Cícero Gontijo: Changing the Patent System (Chapter Three), May 2005
3. THE BRAZILIAN STANDPOINT
Brazil looks back on a long tradition of applying the patent system and participating in international intellectual property agreements. With the deed of January 28, 1809 signed by King Dom João VI., Brazil became the fourth state to adopt an industrial property law, after England (Statute of Monopolies, 1623), the United States (1790) and France (Law on the Privilege for Inventions, 1791).
It also belonged to the 11 original signatories of the Paris Convention, in 1883.
Art. 179, 26 of the 1824 constitution stipulated that: "inventors shall have the ownership of their discoveries or products. The law shall guarantee them a temporary exclusive privilege or compensate them for any loss they may endure from the popularisation."
The law of August 28, 1830 stipulated patents only for nationals. Foreign nationals interested in the local exploitation of their inventions were called "introducers", and they were offered subsidies - not a monopoly. Since the law which was necessary to release the subsidy sums was not passed, the government ministers went on to grant patents to foreign nationals, too, "ad referendum" of the legislative power. The same law introduced the exhaustion instrument for patents that had not yet been locally exploited after a period of two years.
Law nr. 3129 of October 14, 1882 lengthened the period for the event of exhaustion from two to three years and introduced the priority principle (set at seven months) that would be confirmed by the Paris Convention in the following year.
The Brazilian government approved the subsequent revisions of the Paris Convention, with the exception of the Stockholm revision of 1967, to which it has only adhered from 1992. The Stockholm revision created the requirement of a prior compulsory licence as a precondition for exhaustion, which contradicted the Brazilian view on the issue. Furthermore, the compulsory licence became non-exclusive by default, which removed its efficiency. In view of this, Brazil remained associated to the Convention under the Hague revision (1925), just like Poland and the Dominican Republic.
In 1970, the Brazilian government approved Law nr. 5,648, which converted the DNPI into the National Intellectual Property Institute; its aim was to carry out on national territory the norms regulating industrial property taking into account its social, economic, juridical and technological functions. A year later, the government approved Law nr. 5772/71, which introduced the new Industrial Property Code.
In 1975, the World Intellectual Property Organisation (WIPO), the administrator of the Paris Convention, initiated a new revision of the Convention, which had its origin in a UN document from 1964 ("The Role of Patents in Developing Countries") that the Brazilian government had initiated. The revision was aimed at modifying the Convention text so as to permit a differentiated treatment for developing countries. To start, the committee established its principal objectives of a) achieving a reasonable balance between the right of patent holders and development; b) promoting the efficient use of the patents; c) improving the creation and transfer of technology in and to developing countries; d) controlling cases of abuse of the system.
The negotiations went on until 1979, when the parties came to an agreement that was finally approved at the Ministerial Meeting in Nairobi in 1981. To the general surprise of all, the text that had been negotiated for five years before its final approval was completely rejected by the US delegation in Nairobi. With this began the application of the US decision to move the IPR issue from WIPO to GATT, where developed countries have more persuasive power, since there they can link IPRs to trade topics.
These historical observations prove that Brazil has always been involved in the discussion of intellectual property at an international level. They also prove that the country always understood the patent system as a contract between the state and the inventor, according to which the inventor receives a temporary exclusive monopoly in exchange for the full and detailed disclosure of the invention, as well as its local exploitation. Brazil has never agreed to grant exclusive rights just to stimulate the creation and multiplication of inventions.
For the Brazilian government, the patent system has to be an instrument of industrial policy, and as such, the rights granted to the patent holders have their counterparts in unequivocal obligations that have to be fulfilled.
3.1 Local Exploitation as the Right of the State
The late affiliation in 1992 to the Stockholm revision of the Paris Convention has to be seen as an accident resulting from the pressure the Brazilian government had been exposed to in the early 1990s. As a result of the increasing pressure, Brazil abandoned its traditional allies (among them India) in the fight against the TRIPS project. After the approval of TRIPS in the context of the creation of the World Trade Organisation (WTO), the draft law approved by the National Congress was criticised because it went even further, in some aspects, than TRIPS itself.
However, even in this very draft law that was criticised as being too lenient, Brazil maintained its position according to which the local exploitation of patents can be required by states that grant patent privileges. Law nr. 9279/96, art. 68 which provides for the implementation of compulsory licences stipulates: "A compulsory licence is also indicated in the case of: I - non-exploitation of the patent on Brazilian territory due to lack of production or incomplete production of the product, or also the lack of use of the patented process,- excepting cases of economical non-viability, when the import shall be accepted; or II - that the commercialisation does not satisfy the market needs."
The United States questioned this legal disposition at the WTO, alleging that it contradicted TRIPS in its article 27.1: "...patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced".
The controversy was overcome by mutual understanding before the installed WTO panel judged it. The United States withdrew its complaint on June 25, 2001, while Brazil committed itself to informing the US government whenever it wished to apply this legal provision against a US company.
Brazil had strong arguments on its side. In addition to the point that the text of art. 27.1 of TRIPS is not clear, it was stressed that the content of art. 2.1 refers the issue to the text of the Paris Convention: "In respect of Parts II, III and IV of this Agreement, Members shall comply with Articles 1 through 12, and Article 19, of the Paris Convention (1967)."
The article 5.(2) of the mentioned document reads as follows:
"Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work."
The provision of the Brazilian law criticised by the United States clearly complies with the document of the Convention, which it quotes almost literally.
3.2. Prevent TRIPS plus and Act in the WTO for a Modification of TRIPS
After the creation of the WTO and the approval of TRIPS, various bilateral or regional trade agreements were negotiated that included clauses relating to intellectual property, extending the rights guaranteed by TRIPS to patent holders. The NAFTA agreement between the USA, Canada and Mexico, the agreement signed by the US and Caribbean countries, and the agreement between the US and Jordan are a few examples.
As far as Brazil is concerned, the country deals with intellectual property issues in five different forums: in the WTO, Mercosur, with the European Union, with the United States and in the WIPO. In the WTO, in meetings on specific aspects of TRIPS that were scheduled when the agreement had been approved. In Mercosur, in discussions which aim at a potential harmonisation of the different member states' laws dealing with the subject. With the European Union, in an attempt to build a common market with Mercosur. With the United States, in the initiative that aims at building a common market with all the countries on the American continent, except for Cuba. And in the WIPO, where various projects related to intellectual property are in progress.
The correct proceeding would be to concentrate all negotiation efforts in the WTO (and according to the subsidiarity principle in the WIPO), to correct the excesses of TRIPS, and to avoid treating the matter in other negotiations. Discussing the same issue in various forums rather weakens the Brazilian position and leads to concessions which may be reflected in future WTO negotiations.
An intellectual property committee was created in the SGT-7 group of Mercosur (related to industry). For a start, a harmonisation protocol on trademarks, declarations of origin and appellations of origin was signed, but the National Congress rejected it. A protocol on patents is on its way (though progress is slow); a protocol on dispute settlement was signed and is already in force in Brazil. A protocol on the harmonisation of industrialdesign standards has made considerable progress. This document reduces the bureaucratic requirements of international procedures; it complies with TRIPS provisions, and for the first time, the theory on the exhaustion of industrial design rights is applied in the Mercosur area.
In this forum, there is no risk of coming to a TRIPS plus situation. It is expected that after a period of standard harmonisation, Mercosur will try to establish a consensus on some issues, which could help with negotiations in other forums. It is important that the Mercosur countries insert such issues in their national laws to legitimise their claims in other forums.
In future negotiations, certain topics should be included in all national laws of the Mercosur countries: the right to see the local exploitation of patents as an obligation of the right holder, restrictive commercial clauses as an abuse of the right holder, and the recognition of the exhaustion of rights through parallel imports.
With the European Union, the issue of intellectual property was included at the request of the EU delegation. The last meeting of both delegations took place in Buenos Aires in March of 2004. It was the 12th meeting of the bi-regional negotiation committee. In the section on IPRs in the concluding report, each delegation presented its own priorities:
The priorities of the European Union are:
1. To maintain a high level of protection for intellectual property, showing the need to sign and apply the new WIPO treaties (Copyright Treaty - WCT -, and Performers and Producers of Phonograms Treaty - WPPT-) as well as protection for new plant varieties through the UPOV,
2. Implementation in the national legislations of the enforcement measures stipulated by TRIPS,
3. Cooperation,
4. Geographic indications. This issue is considered preferential.
Mercosur set up the following priorities:
1. Connections between TRIPS and the Convention on Biodiversity,
2. Connections between TRIPS and public health,
3. Connections between TRIPS and rules on unfair competition practices,
4. Technology transfer: improve the chapter on cooperation and set up a list of measures that contribute to technology and innovation transfer.
Obviously, the European Union has two main preoccupations: to apply pressure on Mercosur to sign and apply the new WIPO treaties (WCT and WPPT), as well as a proposed agreement on wines (widening the rights linked to appellations and declarations of origin).
As regards Mercosur, there is an interest in finding an appropriate balance between the rights and obligations of right holders, as well as in improving the technological capacities of the receiving countries. Mercosur is obviously worried about the fact that concessions in bilateral or regional treaties on intellectual property issues create precedents in the line of TRIPS plus that may eventually surface in the WTO, forcing the country to concessions in addition to those it has already made in TRIPS.
Although the Brazilian government prefers to discuss the IPRs within the framework of the WTO, negotiations with the European Union continue. They are following a slow pace because they are being hampered by more important discussions between the parties on the agricultural subsidies of EU countries.
The FTAA negotiations (Free Trade Area of the Americas) are somewhat behind schedule, seeing as they should have ended by 2005. The chapter on intellectual property introduced on the initiative of the US delegation presents a novelty: instead of demanding substantial changes in the rights for right holders, so as to bring about a TRIPS plus agreement, the US proposal puts emphasis on the attempt to move Mercosur to insert the so called "enforcement clauses" of the TRIPS agreement (art. 41 - 61) into its national legislations.
The existing documentation on the current negotiating stage (FTAA.ngip/w/80/Ver.2, part III) shows that the main focus of the US proposals aims at enforcement issues that seem to go far beyond the scope of the negotiation of industrial property. Imposing the inclusion of legal provisions in the internal legislation of each country entails serious problems. In this field, each concession means creating new arguments in support of yet more concessions. Issues such as handling indemnisations for losses and damages (art. 2.3, 4.4), restrictions on the liberty to define certain legal periods (art. 3.2), proceedings of judicial authorities concerning the seizure of goods (art. 4.3, 4.4), limiting the factors states have to justify enforcement difficulties (art. 1.9), should not be used as bargaining stock in international negotiations. Such a move would risk a breach of the constitution and may restrict the action of national judiciaries.
Since 2003, the Brazilian delegation for the FTAA negotiations has declared vis-à-vis the US delegation that Mercosur did not want to keep the negotiations on intellectual property at the same level as the discussions on market access that are the core of the FTAA. For the topics that are considered accessory, bilateral agreements are planned, if necessary. Concentrating the negotiations on market access would be a viable way to bring the negotiations back to a desirable pace. The USA appears to have agreed to this form of negotiation some time ago, as the Brazilian foreign minister confirmed in a statement quoted by the newspaper "Jornal do Brasil": "For Amorim, the immovable basis for the negotiation is the one sealed in Miami, in 2003 that can be resumed as follows: concise general norms and openness for wide negotiations according to the interests of each country or block. The US is also totally committed to the Miami parameters, said the Brazilian ambassador in Washington, Roberto Abdemir". (Jornal do Brasil, 29-04-05, p. B 7)
Unless there are fundamental changes in the course of negotiations, there can be no plans to deepen the issue of intellectual property in the FTAA.
The World Trade Organisation (WTO) is the main discussion forum for intellectual property and the negotiating efforts should be concentrated there, after the wise decision by Brazil to avoid discussing intellectual property in bilateral or regional forums.
The TRIPS agreement, in force since 1994, stipulates that certain of its provisions are to be revised. In addition to the provision in art. 27.3.b concerning protection for plants and animals, which shall be reviewed four years after the implementation date of the WTO agreement, the organisation has already been asked for a statement on a solution that will enable the poorest countries, which have insufficient or no pharmaceutical production capacity at all, to reduce the prices of drugs for the serious diseases that affect them (Doha Declaration). At the moment, no general revision is planned; this might be delayed until 2005, the anticipated end of the period given to the developing countries to fully implement the content of TRIPS (art. 66.1 of TRIPS).
Brazil has an interest in the following issues, which will be proposed in due time for their discussion in the framework of TRIPS:
1) Local exploitation: A clear statement that member states can require in their legislations that patent holders have the obligation of local production of patented processes and products. Not meeting this obligation has to be considered as an abuse by the right holder, as already established in the provisions referring to the compulsory licence.
2) Defining that authorities can declare revocation through nullity without having previously to grant a compulsory licence. This proposal consists of returning the nullity to the situation that had been established by the Paris Convention in the Hague revision to which Brazil had been associated until 1992. Nullity is a stronger instrument than the compulsory licence when it comes to exerting pressure on the right holders to produce locally, due to an automatism that exempts parties from prior negotiations. Furthermore, considering the difficulty in finding competent applicants for compulsory licences in developing countries, the only remaining instrument for the state to stimulate local production is nullity.
3) The Technological Development of Developing Countries
TRIPS mentions the transfer and dissemination of technology as one of its recognised objectives, giving it the same significance as the promotion of technological innovation,(art. 7).
However, after the part on principles and objectives, the text maintains complete silence with respect to concrete provisions aimed at stimulating technology transfer and a productivity increase at the licensed companies, as a means to widen the technological and economical development of the country.
There are three provisions that could have a positive impact: 1) tax incentives of the member states for patent holders who exploit their patents in a developing country through licences for nationals; 2) financial incentives of the member states for technical staff of the licence holders from developing countries to undergo professional training in the country of origin; 3) commitments to ensure that publicly funded research benefits are available for all, including the developing countries. Suggestions nr. 1 and 3 appear on p. 26 of "Integrating Intellectual Property Rights and Development Policy" by the Committee on Intellectual Property Rights of the United Kingdom.
3.3 The Brazilian-Argentinian Initiative in the WIPO
Although the principal discussion forum on IPRs is the WTO, the main initiative in which Brazil is currently involved in is the World Intellectual Property Organisation, WIPO. This organisation, which was emptied of substance with the arrival of the WTO, seeks to engage in highly relevant parallel programs. Among them is the coordination of discussions in the framework of the Standing Committee on the Law of Patents (SCP) to establish the text of a Substantive Patent Law Treaty (SPLT), which deserves much attention.
The text under discussion raises patent protection standards considerably and creates obligations that could not easily be met by developing countries. Not only that, the initiative only considers the rights of patent holders, attempting to define and widen them and secure their application without ever engaging in the needs of the countries where such patents will be applied, especially in the developing countries.
It seems to be a repetition of what happened with TRIPS. In spite of having put on equal footing the incentive for promotion of technological innovation and the transfer and dissemination of technology (art. 7), the text centres completely on incentives and compensations for producers, never showing any interest in technology transfer or a balance between rights and obligations.
Worried about a situation where the interests of developing countries are only present in the initial provisions that voice their wishes and good intentions, without a corresponding commitment in the binding provisions, Brazil and Argentina formulated a highly substantial proposal to be submitted to the WIPO general assembly to set up a WIPO development agenda.
This document was presented on 26 August, 2004 and was registered under WO/GA/31/11.
The document starts out by stressing the need for development of the LDCs (least developed countries) as one of the main challenges for the international community. Many declarations signed at international meetings confirm this interpretation.
It recognises the importance of technological innovation, science and creative activities as the basis of welfare and material progress. Nevertheless, statistics prove that an ever-increasing knowledge gap still separates rich and poor countries. Intellectual property should act as an instrument to promote not just technological innovation, but also the transfer and dissemination of technology. In practice, however, its application has been unbalanced, since the need to transfer and disseminate technology has received little attention. Studies prove that in many cases the costs certain countries sustain from the patent system exceed the benefits they derive from it.
To correct this imbalance, the proposal demands the inclusion among the WIPO goals and attributions of the quest for development of its member states. In practice, this means incorporating the preoccupation with development in all its activities, instead of restricting itself to promoting the protection of intellectual property.
One of the anticipated measures is to revise the founding convention of the WIPO to guarantee that the development dimension is unequivocally included as an essential element of the working programme of this organisation.
The proposal demands practical measures. It requests that the Substantial Patent Law Treaty (SPTL) project discussed in the Standing Committee on the Law of Patents (SCP), which will lead to a significant increase in patent-protection standards, takes into account the proposals of the developing countries as a means to reduce the costs of its implementation. The inclusion of the developing dimension in the Standing Committee should be aimed at preserving the flexibilities related to public interest, using the provisions of art. 7 and 8 of the TRIPS agreement.
It also requested that technology transfer, considered as an important goal in the TRIPs agreement, be an issue in the WIPO work. It hopes for the definition of measures that will secure an effective technology transfer to the developing countries, for instance, the use of the results of publicly funded research in developed countries.
Finally, it requests that the preoccupation with the development of the member states be stressed in the studies which aim at imposing enforcement measures in member states, while respecting their legal systems. And that the help and technological cooperation offered by the WIPO to developing countries in the field of intellectual property answer the overriding goals of the UN, which include the holistic development of its member states.
The proposal presented by Brazil and Argentina with the support of several other countries that call themselves "Friends of Development" has the necessary substance to be seriously considered and have an impact on current programs, even including the scope of the WIPO work, because it proposes changes in the proper objective of this organisation.
Brazil has the authority to make this proposal, due to its history of participation in and contributions to the forums of intellectual rights protection: the country was one of the 11 original signatories of the Paris Convention, to which it has belonged without interruption ever since. The UN study "The Role of Patents in Developing Countries" goes back to a Brazilian initiative that led to the revision work of the Convention initiated in 1975, which aimed at making flexible the Convention terms and adapting them to conditions in developing countries. Finally, it already started adhering to the WTO TRIPS agreement in 1994, applying it immediately to its national law, making no use of the 10 year adaptation period it was entitled to both as a developing country and because it had included new sectors in the patent regulations (art. 65, 2 e 4 of TRIPS).
Its history of participation provides Brazil with the necessary authority in international forums to present innovation initiatives like this one at the discussions on intellectual property.
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