Competition and intellectual property in Latin America and the Caribbean

2. Interplay between competition and IP law

This section provides an overview of the interplay between competition and IP law, focusing on the objectives and pillars of each policy area, key competition law principles and approaches to IP law, as well as the institutional set-up in which this interaction takes place.

2.1. Pillars and objectives of competition and IP law

While its objectives remain the subject of intense debate, competition law is often seen as a means to ensure rivalry between competitors, to maintain and encourage the process of competition, promoting the efficient use of resources while protecting the freedom of economic action of market participants (OECD, 2003[7]). Competition law is applicable across markets and intends to ensure that companies can compete on their merits and the business conduct does not hinder the competitive process. Although there are various competition law standards, each featuring its own advantages and disadvantages, the consumer welfare standard still seems to be prevalent in most jurisdictions. This means that competition enforcement focuses on maximising consumer welfare, which includes factors such as price, quality and innovation (OECD, 2023[8]).

In this vein, competition law aims to prevent mergers that have a detrimental effect on competition, anti-competitive agreements and unilateral conduct by dominant firms, in order to fully realise the typical benefits of competition, such as lower prices, greater chose and higher quality (Dunne, 2015[9]).

Competition also contributes to substantial benefits at the macro-economic level, such as productivity, growth, innovation and employment (OECD, 2014[10]). Moreover, while there is no clear consensus on the relationship between competition and innovation, it has been recognised that when markets are constable (i.e. with low entry barriers) and the innovation is appropriable (i.e. successful innovators can capture, at least temporarily, the benefit from innovation), firms have an incentive to innovate (OECD, 2023[2]).

Intellectual property refers to the legal rights resulting from intellectual activity in the industrial, scientific, literary and artistic fields (WIPO, 2004[11]). Most jurisdictions worldwide have laws to protect IP, granting their owner (i.e. inventors and creators) an exclusive right to exploit their inventions and creations, often during a certain period. IP rights are private rights to exclude third parties from certain unauthorised uses of a protected subject matter. IP rights are not absolute rights, being limited in scope and often in time and granted only to those who met certain minimum conditions, according to the different IP rights (WIPO, 2004[11]; Dreyfuss and Pila, 2018[12]).

The various types of subject matter protected by IP rights are characterised by their intangibility, and their informational, expressive or technological nature (Dreyfuss and Pila, 2018[12]). They can be broadly categorised into two groups: authorial property (copyrights) and industrial property (patents and utility models, design rights, trade secrets, trademarks and geographical indications), as explained in the box below.

Box 1. Main types of Intellectual Property Rights

Copyrights

Copyrights protect and reward literary, artistic and scientific works (including, in some jurisdictions, computer software and databases), whatever may be their mode or form of expression. Copyrights stimulate creativity by assuring individuals and businesses that the original, expressive material they create will not be reproduced, adapted, communicated to the public, displayed, distributed or performed without their permission, or otherwise used in a manner that violates their exclusive rights. Copyright laws allow authors to obtain compensation, profit from, and take credit for the material they create. Copyright law’s protections typically last 50-70 years after the death of the creator, or shorter periods for works whose term is established by reference to the date of fixation or communication to the public.

Patents and utility models

Patents protect products or processes that provide new ways of doing something or that offer new technical solutions to problems. Patents stimulate innovation by ensuring inventors that qualifying inventions will not be legally used or sold without their permission for a certain period (usually 20 years). This enables inventors (potentially) to recoup their investments and to profit from them, e.g. by licensing them. To obtain a patent, one must disclose the technical knowledge behind the invention, thereby creating the potential for further follow-on technological developments. Utility models are similar to patents but typically provide protection for a shorter term (usually between 7 and 10 years) and cover innovation of an incremental nature that may not meet all the patentability requirements.

Design rights

Design rights protect new and/or original ornamental or aesthetic aspects of articles rather than their technical features. By providing protection against unlicensed imitations, design rights promote investments in proprietary designs that create value for both consumers and businesses. Registered designs are generally valid for up to 15 years, but they are renewable up to a maximum of 25 years in some jurisdictions.

Trade secrets

Trade secrets comprise confidential business and technical information and know-how with economic value that a firm makes reasonable efforts to keep secret. Trade secrets do not have a fixed duration and can potentially last indefinitely. By providing protection for valuable information and reducing the need for costly security measures, trade secret laws may encourage businesses to invest in the development of such information. Trade secret laws may also encourage businesses to engage in wider, though limited, dissemination of information than they otherwise would, e.g. by sharing sensitive information with business partners (subject to confidentiality agreements), thereby increasing the likelihood of knowledge spillovers.

Trademarks

They are distinctive words, symbols and brand names that help customers identify and purchase products or services that meet their needs and expectations, e.g. in terms of quality or price. By protecting such words and symbols, trademark laws encourage businesses to invest not only in developing brand names, but also in building strong reputations associated with those brands. Trademarks can usually be renewed indefinitely.

Geographical indications

Geographical indications are signs used on goods having specific geographical origins and possessing qualities or reputations that are essentially attributable to their place of origin. Geographical indications differ from other types of IP rights in that they are a collective right rather than a unique right held by a particular individual or business. Geographical indication protection can be renewed indefinitely.

The table below summarises the duration of IP rights in selected LAC jurisdictions.

Table 1. IP right protection in selected LAC jurisdictions

Type of IP right	Argentina	Brazil	Chile	Colombia	Costa Rica	Mexico	Peru
Copyrights	70 years	70 years	70 years	80 years	70 years	100 years	70 years
Patents	20 years	20 years	20 years	20 years	20 years	20 years	20 years
Utility models	10 years	15 years	10 years	10 years	10 years	15 years	10 years
Design rights	5 years, renewable twice (maximum 15 years)	10 years, renewable 3 times (maximum 25 years)	10 years	10 years	10 years	5 years, renewable 4 times (maximum 25 years)	10 years
Trade secrets	Indefinitely	Indefinitely	Indefinitely	Indefinitely	Indefinitely	Indefinitely	Indefinitely
Trademarks	10 years, renewable indefinitely	10 years, renewable indefinitely	10 years, renewable indefinitely	10 years, renewable indefinitely	10 years, renewable indefinitely	10 years, renewable indefinitely	10 years, renewable indefinitely
Geographical indications	Indefinitely	Indefinitely	Indefinitely	Indefinitely	Indefinitely	Indefinitely	Indefinitely

Source: OECD (2019[4]), Licensing of IP Rights and Competition Law, https://www.oecd.org/en/publications/licensing-of-ip-rights-and-competition-law_6a74221e-en.html; WIPO (2016[13]), Understanding Industrial Property, https://www.wipo.int/edocs/pubdocs/en/wipo_pub_895_2016.pdf; Law No. 11.723/1933, Decree-Law No. 6.673/1963 and Law No. 24.481/1995 (Argentina); Law No. 9.279/1996 and Law No. 9.610/1998 (Brazil); Law No. 17336/1970 and Law No. 19039/2006 (Chile); Andean Community Decision No. 486/2000 and Law No. 23/1982 (Colombia); Law No. 6867/1993, Law No. 6683/1982, Law No. 7978/2000, and Law No. 7975/2000 (Costa Rica); Federal Law on the Protection of Industrial Property/2020 and Federal Law on Copyright/2020 (Mexico); Andean Community Decision No. 486/2000 and Legislative Decree No. 822/1996 (Peru).

According to the World Intellectual Property Organization (WIPO), IP is protected for two main reasons. First, to give statutory expression to the moral and economic rights of creators in their creations, while recognising the rights of the public in access those creations. Second, to promote, as a government policy, creativity and the dissemination and application of innovation, thereby contributing to economic and social development (WIPO, 2004[11]).

Indeed, IP law aims at promoting innovation and facilitating its efficient exploitation by offering a reward to inventors in the form of exclusive rights, often for a limited duration, blocking unauthorised users and therefore preventing free riders. The exercise of such exclusive rights provides returns above the competitive level for a sufficient period of time that innovators can recoup their research and development costs. From this perspective, particularly under a static analysis, IP law may appear to conflict with competition law, as IP rights grant an exclusivity – albeit limited – that protects innovators from some kind of competition by blocking entry and raising access costs (Hemphill, 2018[14]; OECD, 2019[4]).

However, as discussed below, IP owners do not automatically obtain market power, as there will often be sufficient actual or potential close substitutes to prevent the exercise of market power. Even if this is not the case, consumers would be better off even at monopoly prices, as absent the IP protection the innovation could not even have emerged. This implies that although an IP right may result in a suboptimal use of an innovation in the short term, this is a trade-off aimed at securing greater dynamic efficiency in the long run by encouraging more research and innovation (Hovenkamp, 2013[15]; OECD, 2019[4]).

Nevertheless, consumer harm may result when IP law confers exclusionary powers that go beyond what is necessary to develop a new product or process, or when such rights are granted without yielding any meaningful innovation (Hovenkamp, 2013[15]). Embedding competition considerations within IP law and its application can prevent such outcomes, as will be discussed in section 4.

Furthermore, the effects of exercising exclusive rights derived from IP can be mitigated through licensing arrangements, which contribute to the dissemination and use of protected innovations and creations, thereby promoting competition in their distribution even while IP rights remain in force. Licensing agreements are also a means of fostering follow-on or cumulative innovation during the period of exclusivity of an IP right. In general, licensing will only occur when licensing revenues exceed the profits the IP holder could obtain by excluding competitors. Thus, the possibility of licensing an IP right creates an additional incentive to invest in innovation in the first place (Padilla, Ginsburg and Wong-Ervin, 2019[16]; OECD, 2019[4]).

In this context, it is widely understood that the conflict between competition and IP law is more apparent than real, as both policies share the common purpose of promoting innovation, economic growth and consumer welfare, albeit through different tools (OECD, 2021[17]; Competition Bureau Canada, 2023[18]; New Zealand Commerce Commission, 2023[19]; U.S. Department of Justice and the Federal Trade Commission, 2017[20]).

Nonetheless, as will be discussed below, IP rights may confer or enhance market power to such an extent that their holders may have incentives to constrain access to and/or retard further innovations, possibly with little economic benefit to society as a whole. In this vein, competition law is a valuable tool to ensure that IP rights do not inhibit the competitive process (Schmidt, 2025, p. 5[21]).

2.2. Competition law principles and approaches to IP rights

Approaches to the relationship between competition and IP law have evolved over time. In the past, IP-related practices were often considered beyond the scope of competition law, as the objective of IP rights was thought to be the provision of a temporary monopoly. In this regard, early cases1 established an immunity for IP-related conducts, which allowed companies to circumvent competition law, for instance through cross-licensing agreements among competitors to fix prices (OECD, 2019[4]).

Nevertheless, competition authorities and courts have progressively moved ahead to limit the scope of the IP immunity doctrine, recognising that competition law can be enforced even when IP rights are at stake, particularly when IP holders exceed the boundaries inherent in their rights. Initially, a more formalistic approach emerged, with certain IP-related practices, such as vertical patent licensing, being treated as per se competition infringements.2 However, in recent decades, jurisdictions have started acknowledging the potential pro-competitive effects of IP-related practices and now require an effects-based analysis, applying the rule of reason, before concluding that a behaviour is anti-competitive (OECD, 2019[4]).

Currently, it is widely accepted that IP rights do not relieve the holder from compliance with competition law when seeking or exercising these rights, as recognised by the OECD Recommendation on Intellectual Property Rights and Competition [OECD/LEGAL/0495]. The Recommendation also calls for effective enforcement of competition law against anti-competitive IP-related business practices, outlining key principles regarding the application of competition law to IP rights:

The scope of IP rights can be different from that of the relevant market. Products enjoying different IP right protection or even products not benefitting from IP right protection can compete in the same relevant market. Although IP rights create boundaries within which owners can exclude others, these do not automatically define completely distinct markets (Schmidt, 2025[21]). In fact, there will often be sufficient actual or potential close substitutes for the IP right-protected product and therefore the relevant market is generally larger than the specific IP right. Thus, a single firm’s IP right typically does not constitute a relevant market on its own.

Holding an IP right does not automatically equate to holding market power. IP rights confer only a legal monopoly to prevent others from duplicating the specific product covered by the right, but this does not extend to other actual or potential close substitutes that may constrain the exercise of market power. Indeed, the power of IP rights is “boundary exclusion”, but only seldom “market exclusion”. Additionally, while IP rights allow their holder to capture the value of an existing asset, if the protected subject has low or no value, the IP right itself will not create any substantial value (Hovenkamp, 2012[22]). Therefore, IP rights are often too narrow to grant significant market power on their own, although they are one of several factors considered when determining the scope of a firm’s market power, assessed on a case-by-case basis.

IP-related business conduct should be subject to a competition effects-based analysis. IP‑related practices should be assessed under the rule of reason.3 This means that IP-related practices, even when carried out by IP holders with market power, are regarded neither inherently anti-competitive nor automatically compliant with competition law, requiring instead a contextual evaluation of their effects (Anderson et al., 2018[23]). In other words, competition authorities and courts must prove that the business behaviour involving IP rights harmed competition and that such a harm was not outweighed by countervailing competitive benefits, including innovation incentives.

In this context, many jurisdictions worldwide, including in LAC, have enforced competition law to IP-related practices, as will be further discussed in section 3. In some cases, such as in Canada (Competition Bureau Canada, 2023[18]), the European Union (European Commission, 2014[24]), Japan (Japan Fair Trade Commission, 2016[25]), New Zealand (New Zealand Commerce Commission, 2023[19]), and the Unites States (U.S. Department of Justice and the Federal Trade Commission, 2017[20]), competition authorities have developed and published guidelines on the main principles governing competition enforcement against IP-related practices. This is in line with the OECD Recommendation on Intellectual Property Rights and Competition and aims at enhancing transparency, predictability and legal certainty for effective competition enforcement. Guidelines are a relevant competition advocacy tool, helping business assess the legality of their IP-related conduct and therefore facilitating compliance with competition law. However, to date, LAC competition authorities have not issued such guidelines.

Box 2. The United States guidelines on competition enforcement in IP-related cases

The US Department of Justice and the Federal Trade Commission have issued joint guidelines to set up a framework to understand the interaction between antitrust and IP-related business practices, particularly regarding the licensing of IP rights. While the guidelines do not eliminate discretion for enforcement bodies, they provide a useful resource for both authorities and stakeholders, offering reasonable flexibility in their application.

The guidelines underline the complementarity of IP and antitrust laws, highlighting the common purpose of promoting innovation and enhancing consumer welfare. Nevertheless, while IP licensing agreements generally fulfil these aims, in certain cases they may harm competition among market participants.

Three overarching principles guide the analysis of potential anti-competitive effects arising from the licensing of IP right: (i) there is no distinction between conducts involving IP rights and other forms of property; (ii) the mere ownership of IP rights does not create a presumption of market power; and (iii) IP licensing is generally considered pro-competitive, as it allows the combination of complementary factors of production.

The rule of reason typically applies to evaluate IP related restraints, requiring the agencies to inquire into the likely competitive effects of the conduct. However, in certain circumstances, the nature and necessary effects of a restraint are so clearly anti-competitive that the per se rule applies (e.g. naked price fixing, output restraints, market division among competitors, and certain group boycotts).

Additionally, the competition agencies have set up a “safety zone”, which establishes a presumption that certain IP licensing arrangements meeting specified criteria will not be challenged. In particular, unless extraordinary circumstances are present, the agencies will not challenge a restraint in an IP licensing arrangement if the restraint does not appear anti-competitive and if, together, the licensor and its licensees hold no more than 20% of each relevant market significantly impacted by the restraint. This safe harbour is designed to promote certainty for businesses involved in licensing transactions, while not constituting a presumption of unlawfulness for agreements that fall outside its scope.

Finally, the Guidelines provide hypothetical scenarios illustrating the likely competitive assessment by the agencies when the interplay of IP rights and competition concerns is at stake.

Source: U.S. Department of Justice; Federal Trade Commission (2017[20]), Antitrust Guidelines for the Licensing of Intellectual Property, https://www.justice.gov/atr/IPguidelines/dl

2.3. Institutional set-ups of competition and IP authorities in LAC

In most jurisdictions worldwide, the enforcement of competition and IP law is entrusted to separate institutions, i.e. competition authorities and IP agencies, respectively. Under this commonly adopted framework, effective co-operation between these two entities is often necessary (as further discussed in section 4), though it can prove challenging in practice.

While this institutional set-up is also prevalent across most regimes in LAC, there are a few jurisdictions in the region where a single agency is responsible for enforcing both competition and IP law. Notably, this is the case in Colombia and Peru, where the same body (i.e. Superintendence of Industry and Commerce/SIC and Institute for the Defence of Competition and Intellectual Property/Indecopi, respectively) is both the competition authority and the IP agency.

Several discussions at the OECD Competition Committee have addressed the topic of multi-function authorities – that is, entities entrusted with multiple roles beyond competition, for instance consumer protection, sectoral regulation, public procurement control and/or IP. These debates have highlighted that integrating such functions within a single agency can present both challenges and opportunities (OECD, 2016[26]; 2022[6]).

While in most cases, establishing multi-function authorities aim at fostering coherence and co-ordination between competition and the different policy domains, in practice the institutional design does not automatically ensure effective collaboration and policy coherence. For instance, in Colombia and Peru, the authority’s dual role as both competition and IP agency does not represent a significant departure from co-operation practices observed in other institutional set-ups across the region. In practice, the two areas are managed by separate units that largely operate in isolation, with co-operation between the competition and IP mandates remaining mostly informal and infrequent.

Other institutional arrangements also exist in LAC. In particular, in the Dominican Republic, the IP agency (INAPI) is the institution in charge of enforcing competition provisions, including concerning collusive practices and abuse of dominance, if they relate to IP rights, regardless of the sector in which the practices occur. The competition authority (Pro-Competencia) does not have the powers to apply the competition act in these cases. Nevertheless, as there are specific competition law provisions governing IP-related practices which are not necessarily convergent with the general competition law framework, this may result in inconsistent competition enforcement, legal uncertainty and duplication of resources (OECD/IDB, 2024[27]).

In summary, there is no “one-size fits all” solution to the institutional design of competition and IP authorities. While each jurisdiction’s choice is shaped by its specific economic, social and legal context, it is important to weigh the advantages and disadvantages of each institutional model in light of these local circumstances, in order to determine the most effective way of promoting fairness and efficiency (OECD, 2016[26]).

Notes

← 1.  For instance, Bement v. National Harrow Co., 186 US 70 (1902); Henry v. A.B. Dick Co., 224 US 1 (1912); Carbice Corp. v. Am. Patents Dev. Corp., 283 US 27 (1931).

← 2.  For example, the US DoJ’s prohibition of “Nine No-No’s”, resulting in an overall condemnation of vertical patent licensing practices as per se illegal. Likewise, The European Union also adopted a strict approach to IP licensing in the 1970s, classifying conduct into “white”, “grey”, and “black” lists based on their permissibility (OECD, 2019[4]).

← 3.  Except for restrictions that are subject to per se/by object treatment, such as hard-core cartels.