Luiz Otávio Pimentel knew he had a tough job ahead of him when he joined Brazil’s patent and trademark office as president in July. That job has since become much harder.
The country has long suffered a large backlog of applications. Patent applicants can expect to wait 11 years for a patent application to be approved. The leaders of the National Institute of Industrial Property, Ministry of Development and Foreign Trade (INPI – also referred to as the BPTO) have made bold claims about improving the backlog for years, but to little effect.
The effort to improve this has become an even bigger challenge. Brazil's economy fell into recession in the second quarter of the 2015, with a contraction of 1.9%. With that comes a hiring freeze handed to the office by the government.
"In Brazil we are going through a large revamping of our public structure," said Pimentel during a panel session at the AIPPI Congress, speaking through a translator. "Brazil is going through a difficult economic situation. That means a reduction in expenses for public institutions and that will include INPI too."
Rather than the hoped-for increase in examiners to reduce the backlog, INPI must make do with what it has. Pimentel faces a daunting mathematical problem. The backlog has grown to 210,000 patent applications. Yet the number of patent examiners at the office is expected to fall from the 196 in place now.
Reducing the backlog is a tough task in the face of increased filing in the past 15 years. In 2000, there were 21,000 patent applications filed, whereas last year there were 33,000.
"The worst thing we face is a backlog," said Pimentel. "There is a problem at the moment where we would need more people working for us but that is not going to happen. One challenge we have faced is the lack of qualified people. Also, our salaries are not as competitive as other institutions in public service. There is a need for remedies."
The new man at INPI needs to get creative. At the AIPPI Congress in Rio in October, Pimentel revealed a number of initiatives. He expanded on them in an interview with Managing IP (with the much-appreciated help of translation services provided by Eduardo Magalhães Machado of Montaury Pimenta, Machado & Vieira de Mello).
Pimentel admitted that next year is going to be rough. But he is taking steps to make the most of what he has got. Pimentel is looking to increase the productivity of each examiner from the average 30 final patent decisions a month now. But he must do it through methods that don't require financial approval from the government.
Pimentel would like to create what he calls a "Brazilian fast track" for applications. He is looking to bring in some programmes similar to those in place in countries that have had success in reducing their backlogs. "But Germany, the United States and Japan have money!" Pimentel noted dryly in English when highlighting his tough task to Managing IP.
His first step will be to implement a pilot programme allowing examiners to work from home and avoid Rio de Janeiro's notoriously awful traffic. It can take examiners two to five hours a day to commute to and from INPI's downtown office. Allowing some examiners to work from home will free up more time for examining.
Non-examiner public servants are also available to the office. Pimentel wants to make better use of them to help organise older paper patent files. Applications in the past five years have been in digital format. But the applications from the 10 years preceding that are on paper. The non-examination staff will be used to help with the cumbersome digitisation process of the older files, which will enable examiners to be more efficient.
A good start...
These positive first steps have been applauded by some Brazilian IP practitioners. Elisabeth Kasznar Fekete, partner at Kasznar Leonardos and president of ABPI, the Brazilian intellectual property association, notes that the "chronic backlog " is not improving. The 196 examiners at INPI issue 17,400 decisions a year compared with the more than 30,000 applications filed annually.
"In other words, if nothing changes, the backlog will simply continue to increase," she says. "The good news in that matter is that the BPTO is, for the first time, seriously considering accepting the examination made by other authorities (for example, EPO). If this comes into effect, it will certainly be a first step into reducing the backlog, which has already led to an average delay between filing and issuance of a patent in Brazil to reach approximately 11 years!"
She notes in fairness that some areas such as mechanical inventions have a shorter delay of about seven years. "But in pharmaceuticals the delay is a little larger (12 years), while in the fast-moving high-tech areas of electronics the delay reaches incredible 15 years!" she says.
A silver lining from Brazil's cloudy economic outlook could also have a positive effect on the backlog figures. "The current fiscal crisis of the federal government in Brazil, expected to last at least until 2017, is a factor that creates difficulties for hiring new examiners at the BPTO but the economic recession plaguing the country [GDP is expected to drop 1.5% in 2015] has also slightly reduced the number of patent filings, reducing the pressure on the BPO," she says.
Double trouble |
If the difficulties posed by the backlog were not enough, Brazil imposes an additional hurdle to patent owners in the pharmaceutical area. Since 1999 the law sets forth that examination in that area must be made by the health regulatory agency Anvisa, which rules on pharmaceutical patent applications before INPI begins its examination. Anvisa is meant to only consider whether the invention is suitable for patenting. However, the selection of the applications to be reviewed by Anvisa and the process of selection are controversial. The two agencies have an uneasy relationship. Anvisa claims that it is entitled to examine the patentability requirements of all drugs of interest for the National Health Service. This is despite the government's attorney general twice making it clear that Anvisa may only assess the existence of health risks, while patentability requirements should only be examined by INPI. Luiz Henrique do Amaral, partner at Dannemann Siemsen Bigler & Ipanema Moreira says: "In Brazil we are unhappy with the situation. It creates a lot of instability in the system. It shifts patentability examination to the board of health. TRIPs is very clear that there should not be double examination of patentability issues but that is happening in Brazil. That's a very serious challenge." Rana Gosain and Gabriela Salerno of Daniel Advogados noted in Managing IP in August that most Brazilian attorneys view the shelving of a patent application without substantive examination by the BPTO as a violation of the law and unconstitutional. The rationale is that on paying an examination fee to the BPTO, an applicant is entitled to have its application examined by the office. Approximately 20 lawsuits have been filed against Anvisa in connection with its denial of prior consent under the previous workflow, with the court reversing Anvisa's denial in the majority of cases. However, as Gosain and Salerno noted: "A recent unexpected decision from the Federal District Court in Rio de Janeiro denied a preliminary injunction and ruled that Anvisa is competent to examine a pharma patent application in terms of patentability requisites. In all likelihood, this decision will be used by Anvisa to assert its legitimacy to examine pharma patent applications and patentees and Brazilian attorneys will have to be creative to overrule this decision." All of this means the double examination situation remains a mess. "Anvisa is suffering several losses, but the matter is still far from settled in the higher courts," reports Elisabeth Kasznar Fekete of Kasznar Leonardos. "The current situation is so complex that even in cases in which Anvisa did grant its prior approval because it has concluded that the patentability requirements are present, and sent the application back to the BPO, subsequently the BPO refused to continue with the examination of the application because it understands that Anvisa has overreached its authority. As a result of this opinion of the BPTO, in such cases the application is simply stopped indefinetely at the BPTO and the applicant must, then, file a lawsuit against the BPTO in order to oblige it to continue the prosecution of the case and grant the patent." She adds: "It goes without saying that the current excessive judicialisation of patent prosecution in the pharmaceutical area must be changed in order to better attract investments to Brazil." She concludes by saying Brazil needs to put patent protection at the top of its priority list, with the objective to achieve a higher degree of innovation. "This may not harm a country that wished solely to continue to be one of the largest producers of food in the world, with low aggregate value in its exports, but Brazil has much larger ambitions, and a practically limitless potential due to its large territory, social peace, strong democracy, and a sizable population of 204 million people," she says. "The challenges in the Brazilian patent system are a mirror to the challenges faced by the country in its struggle to achieve higher levels of social and economic development." |
...But not enough
While these proactive steps are to be applauded, some view them as akin to putting a plaster over a flesh wound. The best Pimentel can appear to hope for in the medium term is to stop the backlog growing even more. This is unlikely to relieve the frustration many dealing with Brazil's patent system feel.
"Things don't seem to improve," says Luiz Henrique do Amaral, partner at Dannemann Siemsen Bigler & Ipanema Moreira and chair of the organising committee for the AIPPI Congress this year. "On the contrary, since the economic crisis that started this year the government has even announced some cuts that will affect the number of examiners and people working at the Patent Office. It will get worse before it gets better." Do Amaral says this affects innovation and investment. "A patent that is pending for a long time creates two combined problems," he says. The first is rights holders find it hard to get investment because it is hard to assume ownership if a patent if pending. The second is potential competitors such as generics also have a challenge because they do not know if a patent will issue or not, and therefore whether they will be infringing or not."
He continues: "It creates a problem for both the right holder and potential competitors in the generic industry because you don't know if that patent will mature or not. So if you invest, the patent owner may in the future say 'you infringed my patent, you have to pay me and stop doing what you are doing now'. So that's a very bad problem that was created by the backlog."
This view is echoed by Lawrence Welch, assistant general patent counsel at Eli Lilly. He reports that the Brazilian office is so backlogged that it is only starting to examine applications his company filed in 2002 and 2003. He pushes back against the notion that pharmaceutical companies should not be so concerned because they are guaranteed 10 years protection in Brazil so the delay will only cover the drug approval process.
"We do care," says Welch. "It would be one thing if the delay was just a few years and the drug hasn't been approved yet, but now we are starting to see drugs being approved before the patent is granted. Brazil does not have the other kind of intellectual property called data exclusivity where the regulatory agency does not allow the generic to rely on your safety and efficacy data for a limited period of time. Such protection is something provided for in TRIPs, but Brazil doesn't require it. So since that is not available there is no interim protection available until the patent grants."
This leaves companies exposed. Welch does note that in the situation where an applicant believes there is infringement it can ask for accelerated prosecution in INPI. However, Welch says he doesn't know of a situation where this has happened. It is not clear what a generic company is bringing to market until they have done so.
"But if generics are on the market and then you initiate litigation there is so much harm done to the expectations of the public and the medical community," says Welch. "Once that generic is approved we believe there is irreparable harm because of what that does in the community. There isn't enough transparency in the Brazilian regulatory authority that you will know a generic is ready to go. You have to wait until they are already out for sale and then the harm is already done."
Wander Stange Menchik, manager of intellectual property at Brazilian aerospace company Embraer, said innovation generally is being stifled in Brazil during an AIPPI discussion in Rio.
"There are structural and legal issues about how to organise IP in Brazil, including regarding the laws and the fees," he said, speaking through a translator. "Things are going to get worse, with the fiscal adjustments and the review of the incentive law. That law is being reviewed and will stop some fiscal incentives for innovation. That could be a major obstacle if you invest in Brazil. How can Embraer be successful in that context?"
He added that there is a lack of tradition and innovation in IP. "We see new companies coming in and establishing innovation centres. There is reverse innovation – US companies come to Brazil, create innovation locally and then export." He said the backlog does not directly create problems directly for his company. But it has a more indirect effect. It does not help with applications with patent offices abroad if one's home office has not approved the patent.
"It's not a major challenge for us because we don't have competitors in Brazil," he said. "But it does bother us that our innovation is recognised all over the world but not locally. Take the example of China: they have invested in hundreds or even thousands of examiners and are also investing in IT tools, information technology, software and training."
He says further improvements should be made at INPI. The patent prosecution highway (PPH) programme would be a big step forward, according to many. Participating patent offices under the scheme have agreed that when an applicant receives a final ruling from a first patent office that at least one claim is allowed, the applicant may request fast track examination of corresponding claims in a corresponding patent application that is pending in a second patent office.
"The PPH has been mentioned many times. We want to adopt this," he said. "But above all they need resources, cash and qualified people. I would love to see the investment in this for INPI so that other companies will come to Brazil and bring innovation from abroad and export abroad. It's a virtuous circle."
This would be long overdue in the eyes of some. Welch at Eli Lilly says Brazil becoming part of of the PPH is a no brainer to break the logjam. He says allowing examiners work from home simply won't cut it in terms of bringing down the backlog.
"A no-cost solution in our view is to do what all the major offices are doing and share the work," says Welch. "That is not to say you will use the substantive law in that country but use the searching they have already done."
Welch believes there is a disconnect between INPI and Brazil's policy makers. He notes that WIPO wanted to make PPH part of the PCT but Brazil was one of the countries that objected.
