Standard Essential Patent (SEP) Litigation in Brazil: The Emerging Landscape

The litigation of Standard Essential Patents (SEPs) is rapidly evolving in Brazil, mirroring a global dispute trend. Over the past few years, the country has witnessed a surge in infringement lawsuits, particularly in the Rio de Janeiro State Courts, which have emerged as the preferred jurisdiction for SEP disputes. Despite its growing relevance, SEP litigation in Brazil still lacks specialized legal frameworks distinguishing essential from non-essential patents in an in-depth manner. As a result, courts tend to handle SEP cases similarly to conventional patent disputes, creating complexities for both patent holders and implementers.

This article provides an overview of the SEP litigation landscape in Brazil, covering key issues such as forum shopping, litigation transparency, injunctions, damages, NPE and implementer risks, foreign entity considerations, and the role of invalidity claims.

1. Brazilian SEP Litigation Hubs

Many companies involved in Brazilian judicial disputes are concurrently litigating in other jurisdictions. The favorable landscape for patent holders in the country has been perceived as an invitation to the filing of infringement lawsuits as a means of exerting pressure in ongoing negotiations abroad.

Patent holders, typically filing such lawsuits before the Rio de Janeiro State Court venue, often request ex parte preliminary injunctions to enjoin defendants from allegedly using their patented technology, that is, before any impartial technical evidence has been produced. These orders are frequently accompanied by substantial fines for non-compliance, thereby strengthening the patentee’s position in global licensing negotiations.

Although neither the Brazilian Code of Civil Procedure nor the Brazilian Industrial Property Law distinguishes between essential and non-essential patents, the peculiarities of this legal framework and the way these lawsuits are unfolding in Brazil have drawn the attention of an increasing number of patent owners.

Brazilian courts, relying on Article 42 of the Brazilian IP Law - which grants patent owners the right to prevent unauthorized commercial practices without differentiating between essential and non-essential patents - have frequently granted preliminary injunctions before the defendant has an opportunity to present arguments on non-infringement or non-essentiality. Allowing defendants to raise such arguments at the outset, though, could better balance the rights of both parties and provide judges with a broader perspective when assessing preliminary injunction requests.

Decisions granting preliminary injunctions on these disputes typically hinge on two key elements: proof of patent ownership and evidence that the patent has been declared essential to a specific standard (e.g., 5G). This leads to aggressive preliminary injunction rulings, often without considering the broader international FRAND negotiations, hold-up or hold-out practices, nor the impact such decisions may have on parallel disputes in other jurisdictions.

As the Rio de Janeiro State Court increasingly establishes itself as a favorable venue for patent holders - given its apparent trend of granting ex parte preliminary injunctions - it is possible to address other key litigation practices frequently seen in such lawsuits:

• Coordinated NPE Litigation: Non-Practicing Entities (NPEs) often work with established litigation-oriented law firms, leveraging judicial precedents in SEP enforcement.

• Validity Lawsuits in Brasília Federal Court: To avoid having infringement cases stayed due to validity challenges, some litigants initiate parallel validity lawsuits in Brasília.

As ICT and IoT developments advance rapidly, it is crucial for Brazilian courts to consider the particularities of this microsystem to prevent technological lock-in.

2. Litigation Transparency Challenges

One of the major hurdles in SEP litigation in Brazil stems from the lack of transparency attributable to the confidential nature of court proceedings. Unlike in common law jurisdictions where case law is widely accessible, in Brazil:

• Courts do not mandate full disclosure of interested parties in SEP disputes.

• Many lawsuits remain sealed, preventing other industry players from analyzing precedents and assessing risks.

• Defendants often lack access to crucial case law information, making it difficult to predict litigation trends or formulate defense strategies.

This deficiency in transparency creates significant challenges for companies operating in the telecom sector, as they struggle to anticipate potential legal risks tied to SEPs.

3. Injunctions and Damages in SEP Cases

SEP holders in Brazil frequently seek preliminary injunctions as a mechanism to compel implementers into licensing agreements, as Brazilian courts allow Ex Parte Injunctions (granted without hearing the defendant).

In addition, when analyzing SEP cases, preliminary injunctions can generally be classified into two categories:

(i) Conditional Injunctions, which are contingent on the confirmation of infringement by an unbiased court-appointed expert. These injunctions impose retroactive daily fines once infringement is established but they typically lack immediate practical effects.

(ii) Unconditional Injunctions, which take immediate effect by ordering the defendant to cease the alleged infringement and withdraw the products from the market without awaiting further technical assessment.

These injunctions can disrupt commercial activities, forcing implementers into quick settlements. Additionally, damages awards for SEP infringement follow different methodologies, including, as established by Article 210 of the Brazilian IP Act:

• Lost Profits (compensating patentees for potential market losses).

• Infringer’s Profits (disgorging unlawful gains obtained through unauthorized use).

• Reasonable Royalty (calculated based on FRAND principles or expert assessments).

While most infringement disputes in Brazil have been settled prior to a technical assessment by an unbiased court-appointed expert, others remain in the evidentiary phase or are under appeal, yet to reach the quantification stage.

4. Defense Strategies for Defendant Companies

Companies facing SEP litigation in Brazil must consider key defense strategies, including challenging essentiality. Brazilian courts do not routinely differentiate between essential and non-essential patents. Since the essentiality is self-declaratory, Defendants may argue that the patent is not truly essential to the standard, potentially weakening the plaintiff’s case.

Additionally, initiating a patent invalidity lawsuit before a Federal Court, counting with the participation of the Brazilian Patent Office as a co-defendant, is a key defense strategy. Many telecom patents in Brazil have undergone limited substantive examination, and challenging their validity in court has led to partial or full invalidations in several cases.

5. Best Practices when Requesting Preliminary Injunctions: The FRAND Importance

Although Brazilian courts have yet to address FRAND terms comprehensively, a recent ruling by Hon. Judge Victor Agustin Torres highlights the evolving landscape of SEP litigation in the country. In his decision, the judge recognized the inconsistencies in SEP-related injunctions, stating: “There has been a lack of uniformity regarding urgent relief measures, some being granted without prior expert evaluation, others requiring simplified expert hearings.”

Judge Torres further stressed the importance of predictability and legal stability, emphasizing that courts should serve as forums for negotiation and the rebalancing of commercial conditions, rather than imposing immediate prohibitions. His ruling indicates a trend towards minimizing judicial intervention and promoting structured FRAND negotiations before any extreme legal measures are taken.

In this evolving context, companies negotiating FRAND licenses in Brazil should adopt the following strategic approaches:

• Meticulously document all negotiations (emails, licensing history, and rate discussions) to demonstrate compliance with FRAND obligations in the event of litigation.

• Ensure transparency in FRAND offers to mitigate risks of litigation, especially given Brazil’s increasing scrutiny over FRAND licensing practices.

6. WIPO’s 2024-2026 Strategy and Its Implications for Brazil

The World Intellectual Property Office (WIPO) has outlined a three-year strategic plan in the field of standard essential patents (SEPs) for 2024-2026. With the aim of improving global SEP frameworks, WIPO’s international bureau strategy focuses on:

• Enhancing dispute resolution mechanisms to reduce litigation. • Tracking SEP enforcement trends to identify emerging risks.

• Promoting greater transparency in SEP cases.

Brazil’s judiciary is gradually aligning with these goals, introducing stricter requirements for injunctions and FRAND assessments. However, challenges persist, particularly regarding case transparency – the lack of transparency arising from confidential lawsuits prevents the tracking of SEP enforcement trends to identify emerging risks.

Conclusion

Brazil is at a pivotal moment in its SEP litigation evolution. While the country remains attractive for patent enforcement, courts are increasingly scrutinizing FRAND commitments and adopting more balanced approaches toward injunctions. However, forum shopping, transparency issues, and NPE activity continue to pose challenges.

As WIPO pushes for greater international alignment in SEP enforcement, Brazil’s judiciary must refine its approach to ensure a fair balance between both patent holders and implementers, ultimately fostering a more predictable and transparent legal environment for SEP disputes.