Brazil Supreme Court rules that patent extensions are unconstitutional

[ Gert Würtenberger ]

In a nine to two ruling, the Brazilian Federal Supreme Court (STF) decided on 6 May 2021 that the automatic patent extension set forth in the subparagraph (“paragrafo único”) of Article 40 of the Brazilian Industrial Property Code (Law No. 9.279/96 – LPI) was unconstitutional (ADI 5529).

While Article 40 LPI holds that the term of a patent for an invention shall be 20 (twenty) years and for a utility model 15 (fifteen) years as from the filing date, its subparagraph states that the term of protection shall not be less than 10 (ten) years for inventions and 7 (seven) years for utility models as from the date of grant. Considering in particular the backlog of patent applications waiting to be examined at the INPI (Brazilian PTO) this rule – which creates in addition to the regular 20 years of protection an automatic and unforeseeable extension of the patent term – leads to a situation in which patent protection in Brazil may exist over 30 years. Especially technologies with a longer lifespan, such as pharmaceuticals, benefit from this provision by taking advantage of the additional years of protection.

While prior to the LPI Brazil did not allow pharmaceutical products and processes to be patented, by implementing the TRIPS Agreement, it was bound to amend its national patent legislation. However, while other controversial points were discussed in Congress, the subparagraph of Article 40 LPI, which according to its supporters was necessary to “compensate patent applicants for potential delays in the examination process”, was introduced into the law without essential discussions.

Considering that

. the Brazilian 1988 Constitution guarantees inventors a temporary exclusive right and, furthermore, requires intellectual property to be in line with both the “social interest” and the “technological and economic development of the country” (Article 5, XXIV);

. in accordance with Article 33 of the TRIPS Agreement, Art. 40 LPI guarantees a minimum term of patent protection of 20 years from the date of filing, and

. Art. 44 LPI provides the owner of a patent with the right to seek retroactive damages for the unauthorized exploitation of the patented object for the period between the publication of the application and the grant of the patent,

the STF decided that the subparagraph of Article 40 LPI, in light of the backlog at the INPI, constitutes an indeterminate and automatic extension of the duration of a patent, the term of which depends on the efficiency of the administrative procedure. Such indeterminate and automatic extension of duration

. undermines the temporary nature of the patent term, harms legal certainty and prevents competitors from developing strategies and making decisions to enter the pertinent markets once the patent expires;

. grants patent rights (monopolies) for an excessive period of time which infringes the constitutional principles of efficiency of public administration, of market economy and of the right to health;

. creates incentives for applicants to adopt strategies towards extending the period of patent examination, benefitting from the restriction of competition and feeding the backlog at the INPI, as the extension of term was introduced into the law without considering the applicants’ responsibility to contribute to an expedition of the examination process;

. has particular consequences for access to medicines and the constitutional guaranteed rights to life and health, especially given the fact that most pharmaceuticals (approx. 70%) take advantage of this patent extension.

In its vote/opinion the Reporting Justice, Mr. Dias Toffoli, several times referred to a study of Dr. Karin Grau Kuntz, scientific adviser of the law firm Würtenberger Rechtsanwälte, emphasizing the unconstitutionality of the provision.[1]

Retroactive application of the decision to patents for pharmaceuticals and medical devices

Generally, a declaration of unconstitutionality has retroactive effects, i.e. it has the same legal effect as if the law had never been enacted. However, in certain cases the Court may stipulate a date after which the law may no longer be applied (so called “modulation of effects”). In the present case the STF decided to partially “modulate the effects” of the declaration of unconstitutionality with the exception of patents for pharmaceuticals and medical devices. Consequently, while for all other  patents the term of duration is ten years from the date of grant, the decision is retroactively applicable to patents for pharmaceuticals and medical devices. This reduces the term of granted patents in these fields to 20 years from the filing date.

Remarks

While studies demonstrate that many lifesaving drugs with extended patent terms were sold in Brazil at prices several times higher than international reference prices, and  that stopping the automatic patent term extension for just nine drugs would reduce the government’s spending by almost USD 1 billion (56%) in the respective extension periods[2], a letter signed by the ambassadors of Belgium, Denmark, France, Japan, the United Kingdom and Sweden was introduced in the main proceedings stating that a declaration of unconstitutionality would negatively affect industry and bear the risk of  a reduced interest of international investors in bringing new technologies into the Brazilian market.[3] This clearly shows the great gap between the interests involved in the discussion about the extension of the duration of patents.


[1] PARANHOS, J. / MERCADANTE, E. / HASENCLEVER, L.  “O custo da extensão da vigência de patentes de medicamentos para o Sistema Único de Saúde”. Cadernos de Saúde Pública [online]. v. 36, n. 11, 2020 (https://scielosp.org/article/csp/2020.v36n11/e00169719/pt/#)

[2] See Amado, Guilherme, “Reino Unido, Japão e Outros Quatro Países dizem que redução de tempo das patentes prejudica Brasil”. Época, 28 April 2021 (https://epoca.globo.com/guilherme-amado/reino-unido-japao-outros-quatro-paises-dizem-que-reducao-de-tempo-das-patentes-prejudica-brasil-1-24991032)

[3] Grau-Kuntz, K.  “Estudo (ADI 5529)”, in As inconstitucionalidades da extensão dos prazos de patentes, Svensson (Org.), 2021, Lumen Juris, (151-198), (https://ip-iurisdictio.org/wp-content/uploads/2021/04/PDF_As-Inconstitucionalidades-da-Extensao-dos-Prazos-das-Patentes.pdf)

Posted in Patent.