The Supreme Federal Court and ADI 5529: the course of innovation

The Supreme Federal Court (STF), the highest body in the Brazilian Judiciary and responsible for defending the Constitution, will decide whether or not the minimum term of validity for patents in Brazil is constitutional (10 years for invention patents and seven years for utility model patents), set forth in the sole paragraph of Article 40 of the Industrial Property Law (Law No. 9,279/96).

This discussion is being held within the scope of Direct Action of Unconstitutionality – ADI no. 5529-DF, proposed by the Attorney General of the Republic in 2015[1], and is extremely important for any and all titleholders, whether of a patent that has already been granted in Brazil or of a patent application that has been filed, regardless of the industry sector.

If the minimum term of validity is considered unconstitutional, in addition to the risk of patents that have already been granted being affected, as well as pending patent applications, there is also a risk to the innovation cycle in Brazilian industry.

For a long time, the Brazilian Patent and Trademark Office – BPTO [National Institute of Industrial Property – INPI] has been incapable of examining pending patent applications within a reasonable period. Studies show that, in 2015, the average time until the end of administrative processing was greater than 11 years. In certain technological areas (e.g. smartphones), the average waiting time for a patent to be granted was 14 years[2]. In some extreme cases, the BPTO took more than 20 years to grant a patent. This delay in granting a patent due to the queue of filed applications is known as a backlog, however, currently, in a commendable effort by the BPTO, a plan to combat the delay is being implemented, which has led to a reduction in the average time to grant a patent to approximately eight years.

Due to the BPTO’s historical difficulty in dealing with the queue of patent applications, the Brazilian legislator inserted a minimum term mechanism into the Industrial Property Law, which is triggered when the Office takes more than 10 years to grant a patent.

This mechanism is important to ensure that patents are in force for a reasonable period of 10 years. In other countries (e.g. the United States, China, Australia and South Korea), where patents are granted in an average time of less than four years[3], patent holders enjoy more than 16 (sixteen) years of exclusivity in the market.

In light of the Brazilian reality, this minimum term of validity prevents patents from being granted with a term that has already expired – so-called stillborn patents – or very close to expiry, which would make the return on investments made in the invention unfeasible. Without a reasonable term, there will be no incentive for new inventions and society will be served by outdated technologies. And this will probably be the worst consequence if the STF deems the sole paragraph of Article 40 of the Industrial Property Law unconstitutional.

It is evident, however, that the minimum term of validity does not violate the Brazilian Constitution. On the contrary, it actually ensures that inventors will enjoy a temporary privilege, as expressly guaranteed by Article 5, XXIX, of the constitutional text. After all, a patent that does not have a reasonable term and, therefore, is not able to reward the inventor, has no economic value.

The constitutionality of the minimum term of validity is defended by legal scholars such as former Justice of the STF Ellen Gracie and by the Director of the Law Faculty at the University of São Paulo Prof. Floriano Azevedo Marques[4]. It is also important to remember that the Industrial Property Law – containing the sole paragraph of Article 40 – was signed by former Justice of the STF Nelson Jobim, then Minister of Justice for President Fernando Henrique Cardoso[5].

As the Supreme Federal Court has so far not ruled on the legality of the sole paragraph of Article 40 of the Industrial Property Law, it is possible, in theory, that this provision will be declared unconstitutional. However, in this event, the STF should modulate the effects of its decision, based on the principle of legal certainty, so that the minimum term of validity for patents applies to patents that have already been granted and the patent applications that have been filed until the date the ruling is handed down.

The constitutionality of said provision is important not only for the private sector, but also for public companies and universities. Petrobrás, for example, has more than 200 (two hundred) patents granted with a fixed term of validity based on the sole paragraph of Article 40. The University of São Paulo (USP) and the University of Campinas (Unicamp), summed together, have more than 400 (four hundred) patents in the same situation.

[1] This discussion started in 2013, when an association of generic drug manufacturing laboratories filed a direct action of unconstitutionality (ADI) to address the same issue. However, the STF decided that such association is not legitimate to file an ADI (the Constitution affords such legitimacy to few people).

[2] Schultz, M.; Madigan, Kevin, 2016. Available at: https://sls.gmu.edu/cpip/wp-content/uploads/sites/31/2016/10/Schultz-Madigan-The-Long-Wait-for-Innovation-The-Global-Patent-Pendency-Problem.pdf. Accessed on 25 September 2020.

[3] Schultz, M.; Madigan, Kevin, 2016. Available at: https://sls.gmu.edu/cpip/wp-content/uploads/sites/31/2016/10/Schultz-Madigan-The-Long-Wait-for-Innovation-The-Global-Patent-Pendency-Problem.pdf. Accessed on 25 September 2020.

[4] Both legal scholars presented favourable opinions on the constitutionality of the sole paragraph of Article 40 of the Industrial Property Law in the case records of ADI 5529-DF.

[5] Which is to say that two former STF Justices endorse the constitutionality of the contested rule.