In a recent decision published in the Official Gazette, the General Superintendence of the Administrative Council for Economic Defense - CADE recommended the condemnation of automakers Volkswagen Brazil Motor Vehicle Industry Ltd., Fiat S / A and Ford Motor Company Brazil Ltda. by anticompetitive conduct in the domestic market of auto spare parts.

This decision was based on economic, competitive, legal and constitutional analysis, where CADE recognized that there is evidence that the imposition of the automakers’ Industrial Design Registration on FIAP'S (Independent Manufacturers of Auto Parts) tends to have serious anticompetitive effects, failing to meet the " social interest and the technological and economic development of the country ", contrary to Article 2 of the Brazilian Patent Law. It is important to note that CADE saw no evidence of sham litigation and base for the nullity of the granted Registration.

CADE also criticized the fact that the amount of merit examination of Industrial Designs is remarkably lower than the amount of registrations granted, generating evergreening practices by the automakers. When consulted, VW said it requested only 30 examinations, in a total of about 300 records, while Ford requested the examination of only three records and Fiat never conducted any examination request on the merits of their records.

Although automakers possess the Industrial Design Registration validly granted according to the BR Patent Law, the Superintendence found that the automakers were using such rights in an anticompetitive way, by using judicial and extrajudicial measures to suppress the activities of FIAP's, inhibiting the manufacture and sale of protected car parts by Industrial Design Registrations.

The ANFAPE (National Association of Auto Parts Manufacturers), representing the FIAP's, argued that the protection of the Registration of automotive parts should be exercised only in the foremarket, as if this protection was extended to the aftermarket, would set up the abuse of rights with anticompetitive effects. Thus, in proposing judicial and extrajudicial orders, automakers would be aiming to end the production and marketing of "visible parts" protected by Industrial Design Registrations.

Meanwhile, the defense of the automakers claimed that the rights of the Registrations should be exercised in the face of FIAP's to recover investments in R & D made by the automakers, encouraging innovation, ensuring the safety of customers and the authenticity of the auto parts and avoid cream skimming (practice of providing the market only high-value-added products and low production cost products), thus ensuring the supply of auto spare parts to consumers, even after discontinuation of a vehicle, since the FIAP's are not legally compelled to this obligation, unlike the automakers.

This opinion shall then be forwarded to CADE Administrative Court for trial, where it will be decided whether the automakers sentencing recommendation will be accepted. If judged as valid, it is likely to be applied the appropriate fines and determined not to imposition of Industrial Designs in question in the face of FIAP's.

Our office Clarke, Modet & Co. will remain committed to closely follow the above process, keeping customers updated about any development.

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