The Supreme Court will assess the constitutionality of the term of patent protection in Brazil

The Supreme Court of Brazil (“TSCB”) will hear an especially important case for all IP community. It will be the first time that TSCB will analyse the constitutionality of a provision of the patent law and also the first IP case to be heard by TSCB in a very long time. The ruling to be issued in this case could modify our patent law in a substantial way and potentially affect thousands of already granted patents, as well as patent applications currently being prosecuted by the INPI, Brazilian Patents and Trademarks Office (“BPTO”).

On 7 April 2021 an en banc session of TSCB is scheduled to decide on the direct action for the declaration of unconstitutionality (Ação Direta de Inconstitucionalidade) number 5,529 (“ADI 5529”). This action was brought by the Attorney-General of the Union (Brazil`s chief public prosecutor) on May 17th, 2016 asking TSCB to declare that the sole paragraph of article 40 of the Law 9,279/96, Brazilian Industrial Property Act (“BIPA”), is unconstitutional. The issue at stake is whether it is in line with our Constitution to have a patent protection term of 10 years from its grant date. 

For better understanding of the issue, it is convenient to reproduce the contents of article 40 of BIPA:

Art. 40. A patent will have a term of 20 (twenty) years and a utility model a term of 15 (fifteen) years, counted from the filing date.

Sole Paragraph. The term shall not be less than 10 (ten) years for patents and 7 (seven) years for utility models, counted from date of grant, unless INPI is prevented from examining the merits of the application, due to proven pending judicial dispute or for reasons of “force majeure”.

Therefore, currently in Brazil the term of protection of a patent is 20 years from filing date or 10 years from grant, the one that is longer. The rationale behind such provision is evident: to make up for the unwanted delays during the prosecution of the patent application, making sure that, if a patent is granted more than 10 years after the application was filed, the right holder will enjoy at least 10 years of protection.

This is supposed to be a “safety provision” that should only be applied in rare and extraordinary cases as, obviously, under normal circumstances, the BPTO should not take more than 10 years to grant a patent application. Unfortunately, as widely known, in recent times there was a substantial increase of the backlog of the BPTO, for several reasons which will not be addressed here, causing extreme delays in the prosecution of patent applications in Brazil. Thus, what was supposed to be an exception became the rule.

Potential impact of the decision

To have a clear picture of the problem and practical implications of a decision declaring the sole paragraph of article 40 of BIPA unconstitutional, it is helpful to look at the numbers of patents that as of today would be directly affected by such decision: patents and utility models granted with 10 years/7 years term from grant is applied, instead of the 20 years /15 years term from filing date. 

According to the recent information provided by the BPTO in the proceedings of ADI 5529, currently there are more than 8,830 pending patent applications that have been filed more than 10 years ago, more than 36,000 patents granted with 10-year term from grant date and more than 2,880 utility models granted with 7-year term from grant date. 

If the contested provision is found to be unconstitutional, all granted patents will have the term counted from the filing date, no matter how long the prosecution procedure before the BPTO takes. In this case, without any safety rule to make up for prosecution delays, patent applications could be granted with really short term of protection (or possibly without any protection term at all) and many granted patents still in force could be considered already expired while others could have its term significantly reduced.

Why this provision is being challenged?

According to the Attorney-General, since the grant date cannot be determined upfront, until the patent prosecution is concluded, the sole paragraph of article 40 of BIPA makes the patent protection term indeterminate. This provision allegedly makes it possible to extend the patent protection indefinitely, which would be contrary to the Constitution that expressly establishes (Article 5, XXIX) that a patent term should be temporary. In addition, the Attorney-General also claims that this legal provision violates other constitutional principles established on articles 5 and 37 of the Constitution: legal certainty, isonomy, efficiency, procedural celerity, free competition, liability of the State, and consumer protection.

Governmental authorities such as the President of the Republic, the Brazilian Congress, and the Chief Federal Attorney (AGU) have defended the validity, constitutionality and maintenance of the contested provision, putting forward several arguments to explain why none of the claimed violations occur.

Due to its relevance and potential impacts several other entities have joined the case as amici curiae, most of them submitting legal opinions from various well-known scholars and former Justices of the higher Courts. Currently there are 13 “amici curiae” already admitted to the proceedings and 2 pending requests. Among those in favor of the claim and supporting the unconstitutionality arguments are ABIA, ABIFINA, FARMABRASIL, IBPI, PROGENERICOS and DPU, most of them are associations of generic pharmaceutical companies. Among those entities against the claim and supporting the constitutionality of the patent term established in article 40 of BIPA, are ANDEF, AB2L, ABAPI, ABINEE, ABPI, AGROBIO, ANPEI, INTERFARMA and ASIPI, most of them associations of innovator pharmaceutical companies.

Possible outcomes of the decision

There are several possible outcomes resulting from the decision to be issued by TSCB and is not possible to foresee what will happen. Nevertheless, below we explain some of the possible results and its effects. 

First, as the case will be heard “en banc” by all the 11 Justices of TSCB, it is important to note that the decision will depend on the opinion of the majority of them. Although obvious, this must be borne in mind as it may considerably delay the final judgment to be issued as, once the hearing begins, any of the Justices may request additional time to review the documents and arguments, and the decision can be postponed (even for months). Since there are so many different parties and entities in the proceedings, with abundant number of briefs, legal opinions, reports, economic analysis, etc, already submitted, it is highly likely that one of the Justices, before issuing an opinion, will request additional time to go through the documents and briefs, causing the hearing to be suspended. Thus, it is unlikely that the decision will be issued on the session of the next 7 April. 

Anyway, after all Justices issue their opinions, a final ruling from TSCB may have several different outcomes:

(i) sole paragraph of article 40 is found to be constitutional: The majority of the Justices recognizes the constitutionality of the 10-year term and the provision is maintained. In this case, TSCB may maintain the law as it is, and nothing changes regarding patent term of protection; but it could also decide to add new specific criteria for the application of the 10-year term.

(ii) sole paragraph of article 40 is found to be unconstitutional: The majority of the Justices decides for the unconstitutionality of the 10-year term and the contested provision is declared null and void, disappearing from our law so that the term of patent protection would be calculated exclusively based on 20-years term from the filing date. 

Such a decision will have “erga omnes” effects and will be binding on the whole Judiciary Power and on the direct and the indirect public administration. There would be no appeal or judicial ways to challenge this decision. Only the Congress would not be bound by the decision and could choose to overcome it by enacting new legislation or even new provisions to the current legislation.

Default “ex tunc” effects

The declaration of unconstitutionality by default has “ex tunc” effects, meaning that the provision would be repealed with retroactive effects. As it has never been valid, it could not generate any valid legal effects. This would impact not only the term of already granted patents but also license agreements already executed, infringement actions already decided and enforced, etc. This is the most extreme possibility as it would wipe out all effects, even past ones, caused by the unconstitutional provision. For such reason it is also the option causing more legal uncertainty and serious economic consequences. 

Modulated effects

While declaring that the sole paragraph of article 40 of BIPA to be null and void, TSCB can modulate the effectiveness of this decision over time, this is to choose when the provision will be considered invalid and stop generating effects. The modulation can be enacted in order to protect legal certainty or exceptional public interest as long as this measure is approved by the qualified majority (2/3) of the Justices. The modulation allows the Justices to declare that the judgment will become effective in different moments in time:

a) “ex nunc” effect: The decision will be effective only once the decision is final and has passed into “res judicata”. This option would “save” the validity of all patents already granted and acts already consolidated in the past, which would not be affected at all. It would still leave the door open to discussions on the effects over pending patent applications for instance, allowing for a considerable amount of uncertainty.

b) “pro futuro” effect: The ruling will set a future date for the judgment to become effective. Only when the selected date arrives the provision will become invalid and stop producing effects. This option would “save” the validity of all granted patents and probably a good part of the patent applications from being affected and would give time for everyone to prepare accordingly to the new limited patent term rule. Therefore, this option seems to be the one providing some legal certainty as past acts, already consolidated or not, would not be affected by the decision. 

c) mixed effects: The ruling can become effective in different moments for different situations. In such option the effective date can vary and be adapted to different situations. TSCB could decide, e.g., that the ruling would become effective when it is final (“ex nunc”), but with exceptions having different effective dates for particular situations. One example could be to decide that the decision will not affect any applications that were pending when the decision becomes effective, or at least applications filed before certain date. This solution may be complex but may also be a reasonable way to find a better balance between the two options mentioned before.

We will keep monitoring this case developments and will shortly report any relevant outcome from the hearing of next 7 April.  

For more information on this matter, please contact us at [email protected].