Amidst calls to reform the Brazilian patent system, Luiz Leonardos and Rodrigo Cid of Luiz Leonardos & Advogados consider whether re-establishing Pre-Grant Opposition would be a solution or a recipe for disaster.
Ever since it was presented to Congress, Bill No 5,402/2013 is the centre of intense debate among intellectual property professionals as it provides for deep reform in the Brazilian patent system. According to the bill’s proposition, preventing obvious inventions from receiving patents is paramount for increasing the country’s levels of innovation.
In order to achieve higher levels of innovation, the bill proposes several changes, which include establishing pre-grant opposition system for patents, redefining the very nature of inventive step, empowering the National Health Surveillance Agency (ANVISA) to influence pharmaceutical patents and disregarding regulatory data protection to favour generic drugs, among others.
This article, however, is focused on the proposal to re-establish the Pre-Grant Opposition system within patent prosecution while, at the same time, excluding the 10-years-from-issuance rule of protection for cases when the Brazilian Patent and Trademark Office (BPTO) takes over 10 years to conclude prosecution.
Current legislation determines patent validity of 20 years from its filing date or 10 years from its issuance, whichever is longer. This provision functions as a statutory guarantee, and means users of the Brazilian patent system can avoid the delays arising from the patent office’s backlog.
Before the current IP legislation was enacted – before the TRIPS agreement – the Brazilian patent system had an established pre-grant opposition proceeding, which was heavily criticised for interrupting patent prosecution for a debate (increasing the already very long prosecution period).
As is well known, applications that have been opposed tend to take much longer (sometimes three to four times longer) than applications that meet no objections. This is still the case for trademarks.
A common issue involving the pre-grant opposition mechanism for patents was that it gave companies a means of delaying prosecution of a competitor’s patents. It was often the case that companies, acting in bad faith, abused the opposition system with ungrounded objections, in order to take advantage of the BPTO’s delay.
Few missed the removal of the opposition system from the IP legislation. It is now possible for third parties to provide the BPTO with subsidies, which function very similarly to an opposition but without interrupting prosecution for long a period. With such subsidies provision came the “10-year protection from issuance” provision, which – though it did not do much to reduce the time frame for prosecution – gave patent owners effective protection for at least a decade.
By analysing the motives behind Bill no. 5,402/2013 we believe the BPTO’s ability to increase prosecution speed is preferable to patents lasting more than 20 years. However, enacting such change before establishing a patent office that can keep the length of prosecution to under 10 years will only result in the complete collapse of the Brazilian patent system.
A return to pre-grant opposition – and, at the same time, the disruption of a patent owner’s protection against the BPTO’s inefficiency – should only be considered when the BPTO is capable of reducing average prosecution time to less than 10 years.
Many of the bill’s defenders, especially those in the pharmaceutical sector, argue that the “10-year protection from issuance” rule is a mechanism to extend patent life for more than 20 years. They say this contravenes the Brazilian Constitution, which establishes that “the law shall grant authors of industrial inventions temporary privilege over its use, as well as protection over industrial creations, property of trademarks, company names and other distinctive signs, in view of social interest and the country’s technological and economic development”.
Supporters of the bill often see the phrase “in view of the country’s social interest” as grounds for creating exceptions to industrial property rights – meaning that, if certain intellectual property rules can have a potentially negative impact on “social interest” (mainly access to drugs), it automatically goes against the Constitution. We feel this view may be too protectionist and ignores the fact that that rules of law are made to seek balance and sustainability – not to benefit nationals or target audiences, which is against the very nature of international treaties.
The Brazilian Constitution only determines that authors of inventions i) must have privilege over its use and ii) that this privilege must be temporary. How much time or if some kinds of inventions deserve different terms of protection is left for ordinary legislation.
We also believe that this argument ignores the fact that, although the protection term of 20 years begins at filing, effective protection is not available until issuance. Before the patent is issued, the owner does not have the most important patent right: the possibility to stop others from using its invention.
The “10-year protection from issuance” rule is a measure to compensate for the BPTO’s own inability to examine patent applications in a timely manner. It does not give rise to any unjust benefits for supposed “oppressive capitalist foreign patent owners”.
Notwithstanding this, the “10-year protection from issuance” rule benefits not only big corporations, but also struggling Brazilian scientists. Take, for instance, the Perillyl Alcohol cancer treatment, developed by Brazilian scientists. Although filed in 2001, the drug’s patent was only issued in 2014. If the compensation rule had been removed from the equation at the time, its developer would have less than seven years of patent protection to recover investments made for the past 30 years.
This is not the only attempt to overcome the “10-year protection from issuance” rule: a constitutional infringement lawsuit was filed against it by ABIFINA, a representative arm of the Brazilian generics industry, in 2013. A provisional measure request was lodged with the lawsuit, but no decision on the merits was rendered until this point.
It may also be argued that the absence of pre-grant oppositions is contrary to due process of law and right of defence.
This view is less subject to exploitation than the previous argument, but shows an interesting concern. Some professionals believe that the current “subsidies to examination” estop the defence rule of law. In the current system third parties may file subsidies to examination mostly by pointing out prior art. The concern is that the patent applicant is not directly informed that subsidies were presented, and its opportunity for defence is not secured.
On the other hand, discovering prior art is the patent office’s main duty during examination and, theoretically, it has access to all documents that any third parties may present in subsidies. In the internet age, it is possible to access subsidies through the BPTO’s website as soon as they are filed.
In any event, if the BPTO understands that the application should be rejected – based or not on prior art brought up by third parties – then the applicant is allowed to reply before an actual decision to reject is issued. By noting that subsidies have been presented, the applicant may promptly reply at any time, without interrupting the prosecution for a lengthy period.
The bill’s idealists believe that altering rules in such a way is beneficial for enabling the “imitation towards innovation” model. If patents receive less protection, more imitation is made possible, theoretically allowing Brazilian business to modernise faster.
However, it has been proven that interchange and licensing are the most effective means of development. Instead of investing copious amounts of resources in reverse engineering complex technologies, it is more effective to modernise by licensing existing technologies and, from that point, taking advantage to invest in the development of new ones.
Indeed, in places such as China and India the imitation model was very efficient and beneficial, but even those nations started slowing down imitation when they reached a certain level. This is because the more advanced a nation becomes technologically; the more difficult to find technical solutions it is.
Additionally, when these countries adopted their models, the growth gaps they had to fill were much greater than Brazil’s. In our current situation, Brazil has the most advanced technologies available through technology transfer. If such practice starts being encouraged, many opportunities for cutting-edge innovation will appear.
There are several effective measures Brazil may undertake in IP to stimulate innovation and help the economy to recover. Most of these measures may be taken regardless of any change in legislation.
The BPTO has long needed modernisation. Examiners are working in conditions that do not meet the country’s standards, while hiring and retaining a workforce on an insufficient budget is another major challenge. Bringing greater efficiency to the BPTO should be the top priority.
One legislative review that would give Brazilian companies better business potential is in the area of licensing. The registration of contracts, as a process, relies on complicated and outdated procedures for making businesses viable, and thus narrows possibilities. We feel this issue must be put under the spotlight.
When the legislative term ended in October 2014, neither of the bill’s proposers – Dr Rosinha and Newton Lima, both members of the governing Worker’s Party – were re-elected for their positions. The bill’s future is therefore uncertain. However, as the new term began congresswoman Jandira Feghali from the Communist Party requested that the bill progress.
Congress must be aware that reverting to lower standards of IP protection may be beneficial in the short term for certain industries, but is potentially disruptive for all of them in the long run. Lowering standards raises barriers against foreign investment in the country and discourages foreign companies from bringing technology into Brazil; national industry will therefore have to chase developed nations, instead of modernising itself in a more effective and sustainable manner.
Without foreign technologies being brought in, it will become harder and harder to develop and obtain cutting-edge knowledge, methods and products, with the potential to severely compromise the development of the economy and of the country itself.
It remains to be seen when Bill No. 5,402/13 will be put to vote, which may take several months owing to the current political situation in Brasilia.