Paper presented at the "Program on Brazil´s New Industrial Property Law", on September 19, 1996 at the Dean Dinwoodey Center of George Washington University Law School.
The object of this paper is mainly to provide a private lawyer view of industrial property-based business in Brazil, when law no 9.279 comes into force on May 15, 1997.
Since most of the industrialized countries signed the TRIPS agreement, business, in general, became definitely and strongly connected to intellectual property rights. This is a fact which resulted in those countries having to adapt their legislation to cope with the requirements imposed by TRIPS.
Brazil was not an exception and those who have already read the new Law no 9.279 of May 14, 1996, will easily recognize that the main TRIPS provisions have simply been transported to the domestic law.
One must never forget that TRIPS is a commercial treaty and, as such, its influence on intelectual property law is of commercial significance and directly affects business. Intellectual property rights became a powerful tool in doing business, mainly in the patent area, where technnlogy is directly involved, and technology is a valuable asset.
Brazil, in spite of all economic and political problems, has a long standing industrial tradition, having a strongly established industry, including most of the biggest american and european multi-national corporations which have had plants in the country for more than fifty years. Due to a close cooperation with local consultants and administrators, those industries have ever managed to be profitable and to survive the many changes in the country’s economic and political policies.
As a consequence of the flexibility demonstrated during the last 20 years, those companies are now in a privileged position to benefit from the new scenario created by the combination of stable economic and political conditions and an industrial property law in conformity with the internationally adopted rules of protection.
Turning now to a more focused view of the new law, I would like to mention and briefly comment upon those points that, in my opinion, represent an improvement in the use of industrial property rights – patents mainly – as a business tool.
Administrative prosecution of patent applications
This can be translated, from the business perspective, as bureocracy. The new law has eliminated several steps in the prosecution of a patent application which should result in a shorter time for a patent to be granted. But, since bureocracy in any part of the world has its own rules and reasons, the new brazilian law provides, in article 40, for a term of protection for patents which goes beyond the TRIPS requirements – patents will have 20 years of life as from the date of filing OR ten years from grant, whichever period is longer.
Another point referring to prosecution is the elimination of a formal oposition stage during prosecution. This was substituted by the possibility of third parties submitting to the Patent Office comments and prior art references until the end of examination (article 31). This allows the Patent Office to start examination without having to wait 90 days for third parties to file opositions as is the case with the law presently in force.
Administrative appeals against allowance were also abolished, thus cutting another formal step which demanded at least 120 days to be fully processed. Third parties still have an adminstrative nullity procedure to contest a granting decision (articles 50-55).
The above changes will represent, from our experience, a significant reduction in the time for a patent to be granted.
Strenghtening of protection
Protection will be strenghtned by a series of provisions introduced in the new law. The main provisions in this regard are:
- Elimination of prohibitions for patentability, in accordance with TRIPS. Almost any and all subject matter will be patentable, although some discrepancies between the law and TRIPS are still being discussed and may be object either of judicial measures or even formal complaints from other countries to the WTO. The most polemic of those points is the word "transgenic" qualifying the patentable microorganisms in article 18, III.
Article 18, III and its sole paragraph read as follows
"Article 18 – The following are not patentable:
III – living beings, in whole or in part, except transgenic micro-organisms meeting the three patentability requirements – novelty, inventive activity and industrial application – provided for in article 8 and which are not mere discoveries;
Sole Paragraph – For the purposes of this law, transgenic micro-organisms are organisms, except the whole or part of plants or animals, that exhibit, due to direct human intervention in their genetic composition, a characteristic that can not normally be attained by the species under natural conditions."
I would like to address the following points regarding interpretations of the above provision, in view of TRIPS:
- Item III of article 18 mentions "living beings, in whole or in part,…". This is not a clear definition, in that there is no definition of what is considered as a part of a living being, nor is it clearly defined what is considered as a living being, for the purposes of the law. Obviously one can find several different and reasonable definitions of those concepts, which only contributes for a lack of definition from the legal point of view.
- Some questions can be made, which show how the wording of the above legal provisions is fragile from the legal perspective:
- Which of the following can be designated as a part of a human being ? A leg, a gene, a cell, a sequence of acids, a chromosome, a molecule, an atom ?
- Can a plant leaf or a flower be considered as parts of a living being ?
- Is a plant a living being ? Is a rock a living being ? What is the difference between them from the chemical point of view ?
- Moreover, when an atom, gene, cell or an alkaloid is removed from a living being and modified outside it by a technical process, thus resulting in a new element, which can not any more be designated as a part of a living being, because it is different therefrom and, besides that, is novel, inventive and useful, could it be patented ?
- I believe that any human intervention in a microorganism, either by genetic engineering or by selection processes, can be considered as "transgenic", in the sense that it actually make a TRANSformation in the GENE. If this modification, in turn, meets the patentability requirements, then it should be patentable.
The above comments obviously do not exhaust this rather polemic topic, but I included them in this paper just to point out that, in spite of the conflict existing between the wordings of the new law and of TRIPS, I believe that no practical limitation in patentability will actually occur due to said article 18, III of the new law, and that reasonable arguments exist to be used in a possible court action.
- A clear definition of the rights of the patentee facilitates enforcement of the patent rights in the courts (articles 42-43).
- Parallel Importation – Article 42 defines the rights conferred by a patent, which include, among others, that of preventing third parties from importing a product that is subject of the patent without the patentee’s consent.
Article 43, on the other hand, states that the rights conferred by a patent do not apply "to a product manufactured in accordance with a process or product patent that has been placed on the internal market directly by the patentee or with his consent."
These two provisions have been the subject of intense discussions, resulting from two interpretations given thereto, namely:
(i) Parallel importation is allowed "because" article 43 refers to a product placed in the internal market with the patentee’s consent, which would include any legitimate product already placed in the market in another country, since the patentee’s rights over that product would be exhausted; and
(ii) Parallel importation is not allowed, "because" article 43 requires the patentee’s consent for the product to be imported, which is in line with the text of article 42.
Important note: I would not like to miss the opportunity to state that I fully agree with the second interpretation above, whereby it is my opinion that parallel importation will not be permited in Brazil, as far as patents are concerned, as from May 15, 1997.
- One year grace period for patent applications, similar to the one existing under U.S. law.
- Certificates of addition.
- Express mention in the law with regard to the protection of equivalents (article 186) in the definitions of the crimes against patents.
- Introduction in the patent law of the concept of indirect infringement (articles 42 and 185), again making it easier to enforce patent rights in the courts. It has to be noted in this case that there is a difference between this "indirect infringement" and the "contributory infringement" provided for under the U.S. law, in that, according to the new Brazilian law, the crime of "indirect infringement", as provided for in article 185 does not require the occurrence of the corresponding direct infringement, while, as far as I understand it, the U.S. "contributory infringement" provisions as provided for in section 271 (b) and (c) of 35 U.S.C.A., require the direct infringement actually to occur in order that the contributory infringement be considered as having occurred. In this sense, the protection afforded by the new Brazilian law is even broader than that of the U.S. law.
- Reversal of the burden of proof for process claims (article 42).
- Compulsory licenses – Although this topic has been the subject of discussions and complaints from the U.S., mainly due to the fact that the new law still requires local manufacturing, while article 27 of TRIPS states that patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced, the conditions established by the new law for one to obtain a compulsory license are extremely strict and not easily met. Compulsory licenses can only be obtained if:
- the patentee exercises the patent rights in an abusive manner or by means of it practices abuse of economic power that is proven under the terms of the law by an administrative or court decision
Compulsory licenses will also be granted if:
- the subject matter of the patent is not exploited in the territory of Brazil, by lack of manufacture or incomplete manufacture of the product or, furthermore, by lack of complete use of a patented process, except in the case of non-exploitation due to economic inviability, when importation will be admitted;
- commercialisation that does not meet the needs of the market.
- A compulsory license will also be granted when the following hypotheses are shown to exist cumulatively:
I – a situation of dependency of one patent on another is characterised;
II – the subject matter of the dependent patent constitutes a substantial technical advance in relation to the earlier patent; and
III – the patentee does not come to an agreement with the patentee of the dependent patent for the exploitation of the earlier patent.
On the other hand, the following points must also be considered:
- A compulsory license can only be requested by a party with legitimate interest and with the technical and economic capacity to carry out the efficient exploitation of the subject matter of the patent, that should be destined predominantly for the internal market.
- Also, if a compulsory license is granted due to abuse of economic power, a period of time limited to 1 year, will be guaranteed to the licensee, within which it may import the subject matter of the license, provided it has been placed on the market directly by the patentee or with his consent
- In the case of importation for exploitation of a patent and in the case of importation provided for in the previous paragraph, the importation by third parties of a product manufactured according to a process or product patent will equally be allowed, provided it has been placed on the market directly by the patentee or with his consent.
- Compulsory licenses based on lack of local exploitation may only be requested after 3 (three) years from grant of the patent.
- A compulsory license will not be granted if, at the date of the request, 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 commercialisation due to legal obstacles.
- Finally, in the case of compulsory licenses for dependent patents, a process patent may be considered as dependent on a patent for the respective product, as also a product patent may be dependent upon a process patent, but, the proprietor of a patent licensed under these terms will have the right to a compulsory cross license of the dependent patent.
- Designs will be protected under a registration system, instead of patents (articles 94-118). Registration will be granted automaticaly upon request and substantive examination will be optional. The term of protection will be 10 years from filing, renewable for three consecutive periods of 5 years each, thus resulting in a total term of 25 years counted from the filing date.
- "PIPELINE" patent applications (articles 229-231) – The so-called "pipeline" applications are defined in the transitory provisions of the new law and refer to substances, matter or products obtained by chemical means or processes and alimentary and chemical-pharmaceutical substances, matter, mixtures or products and medicaments of any type, as well as the respective processes of obtaining or modifying them, which subject matter is not patentable under the law in force at present.
- According to the new law, "pipeline" applications can be filed to protect inventions in the above areas, even after expiry of the convention year and disclosure of the invention. Patents will be granted under the following conditions:
– the product which is the object of the application must never have been put on the market, anywhere in the world by the patentee or with his consent;
– a patent must have been granted in the country of origin (country where the first application has been filed for that invention);
– no serious and effective efforts are being made by third parties to exploit that invention in the country;
– the "pipeline" application is filed within 1 year counted from the publication of the new law, namely, between May 15, 1996 and May 15 1997; and
– the "pipeline" patent will be granted identical to the one granted in the country of origin.
- Protection of Trade Secrets – The protection of trade secrets in Brazil has always been provided within the provisions referring to "Crimes of Unfair Competition". The new law is not an exception. However, it brings improvements in the protection, mainly in item XII of article 195, which expressly defines as a crime the use of a trade secret obtained by illicit means or by fraud. This provision, combined with the previous one of item XI, makes it possible to prosecute not only the employee who steals trade secrets from his employer, but also (and mainly) the new employer who benefits from the stolen trade secrets. This represents an important improvement in this area, since it was extremely difficult to obtain payment of losses and damages or any compensation payment from the individual who stole the secrets.
For the first time, the private sectors in Brazil have actively participated in the discussions which led to the enactment of an Industrial Property Law, at the same time that an international commercial agreement (GATT/TRIPS) established new rules for intellectual property based business. This resulted, in my view, in a powerful instrument for protection, not only of industrial property rights, but also for protection of business investments in Brazil.
Obviously, not all suggestions presented by the private secetor to the Congress regarding the new law were implemented, mostly for political reasons, but I strongly believe that Brazil now has an industrial property law which is among the most modern and effective in the world and, if some discrepancies still exist in view of TRIPS, this latter contains the necessary provisions for other countries to question it before the WTO if necessary.
Finally, I would like to point out that Brazil alone is a huge market for virtually any segment of business, with an economically active population of more than 50 million people, a strong and long established industry, a sound and reliable industrial property system and political and economic stability. If one adds to that the advent of Mercosul – the South Cone Market – composed of Argentina, Uruguai, Paraguai and with the prospect of Chile and possibly other South American countries joining, I would say that we do represent a fantastic place for doing business, compared to other more saturated markets around the world.