Pharmaceutical patent owners on alert
Brazil was authorised by the World Trade Organization in 2009 to cross-retaliate against the US for its subsidies on upland cotton. President Lula enacted new legislation, on February 10, 2010, announcing his statutory authority to suspend the rights of US intellectual property owners in Brazil.
Patents on pharmaceutical and chemical products stand out among the targeted IP rights. According to the Brazilian government, although retaliation with goods would certainly bother the US, threatening to lift pharmaceutical patentprotection could make the affected industry sectors push the US government to eliminate its cotton subsidies and negotiate with Brazil. In addition, retaliating against IP rights may benefit local industries and customers, while commercial retaliations could cause the opposite effect, increasing the price of imported products to the Brazilian market.
US companies or citizens who own or license IP rights in Brazil, and even foreign companies located or with their principal place of business in the US, may be affected.
These cross-retaliation measures amount to approximately $238 million of a total of $829 million in sanctions authorised by the WTO. The other $591 million will come from retaliation in goods, by imposing increased tariffs for imports of US products. The 102 products affected were named by the Brazilian Chamber of Foreign Trade (CAMEX) in Resolution 15 of March 5, 2010, and include a variety of products, from cars and boats to wheat, ketchup and a few over-the-counter drugs, such as paracetamol.
On March 15, seeking to implement the provisions of the new legislation, CAMEX published Resolution No. 16, releasing the first list of intellectual property-related measures to be implemented. Such measures include: reducing the term of protection of IP rights; granting royalty-free compulsory licences of IP rights; suspending the patent owner’s right to prohibit the import and commercialisation of infringing products; increasing the official fees for acquiring and maintaining IP rights; charging a percentage over royalties to be remitted abroad; and making copyright registration mandatory.
It is worth mentioning that the legislation expressly provides that the Brazilian government may also suspend data package exclusivity (DPE) protection. This sounds like a bad joke, given the absolute lack of enforcement of Brazil’s domestic legislation on DPE and the violation of its obligations under Section 39.3 of the WTO’s TRIPS agreement.
Resolution No. 16 opened a 20-day public consultation, allowing interested parties to present written submissions, ending on April 5. The executive secretary of CAMEX, Lytha Spíndola, estimates that the government will take approximately two months to publish the final list.
As negotiations with the US to resolve the dispute progressed, on April 6, CAMEX published Resolution No. 19, postponing until April 22 the implementation of Resolution No. 15, which refers to the retaliation measures regarding goods. By then, Brazil expects to have reached preliminary understandings regarding three aspects of the negotiations: the creation of a fund financed by the US to benefit Brazil’s cotton industry to the tune of $147 million per year; negotiation of new terms for the US Export Credit Guarantee Program; and the implementation of co-operation measures for animal health, particularly in the pork and beef sectors. Providing that these agreements can be reached, CAMEX will further postpone Resolution No. 15 for another 60 days.
Resolution No. 19, however, does not expressly mention that the intellectual property measures will also be delayed. This leaves uncertainties as to whether the government will actually publish the final list within the next two months and make use of this instrument to obtain other guaranties during the negotiation process.
Pharmaceutical patents
The research-based pharmaceutical industry should not only be concerned with the potential implementation of cross-retaliation measures against its intellectual property rights. The en banc Superior Court of Justice’s ruling on Pfizer’s Viagra patent may have a much greater impact on the most important drugs in the market. This decision, which is due shortly, may set a precedent for more than 30 pending cases involving blockbuster drugs such as Novartis’s Glivec, Lilly’s Zyprexa and Pfizer’s Lipitor.
The case involves the interpretation of Article 230, §4 of the Brazilian Industrial Property Law, which defines the term of protection of the so-called pipeline patents, also referred to as revalidation patents. These patents were allowed in Brazil by the transitional provisions of the Industrial Property Law for “substances, matters or products obtained by chemical means or processes, food and chemical-pharmaceutical substances, matters, mixtures or products, and medicaments of any kind, as well as the respective processes for obtaining or modifying them”.
Brazil created this transitory mechanism to allow the revalidation of patents granted abroad that could not be granted in Brazil until 1996, when the current Industrial Property Law was enacted. Without going through the examination of the patentability requirements, patent owners had to comply with other requirements, such as proving that a patent had been issued in the country where the first application was filed and that the respective product had not yet been placed in any market worldwide. They also had to show that no local industry had attempted to produce the product in Brazil, as of the national filing date. The Brazilian Patent Office (BPTO) granted 810 patents of this type.
Regarding their term of protection, Article 230, §4 provides the following: pipeline patents shall be granted for “the remainder of the term of protection in the country where the first application was filed, counted from the filing date in Brazil and limited to the term defined in Article 40”—20 years.
The issue before the court in the Pfizer case is whether, according to such provision, Pfizer’s pipeline patent PI1100028, one of the patents covering Viagra, should be valid for the remainder of the term of protection of its European counterpart or for a 20-year term counted from the first filing date abroad.
If the former, Viagra’s patent will last until June 7, 2011. Pfizer hopes this outcome will prevail. Both the district court and the Federal Court of Appeals for the Second Circuit followed this interpretation in the decisions now being appealed at the Superior Court of Justice.
Should the court reject Pfizer’s claim, Viagra will lose its exclusivity in Brazil on June 20, 2010. The BPTO has been fighting for this interpretation for many years. Several generic companies have already obtained marketing approval before ANVISA (the Brazilian Food and Drug Agency) and are waiting to launch their copies of the drug. The case began at the Superior Court on March 24. It should be noted that the 2nd Section of the Superior Court of Justice decided to hear the case en banc because of the court’s recent ruling in the Novartis case, which revealed a split in the court regarding Article 230, § 4.
Three of the seven judges of the en banc court have already voted in the BPTO’s favour: the reporting judge, the Honourable Judge João Otávio Noronha, and Honourable Judges Sidnei Beneti and Vasco Della Giustina. But the judgment was delayed after the Honourable Judge Luis Felipe Salomão asked to review the case files before rendering his vote. The remaining judges, Honourable Judges Aldir Passarinho, Fernando Gonçalves and Honildo de Mello Castro, chose to wait for Salomão’s vote before rendering their own opinions.
The judgment in the Pfizer case can resume in any session of the 2nd Section of the Superior Court of Justice. The next ones are scheduled for April 14 and 28.
Another big threat to the pharmaceutical industry is the lawsuit filed by the Federal Prosecutor’s Office (FPO) before the Brazilian Supreme Court in April 2009, seeking to declare the pipeline patents system unconstitutional. This case may affect all granted and pending pipeline patents. In other words, all patents starting with PI1100.
The lawsuit results from a representation made by the National Federation of Pharmacists (FENAFAR) to the FPO in the end of 2007. The FPO seeks to declare Articles 230 and 231 of the Brazilian Industrial Property Law unconstitutional for supposedly violating Articles 3 (I to III), 5 (XXII, XXIII, XXIV, XXIX, XXXII and XXXVI); 6; 170 (II, III and IV); 196 and 200 (I and V) of the Brazilian Constitution. In particular, the FPO claims that pipeline patents violate the constitution because they cover inventions that fell in the public domain before their filing dates in Brazil and therefore lack novelty. The FPO states novelty is a constitutional patentability requirement under Article 5 (XXIX) of the Brazilian Constitution: “The law shall ensure the author of industrial inventions, of a temporary privilege for their use, as well as protection of industrial creations, property of trademarks, names of companies and other distinctive signs, viewing the social interest and the technological and economical development of the Country.”
Entities like ANVISA, pro-consumers and pro-generics associations, and NGOs such as IDEC, ABIFINA, Pro-Genéricos and Conectas, filed amicus curiae briefs in favour of the unconstitutionality declaration.
In March 2010, the FPO filed a brief claiming the unconstitutionality of all granted pipeline patents and pending pipeline applications; however, to protect transactions already made in the past that rely on those rights, the FPO voted for the effects of an eventual decision not to be retroactive. In other words, the FPO recommended that the declaration of unconstitutionality should have only ex nunc effects, rendering the patents invalid not from their filing dates, but from the day of a final decision in the case.
In any event, this lawsuit represents a clear threat to the pending and already granted pipeline patents in Brazil. A decision declaring the unconstitutionality of the pipeline patent system would affect approximately 565 pipeline patents still in force and 121 pipeline applications.
Otto Licks is a partner at Momsen, Leonardos & Cia. He can be contacted at: oblicks@leonardos.com.br
Marcela de Souza is an associate at Momsen, Leonardos & Cia. She can be contacted at: msouza@leonardos.com.br
