News

Practical Law – Life Sciences / 2015

The administrative court of the Brazilian antitrust authority (Conselho Administrativo de Defesa Econômica – CADE) has very recently fined a major pharmaceutical industry in over 36 million Brazilian reais (approx. 11 million American dollars) for sham litigation involving the patent application in Brazil of a blockbuster drug used in the treatment of cancer. Although this is not the first millionaire fine imposed by CADE on a pharmaceutical company, cases like this are still rare and the case law of the bureau’s administrative court, which is a federal nonjudicial instance encharged with enforcing the constitutional economic principles, such as free enterprise and free competition, is still being built.

In the present case, the accused company has filed a patent application for a procedure to produce the abovementioned drug before the TRIPS Agreement had come into force in Brazil (later it has broadened the application’s claims to include the drug itself). As it is of common knowledge, Brazilian Law did not admit the patentability of chemical and pharmaceutical compounds until the issuance of the new Industrial Property Act in 1996, which was passed by Congress in order to comply with TRIPS. Notwithstanding the foregoing, by the time the applicant has requested the examination of the invention before the Brazilian Patent Office (BPO), the TRIPS agreement had indeed come into force.

As we informed in our previous newsletters # 2, of January, 2014, and # 6, of August, 2014, the Brazilian Patent Office (“INPI”) enacted Resolution No. 113 in October 2013 ordering that all patents with 2 (two) or more annuities in arrears should automatically be definitely shelved and extinct, without the possibility of restoration. Such resolution aimed primarily at reducing the backlog of pending patent applications and also served to the general goal of increasing the realm of the public domain in Brazil, but many understood that INPI's resolution was in direct violation of Section 87 of Brazil’s Patent Act, according to which the shelving or extinction of a patent can only be decreed by INPI after the patentee has failed to apply for the restoration of the patent (paying the annuities in arrears with a penalty) within the deadline of 3 months after being summoned to do so through a publication in the Official Gazette.

INPI’s Resolution 113 had the potential to swiftly shelve or make extinct over 10,000 patent applications and issued patents, and on July 2014 the Brazilian Association of Patent & Trademark Agents (ABAPI) filed a class action against INPI seeking its revocation. On January, 2015 the 25th Federal Trial Court of Rio de Janeiro ruled in favor of ABAPI and ordered INPI to immediately halt the mass shelving or extinction of patents and to overturn all shelving and extinction decisions that by then had already been published by INPI.

The Trademark Reporter© Vol. 104 – The Law Journal of the International Trademark Association (site da INTA)

Trade secrets are protected as a category of intellectual property rights. In Brazil, their protection resides in the legislation set forth against unfair competition (considered a crime under Brazil’s Industrial Property Law of 1996), in the TRIPS Agreement (the Agreement on Trade-Related Aspects of Intellectual Property Rights) and in other legal provisions such as the ‘inviolability of privacy’ clause of the Federal Constitution.

Trade secrets are thus protected by the statutory rules on fair competition, established in Articles 195(XI) and 195(XII) of the Industrial Property Law with civil and criminal effects, and by Article 842(g) of the Labour Law, according to which the breach of a trade secret by an employee is considered a valid reason for dismissal.

In Official Gazette of February 11, 2015, ANVISA published RDC #7/2015, an update of the technical requirements for the regulation of personal hygiene products, cosmetics and perfumes, in order to simplify and expedite the treatment of this category of products in the country. The resolution came into force on February 25, 2015.

In Brazil, cosmetics are classified by ANVISA as products grade 1 or 2. Grade 1 products are characterized by having basic properties, which do not require further characterization or detailed information regarding their use and restrictions. On the other hand, grade 2 products have specific indications, which characteristics demand attesting safety and/or efficacy, as well as information regarding care, use and restrictions.

As of publication of RDC #4/2014, the procedures regarding the regulation of cosmetics had already been defined in order to stablish the Electronic Automation System of ANVISA as the basis for all activities comprehending notification, registration and corresponding alterations regarding this product’s category.

The Brazilian Patent Office has now started public hearing proceedings regarding the second block of consultations on the new “Guidelines for the Examination of Patent Applications”.

Companies commonly consider their databases as an intellectual asset. Brazilian Copyright Law recognizes that companies own the architecture of databases that can be considered works of authorship, either by the selection, organization or disposition of its contents (article 7, XIII of Federal Law n. 9.610/1998). However, some aspects must be considered when databases contain private information (usually consumer’s data). Given that such data relate to natural persons’ privacy, strong objections are raised in society against the unauthorized treatment and transfer of such information. Unlike other countries, only now this became an issue in Brazil and under an scrutiny of experts and the allegedly mistreatment of client’s personal data by some companies that the debate about the new draft bill of law was recently introduced.

For the last thirty years, Brazilian legal framework has superficially touched the protection of personal data.  Dispositions were spread in the Federal Constitution, the Consumer Protection Code, the federal laws on access to public information and on industrial property, as well as on the Civil Rights Framework for the internet. Still, the lack of a single law fully regulating the issue has led to undesired levels of legal uncertainty.

An old promise of the Ministry of Justice, the Draft Bill of Law on the Protection of Personal Data was finally disclosed last January. Long-awaited by companies, lawyers and consumer defense entities, the draft is under public consultation until April 30, 2015 and might be refined bt the Ministry before its submission to the Congress. It is already possible, though, from the analysis of the document, to derive some conclusions that may guide companies with regard to the best practices to be adopted until the effective enactment of the law.

It is expected that, in 2015, the administrative court of the Brazilian antitrust authority (Conselho Administrativo de Defesa Econômica – CADE) rules some important cases involving the sham litigation doctrine applied to intellectual property. It is expected that these cases will more accurately indicate what CADE understands as anticompetitive behavior and infringement of the economic system concerning the abuse of intellectual property rights.

CADE’s administrative court is a federal nonjudicial instance encharged with enforcing the constitutional economic principles, such as free enterprise, freedom of competition, social role of property, consumer protection and the restraining of abusive behavior. Among its institutional competences it can be mentioned the legally required prior consent to “acts of economical concentration”, such as mergers and acquisitions, and the application of sanctions to infringements of the economic order.

It is always worth remembering that the current Brazilian antitrust Act, differently from its predecessor, expressly considers the possibility of undue use of intellectual property rights as a hypothesis of infringement of the economic system. The administrative court forthcoming decisions this year will help to clarify what CADE understands as an abusive use of intellectual property rights.

The American doctrine of sham litigation, which forbids the abusive use of the judicial system as a way to constrain competitors by the lawsuit itself, regardless of the merits’ pertinence or chances of success, has already been applied by CADE in past decisions. The novelty this time falls within its application to intellectual property related cases.

A new resolution defining the legal concept of “associative contract”, which was issued last year by CADE (Conselho Administrativo de Defesa Econômica) – the Brazilian antitrust authority – came into force in January 2015. According to the Brazilian current antitrust law (Law n. 12.529/2011), once other legal premises are met, such as annual revenue standards, “associative contracts” must be previously notified to and approved by CADE before being performed by the parties despite the fact that the Law does not clarify the meaning of “associative contracts”. Therefore CADE’s Resolução n°. 10 de 29 de outubro de 2014 is expected to eliminate the former legal uncertainty on which kinds of commercial agreements had to be submitted to CADE, a doubt that used to reach intellectual property licensing agreements.

Brazilian antitrust Law establishes that “acts of economical concentration” must be previously submitted to CADE’s approval before coming into force whenever (a) the annual gross revenue in Brazil of one of the parties involved is of 750 million BRL or more and (b) the annual gross revenue in Brazil of the other party is of 75 million BRL or more.

In addition to these parameters, section 90 of the Law lists the strict cases which shall be considered “acts of economical concentration”, the majority of which are related to mergers and acquisitions. Exception made to item (IV) which provides for the prior consent of CADE to “associative contract, consortium or joint venture” though without defining the meaning of “associative contract”, which could reach several agreements with no repercussion on market competition.

As informed in our Newsletters # 2 (January 2014) and # 6 (August 2014), a serious controversy regarding the restoration of patents and of patent applications with annuities in arrears arose from the enactment by the Brazilian Patent Office (hereinafter “INPI”) of Resolution No. 113/2013 (hereinafter “INPI’s Resolution”). Such controversy is due to the contradiction between item 13 of INPI’s Resolution and Sections 86 and 87 of the Brazilian Industrial Property Act (Law No. 9,279/96 – IP Act): although the IP Act allows the restoration of the patent or of the application upon request of its owner within 3 (three) months from the publication of the forfeiture’s notice, INPI’s Resolution set forth that in case multiple annuities (two or more) are left unpaid, a patent or a patent application could no longer be restored.

Given that, on July 10, 2014, the Brazilian Association of Industrial Property Agents (ABAPI) filed a class action before the 25th Federal Court of Rio de Janeiro, aiming the invalidation of item 13 of INPI’s Resolution and the reversion of all the definitive shelving and extinction decisions that were based on such provision.

Recently, on January 13, 2015, Federal Judge Eduardo André Brandão de Brito Fernandes rendered his decision and granted ABAPI’s requests, determining that all shelving and extinction decisions based on item 13 of INPI’s Resolution are void and ordering that INPI complies with Section 87 of IP Act, i.e., patentees must be notified so that, if it is of their interest, they might be able to restore its patent or application by paying the proper official fees. Such decision also granted the injunction request to immediately suspend the effects of item 13 of INPI’s Resolution and, therefore, it will have immediate effect and the 9,745 patents and patent applications that had already been declared shelved and extinct by INPI must now be reinstated.

This paper gives an overview on legal, economic and cultural characteristics that are inherent to the Brazilian business scenario and how they affect the negotiation of know how licensing agreements. The Brazilian regulatory framework and the point of view of Brazilian companies can bring out significant issues not expected by their counterparts of other countries or regions. Experience demonstrates that understanding the concepts, reasons and dynamics of emerging economies from their perspective may help U.S. legal professionals to observe relevant factors and get insights to overcome obstacles in the practice of contractual law in a multinational or multicultural environment, in particular when negotiating know how licensing contracts.
 

This article tells a little of our history, rooted in the extremely active professional life of Richard Paul Momsen, an American lawyer who came to Brazil in the early years of XXth century and founded Momsen, Leonardos & Cia. While Brazil today has a legal market that allows for foreign lawyers and foreign firms, existing regulations are restrictive. Foreign lawyers are barred from practicing domestic law or litigation, and Brazilian-licensed lawyers working for foreign firms or partnering with foreign lawyers cannot do either as well. This was not always the case, however. Until 1963, there was little regulation on the legal profession. Beginning in 1913, elite American lawyers traveled to Brazil, with some even becoming prominent domestic practitioners. They partnered with local elite lawyers (who maintained their domestic privileges) and served as key brokers for U.S. businesses seeking market-entry. Drawing upon the elite theory literature, and on ethnographies, interview data, and over 1,000 pages of rare Portuguese and English archival sources, this study’s thesis is that sophisticated American and Brazilian legal elites capitalized on the lack of regulation to advance their financial interests, and in the process transformed Brazil’s corporate legal sector.

Written with Marielle Dejligbjerg, from HOIBERG A/S

Brazil is the world’s fifth largest country, both by area and population, and has the seventh largest economy measured by GDP. The country excels in the production and exportation of commodities like coffee, iron ore, soya, orange juice, tobacco, and cattle; and produces steel, automobiles & aircrafts, computers and petrochemicals. In the last decade a great portion of the population has become prosperous, and in a time where inflation rates are under control, this makes the Brazilian market attractive to foreign investments. In this article we describe peculiarities of the Brazilian patent system, which are of particular relevance for those who wish to enter the market.