The misuse of sham litigation investigations
Brazil is known internationally as an intellectual property pirate.
The situation has its origins in the import substitution policies developed by UN-CEPAL decades ago, and implemented unanimously in the country by dictators such as Getulio Vargas and the military generals that followed him, as well as elected presidents.
The hopes for change during the mid-1990s, when the Stockholm revision of the Paris Convention, the WTO TRIPS Agreement and a series of new IP laws were implemented, have long vanished. The treaties and statutes approved in the last decades were not overruled or vacated.
They afford plausible deniability to the administration on compliance with international obligations, while denying IP owners effective enforcement.
However, as the statutes are still on the books, IP owners have been seeking enforcement of the country’s IP laws before the Brazilian courts.
Now, the latest anti-intellectual property policy of the Brazilian government is to use the country’s (nominally independent) antitrust authorities to intimidate IP owners that approach the Brazilian judiciary for relief against the illegalities committed by the administration and local infringers.
In the last six months, the Brazilian Patent and Trademark Office (INPI) and antitrust authorities (SDE and CADE) have signed a co-operation agreement in an unprecedented project to scrutinise possible sham litigation practices on the enforcement of IP rights.
The message is simple: there is no possibility to seek IP enforcement before the Brazilian courts without being threatened by an antitrust investigation. In Brazil, sham litigation was invoked by the SDE in a case against Siemens VDO, in a non-IP matter. In this case, the SDE rendered an opinion quoting the sham litigation exception as adopted in the US.
On March 16, CADE’s Commissioner Furlan voted to condemn Siemens due to misuse of its petition right. The conclusion of Siemens’ case is expected within two months. Although antitrust authorities are discussing to what extent sham litigation shall be applied in Brazil, they accept that the theory is supported by Article 17 of the Code of Civil Proceedings.
Concerning news emerged in the media in January about SDE inquiries into 37 research-based pharmaceutical companies. The SDE requested information about the portfolio of products with patents granted in Brazil and information regarding every single litigation filed against any generic company in the past five years.
In theory, the SDE will audit practices initiated by R&D companies in Brazil and punish those found to be violating the antitrust laws.The co-operation agreement The agreement between INPI, the SDE and CADE results from recent investigations initiated before the SDE accusing R&D companies of abusing their rights of petition by invoking allegedly baseless IP rights to hinder competitors’ market entry.
"In a legal system lacking sound case law on the enforcement of IP rights, these premature claims before the antitrust authorities have a detrimental influence on the judges' will to decide cases."
According to the SDE, from 2000 to 2006, four sham litigation investigations were initiated by the agency. Eight further claims have been filed since 2007. Five of the ongoing investigations relate to claims filed by industries seeking to launch copies of pharmaceutical products protected by IP rights in Brazil.
The real story Companies seeking to copy products still protected by IP rights in Brazil file their claims before the SDE in the early stages of any enforcement action filed by the IP owners. In a legal system lacking sound case law on the enforcement of IP rights, these premature claims before the antitrust authorities have a detrimental influence on the judges’ will to decide the cases.
The claims also hinder the antitrust authorities, which must wait for developments on the alleged sham IP enforcement litigations before taking any decision. However, since the judges are uneasy about deciding complex and unfamiliar cases, after an antitrust claim is filed, the assigned judge avoids deciding anything related to it and waits for the antitrust authorities to make a substantial finding.
Thus, before a R&D company initiates litigation pursuing the enforcement of its IP rights in Brazil, it should assess the best strategy to avoid being accused of sham litigation, which could impair its chances of success in the judicial enforcement of its IP rights.
