Brazil’s
Statutory Compulsory License For Lack of Local Manufacturing
This article is the English Version of a Chapter of the book “O Novo Direito Internacional”, published by Editora Renovar in 2005.
Introduction
In July 2001, the United States
Government issued a statement that it will seek a bilateral resolution of the
dispute instead of pursuing action
through the WTO.
Initially, it is important
to note that the scope of the WTO panel limited solely to only one out of the
seven statutory bases for the granting of compulsory patent licenses under Law
9279/96. The seven grounds under which
compulsory licenses can be granted are set forth in the Brazilian Patent Law as
follows:
1 Art. 68. A patent owner shall be subject
to compulsory licensing of the patent if the owner exercises its rights in an
abusive manner.
2 Art. 68. A patent owner shall be subject
to compulsory licensing of its patent if the patent owners uses the patent in
an anti-competitive manner.
3 Art.
68, § 1, I: The failure to work the patent (each independent claim)
within the Brazilian territory, defined as a lack of local manufacturing,
incomplete manufacturing of the product, or lack of full use of the
patented process.
4 Art.
68, § 1, II: A compulsory license shall be granted if the patent owner
fails commercialize the patent to meet the needs of the market.
7. Art.
71: A compulsory license may be granted ex
officio in cases of public interest.
Contrary to what some
Government agencies and newspapers had reported, the compulsory licensing of a
patent due to public interest or national emergency, both set
forth in article 71 of Law 9279/96, were not the subject matter of the
panel set up by the WTO. These grounds of compulsory licensing were not being questioned.
Therefore, one must conclude
that the WTO panel could not be considered as a threat to the compulsory
licensing concept. The panel would
analyze only one of seven grounds of compulsory licensing, known as the
requirement of complete and simultaneous local manufacturing of each independent
patent claim in the Brazilian territory, or according to the non-technical term
used by the media, the “local working requirement.” Clearly, this requirement does not affect the
public use of patents by the Government in cases of public interest or national
emergency.
Even though the Government
has been always aware of the limited purpose of the WTO panel, it had
erroneously alleged that the panel could jeopardize the future of government
programs recognized as effective and appealing to the public, such as the
Brazilian anti-AIDS program. This was
not a true statement.
Official documents
substantiating the objective of the WTO panel are available at the
organization’s website: http://www.wto.org.[1]
The Brazilian Patent System, the Pharmaceutical
Industry and Public Policies
Although the WTO panel’s
inquiry did not deal specifically with the pharmaceutical industry matter, the
panel’s inquiry is of interest to anyone who is investing in research. Patent protection and the WTO panel is
particularly important to the pharmaceutical industry because it needs to
maintain its ability to invest in research of new drugs. For this reason, the pharmaceutical industry
has analyzed the issue and came out against the local manufacturing requirement
long before Law 9279 was passed in 1996.[2]
As shown below, to the
detriment of Brazilian society, inventors of new drugs have been discriminated
against for many years, as they were excluded from patent protection. As summarized by Prof. Martin J. Adelman, one
of the most known international patent experts, consumers cannot benefit from
limitations artificially imposed over the return of investments in
pharmaceutical research. According to
Prof. Adelman, a lack of patent protection jeopardizes the development of new drugs
for the population.
In the specific
context of the pharmaceutical industry, for example, the dilemma for
free-riders is that they leave the cost of the development of new drugs “to the
developed world” and hope that the failure to participate will not stunt so
many drugs’ development that the strategy backfires. Moreover, technological
development to meet the free-riding country’s special needs, such as cures for
locally endemic diseases, may not be forthcoming if these needs are not shared
by countries with patent systems that encourage investment in research and
development.[3]
According to Redwood, the
purpose of eliminating patent protection for pharmaceutical products in Brazil
was to protect national interests by permitting access to new drugs protected
by patent rights. Another goal was to
encourage industrial development and foster research by allowing the legalized
copying of drugs that were the subject of patent protection.
Prof. Redwood teaches that
the Brazilian Government expected that national companies would take advantage
of the opportunity to copy not only through imports, but also by investing in
the local manufacturing of the most promising active chemical substances. Once strengthened, a local industry would
become capable of developing exports and of conducting advanced research.
Contrary to the Government’s
expectations, the prohibition of patent protection for pharmaceutical products
in Brazil had led to other results.
Given the scenario described
by the INPI, how can scientists be encouraged and investors be convinced of
committing themselves, with their will and funds, to the research of drugs for
Chagas’ disease?
The average cost of
researching and developing the drugs that were being marketed in the 90s
exceeded five hundred million dollars (US$ 500,000,000.00) per product. In addition to being very expensive, the
development of a new drug is a risky task for any company, since only three out
of every 10 new drugs have a return, during sales, on the investment made in
research and development.[10]
Only 20% of drugs are
responsible for a 70% return on sales by pharmaceutical labs. In other words, a small group of drugs that
achieve commercial success is accountable for maintaining research, development
and sales of several drugs that would not be in the market without this subsidy
afforded by successful products.
The provision is applied in
three very different manners. The first
one is the actual application for a compulsory license before the INPI, which
has already taken place with PI8704197-9.[13] The second one is the use of the cited
provision in order to upset any balance in a negotiation between a potential
licensee and the patent owner. As
acknowledged by the report of an NGO on this second manner, “the mere
availability of a local working requirement strengthens the ability to
negotiate.”[14]
The third manner is the use
of article 68 of the Law 9.279/96 for defense purposes in a patent infringement
lawsuit. Article 68, § 1, I, I this case, is used as a means of coercion and
threat in order to dissuade the patent owner to use its rights to prevent from
a condemnation.[15]
All of the three manners cited
above have already been used in Brazil. This fact proves the evident damage
caused to the patent owners through the application of the provision discussed.
Thus, one cannot affirm that there is no damage or use.
The requirement of local
manufacturing of a patent within the national territory is described by the
late distinguished Prof. Beier, of the Max Planck Institute in Munich, as the
most protectionist doctrine of the international patent system. Such doctrine is outdated and unfair to
anyone investing in development, technology and new products.
In a posthumous article
published by the International Review of Industrial Property and Copyright Law
(IIC), Prof. Beier discusses, impartially, the emptiness and decadence of the
obligation to locally work a patent, as this concept is contrary to the patent
system and economic principles:
It soon became clear that the national obligation to work a patent, the protectionist nature of which is evident, was contrary to the concept of international patent protection and reasonable economic principles.
Compelling a patent holder to produce each
protected product in every country, irrespective of the dimensions of the
market concerned and the existence of the remaining framework conditions for
economically sensible manufacture or licensed manufacture, would be utterly
contrary to economic reason and to the principle of the international division
of labor.
In an age of increasing globalization of
manufacture and distribution, an institution such as the national obligation to
work a patent is more than nonsensical.
Where the patent holder does not act unreasonably, but according to
economic principles by producing at minimum expense at the best location, then
he is not acting abusively: “Failure to
work a patent is not an abuse to the extent that the patent is worked at all
and insofar as the needs of the market are satisfied by imports.[16]
It becomes clear that there
is no subordinate relationship between the first two possibilities of granting
a compulsory license listed in article 68 (abusive exercise of rights and
anti-competitive use of patent rights) and the other possibilities under §1 of
the same article, such as a compulsory license due to a failure to completely
manufacture in Brazil all independent claims of a patent.
Any interpretation
contemplating a subordinate relationship between the provisions under article
68, §1, such as failure to locally manufacture the patent, and the first two
grounds found in article 68, is overlooking the rules of interpretation and construction
under Brazilian law.
Everyone knows that the
compulsory licensing system in effect until January 1995, created by Law
5772/71, the Industrial Property Code, contained a legislative technique
identical to the one now being challenged.
It is important to remind
that the Law 95/88, a specific statute which provides rules for interpreting
national legislation, contains provisions in a section of which the heading was
entirely vetoed, just as the second section under article 2, the heading of
which was vetoed. In other words, in our
legal system, even the specific law on interpreting legislation has sections
with no heading. If the proposed case
for subordination were true or correct, examples like this simply could not
occur.[18]
Moreover, it is always good
to bear in mind that the language of the first paragraph under art. 68 provides
that: “likewise the following shall also result in a compulsory license”
this clearly shows that there are additional possibilities besides the two
listed in the beginning of article 68.
The requirement of complete work of the object
of a patent in the national territory: an injustice detrimental to Brazilian
consumers
First of all, the
requirement contained in art. 68, § 1, I of Law 9279/96, compels the holder of
patent in Brazil to manufacture, within the national territory, simultaneously,
any products potentially infringing all elements of each independent
claim of a patent.[19] No matter how many claims the patent may
contain. This is much more than requiring the local manufacture of a specific
product.
The INPI has affirmed such
interpretation in a few more than four hundred decisions regarding forfeiture
cases, all of them prior to implementation of the Uruguay Round. The interpretation
repeatedly expressed by the INPI regarding the requirement for “actual working”
of the object of a patent within the national territory under art. 33, §3 of
the former Industrial Property Code (Law 5772/71), was that the owner of a
patent about to be forfeited should work the patent to its fullest
extent. In other words, the legal
obligation was the same, however, whereas under Law 5772/71 the penalty was the
forfeiture of the patent, and nowadays the penalty imposed is a compulsory
license in the manner provided by art. 68, § 1, I of Law 9279/96.
As an example, one might
mention an opinion for the forfeiture of patent PI 6677387 (RPI 1693, of
1/13/1984), due to non-working of only one among several independent
claims. In such opinion, the head of
DIQUOR mentioned that the “[i]nvention must be used as described in the
specifications and claims, and work must be related to the entire claim chart.”[20]
Seeking to avoid the
forfeiture due to non-work of a single claim, the patent owner alleged a reason
of force majeure grounded on the
“difficulty of locally working the process due to the need for highly complex
plants requiring such large investments and execution time as would be
incapable of being solved in the short time period established by article 49
(a) of Law 5772/71.”
Perhaps the most important
and illustrative example is the decision of the Court of Appeals for the
Federal Circuit (nowadays the Superior Court of Justice), which affirmed that
the requirement of working all independent claims of a patent in order to avoid
forfeiture also applied to compulsorily licensing patents.[22]
A patent will
always be one and indivisible, in the legal sense, and there is no requirement
of unity of the working process (...)
In the pharmaceutical
industry, a patent application must be drafted and filed long before any
clinical studies are begun, or a better formulation and use of a “promising
molecule” are defined for a pharmaceutical product. Patents are filed and granted almost 10 years
prior to the release of any product in the market. Several independent claims are perhaps not
being “worked within the Brazilian territory” because of a lack of conclusive
safety and efficacy studies. On the
other hand, other claims are perhaps not being “worked” precisely because of
the existence of studies produced after the patent was granted, which show
additional and as yet unsolved technical problems.
This is just one of the
reasons why patent owners are outraged, as they see such statutory requirement
as unfair and potentially detrimental to Brazilian consumers.
Additionally, independent
claims in the same patent can be produced in Brazil, but not simultaneously.
Accordingly, if a certain
patent for a pharmaceutical product contains a claim for an ethical product,
and another claim for an over-the-counter (OTC) product, the legal requirement
of art. 68, § 1, I, would be met only if the patent owner had two products in
the market at the same time, and were working all claimed elements in the
national territory.
This statutory requirement
is so difficult to be met that not even the patent of the well-known
sterilization system and product (PI8302255) invented by Brazilian genius
Alintor Fiorenzano Jr., and sold under the trademark Sterilair, would be
capable of reaching what the law requires, since it would not have all
independent claims produced continually and simultaneous within the established
deadlines.
According to the definition
contained in art. 68 , §1, I, the work, import and distribution , albeit almost
in the totality of the patented object, are insufficient to meet the statutory
requirement. Manufacturing a large part
of the patented product also does not satisfy what the statute requires
according to the INPI’s practice and the Courts’ decisions.
It is interesting to note
that such requirement of art. 68, § 1, I, diverges from all legislation
regarding rules of origin, which provides the percentage ratio of a product
that must be produced in Brazil in order for it to be deemed a national or
Mercosul product.[24]
The requirement of art. 68 §
1, I, puts an end to any possibility of using the drawback system to ensure a
greater competitiveness for Brazilian high-value-added products which are under
the protection of a patent.[25] The risk to the competitiveness of Brazilian
exports is obvious.
Considering that the work of
each “element” of a claim may represent a cost increase – due to currency
reasons, a scale economy, or electric power shortage – the requirement is
potentially detrimental to exporters and foreign exchange as well as to the end
consumer, whose product will be priced higher in order to cover higher
production costs.
Apparently, such damages for
the nation were pointed out by the Ministry of Foreign Affairs in the early
90s, long before the Uruguay Round was concluded. After all, art. 73, § 2 of Bill of Law # 824,
arisen from Presidential Message No. 192, of April 30, 1991, which contained a
bill of law “regulating industrial property rights and obligations,” already
provides that imports should be deemed as a form of actual work. Bill of Law 824 was publicly supported by the
Brazilian ambassador to the GATT at the time, Rubens Ricupero.
To sum up, if a patent owner
that has ten independent claims produces only nine of them within the Brazilian
territory, the patent is subject to a compulsory license due to a failure of
local working of only one such claim.
According to the practices adopted by the INPI, all 10 claims would be
licensed, i.e., the nine claims being worked plus the only one that was not, as
the INPI does not grant any partial licenses.
On the other hand, if a
compulsory license is granted for failure to produce one of the claims locally,
the “compulsory” licensee might not have the same obligation as the patent
owner to locally work all claims. This
is due to the fact that, under art. 68, § 2 of Law 9279, the licensee is
required only “to carry out an efficient work of the object of a patent.”
This unequal treatment
standard of legislation is another reason why patent owners are outraged, since
they see such legal requirement as unfair and potentially detrimental to
foreign investment.
Language of the articles and the controversy
As already shown, one of the
seven possibilities for a compulsory patent license under Law 9279/96 is the
“failure to exploit the object of a patent within the Brazilian territory for lack of working or incomplete working of
the product of the product, or lack of
full use of the patented process.”
In Brazil, it has been
sustained by some that the Paris Convention provides that the complete work of
the object of a patent in the national territory is required. This is incorrect.
The requirement of the
complete work of the object of a patent exists under Law 9279/96, but it does
not exist under any provision of the Paris Convention.
Rodenhausen, the Paris
Convention’s most famous commentator, believes that “the member States are also
free to define what they understand by failure to work.”[27]
In light of the above, TRIPS
art. 27(1) provides that “patent rights [shall be] enjoyable without
discrimination ... as to […] whether
products are imported or locally produced.”[28]
Requirement for local work in a free-trade
agreement: an inconsistency
Before analyzing the aim of
the WTO panel, we must ask ourselves what is the main purpose of the WTO, and
which are its objectives.
We must not forget that the
preamble of the main WTO agreement, to which the TRIPS is subordinated (Annex
1C), provides that the primary objectives of such Organization are the
expansion of international trade and the optimal use of the world’s resources.
Thus, upon analyzing
Brazil’s obligations and rights, we must bear in mind the objectives that
justify the WTO’s existence.
Seeking to develop the free
trade of goods and services, the TRIPS has incorporated standards higher than
those of the Paris Convention. The
inconsistency of the requirement of local work becomes self-evident when
analyzed in light of a system aiming at the international circulation of goods
and services.
Thus, as international trade
is the key to the development of the world’s nations, its progress must not be
defended through a suggestion to withdraw any products protected by patent
rights. As explained by the report on
the TRIPS published by UNCTAD, “[t]he patentee’s bundle of exclusive rights
must include the right to supply the market with imports of the patented
products.”[29]
Otherwise, how can an
international effort toward developing trade and lowering tariff and non-tariff
barriers be compatible with a requirement that is contrary to international
trade itself, that penalizes patent owners?
Nuno Pires de Carvalho,
consultant to the Intellectual Property Division of the World Trade
Organization at the time, and presently a member of the World Intellectual
Property Organization (WIPO), with the authority of someone who is also a
specialized patent lawyer in Brazil, has warned about the need to analyze the
requirement for local work in light of the WTO’s more general dictums and
postulations:
“Discriminating
as to whether products are imported or produced locally is an issue that has
been dealt in a fiery way in Brazil (...)
As far as this
matter is concerned, it should be made clear that the WTO Agreement and its
annexes must be looked upon as a whole, since they were negotiated and accepted
by WTO members as a “package,” i.e., an indivisible and harmonious set of
principles and rules. Thus, in order for
the extent of the TRIPS provisions to be understood, one must take into account
rules which are found in other WTO agreements that help clarify their meaning.
Actually, the big
difference that exists between the TRIPS Agreement and other WIPO-administered
treaties resides in the fact that the TRIPS Agreement is, just as any other
agreement within the WTO, a mechanism resulting in the access to markets for
products and services. Unfortunately,
there is a certain trend for overlooking this point, which is key to
understanding the TRIPS’ true meaning.
The first
paragraph of art. 27 does, indeed, involve the principle of national treatment,
but not the national treatment applied to individuals under the Paris and Bern
Conventions, but that which is applied to goods under art. III, paragraph 4, of
the 1994 GATT Agreement, which states that:
“Products from
the territory of every contracting party, which are imported into the territory
of any other contracting party, must not receive a less favorable treatment
than that which is given to similar products of domestic origin, insofar as any
law, regulation or statute of limitations affecting the sale, offering for
sale, purchase, transportation, distribution and use of such products in the
domestic market.”
In other words,
those WTO members imposing the burden to work patents must not give imported
products a less favorable treatment than the one given to locally-manufactured
products for purposes of using them as proof of work.”[30]
Therefore, bearing in mind the WTO’s
objectives, we can conclude that the requirement for local work is
inconsistent, as it is, in itself, adverse to free trade.
TRIPS art. 27(1)
categorically provides that patents are available and patent rights enjoyable
without discriminating as to the place of invention, as to their technology
sector, and as to whether the goods are imported or produced locally. One can see, therefore, that at least
apparently there is a conflict between TRIPS art. 27(1) and art. 68 § 1 I of
Law 9279/96. And it is precisely such
inconsistency of the national Patents Act with the TRIPS that caused a panel to
be set up at the WTO’s Dispute Settlement Agency.
There are several technical
and unbiased papers either commenting on or interpreting the TRIPS. Those papers show the more acceptable reading
and expectations of the international community.
In determining
the ... enjoyment of patent rights Article 27(1) also prohibits discrimination
based on whether the invention is locally produced or imported, ... This
concerns working requirements and possible compulsory licenses which, before
the TRIPS Agreement, were regulated only by the narrowly-drafted Article 5A of
the Paris Convention, which ... left contracting States free to impose
compulsory licenses for failure to work after a prescribed delay.[31]
One can see that Prof.
Gervais understands that TRIPS art. 27(1) limits the right granted by art.
5A(2) of the Paris Convention, by prohibiting the requirement of local work in
order for the rights of a patent owner to be upheld.
Prof. Gervais’ opinion is
not an isolated opinion. Almost all of
the papers published worldwide on the TRIPS agree with the English professor’s
judgment. The vast majority of opinions
found in the international community disallow the concept that the right
granted by art. 5A(2) of the Paris Convention ought to be upheld. This concept
seems to be made by those who suggest upholding the challenged provision in
Brazil.
At first
glance, the TRIPS Agreement seems to rely substantially on the Paris
Convention. Indeed, some scholars have
concluded that the two agreements may successfully, if not happily,
coexist: Closer examination, however,
shows that the Paris Convention simply provides a context for the TRIPS
Agreement and not a standard. The
Agreement, in reality, derogates from the effects of the Paris Convention.
Article 2(2)
thus confirms the fact that TRIPS is a “Paris-plus” agreement… It is important
to emphasize that Article 2(2) refers to obligations of Members, not to all
provisions that have been incorporated into TRIPS. A number of those provisions
allow contracting Parties either to limit the scope of a right or to impose
formalities. These provisions do not create obligations for those Parties and
may be derogated from in TRIPS.[34]
Prof. Gervais, like many
other unbiased Professors, attests the mistake of the Brazilian theory in order
to interpret the Treaty.
On the other side of the
world, quite far from the United States, Prof. Michelle McGrath from the
University of Sidney, Australia, expressed her disappointment upon
acknowledging the concept that prevailed in the final language of the TRIPS,
respecting its provisions: “[H]owever, the major disappointment in this area is
that under the combined effect of Articles 27 and 31, local working of the patent
by the owner is not required so long as importation of patented products
‘sufficient to meet local need’ is provided.”[35]
Likewise, Prof. Michael
Blakeney, Director of the Law School of Murdock University, in Perth,
Australia, also acknowledges that the right entertained by art. 5A(2) of the
Paris Convention is not available to TRIPS members, by virtue of articles 27(1)
and 31:
A contentious
issue, which had been unresolved during the negotiations on the revision of
Article 5A, was whether the importation of patented products could be
considered to be a sufficient working of a patent. The Paris Convention in Article 5A(1) had
disallowed the forfeiture of patents on the ground of importation by a
patentee. Article 27 of the TRIPS
Agreement attempts to resolve this issue by its insistence that ‘patents shall
be available and patent rights enjoyable without discrimination as to the place
of invention ... and whether products are imported or locally produced.[36]
It is interesting to note
that some concepts being made in an attempt to justify the legality of the
requirement to produce locally in accordance with the commitments undertaken by
Brazil, in sovereign manner, at the time of TRIPS and the WTO, suggest that the
right granted by the non-literal interpretation of a provision of the Paris
Convention is an unchangeable rule that must prevail over any other, albeit an
express and subsequent one.
However, the UNCTAD
representative at TRIPS negotiations, Abdulqawi A. Yusuf, clarifies that the
modification of international commitments undertaken in a treaty by another
international treaty is commonplace in intellectual property. According to Yusuf:
It is not
unusual of international agreements of a technical character to be often
amended or revised. As stated earlier,
the Paris Convention and the Bern Convention themselves have been revised on
several occasions, each revision resulting in a new version of the original
convention, which continued to exist.
The states parties to the new version, or as it is called the most
recent act of such a convention, are sometimes different from those that had
subscribed to the original convention or to earlier versions.
To the same effect is the
opinion of the director of the Intellectual Property Division of the World
Trade Organization, Adrian Otten, highest-ranking staff member in the WTO
hierarchy, with technical responsibilities regarding this topic:
The TRIPS
Agreement adds a substantial number of additional obligations with respect to
matters where the preexisting conventions were silent or were perceived as
being inadequate. The TRIPS Agreement is
thus sometimes referred to as a Bern and Paris-plus agreement. While the TRIPS adds new obligations, it also
aims to make more effective the application of the main preexisting
conventions.[38]
During a specific
presentation about some implications of the TRIPS over the pharmaceutical
industry, Adrian Otten was even more incisive, when affirmed that “[f]ailure to
meet the reasonable needs of the market can remain a ground for the grant of a
compulsory license. But the compulsory licensing system must not provide for
differential treatment according to whether the patent owner supplies the
market through imports or local production”.[40]
As commented
above, article 27(1) of the Agreement (in accordance with which ‘patent rights
shall be enjoyable without discrimination ... whether the products are imported
or locally produced),’ has been interpreted as a prohibition of obligations
requiring the industrial execution of the invention. Hence exploitation of the patent could be
satisfied through importation.[41]
The
interpretation of this clause is debatable.
Though Article 27(1) has been understood as prohibiting any obligation
to execute a patented invention locally, this interpretation is not unanimous. Thus, the Brazilian Patent Law (1996) has
included an obligation to exploit patented inventions locally. The interpretation of this article is likely
to be finally settled under WTO procedures if a dispute thereon arises between
WTO members.[42]
In 1995, the World Bank
itself, through a specific publication from the expert in charge of matters
relating to intellectual property, ironically a Brazilian, USP [University of
São Paulo] Prof. Carlos A. Primo Braga, indicated the proper interpretation of
art. 27(1). The World Bank’s text
indicates that importation should be considered as working a patent, which can
no longer be conditioned on local production: “[i]n other words, importation
should be accepted as meeting the obligation to work a patent. Accordingly, working obligations that require
domestic execution of the invention – a common practice in developing countries
– will not provide grounds for granting compulsory licenses anymore.”[43]
It is thus clear, according
to the most reputable, impartial and unbiased international experts, that art.
5A(2) of the Paris Convention has been derogated by TRIPS art. 27(1),
disallowing the maintenance of the requirement for complete work of the object
of a patent in the national legislations of WTO member States and,
consequently, establishing the unlawfulness of art. 68, § 1, I of Law 9279/96
in light of the WTO system.
The proper interpretation in Brazil
For this reason, one might
say that the legislative advisors to the Federal Senate understood quite well
the extent of the obligations under TRIPS articles 27(1) and 31, as expressed
by one them, Cicero Ivan Ferreira Gontijo, in an article published in Revista de Informação Legislativa
[Legislative Information Review]: “[w]ith respect to any substantial points,
the GATT stipulates the following: ... g) prevents member States from requiring
from patent holders the obligation of local production, by considering imports
as sufficient to satisfy actual working (art. 27(1)).’”[47]
A proper interpretation, and
the resulting infringement of international obligations undertaken by Brazil in
a free and sovereign fashion, were also emphasized by Nuno Carvalho in 1999,
during the annual ABPI Seminar, with the official participation of the
Brazilian Patent and Trademark Office – INPI.
Nuno Carvalho, technical consultant to the WTO at the time, presently a
lawyer with the WIPO, is quite clear in his conclusions:
There has been
some doubt as to how art. 27, paragraph 1, of TRIPS Agreement might coexist
with the Paris Convention, due to the incorporation of its articles by
reference.
1 – A bilateral
or multilateral treaty, or any provision of a treaty, is null and void if its
enforcement involves breaking an obligation of a treaty previously assumed by
one or more of the parties thereto …
2 – The rule
formulated in paragraphs 1 and 2 does not apply to subsequent multilateral
treaties, which share in a degree of generality, which imparts to them the
character of legislative acts, and reach properly speaking all members of the
international community, or should be deemed to have been concluded in the
international interest. Nor does it
apply to any treaties that revise multilateral conventions in accordance with
their provisions or, in the absence of such provisions, pursuant to a
substantial majority of the parties to the revised convention.[48]
The scope of the WTO panel
was a requirement potentially damaging to consumers, inasmuch as it increases
production costs; and also to the country, inasmuch as it decreases the
competitiveness of its products and diminishes the market for Brazilian
products, if adopted by the MERCOSUL nations, by cutting off the flow of direct
foreign investments in manufacturing plants for high value-added products.
The bundle of
results from the Uruguay Round are very positive to Brazil, for which reason
the option not to participate in the WTO surely would not be desirable to the
country. Brazil has gained concrete and
palpable advantages in different sectors, such access to markets, agriculture
and textiles. Evidently, we have not
obtained everything we desired, but in that regard we are no different from
other countries.[50]
It is important to recall
the fact that Brazil was the first country to use the Dispute Settlement Body
of the WTO, in which it was victorious, upon requesting the creation of a panel
against the United States of America.”[51]
For the foregoing reasons,
Brazil awaits a bill of law repealing sub-section I of article 68, § 1 of Law
9279/96, so that efforts to promote foreign investments and increase exports
are not impaired by political decisions that are either unreasonable or aimed
at capturing votes in any forthcoming election.
* Senior Partner of A. Lopes Muniz Advogados
Associados.
** Professor of Patent Law for
graduate programs at PUC-RJ [Catholic University of Rio de Janeiro] Law School,
Interfarma’s legal advisor.
[1] See, e.g., documents WT/DS199/1 G/C/385 IP/D/23 8 June 2000
(00-2254) and WT/DS199/3 9 January 2001 (01 0003).
[2] See, in this connection, Interfarma’s Position – Pharmaceutical Patents,
suggested changes to PLC 115/93 in order to attract private investments in
research, pp. 8-9.
[3] 29:391 Martin J. Adelman & Sonia Baldia, Prospects and
Limits of the Patent Provisions in the TRIPS Agreement 507 (Vand, J. ed.,
Transnat’l L. 1996)
[4] Heinz Redwood, Brazil – The Future Impact of Pharmaceutical
Patents, Oldwicks Press, England 1995. A translation of the article was
published in Brazil with the editorial coordination of Francisco Alberto
Teixeira, from which the quoted paragraphs have been drawn.
[5] Sources: IMS; Total Market -
Abifarma
[6] As regards Brazilian
pharmaceutical imports, Redwood describes a similar situation: “[t]he figures
in the Brazilian trade balance, under item ‘Medicinal and Pharmaceutical
Products,’ show that the position from 1988 to 1992 has been consistently
negative.”
[7] Pursuant to approval of Application No. 493, of 1991-CN, a Joint
Congressional Committee was created for the purpose of investigating the causes
and dimensions of the technology backlog.
The quoted testimony was taken during the 13th Committee
Hearing, on 8/13/1991. Final Report, p.
53
[8] INPI, CEDIN, and UFRJ
[Federal University of Rio de Janeiro] Chemistry School, Prospecção tecnológica, doenças tropicais [Prospective Technology,
Tropical Diseases], 1994, p. 75.
[9] 2000 Industry Profile
(PhRMA/Pharmaceutical Research and Manufacturers of America, Washington, D.C.),
2000, at. V.
[10] Grabowski, H. & Vernon, J., Return To R&D On New Drug
Introductions in the 1980s, 13 Journal of Health Economics (1994).
[11] Final Report of the Joint Congressional Committee for investigating
the causes and dimensions of the technology backlog, at. 121.
[12] Id., p. 119
[13]Revista da Propriedade
Industrial (RPI – Industrial Property Review),
issue 1460, of 12/29/1998, published by the INPI, reported that Vacuum Pack
Services Limited applied for a compulsory license due to failure to produce
patent PI8704197-9, held by Interprise-Brussels.
[14] Drug Companies vs. Brazil:
The threat to public health (Oxfarn GB), 2001, at 15.
[15] See, for example, the compulsory license of patent PI7107076
granted to Nortox Agro-química S/, through official notice published in the
Brazilian PTO Official Gazette # 710, dated 05/19/1984, page 86, proceeding
DIRCO/1649/83, after the patent owner had notified the company for violation of
said patent.
[16] Friedrich-Karl Beier, Exclusive
Rights, Statutory Licenses and Compulsory Licenses in Patent and Utility Model
Law, 30 IIC 252 (1999), (no highlighting in the original).
[17] The Administrative Council for Economic Defense – CADE is an
adjudicating agency created by Law No. 4137 of 1962. Among other duties, it is up to CADE to
ensure free competition, disseminate the culture of competition by clarifying
to the public the forms of violation of economic order, and decide any issues
pertaining to such violations.
[18] Law 95, of February 26, 1998, provides for the drafting, language,
amendment to, and consolidation of statutes, as required by the Federal
Constitution under art. 59, sole paragraph.
[19] Article 25 of Law 9279/96 sets forth that claims must be grounded
in the descriptive report, characterizing the particulars of the application
and defining, clearly and accurately, the matter subject to protection.
[20]DIQUOR (Division of Organic Chemistry, Biotechnology and Related Areas)
is a division of the INPI Patent Directorate, which is responsible for granting
Patents and Industrial Drawing Registrations.
Nowadays DIQUOR is in charge of examining pharmaceutical patents.
[21] To the same effect was the decision rendered in Appeal of Writ of
Mandamus #. 77.429-RJ by the 1st Circuit of the now-extinct Federal
Court of Appeals whereby a decree forfeiting a patent, on the grounds of
failure to produce it locally under art.9 (a) of the Industrial Property Code
then current, was affirmed. A likewise significant court decision to such
effect was rendered by the 5th
Circuit of the same Federal Court of Appeals in Civil Appeal #
58.205-RJ. In that decision, the Court
affirmed a decree forfeiting a patent, and did not accept, for purposes of
precluding forfeiture, an allegation of force
majeure due to economic reasons made by the patent owner.
[22] Appeal in writ of mandamus # 106.155-RJ, heard on May 28, 1996,
with the decision written by Justice Ilmar Galvão and published in Diário de Justiça [Court Daily] on
8/21/1996.
[23] The National Surveillance Control Agency – ANVISA was created by
Law 9782, of January 26, 1999. The
Agency’s institutional purpose is to promote the protection of the population’s
health by controlling the sanitary manufacturing and sale of products and
services subject to sanitation control, including the environments, processes,
production requirements, and technologies thereto related.
[24] In Brazil, the rules of origin agreed upon within the scope of the
Asuncion and Montevideo Treaty were internalized pursuant to Decrees 3325, of
12/30/99, and 1568, of 7/21/95. These
accords define the criteria for general rules of origin, which were divided
into four criteria, so that goods can be deemed to originate in a given
country. One of the main criteria for
defining the rule of origin is the value added to products, so that
competitiveness can be maximized through the drawback system, according to
legislative criteria, the maximum percentage of third parties’ raw materials in
the manufacture of the final product, so that it can still be deemed
original. In Mercosul, 60% of Regional
Contents are required, and no more than 40% of raw materials from third-party
countries can be used. ALADI allows up
to 50% of raw materials to be used.
[25] “The drawback system is the return, wholly or in part, of the
duties levied on the entry of foreign products into the country, which are to
be reexported in their original condition, or on the importing of raw materials
or partly-manufactured products which are to be used in the production of
domestically-manufactured goods to be exported.
The drawback system is also deemed as the return of internal charges and
taxes levied on domestic products which are to be exported or on certain raw
materials used in their composition.” (Ratti, Bruno, Comércio internacional e câmbio [International Trade and Exchange],
1994, p. 372.
[26] The original language of art. 5A(2)
in English is the following: “Each country of the Union shall have right
to take legislative measures providing for the grant of compulsory licenses to
prevent abuses which might result from the exercise of the exclusive rights
conferred by the patent, for example, failure to work.”
[27] G.H.C. BODENHAUSEN, Guide to the Application of the Paris Convention
for the Protection of Industrial Property as Revised at Stockholm in 1967,
BIRPI, Swiss, 1968, at 71.
[28] The acronym “TRIPS” is used herein because it is a term contained
in the English original of the Agreement.
The TRIPS forms Schedule 1C of the Marrakech Agreement for Creation of
the WTO, one of the documents of the Final Minutes Incorporating the Results of
the Uruguay Round of Multilateral Trade Negotiations into the GATT, signed by
Brazil in Marrakech on 4/12/1994. The Final Minutes were approved by the
Legislative, in accordance with art. 4 I of the Federal Constitution of 1988,
pursuant to Legislative Decree No. 30 of 12/15/1994, published in the DOU
[Official Gazette of the Federal Government] on 12/19/1994. Once the Final Minutes were approved, the
instrument filing for ratification was filed on 12/21/1994 (according to Decree
No. 1355/94 and information disclosed by GATT’s Director General). The Final
Minutes were subsequently promulgated and published in accordance with Decree
No. 1355, of 12/30/1994, published in the DOU on 12/31/1994.
[29] United Nations Conference on Trade and Development, The TRIPS Agreement and Developing Countries,
UNCTAD/ITE/1, New York and Geneva, 1996, at 30.
[30] Nuno T. P. Carvalho, “TRIPS – Questões
controvertidas na área de patentes [Controversial Issues in the Patent Area], XIX
Seminário Nacional de Propriedade Intelectual, ANAIS 1999 [19th
National Seminar on Intellectual Property, 1999 ANNALS], ABPI [Brazilian
Association for Industrial Property], Rio de Janeiro, at 92 (1999). Dr. Nuno Carvalho has
a doctorate in Economic Law from UFMG [Federal University of Minas Gerais] and
a doctorate in Law from the Washington University in St. Louis, MO, U.S.A.
[31] Daniel Gervais, The TRIPS Agreement: Drafting History and
Analysis 148, Sweet & Maxwell ed. (1998)
[32] J.H. Reichman, Universal Minimum Standards of Intellectual
Property Protection under the TRIPS Component of the WTO Agreement, 29
Int’l Law, 345, at 352, Summer 1995
[33] Ruth L. Gana, Prospects for Developing Countries under the TRIPS
Agreement, 29 Vand, J. ed., Transnat’l L., at 735 (October 1996).
[34] Daniel Gervais, The TRIPS Agreement: Drafting History and
Analysis. 46, Sweet & Maxwell ed. (1998)
[35] Michelle McGrath, The Patent Provisions in TRIPS: Protecting
Reasonable Remuneration for Services Rendered – Or the Latest Development in
Western Colonialism? 7 EIRP 398
(1996).
[36] Michael Blakeney, Trade Related Aspects of Intellectual Property
Rights: A Concise Guide to the TRIPS Agreement, 90-91 Sweet & Maxwell
ed., (1996).
[37] Abdulqawl A. Yusuf, TRIPS: Background, Principles and General
Provisions, in Intellectual Property and International Trade: The TRIPS Agreement,
Carlos M. Correa and Abdulqawi A. Yusuf Ed., United Kingdom, Kluwer Law
International 19-20 (1998).
[38] 29:391 Adrian Otten & Hannu Wager, Compliance with TRIPS:
The Emerging World View, Vand, J. ed. Transnat’l L. 396 (1996).
[39] No highlighting in the original, Id. at 401.
[40] Adrian Otten – GATT Secretariat. The implications of the results of the Urugay Round for the protection
of pharmaceutical inventions, ALIFAR Annual International Forum on the
Latin – American Phamaceutical Industry, 12 May 1994, p. 5. Note that the
possibility pointed out by the specialist is provided in article 68, §1, II, of
Law 9.279/96.
[41] Carlos A. Correa, Patent Rights, in Intellectual Property and
International Trade: The TRIPS Agreement, Carlos M. Correa & Abdulqawl A.
Yusuf Ed., United Kingdom, Kluwer Law International 208, (1998).
[42] Carlos M. Correa, Intellectual Property Rights, the WTO and
Developing Countries, the TRIPS Agreement and Policy Option 91, Zed Books,
(2000).
[43] Carlos Primo Braga, Trade-Related Intellectual Property Issues:
The Uruguay Round Agreement and its Economic Implications 23, International
Trade Division, World Bank, (January 1995).
[44] Guide to the Uruguay Round Agreements 215, The WTO
Secretariat; The Hague, (1999).
[45] Alberto C. Cerviño & Begona Cerro Prada, GATT y propriedad
industrial [GATT and Industrial Property], (Tecnos ed., 1994).
[46] Hildebrando Accioly, Tratado de Direito Internacional Público
[Treatise on International Public Law] 572, (2nd ed., 1956)
[47] Cícero Ivan Ferreira Gontijo, O Acordo
Sobre Propriedade Intelectual Contido no Gatt e suas Implicações para o Brasil
[The Agreement on Intellectual Property under the GATT and its Implications to
Brazil], 32/125 Revista de Informação Legislativa, at 183 (Jan. / Mar. 1995).
[48] Lauterpacht’s Report on the law of treaties (4/87 U.N., doc. A/CN,
at. 35).
[49] Doc. No. MTN.TNC/W/35/Ver.1 (Dec. 3, 1990). This document became known as “Brussels
Draft.” It is interesting to note that Brazil submitted a joint communiqué with
other countries participating in the Uruguay Round where the obligation to
produce locally was clearly proposed under art. 5(2)(III). The proposal, forwarded pursuant to document
MTN.GNG/NG11/W/71, of May 14, 1990, was not accepted. Nevertheless, the Brazilian understanding
remained unchanged
[50] XV Seminário Nacional de
Propriedade Intelectual [15th National Seminar on Intellectual
Property], 1995 ANNALS, ABPI, 1995, at 61.
[51] United States – Standards for Reformulated and Conventional
Gasoline, complaints by Venezuela (WT/DS2) and Brazil (WT/DS4). The decision is in WT/DS2/R, 29 January 1996
and WT/DS2/AB/R, adopted on 5/20/1996.
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