001 : CADE considered that Globo’s signal was not essential for the provision of services of cable TV. CADE ruled that DirecTV did not depend on Globo’s signal to subsist in the market. • Embratel vs Telesp – 2002 : Telesp was accused of offering competitive advantages to its subsidiary “Telefônica”, harming Embratel in bids regarding long -distance calls. CADE ruled that there was an antitrust violation , based on the absence of reasonable basis for the difference in prices charged by Telesp from Embratel and Telefônica. 13
Enforcement of essential patents in Brazil CADE’s decisions Decisions rendered by CADE relating to de facto “ essential patents ”: • Gradiente and Cemaz vs. Philips (Case # 08012.001315/2007-21) – May 13, 2009 : • The accusation claimed abuse of its dominant position, abusive pricing, denial of access to essential technology, and discrimination of lawful players in the market. • In regard to the alleged abuse of dominant position, CADE understood that there was no antitrust violation, since the IP Statute allows the patentee to prevent others from commercializing the patent subject matter without its consent, and that there was no evidence that Philips failed to negotiate a license . • Sony Corporation, Philips, Panasonic, Hitachi Consumer Eletronics, Samsung and Cyberlink (Case # 08012.008810/2009-23) – June 26, 2011 : • Pool of essential patents for running and reproduction of Blu-Ray discs, as well as DVD and CD format is Blu-ray devices. • CADE understood that the pool brought competitive benefits to the markets involved, that it did not reduce the competition in the final markets, and that it promoted access to essential patents, imposing the non-discriminatory licensing . 14
Enforcement of essential patents and ex parte preliminary injunctions
Enforcement of essential patents and ex parte preliminary injunctions (Background) • There is no specific legal framework for the enforcement of “essential patents”. • But the enforcement must be reasonable, as there is a growing concern about IPRs and antitrust. • The enforcement of “essential patents” is a regular patent infringement lawsuit. The particularities of the enforcement of an “essential patent” will come to light in the arguments for request of an injunction. Why the preliminary injunctions to protect IPR in Brazil are so important? • Injunctive relief is the only adequate remedy. How to perform a reasonable enforcementand also obtain an ex parte preliminary injunction in Brazil? 16
Enforcement of essential patents and ex parte preliminary injunctions (General legal requirements) • Legal requirements - Art. 300 of the Brazilian Civil Code of Procedure : (i) risk of irreparable harm (ii) likelihood of the plaintiff’s claims on the merits • Preliminary injunctions can be granted ex parte (that is, before the service of the complaint) Article 209, paragraph 1 st , of the IP Statute: “ The judge may, so as to avoid irreparable damages or damages that would be difficult to recover, grant an injunctive order to suspend the violation or act that has such in view, before summoning the defendant, upon, if necessary, the deposit of a bond . ” • Liability for the Plaintiff who request a preliminary injunction : Article 302 of the Brazilian Code of Civil Procedure provides for strict liability for damages caused by the injunctionin case the final decision on the merits is unfavorable. 17
Ex parte preliminary injunctions Irreparable harm • Hardship to obtaining compensation in Brazil for patent infringement: • “ the restitution in integrum should reach, independently from the effective peeve, all the economic advantage achieved by the infringer , due to the illicit and in the case of counterfeit, the indemnity of the loss of profits should be correspondent to the profits obtained by the infringer , that profited from a right that did not belong to him and, therefore, should refund what was obtained, in terms of counterfeit profit” (AC 237.462.4/6, Court of Appeals of São Paulo , 2nd Panel of Private Law, reporting judge Cezar Peluso, 04/02/2003). • “The indemnity for moral damages should be correspondent to the profits obtained by the infringer and to the infringement itself, limited by the principle of reasonability and, on the other hand, should serve as propaedeutic to the infringer .” (REsp n 582047, Superior Court of Justice , 3rd Pane , Reporting Judge Massami Uyeda, j. 17/02/2009, DJ 04/08/2009) • But… in Brazil there are no punitive damages, no treble damages for willful infringement , or any kind of enhanced damages in the statute… Evidence of the actual harm is required, otherwise there would be “unjust enrichment” and, for instance, evidence of loss of market share and loss profits is usually hard to accomplish. 18
As a result... • In general, Courts often grant preliminary injunctions based on prima facie evidence acknowledging the importance of the injunctive relief as the primary remedy for the protection of IP rights. It is also the main remedy for the ones that can be accused of infringement, as preliminary injunctions on declaratory lawsuits of non- infringement (“ inter partes ”) and on invalidity lawsuits before federal courts (“ erga omnes ”) are also available. 19
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