by Ivan B. Ahlert
December 01, 1991
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1. BACKGROUND
According to the previous Industrial Property Code, Law 5.772 of December 21, 1971, substances, materials, mixtures or chemical-pharmaceutical products and medicaments and the processes of obtaining and modifying them were not patentable.
When the Bill for a new industrial property law was submitted to the Brazilian Congress in 1991, one of the most controversial issues was the proposal to allow patentability of inventions in the pharmaceutical field. The negotiations for the adoption of the GATT/TRIPS, and the later conclusion of this agreement in Marrakech in 1993, provided a strong basis for those who were fighting for the elimination of the earlier exclusions to patentability, while those who wished to retain the exclusions, principally the national pharmaceutical laboratories, were insistent on the need to provide a larger transitional period for the adoption of patent protection in the pharmaceutical field. It soon became clear that Congressmen in the Lower House were predominantly in favor of narrowing the exceptions to patentability, particularly because, during the long period in which patents were not granted for pharmaceutical substances and processes – not surprisingly – research activity in this area among national laboratories was practically non existent.
A parallel discussion arose with respect to the protection of medicaments for which patents had been filed abroad, and which had not yet been placed on the market anywhere, but for which the 1-year priority term had already expired. The so-called "pipeline" provisions, which would give protection to pharmaceutical products no longer fulfilling the novelty requirement, became the focus of criticism among the most radical opponents to patent protection in the pharmaceutical area. Pipeline provisions were nevertheless approved, although undesirably they also embraced patent applications already filed in Brazil, pending when the new law was enacted. The resulting drawbacks will be outlined later in this article.
2. RATIFICATION OF TRIPS
Before the new law was finally approved, the Brazilian Congress ratified the final Act of the Uruguay Round of GATT by means of Legislative Decree No. 30 of December 15, 1994, and President Fernando Henrique Cardoso promulgated it through Decree No. 1355 of December 30, 1994. The GATT/TRIPS Agreement entered into force in Brazil on January 1, 1995, when the World Trade Organization was officially created.
The ratification of the GATT/TRIPS agreement immediately prompted discussions as to the date on which it would become fully effective in Brazil. On the one hand, the Brazilian Patent Office and the Ministry to which it is subordinate issued official opinions to the effect that, as a developing country, Brazil would be entitled to postpone full implementation of TRIPS until January 1, 2000, on the basis of its Art. 65. On the other hand, the Brazilian Intellectual Property Association (ABPI) issued a resolution stating that this Agreement not only entered into force on January 1, 1995, but also became fully effective on that date. ABPI’s opinion relied on the fact that, although Brazil would undoubtedly have been entitled to the transitional periods of Art. 65, Decree No. 30 incorporated the Final Act of the Uruguay Round into Brazilian legislation without any proviso as to a possible delay with respect to full implementation of the Agreement. On the contrary, the Decree stated that the Final Act should be complied with in its entirety, revoking provisions to the contrary.
Patent applicants and patent owners soon started to rely on TRIPS’ provisions in order to ensure that their patent applications concerning pharmaceutical products and processes would be allowed, and to obtain an increase in the 15-year term of patents that were still in force on January 1, 1995.
The Patent Office invariably rejected every requirement based on TRIPS, and several lawsuits were filed against the Patent Office’s decisions. Although the first court decisions issued in this respect were far from consensual about the "date of application" of TRIPS in Brazil, today there is a clear predominance of decisions in favor of the full applicability of TRIPS as from January 1, 1995. Nevertheless, so far no decision has been issued in this respect by the Federal Supreme Court or by the Superior Court of Justice.
3. THE NEW LAW
On May 15, 1996, the new Industrial Property Law, Law 9.276/96, was published in the Official Journal. Except for the pipeline provisions, which entered into force immediately, the law would become fully effective one year later, i.e., on May 15, 1997.
Although one of the main purposes of the new law was to bring the Brazilian legislation into line with TRIPS, and although this purpose was widely achieved, when the new law was enacted applicants and patent owners were already claiming the direct application of certain provisions of TRIPS before the courts. This situation created some uncertainty as to the application of the few provisions of the new law that were not in complete harmony with TRIPS.
3.1. PIPELINE PROVISIONS
According to Art. 229 of Law 9279/96, the provisions of this law would be applied to all pending applications, except, amongst others, with respect to the patentability of chemical-pharmaceutical substances, matter, mixtures or products and medicaments of any type, as well as the respective processes of obtaining or modifying them. The patentability of such inventions would be conditioned by the provisions of subsequent Articles 230 and 231, the pipeline provisions.
Pipeline applications could be filed during the transitional period between May 16, 1996 and May 15, 1997.
The basic conditions for a pipeline application to be filed for subject matter that was unpatentable under the previous law, were as follows:
Patent applications filed under the pipeline provisions were published, allowing interested parties to intervene with respect to whether the above conditions have been met.
A pipeline patent would be granted as soon as grant of a patent in the country where the first application was filed could be proved, and the patent would be granted in Brazil, exactly as granted in the country of origin. The term of protection of a pipeline patent would correspond to the remainder of the term of protection in the country of origin, limited, however to a maximum of 20 years.
If the subject matter of interest had already been claimed in a pending Brazilian patent application, a new application could be filed under the pipeline provisions, provided that the applicant abandoned the pending application.
Last but not least, inspired by a similar situation in Mexico, an official filing fee for pipeline applications was established at R$ 10,000.00, or about US$ 10,000.00, which fact alone discouraged several applicants from re-submitting their pending applications under the pipeline provisions.
3.2. PHARMACEUTICAL PATENTS
Patent applications filed in Brazil on or after May 15, 1997, including PCT applications having a later international filing date, fully benefit from the new law, particularly concerning the patentability of pharmaceutical products and processes and the 20-year patent term. The only barrier that still exists to the patenting of pharmaceutical products and processes lies in the provisions of Provisional Measure 2014, which will be discussed in section 4 below.
3.3. COMPULSORY LICENSES
According to Art. 68 of the new law, a patent is subject to a compulsory license upon request by a third party if (i) the patentee exercises patent rights in an abusive manner or (ii) by means of the patent the patentee practices abuse of economic power that is proven under the terms of the law by an administrative or court decision. A patent will also be subject to a compulsory license if (iii) the invention is not effectively worked in Brazil, or (iv) if commercialization does not meet the needs of the market.
From the above, it appears that item (iii) is the only one that would not be in full compliance with TRIPS’ Articles 27.1 and 31. According to Art. 68, §1 of the Brazilian law, a patent is not deemed to be worked if the patented product is not completely manufactured in Brazil. An exception to local working exists in the case of non-exploitation due to economic unfeasibility, when importation will be admitted. Since working by importation is restricted to a very specific situation, this would seem to result in discrimination, which is contrary to TRIPS Art. 27.1.
This apparent violation caused the US Government to submit, in June 2000, a formal consultation to Brazil through the WTO, to which consultation the European Union joined as an interested party. So far, apparently the Brazilian Government has not formally replied to this consultation. Although not very likely, there seems to be a possibility that this matter will be resolved by means of bilateral or multilateral conversations outside the WTO.
Besides the above conditions, a temporary compulsory license can also be granted in cases of national emergency or public interest, declared by an act of the Federal Executive Authorities, insofar as the patentee or his licensee does not meet such need, and provided that the rights of the patentee are not prejudiced. This possibility seems to be supported by TRIPS. This provision was regulated by Decree 3201/99, the only provision of which that appears to merit closer attention lies in the obligation of the patentee, if required, to provide the necessary and sufficient information for the effective production of the patented product.
An important aspect of compulsory licenses lies in that, on the one hand, since 1997 only one request for a compulsory license has been notified in the Industrial Property Gazette, and even this single case apparently ended in a voluntary agreement between the parties. On the other hand, Art. 69 of the Industrial Property Law provides that a compulsory license will not be granted if the patentee (i) justifies non-use for legitimate reasons, (ii) proves that serious and effective preparations for exploitation have been carried out, or (iii) justifies lack of manufacture or commercialization due to legal obstacles. In cases of national emergency or public interest, again a temporary compulsory license will only be granted if the patentee is not able to meet this need. Finally, at least as from January 1, 2000, the conditions to be met with regards to a possible request for a compulsory license must be in accordance with TRIPS’ Art. 31, e.g., that the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time (Art. 31.b).
Thus, this issue may become more academic then practical.
3.4. EXCEPTIONS TO PATENT RIGHTS
Of particular interest with respect to the pharmaceutical area, the Brazilian law provides the following exceptions to which patent rights do not apply:
a) Experimental use exception
The experimental use exception of Art. 43, II is another controversial issue of the Brazilian law. Although this exception refers to acts having experimental "purposes", there is a body of opinion that sustains that it would also apply to experiments aimed at regulatory approval. This position does not seem to be accurate, for several reasons. Firstly, again the exception refers to acts which have an experimental purpose, while experiments for regulatory approval have a clear commercial purpose. Secondly, this exception in the Brazilian law derives from the text of one of the earlier versions of WIPO’s Harmonization Treaty, which contained between brackets an additional passage expressly referring to the purpose of seeking regulatory approval for marketing, from which it becomes clear that the precedent passage covering acts for experimental purposes deals with a different situation. Third, as will be discussed below, in the 7th reedition of Provisional Measure 2014 an additional provision was added to present Art. 43 of the Brazilian Industrial Property Law, which deals expressly with the issue of regulatory approval, thus leading to the conclusion that this matter was not addressed by the original paragraphs of that Article. Finally, apparently rendering MP 2014 ineffective in this respect, a Bill recently submitted to the Brazilian Congress and concerning the protection of non-disclosed information provides that acts aimed at obtaining approval for commercialization are to be deemed as experimental according to the provisions of Art. 43, II of Law 9279/96.
Nevertheless, even if the exclusion allowing third parties to perform acts aimed at obtaining regulatory approval is approved by the Brazilian Congress, the Council for TRIPS has already issued a report in the panel European Community v. Canada on Patent Protection of Pharmaceutical Products, stating that the provisions of Section 55.2(1) of the Canadian Patent Act is not inconsistent with the obligations under Article 27.1 and Article 28.1 of TRIPS Agreement.
b) Exception concerning individual use
Art. 43, III, of the Brazilian law also prevents the patentee from preventing third parties from preparing a medicine for individual cases, according to a medical prescription. Also these provisions originated from earlier versions of WIPO’s Harmonization Treaty, and presumably do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, thus not being in conflict with TRIPS’ Art. 30.
The restrictions are clear: (i) the preparation itself is restricted to the presentation of a medical prescription; (ii) it shall be restricted to individual cases; and (iii) the preparation shall be executed by a qualified professional. Thus, third parties are precluded from preparing large amounts of the patented medicine, and then selling it to individuals carrying a medical prescription. Besides, if the active ingredient is the object of a separate claim, the above exception apparently does not allow third parties to manufacture and/or to maintain in stock large amounts of this ingredient for later preparation of the medicine, since those acts do not seem to be covered by the exception.
3.5. PARALLEL IMPORTATION
As a general rule, according to Art. 43, IV, exhaustion of patent rights is deemed to occur only with respect to products placed on the internal market by the patentee or with his consent, while – amongst other acts – the patentee has the right to prevent third parties from importing the patented product or a product directly obtained by the patented method (Art. 42). Although considered as infringement for civil purposes, parallel importation is not considered as a crime (Art. 184, II), even though further acts performed with respect to the product will possibly constitute a crime. Thus, as a general, rule, the patentee is able to prevent third parties from performing parallel importation, although any effective measure in this respect will be restricted to the civil courts.
Despite the above general rules, the Brazilian Industrial Property Law provides for two specific exceptions, in which the patentee cannot prevent parallel importation: (i) under art. 68, §4 if the patentee is exploring his patent by means of importation of the patented product, then third parties are entitled to perform parallel importation; (ii) according to art. 68, §3 if a compulsory license is granted to a third party on the grounds of abuse of economic power, the licensee is entitled to perform parallel importation during 1 year, and during the period in which the licensee is importing the patented product any third party is also entitled to perform parallel importation. As to item (i) it seems that the Brazilian Industrial Property Law stands against the provisions of TRIPS’ Art. 27.1 insofar as "patent rights [shall be] enjoyable without discrimination as to … whether products are imported or locally produced", and thus the rights of the patentee should not be affected in any way as a result of such discrimination, even considering that TRIPS’ Art. 6 excludes issues concerning exhaustion of rights from the scope of this agreement.
3.6. PROTECTION OF UNDISCLOSED INFORMATION
Art. 195 of the Brazilian law is substantially in line with TRIPS’ Art. 39(3), as far as the protection of results of tests or other undisclosed data is concerned. Nevertheless, the regulations in force concerning the registration of medicaments by similarity do seem to violate the principles established by these provisions, since the applicant for the similar product is entitled to present only complementary tests, such as those related to the stability of his product, while indirectly benefiting from the complete tests submitted by the applicant for the original product even though he has no access to this information. This situation will possibly change, in view of the submission by the Brazilian Government to the Congress on September 4, 2000 of a Bill concerning the protection of non-disclosed information submitted for the approval of commercialization. This Bill provides for a 5-year protection term for products using new chemical or biological entities, and a 2-year term for other products. This Bill will still be discussed in the Brazilian Congress before its possible approval.
4. PROVISIONAL MEASURE 2014
Having as background an open confrontation between the Health Minister, José Serra, and the pharmaceutical industry, particularly concerning the prices of drugs used in public health programs such as that against AIDS, a Provisional Measure was edited by the Government only two weeks before the date in which Brazil would unquestionably be forced fully to apply TRIPS. The initial Provisional Measure was reedited on December 30, 1999, as Provisional Measure 2014-1, and has the following basic effects:
Provisional Measure 2014 also provides that the grant of patents for pharmaceutical products and processes shall depend on previous approval by the National Agency for Sanitary Surveillance (ANVS).
Finally, as already commented in this article, the 7th reedition of this Measure included another paragraph to Art. 43, establishing an exception to the patent rights with respect to acts performed by third parties aimed at obtaining regulatory approval.
The Brazilian Intellectual Property Association issued a resolution, according to which Provisional Measure 2014 is unconstitutional, and violates TRIPS. Besides, assuming that for approving allowance of the respective patents ANVS will rely on the same criteria they currently use for allowing or disallowing commercialization of pharmaceutical products, this procedure will also violate the Paris Convention. ABPI’s resolution was distributed to authorities and to representatives of the pharmaceutical industry, but so far he Government continues to republish monthly reeditions of the Provisional Measure.
5. AIDS DRUGS
While the Clinton administration has declared the global spread of AIDS a threat to national security, apparently with no impact on patents in this area, Bill 1922/99 was submitted to the Brazilian Congress with a proposal to exclude drugs for treating AIDS and the respective processes from patent protection. Discussions within ABPI revealed an apparent consensus in the sense that this alteration on the present law would represent a clear contravention to TRIPS Art. 27.1.
As the most recent developments in the pharmaceutical field have shown, a close eye will need to be kept on possible new legislative proposals. So far, ABPI has managed to react rapidly, upon repealing initiatives that result in contravention to international treaties in the intellectual property field.