Brazilian Antitrust Agency Rejects Complaint on the Automobile Spare Parts Market

Economic Law Secretariat of the Ministry of Legal Affairs (SDE), one of the Brazilian antitrust agencies, has granted auto manufacturers an important victory in a complaint involving the alleged abusive enforcement of intellectual property rights in the automobile spare parts field.

The dispute began approximately two years ago, when automakers started to enforce industrial design rights against independent manufacturers of automobile spare parts, in order to enjoin them from making and selling copies of the parts whose overall impressions are protected by industrial design registrations.

As Brazilian courts have been deciding in favor of the automakers and granting search and seizure orders against the independent companies, the National Association of the Automobile Spare Parts Manufacturers (ANFAPE) brought an antitrust complaint against the automakers on April 4, 2007.

ANFAPE accused the automakers of creating a monopolization scheme based on the abusive enforcement of industrial design rights, designed solely to interfere with the independent manufacturers’ business and keep them out of the automobile spare parts market, in violation of the Brazilian antitrust statute.

In response, automakers sustained they were making a mere enforcement of vested rights since they own property rights over the parts design. Further, there was no anticompetitive conduct since they were simply protecting innovation in a field that demands substantial R&D investments.

On February 29, 2008, SDE decided in the automakers’ favor. According to SDE, the aesthetic feature materialized on the parts design is an essential element for product differentiation and it is imperative to preserve R&D investments on this market field. In the words of the antitrust agency, "free riding not only violates IP laws but also generate damages and significant potential risks".

In the SDE’s view, the issue can be qualified as a trade off whereby lawmakers sought to foster innovation and industrial development by granting temporary exclusive rights over industrial designs, "even if in the short-run the price to be paid for the parts is higher than the price that would be charged in the absence of protection". For this reason, SDE concluded that there was no antitrust violation and rejected the complaint.

This ruling is extremely important, not only because it is one of the first cases in Brazil that dealt with an apparent tension between IP rights and antitrust laws, but also because it denotes a high degree of maturity of the Brazilian antitrust authorities in respect to the importance of IP rights for economic development and innovation.

Thus, although IP owners should keep examining their practices in light of their possible anticompetitive effects, they can now rely on this significant precedent and are aware that the Brazilian antitrust authorities are attentive to the concept of dynamic efficiency and to all long-run benefits derived therefrom.