Brazil: An Update of the Most Relevant Events for Pharmaceutical Companies in 2014: Part 1 of a 5-Part Series

The second half of 2014 has proven to be very busy for companies having business and other interests in Brazil that rely on intellectual property (IP) protection. This is part 1 of a 5-part series  providing updates on: 1) mailbox patent litigation; 2) the constitutional challenge filed by ABIFINA against the 10-year patent term guarantee; 3) prior approval challenges and ANVISA; 4) a new Productive Development Partnership (PDP) rulemaking draft proposal; and 5) an opinion issued by the Brazilian Antitrust authority (CADE) regarding sham litigation.

Mailbox Patent Litigation

On September 2013, the Brazilian Patent and Trademark Office (INPI) filed more than 35 lawsuits seeking a declaration of invalidity of 222 mailbox patents (namely, patent applications filed between January 1, 1995 and May 14, 1997, under the terms of Article 70.8 of the TRIPS Agreement). According to INPI, these patents should have received a term of 20 years from their filing date. However, these patents mistakenly received a term of 10 years from the date of grant.

Since June 2014, three mailbox cases have been decided by the Federal Judges (Judges) in Brazil. Two Judges ruled in favor of the patent holders and one against. Not surprisingly, the Judges each conveyed different points of view regarding the inefficiency of the INPI to examine patent applications in a reasonable time and to deal with its current backlog.

The Judges ruling in favor of the patent holders stated INPI violated the IP Statute when it failed to comply with the rule requiring examination of mailbox applications before 2004 (as required by the IP Statute). The Judges also stated that the lawsuits filed by INPI to invalidate these patents are a violation of the constitutional principle of “legitimate expectation,” which requires a certain amount of predictability and trust in the acts of the Public Administration.

However, right after the first favorable decisions were issued, Judge Maria Nunes rendered a decision against certain patent holders and granted an injunction to change the term of the patents at issue to 20 years from filing. Interestingly, Judge Nunes is handling a majority of the pending mailbox cases (she has 17 in total).

According to Judge Nunes, the interpretation of the law defended by the mailbox patent holders would be significantly more prejudicial to society as a whole and, as a result, society would have to accept the burden of an amplified patent term and would have to pay more for the drugs covered by such patents. Additionally, Judge Nunes also stated that constitutional principles that defend the social (and public) interest would have clear precedence over principles that protect private interests, such as legitimate expectation. Therefore, in Judge Nunes’ view, the rejection of the INPI’s claim would prioritize the interests of large companies and would unduly harm free competition, national development and the access to health.

The appeals filed by the INPI and by the patent holders will be heard by the Federal Court of Appeals in 2015. In the meantime, it will be interesting to see how Judge Nunes will rule regarding the counterclaims filed by some patent holders seeking damages from the INPI, since she has already ruled that patent holders who can prove that they were damaged as a result of INPI’s conduct would be entitled to compensation.

A pictorial summary of the mailbox patents challenged by INPI as prepared by the Licks Attorneys can be viewed by clicking here:  MAILBOX.

Please continue to watch the BRIC Wall Blog for further updates on the mailbox patent litigation in Brazil.

This post was written by Lisa Mueller and Roberto Rodrigues of Licks Attorneys.

The Problem of Mailbox Patents and Patent Term in Brazil

The World Trade Organization (WTO) is an international organization that deals with the rules of trade between nations. When the WTO was created on January 1, 1995, one of the agreements that came into effect was the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. To date, the TRIPS Agreement is considered one of the most comprehensive multilateral agreements on intellectual property.

Most member countries agreed to apply the TRIPS Agreement immediately upon joining the WTO. However, developing countries were permitted certain transitional periods in order to have sufficient time to enact new laws that were TRIPS compliant. One such transitional period allowed developing countries up to ten years (specifically, until January 1, 2005) to introduce patent protection for pharmaceutical and agrochemical products. However, Article 70.8 of the TRIPS Agreement provided that developing countries that utilized this transitional period were required to allow inventors to file patent applications on pharmaceutical and agrochemical products beginning on January 1, 1995, even though a decision to grant a patent on such applications could be delayed up until January 1, 2005. This provision of the TRIPS Agreement is often referred to as the “mailbox” provision (meaning that a “mailbox” is created to receive and store such applications) and patents issuing from applications filed pursuant to this provision are frequently referred to as “mailbox” patents. According to the TRIPS Agreement, the term of any “mailbox” patent is 20 years from its filing date.

At the time Brazil became a member of the WTO, patents on pharmaceutical and agrochemical products were prohibited. Thus, Brazil utilized the transitional period in order to have sufficient time to become TRIPS compliant and established a mailbox for any pharmaceutical and agrochemical product applications filed between January 1, 1995, and May 14, 1997 (“filed” refers to any application having a convention filing date or having a PCT International filing date (and for which the National Phase was entered in Brazil) between January 1, 1995, and May 14, 1997). Applications filed in the mailbox were also referred to as “pipeline” applications. Brazil enacted a new, TRIPS-compliant patent law on May 15, 1996, the full provisions of which went into effect on May 14, 1997. Effective on May 15, 1997, “mailbox” or “pipeline” applications ceased to exist.

The term of a mailbox patent is set forth in the sole paragraph of Article 229 of the Industrial Property Law (Law) which reads as follows:

“Article 229…Sole Paragraph – The patenting criteria of this Law shall apply on the effective filing date of the application in Brazil, or on the priority date, if any, to applications relating to pharmaceutical products and to chemical products for agriculture filed between January 1, 1995 and May 14, 1997, and protection is assured as from the date of grant of the patent for the remaining term, counted from the date of filing in Brazil, such term being limited to the one prescribed in the heading of Article 40.”

Article 40 provides that the term of a patent is 20 years from its filing date but not less than 10 years from the date of grant. Specifically, Article 40 states:

“Article 40 – 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.

Sole Paragraph – The term shall not be less than 10 (ten) years for inventions and 7 (seven) years for utility models, as from the date of grant, except where INPI is prevented from carrying out the substantive examination of the application due to pending litigation or for reasons beyond its control.”

Additionally, Article 229-B of the Law provides that the National Institute of Industrial Property (INPI) will grant or deny a patent for any mailbox application by December 31, 2004.  Specifically, Article 229-B states:

“Article 229-B – Product patent applications filed between January 1, 1995 and May 14, 1997, which were not granted protection under Article 9 letters “b” and “c” of Law No. 5.772 of [December 21,] 1971, whose applicants failed to exercise the right specified in Articles 230 and 231, shall be decided until December 31, 2004 in conformity with this Law.”

For many years, INPI has been examining and issuing mailbox patents well beyond December 31, 2004. These patents have been receiving a term of 10 years from grant.

On September 5, 2013, the federal attorneys of INPI submitted a brief to the President of INPI regarding the term of mailbox patents. Specifically, the attorneys argued that the term of mailbox patents was 20 years from their filing date and that the provision in the sole paragraph of Article 40 did not apply to these patents (namely, these patents were entitled to a patent term of 10 years from grant) because mailbox patents were given specific treatment under the sole paragraph of Article 229. In addition, the federal attorneys argued that the Brazilian Association of Intellectual Property had “expressly acknowledged” that mailbox patents did not benefit from this minimum patent term. Therefore, according to the brief, a nullification action under Article 46 of the Law was appropriate for any mailbox patent granted having a patent term of 10 years from grant.  Interestingly, the brief is completely silent regarding Article 229-B and the fact that INPI was required to grant or deny mailbox applications by December 31, 2004. In fact, had INPI examined such applications as it was required to do so by December 31, 2004, the issue regarding the term of mailbox patents discussed in the brief would not exist.

On September 6, 2013, the brief was signed by Jorge de Paula Costa Avila, the President of INPI (who was subsequently removed as President). The brief was very quickly published in the Patent Gazette on September 10, 2013, which was highly unusual. On September 12, 2013, 33 lawsuits were filed by INPI in the Federal Court in Rio de Janerio (Federal Court). Examples of the some of the companies named in the lawsuits include:  Astellas, Merck, Monsanto, Boehringer Ingelheim, Sanofi, Pfizer, AbbVie, Bayer, Bayer Crop Science, Bayer Animal Health GmBH, Siemens Healthcare, Diagnostics GmBH, Novartis, AstraZeneca, Johnson & Johnson, Gilead and Eli Lilly. Each of the lawsuits reads very much like the brief and seeks: (1) correction of the term of the recited mailbox patents; (2) nullification of the patents (according to Article 56 of the Law, a nullity action can be brought by INPI or any party with a legitimate interest); and (3) a preliminary request to suspend the rights of the mailbox patents while the lawsuit is pending. The lawsuits were filed in front of one judge in the Federal Court who has subsequently reassigned three of the lawsuits to other judges. All of the judges denied the preliminary requests in each of the lawsuits.

We recommend that any company receiving one of these lawsuits carefully consider the value of each of its mailbox patents recited in the lawsuit. If the patents have value, we recommend that a company fully participate in the lawsuit. However, if one or more of the patents have little to no value, we recommend that a company renounce its interest in such patents (namely, abandon the patent). The reason is that according to Brazilian Civil Procedure, the losing party in a lawsuit must pay the other party’s attorney fees {which are fixed at 10-20% of the amount assigned to the lawsuit (likely to be about U.S $1,000, however, by the time this fee is collected, with interest, could be about U.S. $10,000)}. Therefore, if a company simply ignores the lawsuit and loses, there is a risk that the company may be liable to pay INPI’s attorney fees. Certain inconveniences can result if a company is unaware and fails to pay these attorney fees. Specifically, the attorney fee debt may be listed in the Brazilian government’s debtor list. If this listing occurs, a debtor company may be restricted from participating in public biddings as a potential supplier of a product or service (for example, oncology drugs or medical supplies) to the government or public agencies. Some companies sell their products primarily through such a bidding process, so the consequences could be substantial.

Please watch the BRIC Wall for future updates on these mailbox patent lawsuits in Brazil.

This post was written by Lisa Mueller and Gustavo de Freitas Morais and Justin Duarte Piné of Danneman Siemsen.