Brazilian court hands down first tech permanent injunction to Netflix, as SEP litigation continues to rise

Brazil is well known in the global IP community for its preliminary injunctions (see “Availability of preliminary injunctions makes Brazil an attractive litigation venue for SEP owners”). Plaintiffs that can establish likelihood of infringement and demonstrate that they are suffering irreparable harm (eg, as a result of patent holdout) may be awarded injunctive relief as quickly as 24 hours after filing a complaint. However, the ever-growing number of cases dealing with patent infringement in the tech space sheds light on other strategic benefits for owners of SEPs litigating in Brazil.

Carlos Aboim and Rodolfo Barreto, partners at Licks Attorneys, represented the plaintiffs in the following assertions.

DivX secures victory against Netflix

DivX v Netflix has been ongoing since 2020. However, the case reached an unprecedented stage for tech patent disputes in Brazil at the end of last year when a final decision on the merits was rendered and Netflix was found to have violated DivX’s patent, which covers a technology related to deblocking video content using HEVC.

This outcome sends a crucial message from the Brazilian judiciary to companies potentially infringing Brazilian patents and underlines the country’s growing importance in global patent litigation strategies.The Fifth Business Court of the Rio de Janeiro State Court handed down a judgment on 15 December 2023 toconfirm the preliminary injunction and grant a permanent injunction to – effective immediately – enjoin Netflix from violating DivX’s patent by making available video content with the HEVC deblocking filter enabled.

The streaming giant was also ordered to compensate DivX for the material damages that resulted from the infringement based on Brazilian IP law. According to the relevant provision, the amount due corresponds to what Netflix would have paid to DivX for a licence, had it been willing, in addition to a US$4 million fine for contempt of court for failing to comply with the preliminary injunction.

Netflix has already filed an appeal, which will be heard by the Rio de Janeiro State Court’s Fifth Chamber of Private Law, the same appellate panel that issued the preliminary injunction and dismissed dozens of other interlocutory appeals filed by Netflix over the course of the proceedings.

This is a critical outcome considering that this is the first time that a permanent injunction has been awarded in a tech case in Brazil. Implementers usually settle with the patent holder when the preliminary injunction is stabilised or enforced.

Other DivX assertions

This latest win caps a series of victories for DivX in asserting this particular patent in Brazil. Netflix is the only convicted implementer still refusing to take a licence. Other implementers that DivX has filed infringement actions against in the past include:

• Samsung in 2021, which resulted in a global patent agreement only 17 days after the injunction was granted; and
• TCL in 2022, which also ended up in a licensing agreement shortly after the preliminary injunction was enforced – TCL was obliged to take effective measures to cease unlawful use of DivX’s deblocking technology.

DivX is also currently asserting the same patent against Amazon (action filed in 2022) and a court-appointed expert has already concluded a court-ratified report attesting the infringement. This suggests that Amazon should expect to face similar consequences to those now facing Netflix.

The reason why companies such as Samsung and TCL did not hesitate to enter meaningful licensing negotiations following the issuance or enforcement of a preliminary injunction is most likely because Brazil is a crucial market for electronic devices and streaming platforms. Netflix, for instance, has a 20-million-strong viewer base in Brazil and is set to invest 1 billion Brazilian reals (approximately US$200 million) by the end of 2024 to bolster its subscriber offering.

Growing attractiveness as a venue for patent holders

Brazilian law provides for effective remedies to protect patent holders’ rights, which has resulted in the country being increasingly vetted for SEP/tech patent assertions by a wide range of patent holders.

In November 2023, the Third Business Court of the Rio de Janeiro State Court granted Ericsson a preliminary injunction against Lenovo and Motorola over two SEPs covering technologies related to security procedures in 5G networks. The implementers were enjoined from implementing Ericsson’s patented technology on their cellular devices compatible with the 5G standard under a daily fine of 100 Brazilian reais (approximately US$20) per act of non-compliance, which includes the manufacture, offer for sale or commercialisation of any product that uses the patented technology. The injunction was maintained twice at appellate level and remains fully in force.

As more cases are filed in Brazil, decisions are evolving. In a case filed by Dolby against TCL asserting a patent related to a data-hiding technology in the HEVC standard, the court ordered that a simplified expert examination be conducted to confirm the essentiality of Dolby’s patent to the HEVC standard. This was the first time that a procedure of this type was carried out in a SEP/tech case, and the expert confirmed the essentiality of Dolby’s patent. This outcome strengthened the preliminary injunction and enabled the patent holder to request stronger enforcement measures. The preliminary injunction decision was praised by the appellate court.

Another highlight from Brazil in 2023 was Nokia v Oppo. Nokia filed a SEP infringement lawsuit against Oppo last year and a preliminary injunction was granted the following day to enjoin Oppo from commercialising smartphones equipped with its speech codec patent – which is essential to the AMR-WB standard – under penalty of a 10,000-reais (US$20,000) daily fine. The injunction was confirmed twice at the appellate level, and Oppo left the Brazilian market. In January 2024, the parties reached a global licensing agreement.

Looking ahead

As the attorneys representing the plaintiffs in these assertions, the permanent injunction obtained against Netflix reinforces the consistency of the Rio de Janeiro Appellate Court in adjudicating several tech patent cases and providing effective protection for patent holders.

The Brazilian judiciary yields vital results for patent holders, and between 2023 and 2024, it has seen new and innovative strategies to assert and enforce their IP rights. Brazil is expected to be selected more and more frequently as a patent litigation venue, given the force of Brazilian courts as leverage in licensing negotiations in the tech space.