Brazil: CADE Rejects Antitrust Investigation Against Ericsson

In 2012, Telefonaktiebolaget L. M. Ericsson brought its first action for infringement against TCT Mobile Telefones LTDA
(TCT) before the 2nd Civil Court of Rio de Janeiro (RJ) seeking a preliminary injunction prohibiting the infringement of its patent PI9811615-0 declared essential to the standard 3GPP and implemented in the ‘Alcatel One Touch 900M’ mobile device.

In this respect, Ericsson petitioned that TCT:
"(a) terminate[s] the marketing of Alcatel One Touch 900M’device , including its manufacture, use, offer for sale (including any advertising), sale and import of mobile device without permission from Ericsson and so for take all appropriate measures for the immediate payment of products held by third parties, subject to a daily fine of R $ 100,000.00; (b) refrain[s] from any act that may contribute to the activities listed above, including any transfer regarding the ‘Alcatel One Touch 900M’ device, as well as any other act inconsistent with what is determined by the court when the eventual approval of the grant of the preliminary injunction, subject to a daily fine of R $ 100,000.00".

However, unlike in the judgement given by the Court of Justice of the European Union in the dispute Huawei v ZTE (Case C-170/13), the RJ Court granted the preliminary injunction to protect the interests of Ericsson. Actually, the Brazilian court did not raise questions that would evaluate the balance of interests between SEP holders (hold-up) and the potential licensees (hold-out) concerning negotiations aiming at determining fair reasonable and non discriminatory (FRAND) rates.

Here is the extract of the RJ Court judgement:
"This patent belongs to [Ericsson], which did not allow its [use] by the defendant, who, it seems, is violating the intellectual property rights of the patentee. The violation of the patent holder’s rights is irreparable or of difficult recovery, growing every day, in apparent damage to its assets, since the liquidation procedure of this kind of damage hardly fully applies to all committed unlawful acts, not to mention the difficulties for the compliance with judgment in certain cases. Thus, the principle of effective judicial decision recommends the anticipation of the effects of the protection. So, I grant the request for injunctive relief for the purpose of determining the defendant, subject to a daily fine of R$ 100,000 reais: (a) to refrain from marketing the Alcatel One Touch 900M device, including its manufacturing, using, offering for sale (including any advertising) and import, without permission from Ericsson, and from doing any act that might contribute to the activities listed above, including any relating to the transfer device; (b) to take all appropriate measures for the immediate withdrawal of the devices maintained by third parties such as resellers. (See document TJERJ. Decisao. 2012)"

Ericsson brought three other legal actions, which are all appended to the first case. The actions relate to alleged violations of patents P198116150 and P194054053 concerning the selling of the following devices in Brazil: Alcatel 900M, Alcatel One Touch Idol, Alcatel One Touch MPOP, Alcatel One Touch Pixi, Alcatel One Touch Fire and the Tablet Model Alcatel Touch Ev07, Alcatel One Touch Pop C5 , Alcatel One Touch Pop C3 , Alcatel One Touch Pop C1 and Alcatel One Touch Mini .

Here is a table indicating all the legal cases between Ericsson and TCT in Brazil.

 Image extracted from the CADE decision

In 2015, TCT brought a complaint (in Portuguese here)  against Ericsson before the Brazilian Tribunal of the Administrative Council of Economic Defense (CADE) seeking to open an investigation of possible antitrust violations, on the grounds of (i) industrial property abuse, (ii) coercive negotiation (hold-up) and (iii) sham litigation, in accordance with Article 36 , paragraph I and XIX § 3 of Law no. 12.529 of November 30, 2011. (See document Decisao.CADE.Ericsson.TCT.BR)

However, CADE denied TCT’s demand of TCT’s request. Notably, it held in paragraph 6 of the decision that Ericsson’s actions were not sham litigation but actions to avoid hold-out. As to the categorization of anti-competitive behavior, it noted that Ericsson indicated that its present-day activities are restricted to research and technological development in the telecommunications sector, neither therefore influencing the marketing of cell phones or tablets, nor distressing the market of TCT products, nor improving Ericsson’s competitive advantages, in the absence of a patent licensing agreement.

Additionally, CADE held that the dispute in suit “constitute[d] a commercial matter of intellectual and contractual property between private individuals, to be discussed in court”. CADE consequently decided to file TCT petition. Subsequently, TCT appealed but CADE upheld its decision because TCT did not convey new facts. (See Desp.SG760.pdf)

It is worth to mention that Ericsson submitted to CADE elements showing hold-out: its arbitration demand brought against the TCT, the lengthy period of FRAND negotiations, as well as the achievement of FRAND licensing deals with several other buyers.

At present, all legal cases are stayed according to U.S. District Judge James Selna’s decision who granted to TCT an anti-suit injunction against litigation in France, the United Kingdom, Brazil and Russia.

Guest post by Magda Voltolini.