June 5, 2020
The Brazilian Supreme Court (STF) is going to analyze the alleged unconstitutionality of a section of the patent law for the first time in Direct Plea of Unconstitutionality #5529 (ADI #5529), filed before the Court on May 17th, 2016. The issue before the Court is whether patent owners can enjoy a minimum patent term of 10 years from grant. The challenged provision is established in the Brazilian Patent Statute (Article 40, sole paragraph):
Article 40. A utility patent will have a term of 20 (twenty) years and a utility model patent term of 15 (fifteen) years, counted from the filing date.
Sole ¶ The term will not be less than 10 (ten) years for utility patents and 7 (seven) years for utility model patents, counted from grant, except when the BRPTO is barred from proceeding with the substantive examination of the application, due to proven pending judicial decision or for reasons of "force majeure".
Brazil is a civil law country, and there is no proceeding like the US writ of certiorari order. The law establishes the requirements for admission of appeals and for actions that can be originally filed before the Constitutional Court. The lawsuit was filed before the Supreme Court (ADI #5529) seeking to abolish the minimum 10-year term, impacting new cases and even old cases.
In a country where the Brazilian Patent Office (BRPTO) struggles with pendency and backlog, over 46% of the patents in force in the country may be impacted by Supreme Court’s ruling on ADI #5529. This represents 22,583 patents in our system, as of June 4th, 2020.
Over the years, especially between 2014 and 2018, most of the patents granted by the BPRTO took more than 10 years in prosecution. For such patents, Article 40, sole paragraph, 10-year term from grant is applied.
In some arts, the difference is significant. Telecommunications, Computer & Electronics, Pharmacy, Mechanics, Physics & Electricity, Molecular Biology patents historically take more than 10 years to be granted by BRPTO.
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Regarding pending patent applications, data shows that Supreme Court’s ruling may impact 24,575 regularly filed duly pending patent applications that wait for BRPTO’s examination for more 10 years.
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Infringement actions already filed would also suffer impacts. With the potential retroactive effects of an eventual declaration of unconstitutionality, those actions would lose their object, creating a scenario of legal uncertainty and unnecessary movement of the Judiciary. There is also an emptying of the rights related to patent protection regarding its compensatory and inhibitory nature.
In other words, individuals, or companies whose economic activity was based on a conscious patent infringement would be rewarded, while those who acted under patent protection would find themselves helpless.
The constitutional challenge will be decided by the Supreme Court en banc session of 11 Justices, not by one of the Court's two panels. Justice Fux is the Reporting-Justice. Brazilian Supreme Court's hearing of the case was initially set to begin on May 22nd. However, due to an amicus brief filed by Farmabrasil, an association representing Brazilian main pharmaceutical companies, the court hearing was postponed, and it has not been rescheduled yet. After receiving the brief, Justice Fux withdrew the case from the Supreme Court schedule in May 15th and admitted the entity as amicus curiae in May 19th. The admission of new amicus curiae after a hearing is scheduled is unusual.
Two retired Justices of the Supreme Court signed Farmabrasil amicus brief: Carlos Velloso and Ayres Britto. Retired Justice Carlos Velloso was appointed to the Supreme Court in 1990, by former president Fernando Collor, acting as Justice for 26 years, until his retirement in 2006. Retired Justice Ayres Britto was appointed to the Supreme Court in 2003, by former president Luis Inácio Lula da Silva, acting as Justice for 9 years, until his retirement in 2012.
The postponement of the hearing in such circumstances opened a window for new submissions and additional efforts from stakeholders before the hearing is scheduled. Pro-Genéricos (Brazilian Association of Generic Medicines) filed a brief requesting admission on May 22nd. Justice Fux did not decide on the admission yet.
Farmabrasil and Pro-Genericos did not present new facts, arguments, or technical/scientific data to the case. All issues raised by those associations were already addressed by other amici curiae.
The constitutional challenge was filed in 2016 by the Public Prosecutors Office (acronym "PGR"), one of the entities entitled to file a constitutional case to the Supreme Court. In a nutshell, PGR develops the argument that the sole paragraph of article 40 would work as a tool to extend the term of patents in Brazil. It defends the application of the 20-year term from the filing date for all cases, grounded on the Patent Statute and on the TRIPS Agreement, arguing that the extended patent term affects society, consumers, and the local industry. PGR filed the case based on a previous case filed by ABIFINA (association of generic pharmaceutical industries).
Governmental authorities such as the President of the Republic, the Brazilian Congress, and the Chief Federal Attorney (AGU) presented briefs supporting the constitutionality and maintenance of the Article 40, sole paragraph, LPI provision.
AGU argued that patent terms in Brazil are defined by a Congress-approved Statute (LPI) and the Constitution does not regulate the term extension itself, delegating this task to the Congress. The Brazilian Constitution only defines that there must be a limited term.
The sole paragraph of article 40 is in line with the Brazilian patent system tradition. Almost every patent statute since the first Brazilian Constitution (1824) had a similar provision. Article 40, sole paragraph was added to Brazilian IP Statute with no restriction. The goal was not to punish the applicant due to BRPTO's inefficiency since between the filing date and the actual grant of the patent, a considerable period could elapse.
In the United States, since 1861, the term of protection on a utility patent was 17 years from the grant date. This scenario only changed in 1995, after the signature of the General Agreement on Tariffs and Trade (GATT), which determined a protection term of 20 years after the application filing date. But even under the new legislation, American IP law has the Patent Term Adjustment (PTA), which considers situations of delays in prosecution at the USPTO, adjusting the protection term after the grant.
AGU also argued that a 10-year term guarantee was included in the Patent Statute considering the Brazilian Patent and Trademark Office (BRPTO) backlog and pendency problems.
Data from 2018 shows that, as mentioned by AGU, patent applications took more than 10 years to be examined by the BRPTO. For some arts like biotech, pharma, and telecom, the BRPTO used to take about 14 years to examine a patent application, as shown by data made available by the BRPTO. Each bar of the following chart shows the average pendency time per art.
To reduce the backlog, in July 2019, the Brazilian Ministry of Economy and the BRPTO adopted a plan to tackle examination pendency. The plan seeks to reduce the backlog by 80% by 2021, allowing the Patent Office to achieve a 2-year examination maximum pendency after the examination is requested instead of the actual 12 years.
The main solution implemented by the BRPTO consists of relying on a foreign search report when the Brazilian patent application is part of a patent family for which a foreign patent office has already done the search. More than 149,000 patent applications in Brazil were in this situation in 2019. Examination has already started in 72,629 of them, and if the BRPTO keeps issuing about 1500 office actions per week under the plan, its objectives will be met.
Recent BRPTO data from 2020 shows the existence of 111,287 regularly filed duly pending patent applications at the BRPTO backlog in Brazil. A significant reduction from 2019's situation. This indicates that BRPTO's plan is proving to be an extraordinary success.
The good results came from a reorganization of BRPTO's structure, as (i) additional resources were not allocated to the BRPTO; and (ii) the number of examiners has not changed. Our internal data shows that pendency time is being reduced. The average pendency time for patent applications at the BRPTO went down from 10 to 8 years.
In addition to PGR and AGU arguments, interested parties filed amicus curiae requests. Licks Attorneys represent AGROBIO (now Croplife).
The table summarizes the main arguments discussed in ADI #5529. The arguments were presented by PGR, AGU and in the amicus curiae briefs.
The case might now develop into the following possibilities before the Supreme Court hearing of ADI #5529.
Reporting Justice Fux's decision admitting Farmabrasil, did not set a new schedule for the hearing. So, ADI #5529 instruction procedure is open for new amicus requests for admission. During the instruction procedure, new arguments could be introduced by PGR, AGU, new briefs from amicus curiae already admitted and new amici curiae could be admitted.
Reporting Justice Fux may decide to call for a Public Hearing. The Supreme Court when dealing with complex matters often opens the possibility of a Public Hearing. The Public Hearing allows for a broad engagement of the public. PGR, AGU and admitted amici curiae may request a Public Hearing to the Reporting Justice. If the Court holds a Public Hearing, ADI #5529 hearing date for the final ruling would be scheduled only after the Public Hearing's conclusion. Due to the coronavirus pandemic, virtual sessions are being held by the Supreme Courts' two panels and en banc session. A virtual Public Hearing could be scheduled for 2020. If the decision is to call for an in-Court (face-to-face) Public Hearing, it would only take place in 2021.
Reporting Justice Fux's also may set a new date for the hearing, with or without a Public Hearing. Considering the Supreme Court's previous constitutional cases, the time lapse between the request for hearing date and the official schedule thereof may take up to eight months.
Due to COVID-19 pandemic, the Brazilian Supreme Court is conducting its hearings on constitutional cases in virtual sessions. The Court is receiving loads of new cases regarding the pandemic to be ruled under its jurisdiction. So far, 2,270 cases were filed before the Supreme Court regarding Covid-19 matters. The Court workflow is being affected by those cases and judicial review cases, such as ADI #5529, and can take more time to be ruled.
Once the hearing begins, one of the Justices may request additional time to analyze the dockets, and the decision can be postponed.
After all Justices presented their opinions, a final ruling from STF many have two different outcomes, considering Brazilian Procedure Laws for constitutional cases:
The majority of the en banc session recognizes the constitutionality of the 10-year term and the provision is maintained. The Court may fix parameters for the application of the 10-year term, rather than those provided in the patent statute.
The majority of the en banc session decides for the unconstitutionality of the 10-year term and the provision is declared unconstitutional. The Court can set transition parameters for the unconstitutionality ruling effects, including its range and application over time. e.g., the sole paragraph may be considered unconstitutional only after the publication of the decision, which may mean that patents already granted based on the norm could keep the 10-year term.
The Court may also decide on the extension of the declaration of constitutionality or unconstitutionality of the article (called effect modulation). STF may set parameters, both in the case of the declaration of constitutionality and in the case of unconstitutionality. Effect modulation can be carried out later (not necessarily in the original decision).
Rulings in constitutional cases produce binding effects on the whole Judiciary Branch and on the direct and the indirect public administration. These binding effects do not reach the Legislative Branch.
Supreme Court Justice's short bio is available here.
Our team is monitoring the case developments. For more information on this matter, e-mail us at info@lickslegal.com
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