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Legal Update

Brazil: Antitrust and IP in the Automobile Industry

1 December 2017
Tauil & Chequer Legal Update

The dispute over the alleged abuse of intellectual property rights by automakers regarding the protected design of aftermarket car spares, as well as the alleged right of the automotive parts manufacturers to commercialize these parts is not new in Brazil. Since 2007, this dispute has been marked by controversial understandings of the law by legal practitioners and Brazilian courts alike.

The Administrative Council for Economic Defense (CADE) has been able to analyze Administrative Proceeding No. 08012.002673/2007-51, which originated from the complaint filed by the National Association of Automotive Parts Manufacturers (ANFAPE), regarding the argument that VOLKSWAGEN, FIAT and FORD would have been engaged in anticompetitive conduct since they tried, through extrajudicial and judicial proceedings, to prevent car assembly companies from producing and selling aftermarket car spares such as bumpers, bodywork and headlights, among others, and in so doing the manufacturers would be violating intellectual property rights.

In turn, the automakers, which are holders of industrial design registrations for auto parts, attempted to demonstrate to CADE’s counselors that the violation of exclusive rights was not reasonable and that the manufacturers have never attempted to license such industrial designs, which would give them the right to utilize the intellectual property assets developed by the automakers and that are the result of high investments.

In the trial session held on November 22, 2017, CADE’s Reporting Commissioner Paulo Burnier voted for the conviction of the automakers FIAT, FORD and VOLKSWAGEN, subject to the understanding that these companies had abused intellectual property rights regarding car spares that are protected by industrial design proceedings, and that are duly registered and are in full force and effect before the Brazilian Patent and Trademark Office (“BPTO”), in connection with aftermarket auto parts. To that end, CADE’s Reporting Commissioner proposed a fine in the minimum amount permitted by the law, which amounts to 0,1% of the automakers’ revenue in 2009 (equivalent to approximately R$ 4,2 million), and also determined that the automakers cease their attempts to prevent ANFAPE from producing and trading aftermarket car spares.

According to the Reporting Commissioner, the automakers’ conduct would be at odds with the very purpose of the Brazilian intellectual property policy, because in his view, there would be no freeloading on the part of the Independent Auto-Parts Manufacturers’ (“FIAP”) .

ANFAPE argued that design protection provided by the BPTO would only grant exclusive rights in the primary market, that is, in the assembly of new cars, and not in the secondary market which relates to replacement parts (retail commercialization). This was the understanding set out as the basis of Paulo Burnier’s vote.

The judgment was adjourned due to a request of access to the case docket, with the votes of 6 council members still pending. The session is expected to reconvene on December 13, 2017.

In the event that CADE’s decision is unfavorable to the Original Equipment Manufacturers (“ OEMs”), the traditional business model used by ANFAPE’s players in the automotive market will probably face rearrangement, since the majority of investments in the development of car spare parts are usually supported and financed by OEMs, and which usually deal with the auto parts manufacturers as industrial service providers.

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