I have had IB flights where I have been invited to upgrade, and many where I have not, so I asked about this procedure at the Iberia booking kiosk (not the check-in counter) at Barajas. The agent told me that selection of passengers invited to upgrade was random, that she thought it was limited to Iberia Plus members, and she was not sure if ticket bucket was taken into account (more expensive, first, I would imagine).
Of course, the whole thing depends on seat sales in J.