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PPH - Suggestions for Fine -Tuning the Brazilian Patent-granting System

Study of the advantages brought by
the Patent Prosecution Highway (PPH) for innovation in Brazil
Current as of November, 2016

PPH - INTRODUCTION

At a time when Brazil is dealing with political uncertainties and striving to surmount economic hurdles, there is widespread agreement that steps are required to boost economic growth. A major contribution may come from private foreign direct investment (FDI), with the newly-introduced Investment Partnership Program (IPP)1 showing the way. Equally important are foreign direct investments with no contractual interactions between the state and the private sector, dependent on a competitive context and technological innovation. Here, one of the most important ways of spurring economic growth is the effectiveness of the rules regulating intellectual property, especially the patents of invention system.

In order to lessen the negative impacts to foreign direct investments in Brazil, it is vital to upgrade the performance of the Brazilian Patents and Trademarks Office (National Industrial Property Institute – INPI/BRPTO) very quickly. Handling patents of invention, the BRPTO is a federal semi-autonomous government entity that was set up in 1970 by President Medici, with the core purpose of implementing Brazil’s industrial property laws and standards. The most important legislation in this field is: Decree #81,742 – Patent Cooperation Treaty (PCT) in 1978; Decree #1,263 – Paris Convention for the Protection of Industrial Property and Decree Nº 1,355 – Trade-Related Intellectual Property Rights (TRIPS) Agreement/World Trade Organization (WTO). Appointed by the Ministry for Development, Industry and Foreign Trade (MDIC), the President of this Office is appointed and removed freely by the President of Brazil.  Since August 11, 2015, it has been headed by Professor Luiz Otavio Pimentel, who was nominated by then Minister Armando de Queiroz Monteiro Neto and appointed by former President Dilma Rousseff.

The main function performed by the BRPTO is awarding patents of invention and utility models, in addition to registering industrial drawings, brands and trademarks. While performing these functions, it has been criticized by users for excessively long delays in patent application examinations and the quality of its administrative decisions. It has in fact become commonplace for users to file suits with the Courts requesting reviews of decisions denying industrial property titles. The Federal Court of Appeals for the Second Circuit has in fact established two Panels specializing in industrial property, while the Federal District Court of Rio de Janeiro has four specialized courts, all required to handle the massive numbers of lawsuits filed against the BRPTO (267 during the past twelve months in Rio de Janeiro alone).

There are currently more than 10,000 lawsuits involving the BRPTO filed with the Brazilian Courts.  

The BRPTO is also in charge of registering software, geographical indication, designs of integrated circuits and licensing contracts.
The difficulties encountered by the BRPTO in bringing patent application processing activities to completion is acknowledged as the main stumbling-block in Brazil’s intellectual property system. At the moment, the BRPTO takes an average of eleven years to decide on whether or not to grant a patent application.

It is well-known that the BRPTO has not been able to fulfill its institutional functions satisfactorily, harming users, undermining the interests of society and hampering the technical and economic development of Brazil. Three consequences of this poor performance by the BRPTO are: i) the number of applications on which the Office has not handed down decisions (backlog); ii) the length of time that the BRPTO takes to decide on any user applications (pendency); and iii) differences in the operating, management, administration and governance standards for its activities, compared to government entities performing similar activities in other countries, or even other public institutions in Brazil.

For comparative purposes, according to official data for 2014 and 2015, the European Patent Office (EPO) takes around three years to decide on a patent application, while the United States Patents and Trademarks Office (USPTO) takes two and a half years, the State Intellectual Property Office of the People’s Republic of China (SIPO) takes less than two years, with only a year and a half required by the Japan Patent Office (JPO) and the Korean Intellectual Property Office (KIPO).

PPH - COMPARISON – AVERAGE EXAMINATION TIME BY PATENT OFFICE

Productivity levels at the BRPTO are extremely low: each year, an examiner issues an average of 35 decisions on merit through technical examinations of patent examinations, which is less than three decisions a month. Consequently, in 2015 the BRPTO had a backlog of 211,478 patent applications awaiting final decisions on initial examinations, with its own estimate bringing this figure up to more than 300,000 applications in 2022 (see Graph 2 on page 6).

The problems caused by the BRPTO backlog have direct impacts on the Brazilian economy and the nation’s development. In the Global Innovation Index 2016 Report published recently by the World Intellectual Property Organization (WIPO) and others, Brazil ranks only 69th for innovation, behind Chile (44) Costa Rica (45), Mexico (61), Uruguay (62) and Colombia (63). The WIPO report stresses the strength of Brazil through the impact of scientific publications, as a positive aspect, but also highlights its weakness to construct a business-friendly context. The report concludes that the situation in Brazil could improve if cooperation agreements with other nations were drawn up in the innovation field.

Along the same lines, other publications – such as the Global Information Technology Report 2016 – also underscore Brazil’s poor performance in constructing an innovation-friendly environment, rating it 72nd in the general ranking and 124th for Innovation in Business Environment. Brazil’s lack of adequate and effective protection for industrial property rights is directly linked to this unfavorable context.

The BRPTO has been unable to play its institutional role in an efficient manner, respecting due legal process at the administrative level and ensuring a reasonable timeframe for the proceedings. Its activities are often questioned in terms of the various fundamental guarantees and rights established through Article 5 of its 1988 Constitution (CF/88), in addition to the principles ruling the Civil Service, set forth in Article 37 of the Constitution, establishing an Unconstitutional State of Affairs that adversely affects not only the direct users of the patents system, but Brazilian society as a whole.

Other Patent Offices in Latin America support their governments and private enterprise in the competition for foreign direct investments.  For example, Chile, Colombia and Mexico have long implemented efficient ways of dealing with backlogs, pendencies and management problems. In September 2016, the new president of the Argentine Patent Office, Damaso Pardo (appointed in July 2016), went even further through Rule P-56/2016 that adopts a simple approach to encouraging the diversion to Argentina of high-value investments originally earmarked for Brazil. With no need for treaties or executive agreements, the Argentine Patent Office introduced a patent application examination system designed to ensure fast-tracked decisions for investors considering Argentina.

pph - THE BRAZILIAN PATENTS SYSTEM – OVERVIEW

In Brazil, protection for inventions, industrial creations, brands and trademarks, company names and other distinctive signs is assured as a fundamental right, through Item XXIX of Article 5 of its 1988 Constitution.

The process of awarding a patent of invention is regulated by the Brazilian Patent Statute (Patent Statute) – Law #9,279/96, as well as by international treaties included in the Brazilian Legal System. For example, the Patent Statute establishes that an invention will be patentable when compliant with the patentability requirements – novelty, inventive step and industrial application – as well as the formal requirements set forth in Articles 8 and 24 of the Patent Statute.

Once all the requirements have been confirmed, the BRPTO must grant the patent. The administrative act awarding a patent is binding, rather than discretionary, with no room for judgments of convenience and opportunity by the BRPTO. This is what is affirmed by the case law established by the Brazilian Courts: 
“It must also be noted that, contrary to the statement presented by the BRPTO, the act of awarding a patent is not discretionary, with the Civil Service necessarily being bound to the criteria delineated in the law. Deploying control over the legality of administrative acts, the Judiciary is fully empowered to examine compliance with these criteria, with the assistance of qualified professionals, as occurs in these case records.”

(Appeal Nº 9702296218, 2nd Panel, Federal Court of Appeals for the Second Circuit, judgment: February 20th, 2002).

“This is a matter of defining the duration of the statute of limitations for a lawsuit filed by a registrant wishing to discuss the duration of the validity established by the BRPTO. Initially, it must be stressed that this act of impugnment safeguards the juridical status of the administrative act (…). It is noted that this is a bound act, as all its elements are defined in the law.”
(Appeal #2008.51.01.817159-7, 2nd Specialized Panel, Federal Court of Appeals for the Second Circuit: August 31st, 2010) Consequently, the BRPTO is forbidden to use its institutional function – regulated by the Patent Statute and Law #5,648/70 that set up the BRPTO – to make discretionary choices and patent awards based on judgments of convenience and opportunity.  

Sovereignty is held by the Brazilian State, which is a single indivisible unit. When the Brazilian State pursues a political option through the Legislative and Executive Branches (direct civil service) to promulgate laws and adhere to international treaties that ban discrimination in fields of technology and against foreign companies for patent award purposes, the BRPTO must ensure compliance with the law and exercise its institutional functions with impartiality, reality, disclosure and efficiency. This is why the BRPTO may not delay administrative proceedings awarding patents in specific  fields of technology filed by foreign applicants.

Sovereignty is held by the Brazilian State, which is a single indivisible unit.