Enforcement and licensing on the rise in Brazil
José Carlos Vaz e Dias of Vaz e Dias Advogados & Associados reports on the latest developments to improve the Brazilian IP system
The complaint about the backlog of patent work at the Brazilian Patent and Trade Mark Office (BPTO) is a recurring subject during business meetings involving IP rights in Brazil due to the 10 years or more that it takes patent prosecution to be concluded. The endless technical examination has been raised as a clear obstacle to the entry of direct foreign investment since IP owners have been reluctant to invest in a country where their intangibles are not fully recognised in an adequate time-frame.
However, it is relevant to state that Brazil has forged ahead with IP framework improvement in the enforcement and licensing areas that has strengthened owners' rights and redesigned IP through commercial arrangements.
This new positive reality seems to be blurred and hidden in view of the frustration caused by the delay on patent prosecution.
Specialised IP courts make a difference
The Industrial Property Law (Law 9,279/96) envisaged in its Article 241 the creation of specialised courts to settle conflicts related to IP rights. The main purpose was to allow judges to access greater knowledge in a legal field not extensively taught at the faculties of law and therefore expedite court proceedings.
This legal trend became a reality in 2001 when the federal courts located in Rio de Janeiro created a specialised structure that specifically addressed IP rights by establishing four federal trial courts. This novelty was carried on by the setting up of two specialised appellate panels at the Second Federal Regional Court. Those courts – the first and second instance – deal with challenges to BPTO's administrative decisions that either rejected applications or granted IP rights, including patents, trade marks, utility models and industrial designs.
A leap forward in this direction was also taken in 2001 at the State Court of Rio de Janeiro, also in the city of Rio de Janeiro, with the creation of seven chambers on business law matters, which also encompasses IP infringement disputes concerning private parties. As a result, the state court is the appropriate venue for patent and trade mark owners, for example, to request injunctive reliefs both in the civil and criminal arena and obtain losses and damages in compensation for losses caused by acts of violation of IP rights and unfair competition.
Business law matters have been extended since 2015 to include copyright and software-related matters.
These changes have contributed significantly to the quality content of the decisions either rendered by the federal courts or the business law chambers on industrial property and company law matters due to the judges' acquaintance with patents, trade marks and unfair competition. Further, it promoted the dissemination of IP rights in Brazil by prompting the creation of various university programmes in the matter.
It is also notable that the enforcement time-frame has been reduced substantially. It is no longer an exception to have a final decision rendered at first instance of the business law chambers at the State Court of Rio de Janeiro within 24 months as from the court suit filing in trade mark matters, and within 36 months for patent violation, depending on the complexity of the case. Ex parte preliminary injunctions may be obtained in one or two days. It is also reality to have a final decision in second instance to be rendered within 24 to 36 months on IP conflicts.
The success of the specialised courts of Rio de Janeiro hit the courts in the state of São Paulo, which has also created two specialized appellate chambers.
The court specialisation has been of importance to enforce patents in high-tech fields and those technologies linked to social media. It was particularly crucial to make valid and effective IP rights linked to the 2014 World Cup and the 2016 Olympic Games and to be fast enough to hamper any ambush marketing and counterfeiting.
Last but not the least, the specialisation of the courts has provided relevant technical confidence that permitted the enforcement of inventions not yet granted by patents through unfair competition rules and illicit enrichment, which reduces by any means the patent grant requirement for enforcing property rights. This is relevant in a country with a recognised backlog of work.
Focus on speed
Since March 18 2016 a new New Civil Procedural Code (NCPC) - Federal Law 13,105/2015 – has been in force in Brazil. This code provides new instruments to increase the enforcement of rights in Brazil and to make the court proceedings faster and less complex. After all, a fast and an effective court system ensures the exercise of the exclusive rights on a patent or trade mark. Further to that, it secures the reputation of products and/or services, and reduces the costs of resolving conflicts that are not possible to be settled amicably.
The NCPC provides that the effective satisfaction of the plaintiff and defendant can be secured more adequately if the solution is reached mutually by them, not only imposed by a judge. Thus, the new law has emphasised the possibility for the parties to put an end to the conflict by mediation or conciliation within the court proceedings. Simplicity has been also incorporated into the appeal system, since obsolete and diverse appeals adopted in the prior law have been deleted. A uniform time frame to file the diverse appeals was set to be 15 working days after a decision is rendered, with the exception of the requests for clarification appeal.
The NCPC also brings innovations to the legal provision so-called procedural agreement, which is a mechanism that allows litigants to enter into an agreement in relation to the adoption of specific procedures that fits more to their interest and to the nature of the court action. In practice, for example, in a trade mark infringement case, parties could establish mutually that the suit will be solved without the production of an expert opinion. They may also put aside other proceedings that delay the court procedure.
This is a significant change, whose inspiration came from the arbitration proceedings, also existing and strongly promoted in Brazil. This innovation is expected to promote faster and better quality solutions to a court action, insofar as the litigants in proceedings may cooperate mutually to avoid unnecessary costs, intangible violation and imposition of high losses and damages due to IP infringement.
Injunctions in sight
Another interesting improvement in the NCPC relates to the grant of injunctions, which may be now grounded on urgency or evidence of rights. Both in the case where there is a risk of losing a right (urgency) and in the event that strong claims and rights of one of the parties (evidence) are presented, regardless of the presence of periculum in mora or the effective risk of imminent and irreparable damage, the plaintiff may receive a preliminary injunction to safeguard its rights and cease the violation.
An injunction grounded on evidence is a novelty since it increases the protection of intangibles. It was not rare to see a Brazilian judges refuse the grant of injunctions due to the absence of periculum in mora. Following the new procedure, judges may not refuse as a rule to grant injunctions when the plaintiff proves the existence of strong rights, notwithstanding the fact that the measure is not urgent and the infringed right could be later repaired financially.
In the new system, the injunction based on either emergency/urgency or evidence may be requested prior to or during the course of the main suit. In this perspective, if the injunction is granted with the defendant opposition, the injunction will be maintained and the court action will be extinct without the examination of the merits. This procedure has been called preliminary injunction stabilisation.
Royalty remittances overseas from technology transfer agreements, including patent licensing, require the prior recordation of the corresponding agreement at the BPTO, following Normative Instruction 16 of March 18 2013.
During recordation proceedings, the BPTO will apply the foreign exchange control laws that admit the calculation of royalties from the licence of patent applications, but do not permit remittances. The calculated royalties are usually kept in an escrow account in any of the commercial banks located in the Brazilian territory until the licensed patent application matures into a patent. This limitation is due to the understanding that patent applications are regarded by the IP law as expectations of rights where the patentability requirements are yet to be examined. They are not matured for remittances overseas.
As an alternative, contracting parties have been adopting a bundle agreement where a licensor grants a licensee under the same agreement the rights to exploit patent applications and also the know-how (unpatented technology). By this procedure, the licensor can obtain royalties from know-how and then, at a later stage, from patent licensing when the applications mature into a patent.
Until recently the BPTO did not accept this strategy when both know-how and patent application comprised the same licensed technology. When royalties were accrued from know-how, they could not be charged on the exploitation of the patented technology afterwards.
This limitation no longer applies to bundle agreements and the BPTO has therefore been accepting royalty remittances from know-how use and afterwards from the patent licensing under the same agreement. This means that royalties may be collected and remitted overseas although the technology under the patent application is still under examination.
There is nevertheless a time-frame limitation on know-how licensing, as the licensee will be able to remunerate the licensor for a period of five years with a possibility of renewing it for an additional period of up to five years upon justification.
Some attorneys and scholars understand that the royalty flexibility comes from the recognised delay in patent prosecution, since the technology under the patent application is under exploitation by the Brazilian licensee by means of know-how. In any case, this is regarded as an important development under the law of the land, since it guarantees the adequate exploitation of rights under the patent application by third parties.
Expedited patent programmes
Although it is known that patent prosecution work lags behind at the BPTO, the agency has taken steps to speed up patent applications by creating fast track procedures based essentially on specific technical fields or industrial areas. They are as follows:
US-Brazil PPH pilot programme
The United States-Brazil Patent Prosecution Highway (PPH) Pilot Project involves essentially inventions comprising claims to oil and gas developments that have been filed up to three years before the PPH takes place. Besides these requirements, the related US-Brazil applications under examination should belong to the same patent family.
This is a relevant initiative and viable prosecution highway for inventions in the oil and gas industry. You should further note that only American patent applications in the oil and gas sector can benefit from the PPH in Brazil. However, there are no sector restrictions in relation to Brazilian applications that will be examined in the US. The US-Brazil PPH programme was released as a pilot programme and has a time limit of two years from January 2016 or after reaching the examination of 150 applications on each side, whichever happens earlier.
Green patent pilot programme
This priority examination programme relates to green technologies in the areas of energy, transportation, agriculture, alternative energy and management resources. This programme is specifically linked to the aforementioned technologies and has no limitations regarding the origin of applications. Therefore, foreign applicants can benefit from the green patent programme. This programme is temporarily suspended for the purpose of assessing the results so far reached by the BPO.
Pharmaceutical priority programme
This programme is governed by BPTO's Resolution 80 of March 19 2013 and provides the possibility for foreign and local companies to request priority in patent examination of pharma products and process as well as equipment and materials related to public health.
The pharma products/processes need to relate to the diagnosis, prophylaxis and treatment of AIDS, cancer or neglected diseases (provided in section II of Resolution 80/2013). In addition, products, processes and equipment related to the health industry listed by the Ministry of Health as indispensable and strategically necessary for Brazil may also be prioritised for patent prosecution. To benefit from the programme, the patent application needs to be published in the Industrial Property Gazette and the examination of the patent application needs to be requested by the applicant under the terms of Article 33 of the IP Law.
Other means to speed up prosecution
As an attempt to establish criteria for speeding up the prosecution of patent applications, the BPTO published Resolution 151 on October 23 2015 and enlisted the following situations for a possible priority examination:
1) The applicant is 60 years old or older;
2) the grant of patent rights is indispensable for the applicant to obtain resources and public subventions for the exploitation of the patented invention;
3) the applicants have become physically or mentally disabled or hold serious illness following Article 69-A, II and IV of Federal Law 9,784 of January 29 1999;
4) cases where an invention under a patent application is being infringed by third parties by means of use, manufacture, licence and commercialization; and
5) inventions that are declared by the authorities as a national emergency and of public interest.
Another option has been the filing of writ of mandamus at the Federal Court of Rio de Janeiro (First Region) against the Patent Director of the BPTO. These court proceedings aim to oblige the commencement or reestablishing the examination of the patent application. The decisions issued by the judges of the Federal Court do not stipulate a time-frame for the conclusion of the prosecution, but solely determine the commencement of work. Writ of mandamus is commonly filed as an attempt to overrule illegal acts of authorities, which can be expressed in acts of omissions that violate or restrict the rights of individuals.
Jose Carlos Vaz e Dias
Jose Carlos Vaz e Dias is an attorney at law who has specialised in patent and trade mark matters and foreign investment law since 1993. His activities are focused on legal support and consulting to foreign companies that want to invest in Brazil, especially in the technology fields. He works on trade mark prosecution and patent and trademark litigation, and commercial arrangements by means of technology transfer and licensing agreements. He has knowledge of biotechnology patents, plant variety rights and pharmaceuticals, which allows him to draft strategies for exploring such inventions in the Brazilian market.
One of his areas of expertise is participating in the negotiation and drafting of technology transfer, licensing agreements, joint ventures, distribution, franchising and other commercial agreements that aim to exploit IP rights in the Brazilian territory. Most recently, he has worked with the Brazilian Innovation Law to obtain fiscal benefits and funding granted by the local government, leading several R&D agreements involving Brazilian research centres and companies and given support to companies on IP and fiscal laws.