The interface between intellectual property and competition law in Perú

1. The interface between intellectual property and competition law in Perú Second WIPO Inter – Regional Meeting on South – South Cooperation on Patents, Trademarks, Geographical Indications, Industrial Designs and Enforcement May 6 to 8, 2013 Cairo Dr. Hebert Tassano V. Perú

2. Indecopi The National Institute for the Defense of Competition and Protection of Intellectual Property Rights (INDECOPI) is a specialized public agency with legal capacity in domestic public law. Consequently, it has functional, technical, economic, budgetary and administrative autonomy and it belongs to the Presidency of the Council of Ministers.

3. Indecopi INDECOPI has, among other functions, the important function to be the National Competition Agency and at the same time, the Intellectual Property Authority INDECOPI Instituto Nacional de Defensa de la Competencia y de la Protección Intelectual

4. Structure of Intellectual Property

5. Structure of Competition

6. Is there any relation between intellectual property and competition law? • - We believe YES there is an interface between Competition Law and Intellectual Property. • This interface has attracted more attention in recent years because intellectual property rights have acquired importance in the knowledge economy and the legal protection of competition as a mechanism for allocating and innovation in markets. • In the case of developing countries like Perú, are more evident problems in the interplay of both areas.

7. Is there any relation between intellectual property and competition law? • Whereas the need for development and promotion of innovation may be associated with the idea that technology -subject to the protection of Intellectual Property – pass as soon as possible to the public domain. • In response, the natural incentive for holders of Intellectual Property Rights is delaying the transfer to the public domain by using anticompetitive practices. Therefore it is necessary to study the mechanism of interaction between these two areas and how to resolve potential conflicts between them if their appear.

8. How is the interface in INDECOPI? • First Possibility: Intellectual Property and Competition • Compulsory Licensing: is the area in which the link between patents and competition is more evident. Consists of the ability to use and exploit a patented product without authorization of the patent holder, in particular cases, properly defined by law. • Second Possibility: Competition and Intellectual Property • Competition cases involving intellectual property rights: are those in which a company has dominant position because it is the holder of an intellectual property right (for example a patent) and refuses to grant a license to its competitors, making use of its right but probably affecting the interest of others because its behavior distorts competition.

9. Intellectual Property and Competition Compulsory licenses

10. Compulsory Licenses • Perú is member of the CAN that is a community of countries (Bolivia, Colombia, Ecuador and Perú) united voluntarily to achieve development. Therefore, we applies Decision 486 of the CAN which provides the cases where a Compulsory License could be granted, mainly: • Public necessity, urgency or national emergency. • Abuse of dominant position • The Inventions and New Technologies Directorate of INDECOPI (DIN) is in charge of granting Compulsory Licenses. • If DIN grants a mandatory license, it must determine the amount and conditions of economics compensations that will be received by the patent owner. • To date, DIN has not received any request for a Compulsory License, but we will study the two most important possibilities.

11. 1. Compulsory Licenses: public necessity, urgency or national emergency Compulsory licenses can be requested when the Peruvian Government needs to use a patented invention to address a situation of public interest, emergency or national security. In these cases, in addition to the amount and terms of financial compensation, DIN must establish the scope of the license (duration and object). This type of mandatory licenses is valid only for the duration of the situation that originated the request of the government and it does not eliminate the exploitation right of the patent holder.

12. 2. Compulsory Licenses: abuse of dominant position DIN can grant a mandatory license in presence of an anticompetitive conducts, particularly, in case of abuse of dominant position, as determined by the antitrust authority, the Defense of Free Competition Commission of INDECOPI. Thirds parties that are granted the compulsory license are required to pay to the owner a compensation, the amount of the compensation must take into account the need to correct the anti-competitive practice. This type of licenses can be granted by DIN with or without a request from a third party.

13. Competition and Intellectual Property Antitrust cases involving intellectual rights

14. Free Competition and Intellectual Property • Legislative Decree 1034, Law Enforcement of Anticompetitive Conduct, provides sanctions for abusive behavior of dominant position when the holder of an intellectual property right refuses to grant a license and thereby unduly restrict competition, obtaining benefits and hurting real competitors. • The law establishes the need to demonstrate that the restrictive effects outweigh the positive effects on the market. • To date, the Commission of Defense of Free Competition has not sanctioned this kind of behavior. However, there are cases that have involved aspects of IP rights.

15. Free Competition and Intellectual Property • In fact, some antitrust cases analyzed in INDECOPI have involved issues regarding intellectual property rights: • Telecable S.A. V. Telefónica del Perú S.A.A. and Telefónica Multimedia S.A.C • AmbevPerú S.A.C. V. Unión de Cervecerías Backus and Johnston S.A.A. and others.

16. Case 1: Telecable V. Telefónica del Perú and Telefónica Multimedia • Telecable S.A. filed a complaint against Telefónica del Perú S.A.A. y Telefónica Multimedia S.A.C. because of anticompetitive conducts consisting of subscribing exclusive agreements for broadcasting and refused to grant intellectual property licenses. • Exclusivity arrangements would be limited to the city of Loma and would have been held with Turner Broadcasting System Latin America, Inc. and Fox Latin American Channel, Inc. • The ruling was in favor of the complainant and ordered to annul all the clauses involving the granting of exclusive transmission and / or distribution of their programming.

17. Telecable V. Telefónica del Perú and Telefónica Multimedia • However, two out of five members of the collegial body opposed the majority decision. • Among other things, they argued that the proper functioning of markets is based on the protection of property rights; in this case, Turner and Fox ’s intellectual property rights. • In their opinion, any limitation of property rights must be based on the belief that consumers welfare is being affected in the long term and without justification and that point was not analyzed in this case. • (Res. 062-CCO-2000/Osiptel)

18. Telecable V. Telefónica del Perú and Telefónica Multimedia This case teaches us that there are cases where the action of a provider to limit the granting of intellectual property rights and the transmission / distribution of your signal may limit competition in the market.

19. Case 2: Ambev V. Backus and others • Cervecera Ambev Perú S.A.C. filed a complaint against Unión de Cervecerías Peruanas Backus y Johnston S.A.A. (Backus) and others for abuse of dominant position preventing its access to a system through which other beer companies interchanged their bottles (SIE), as well as exclusivity contracts between Backus and beer retailers in order to prevent access to major retail channels of beer. • The objective of the agreement was to protect the reputation SIE Product. It also facilitated the exchange of containers (glass containers uniforms 620 ml amber color with the symbol "Triangle CFC") at the producer and consumer and retail level. Backus applied for registration of the package and the symbol to the Trademarks Office of INDECOPI (today, Trademarks Directorate) as three-dimensional mark. • (Res. 045-2009/CLC-INDECOPI)

20. Ambev V. Backus and others • In December 2005, The Tribunal of INDECOPI decided to refuse the registration of the three – dimensional trademark. In 2006, the Defense of Free Competition Commission of INDECOPI re – initiated its procedure referred to the access of Ambev to SIE. • In April 2009, Ambev withdrew all of its complaints referred to the access to SIE. Nonetheless, The Defense of Free Competition Commission analyzed if the practices affected third party’s interests. With regards to the denial to access to SIE, INDECOPI concluded that it meant a non – significant incremental cost to Ambev, so there was no impact in switching cost or in entry into the market. • (Res. 045-2009/ST-CLC-INDECOPI)

21. Ambev V. Backus and others • Although the conduct complained was not accredited, this case shows that the registration of a distinctive sign could lead to a restriction of competition if the market entry of a competitor depended on its use. • (Res. 045-2009/ST-CLC-INDECOPI)

22. Conclusions • In Peru INDECOPI is in charge of the Defense of Free Competition and also of Intellectual Property Protection, noting that there is an interface where intellectual property rights might collide with free market competition. • An example are the challenges to the patent system, considered by some as an "artificial monopoly" held by the State which may create distortions in sensitive markets such as food and pharmaceuticals. However, if we were in a situation of national emergency or misuse abuse of dominant position, it is possible that the State through INDECOPI can grant Compulsory Licenses. • To date, INDECOPI do not sanction any company for abuse of dominant position and do not grant Compulsory licenses but has the tools to do it.

23. Conclusions • Therefore, we believe that while there is an interface between the Defense of Free Competition and Intellectual Property Protection, this does not mean that there is a collision between the two. On the contrary, should be regarded as exceptional situations, as the exclusive rights encourage innovation and the generation of technology to benefit society. • In that line is important to note that the patent system also encourages the development of incremental technology from technical information protected, what motivates competitors to improve or exceed technology, researching about the technical stuff and patented thereby generating an incentive for competition.

24. Conclusions • In this scenario it is important that these events serve as a platform to exchange knowledge and experiences in order to develop public policies to harmonize the relationship between Intellectual Property Rights and the Protection of Free Competition. • In that sense, for a developing country like Peru is of great importance to establish guidelines and procedures for the granting of compulsory licenses for public necessity, urgency or national emergency, taking into account that their award is an exceptional flexibility or limitation patent law.

25. Conclusions • Therefore, our proposal is to work within WIPO in developing guidelines and / or clear procedural guidelines for defining specifically in which case we have a public necessity, urgency or national emergency and in what way can exercise these flexibilities in practice, taking into account that while South America (Brazil and Ecuador) Compulsory licenses have been granted, there is no history of guidelines that define the course of public necessity, urgency or national emergency or procedural guidelines aimed at standardizing the way in which they can exercise these flexibilities.

26. THAK YOU VERY MUCH PERÚ

27. ORGANIZATIONAL STRUCTURE OF INDECOPI BOARD OF DIRECTORS Functional Agencies Administration