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The IP Chapter of the trade agreement between Mercosur and EU

On June 28th, Mercosur and the European Union reached a political agreement for a comprehensive trade agreement between the two regions after 20 years of negotiations. This would be the first major trade pact signed by Mercosur, a bloc comprising Argentina, Brazil, Paraguay and Uruguay and creates the largest trade zone in the world in terms of population. The trade agreement covers a wide range of areas, going beyond tariffs to include access to public procurement contracts, protection for regional food specialties and greater freedom to provide services.

The trade agreement also provides a broad chapter on Intellectual Property Rights, covering copyright, trademarks, industrial designs, geographical indications, plant varieties, as well as provisions on the protection of trade secrets and border measures against counterfeits. One of the big points about the chapter on Intellectual Property Rights is not only the revision on some strategic points that it might bring to the Brazilian IP practice, but also a possible assistance on the harmonization of the law and practice among Mercosur countries.

However, it is important to note that supplementary protection certificates (or mechanisms extending the patent term in general) and regulatory data protection under paragraph 3 of article 39 of the TRIPS Agreement have been excluded from the negotiating process upon request of Mercosur countries. Even though the exclusion of these two issues have been perceived by part of the Brazilian delegation as a win, it seems that in case the negotiations for a trade agreement with the United State develop, the American government would not accept it. As pointed out by the US Secretary of Commerce Wilbur Ross during his trip to Brazil in July, there are flaws in the EU-Mercosur agreement that could jeopardize an agreement with the US. The major American objections to this agreement relate to pharmaceutical, chemical and food areas.

We present herein below a brief overall of the chapter on Intellectual Property Rights based on the text made available by the European Union on September 6th.1 Although it is expected that there should not be any further changes to the text, it will be final only upon signature and may still undergo further minor modifications.

Patents

The part on patents is extremely short, basically agreeing only to compliance with the Patent Cooperation Treaty – which is actually critical considering that Argentina and Uruguay are not members.

It can be understood that differences of opinion on issues related to patents and access to medicines might have hindered deeper commitments in this area. The issues related to IP and public health are divided among some provisions located in Article X.4, that lists the general principles related to IP, and Article X.8, with a special focus on the affirmation of the Doha Declaration. It is relevant to note that the agreement defines that the parties “shall implement Article 31bis of the TRIPS Agreement”. Article 31bis basically allows countries producing generic medicines under compulsory license to export the medicine to least developed countries. This can create a political scenario for a more compulsory license friendly environment, creating inevitable issues within the patent system.

Trademarks & Designs

From a trademark perspective, the agreement includes references to both the Madrid Protocol and Nice Agreement – the former was recently adopted in Brazil, but the rest of the Mercosur countries could now follow. Furthermore, there are stipulations around introducing bad faith as a ground for trademark application invalidation, which is another area that harmonization would be beneficial.

On designs, all parties have agreed to make “the utmost effort” to comply with the Hague Agreement, which would be an important step for the Mercosur region. An unfortunate point is that the agreement fails to bring any provisions on designs for parts of products. Also, although there is a provision on protection of unregistered designs on Article X.30, it leaves it entirely to the discretion of the member countries.

Copyrights

The part on copyrights covers a vast area, especially on issues of remuneration and collections of royalties for usage of copyrights (including provisions on cooperation of collective management rights). Article X.15 deals with issues regarding the term of protection and might harmonize among the member states some complicated issues, such as the one in relation with anonymous/orphan works which was largely discussed in the EU in recent years.

Another particularly interesting point is the matter of limitation/exception to copyrights, foreseen on Article X.18. It is a very succinct article, basically setting the idea that exceptions and limitations should be provided only for special occasions and when they do not conflict with the normal exploitation of the work. This is probably due to an impasse on harmonization between the “fair dealing” or “three step test” systems in the EU and the numerus clausus limitations on Mercosur countries, such as Brazil.

It is interesting to note, however, there is a clear provision aiming to make the act of streaming not to be considered within the reproduction right.
Furthermore, Article X.19 defines that parties shall provide protection against the circumvention of technological measures that are used by right holders, making it clear that allowable circumventions should be defined as a specific limitation. Article X.20 has similar provision for rights management information. This seems to indicate a special care about the search for balance and harmonization regarding new monetization methods for copyrightable content. The trade region has a huge potential as a market for content related products and a good level of protection is essential.

Geographical Indications

The chapter on Geographical Indications is one of the most extensive ones, considering the effort that both regions place on distinctive high-quality regional food and drink products. In general, under the agreement, Mercosur will protect European Geographical Indications for wines, spirits, beers and food products, such as Prosciutto di Parma, Champagne, Port wine, and Irish whiskey. In exchange, the EU will also protect the names of traditional Mercosur products such as Cachaça (a Brazilian distilled spirit) and Mendoza wine from Argentina.

The Article X.35 defines the scope of protection for geographical indications and it is quite extensive, including the scope of the rights granted as well as exceptions and conflicts with trademarks. The article includes provisions on homonymous geographical indications and the appendix to annex II have complex rules on labeling.2 Considering the level of interest that both regions place on this topic, players on the several industries related to food and drinks should be aware of potential liabilities.

Plant Varieties, Biodiversity & Traditional Knowledge

The part of biodiversity and traditional knowledge is short, largely reaffirming the obligations over some strategic treaties such as the Convention of Biological Diversity of 1992. The part on Plant Varieties is on the same level, basically reaffirming the UPOV.

Trade Secrets

The subsection on the protection of undisclosed information is another one of the most impactful ones of the agreement. The chapter is highly influenced by the EU Directive 2016/943 on the protection of trade secrets. Proper implementation of this part would be very beneficial to Brazil, who lacks a separate provision to trade secrets, dealing with it mainly within the article for unfair competition. Another important point is the inclusion of the infringement of trade secrets when the person ought to have known that the trade secrets have been obtained unlawfully. This obligation is contained in a footnote attached to Article 39.2 and is not clearly provided for in some countries, such as Brazil.

Enforcement & Border Measures

The agreement has several provisions on enforcement and border measures, with a possible effect to assist harmonization on some practical issues. Article X.45 defines lex fori as the applicable law for IP matters, and makes clear that besides the IP rights owners, authorized exclusive licensees as well as legally recognized intellectual property collective rights management bodies also have legitimacy to start legal procedures for protection of IP rights.
Article X.46 deals with evidence and aims to allow the competent authorities to provide effective provisional measures to allow IP right owners to preserve evidence. Furthermore, several articles aim to harmonize preliminary procedures, especially injunctions, and overall remedies. An interesting point is the possibility for the judicial authorities to order pecuniary compensation instead of normal remedies, such as injunctions, when the infringer acted unintentionally and without negligence.

Article X.58 has several general provisions about border measures. A problematic point is that the agreement does not make it mandatory for the member countries to detain goods suspected of patent infringement. Also, it makes clear that there is no obligation to apply border measures to goods in transit. Furthermore, the agreement fails to bring a conclusion to the issue of parallel importation, leaving domestic law to deal with this matter. However, there is a compromise to coordinate further cooperation on the prevention of the exports of counterfeit goods, which would be highly welcomed in the Mercosur region.

1 - Available at https://trade.ec.europa.eu/doclib/docs/2019/september/tradoc_158329.pdf.

2 - See https://trade.ec.europa.eu/doclib/docs/2019/september/tradoc_158330.pdf.

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