Technology Transfer and the Law

The Brazilian Patent and Trademark Office (BPTO) is in charge of registering contracts that involve transfer of technology, franchise contracts and similar ones.

As provided in the Regulatory Act nº 135, of April 15th, 1997, said contracts are:

• Patent Exploitation Contracts

• Contracts for the Use of Marks

• Technological Knowledge Acquisition Contracts

• Contracts for the Rendering of Technical and Scientific Assistance

• Franchise Contracts

The current Industrial Property Law – Law nº 9.279, of May 14th, 1996 – has definitely excluded the BPTO’S attribution to "accelerate and regulate the transfer of technology and to establish better negotiation conditions and utilization of patents".

However, what is verified is really that BPTO continues to intervene with the contracts for transfer of technology and to point out, in many instances, eventual violations to laws 8.884, of June 11th., 1994 (Economic Order Defense Law); 8.955, of December 15th., 1994 (Franchise Law); 9.609, of February 19th., 1998 (Software Law); 8.078, of September 11th., 1990 (Consumer Defense Code), among others.

As it was not enough, BPTO has consolidated some own understandings, deprived from legal basis, which face strong obstacles to be discussed in the administrative sphere, otherwise we may see:

• Establishment of the date of registration of the application for annotation with the BPTO as an initial record of the annotation, irrespective of the date provided in the contract as the initial term, which means that the licensed company may not remit payments arising from sales or invoicing comprised between the date set forth in the contract and the day of its submission to BPTO for annotation.

There is an exception to the contracts submitted for annotation within the 60 (sixty) days subsequent to the date of contract execution, in which event the annotation affects retroact to the date of execution.

• Application of the Limits of tax deduction in the Directive nº 436/58 of the Ministry of Finance as limits of remittance of payments in contracts involving companies with corporate commitment, in which the foreign party directly or indirectly maintains the control of the capital with right to vote of the Brazilian contracting party.

It must be observed that there is not in the entire Brazilian tax legislation any express provision that fixes limits for the remittance of payments, whether among bound companies or without any corporate commitment.

• Application of the maximum time limit of tax deduction, established in § 3º of Art. 12 of Law nº 4.131/62, for the contracts of transfer of technology as a limit of validity of such contracts.

Upon this understanding, BPTO determines that the contracts of transfer of technology, being excluded the marks and patents license contracts, technical assistance and franchise contracts, may only be registered for the maximum period of 5 years, which can be extended for a sole additional period of 5 years, since evidenced the advantages of the continuity of the contracting for the Brazilian company.

Although legally questionable, we have no information on any legal suits contesting the positioning adopted by the BPTO.

It is worth to observe that the annotation of contracts with BPTO shall only produce the effects above upon its publication in the Industrial Property Magazine, as determined by the article 226 of Law nº 9.279/96.

In the event of contracts between parties domiciled in Brazil, with payments in the country’s currency, the annotation is unnecessary to allow the tax deduction from the amounts paid.

This understanding results from the interpretation of the articles 52 and 71 of Law nº 4.506/64, which regulate in a broad manner the subject pertaining to the tax deduction resulting from contracts for the licensing of industrial property rights and the transfer of technology. Such positioning is confirmed by some legal decisions in order to dismiss the annotation for tax purposes when the payments are made in the country, in national currency, among parties domiciled herein.

By means of the enactment of Law 9.279, of May 14th., 1996, for the first time it was established the period of 30 days to BPTO examine the contracts submitted to its approval with the purpose of accelerating the annotation process. However, this term is renewed at each submission of the request for compliance with requirements during the annotation process, and does not represent any guarantee that the Annotation Certificate is issued during this period.

In practice, the first manifestation of the BPTO has been taking approximately 40 days counted from the submission of the contract for annotation.

In the event of non-compliance with this legal provision, it is admitted an administrative appeal to the BPTO’s president, according to §3 of art. 212, requesting the automatic annotation of the contract or its immediate analysis by the BPTO. Besides, it is possible to file a writ of mandamus or the file an ordinary action for damages in the event of such a non-compliance resulting in any impossibility of the execution of the contract or damage to the parties.

co-authored with Fávia C. de C. Amaral and Rita Capra Vieira