Brazil’s Supreme Court ruling on patent terms sends shockwaves throughout the pharmaceutical industry

In May, Brazil’s Supreme Court (STF) declared that the Industrial Property Law’s article 40, establishing a minimum term of validity for patents and inventions, is unconstitutional. The ruling means that patents in Brazil will now be valid for 20 years from filing date, regardless of the time taken by the National Institute of Industrial Property (INPI) to issue a decision. Valid patents will continue to benefit from the previous terms, except for patents from the pharmaceutical and medical devices sector.

Since then, the Supreme Court’s ruling has generated a heated debate amongst legal and IP experts given its wide-ranging effects on society and the pharmaceutical industry. The decision took place as part of the judgement of the Direct Plea of Unconstitutionality 5,529 (ADI 5529), filed on May 2016 by the Public Prosecutor’s Office (PGR), which sought to abolish the minimum 10-year patent term described in the Article 40 of the Brazilian Industrial Property Law.

Article 40 outlined the minimum term of validity of 10 years for patents of invention and seven years for utility model patents, to be counted from the granting date by the Brazilian Patent and Trademark Office (BRPTO).

The same article, however, also stipulated a 20 and 15-year exclusive use period for inventors, to be counted from the filing date at BRPTO, considering the time required by the patent office to evaluate applications, which in some cases, can mean up to a decade. In 2015, for example, the average waiting time for an administrative proceeding to be completed before the BRPTO surpassed 11 years and, when the case involved technology, that period increased to over 14 years.

In this scenario, if the BRPTO took 15 years to analyze a patent application, the inventor would have an extension of 10 years, to counted from the date of the granting decision and, therefore, a 25-year exclusive protection period.

Leading IP law firm Licks Attorneys described the decision as “the attack of the century to the country’s patent law” and added that STF is harming Brazil’s legal security.

“The Supreme Court extinguished counting the period of validity from the date in which a patent is granted, a consolidated tradition in the Brazilian legal order for 185 years, whose rupture damages the legal security and research and development in the country. Brazil is going in the opposite direction compared the rest of the world, which is implementing ways to compensate inventors for the delays by agencies to examine patent applications. In Brazil, we did not solve the BRPTO’s delay, but we stripped inventors of protection: all of society loses.”, stated Otto Licks, seasoned name partner of Licks Attorneys, exclusively to Leaders League Brasil.

The Supreme Court’s decision has impacted over 3,000 valid patents in the pharmaceutical industry and will allow more generic drugs to enter the market, lowering the prices of medication in the country. However, other specialists interviewed by Leaders League Brasil also predict that the decision will only have a short-term impact in the country’s economy.

“Society may benefit in the short-term with generic drugs entering the market at lower prices and sooner than previously expected. However, in the mid-to-long-term, the decision impacts the possibility of investment return in R&D made by innovative companies, universities and research centers, discouraging innovation, as it removes the legal security of a reasonable patent protection term in a country in which the backlog of the BRPTO has not been solved definitively solved.”, informed Marcela Trigo, IP and Tech partner of full-service giant Trench Rossi Watanabe.

Lastly, Aline Ferreira, partner at elite IP law firm Kasznar Leonardos, highlights that following the decision, investment into pharmaceutical research will no longer yield attractive dividends in the short-term and, thus, the ruling could discourage long-term sector-related investments in Brazil.

“For the generics and biosimilars industry, the result of ADI 5529 creates new opportunities in the short-term, but no one guarantees that profitability will remain stable in the medium and long-term, with many competitors fighting for the market, especially in the fine chemicals sector. For society, although the competition generated over some blockbuster drugs may reduce prices in the short-term, the decrease of patent terms is not what will solve the history of underfunding the Unified Health System (SUS) and the delay of incorporating medication into its network.”, added Ms. Ferreira.