Brazil: Inspiring the private sector to go public

Inventors in Brazil are facing a problem. It is a well-known fact that the Brazilian Patent and Trademark Office (INPI) has a patent backlog. It is estimated that around 220,000 applications are waiting to be examined. With the timeframe from the filing date to the first examination reaching as much as 12 years, Brazilian inventors are, in effect, being discouraged from seeking protection for their creations.

After the INPI hired 210 new patent examiners in 2017, the backlog fell by 7.6% from 243,820 applications in 2016 to 225,115 in 2017. However, more work needs to be done to encourage innovators to protect their inventions in the country.

Bruno Lopes Holfinger, partner at Dannemann Siemsen, says that the scenario is far from positive, at least in the short term.

“Regarding patents, unfortunately Brazil is a country that does not produce much technology considering its potential,” he explains.

“We receive many more applications from overseas than those developed and implemented by the internal market.”

One of the reasons behind this is the time it takes to get a patent, according to Holfinger.

Past efforts

The government has acknowledged its problems and implemented various methods to promote inventors to file patent applications in Brazil. Gabriela de Paiva Morette, lawyer at Trench Rossi Watanabe, says that Brazil enacted a law way back in 2004 with the purpose of increasing the level of innovation in the country.

“The law, however, was deemed to be generally unfavourable to the private sector due to bureaucracy and restrictions imposed on the ownership of IP developed in research and development (R&D) projects subject to the law,” she says.

“As a result, innovation in Brazil was not boosted as originally intended by the government.”

However, she continues that, in 2016, the law was amended in an attempt to reduce bureaucracy and to increase investments in R&D, especially by the private sector. According to Paiva Morette, innovation in Brazil is generally driven by the public sector.

This is because the bulk of investments made in innovation are made available by the public sector through funding or tax incentives, she explains. When the public sector cuts funding or tax incentives, many companies also reduce investment in R&D.

“The result of the 2016 amendment was that Brazil’s position in the 2018 Global Innovation Index (GII) jumped from 69 to 64,” she says.

“The Index pointed out Brazil for R&D expenditure, net high technology imports and exports, and quality of scientific publishing.”

The GII is an annual report that ranks countries in order of their capacity for, and success in, innovation. It is developed by Cornell University, graduate business school INSEAD and the World Intellectual Property Organization (WIPO).

Brazil has moved forward in the listings, but it is still lagging behind some of its Latin American counterparts, namely Chile (47th), Costa Rica (54th) and Mexico (56th).

Better numbers

Further research indicates that innovation in Brazil is on the rise.

A report published in July by the Center for Advancing Innovation, in conjunction with R&D analytics company PatSnap, points to rising numbers of patent applications over a 20-year period.

According to the report, the compound annual growth rate (CAGR) for patent applications grew 3.8% from 1995 to 2015. Meanwhile, the average annual growth rate (AAGR) rose 4% within the same time-period.

Patent grants also rose. The CAGR of patent grants went up by 3.5% from 1995 to 2015, with the AAGR increasing by 5% within that time.

Meanwhile, according to WIPO’s findings, patent applications made by Brazilian entities in 2016 reached 5,200, up from 4,641 the year before, when the number of resident patent applications was the lowest it had been since 2010.

“Another indication of progress is the number of resident patent applications filed per year compared to non-residents,” says Holfinger.

“Although the total number of patent applications filed at INPI reduced in the last year by 15.43%, resident applications increased around 17.67% (non-resident applications had a reduction of around 21%).”

Figures from the INPI show that nine of the top ten national entities that filed the most patent applications last year were universities.

The University of Campinas filed the most, followed by the Federal University of Campina Grande and the Federal University of Minas Gerais.

The only private company that finished in the top ten native Brazilian patent filers was CNH Industrial Brasil (a subsidiary of CNH Industrial), which came in seventh place.

For external patent filings, Qualcomm filed the most in Brazil during 2017. Other well-known international companies that were among the top ten filers for last year included Huawei, Philips, Microsoft, Boeing and Toshiba.

Despite the 21% reduction in non-resident patent filings last year, foreign businesses still dwarfed domestic entities for filing patent applications in Brazil last year, submitting almost 21,000—compared to nearly 5,550 by residents.

“There are some measures adopted by INPI to try to remedy this,” explains Holfinger.

Similar to IP offices in other countries, the INPI has reduced the official fee of patent applications by up to 60% for microenterprises, individual micro entrepreneurs and small businesses, educational and research institutions, universities and non-profit entities, according to Holfinger.

“Further, since 2013, there are also some possibilities to fast-track examination,” he adds.

Applicants can be fast-tracked if they meet certain criteria including if there is evidence that a potential infringement is taking place; if the applicant is 60 years old or more, or disabled; or if the application is for pharmaceutical products and processes, or equipment related to public health.

“According to the Brazil Innovation Value 2018 publication, the main sectors investing in innovation in Brazil are consumer goods and pharmaceuticals,” says Paiva Morette.

Pre-exam method

Holfinger says that another method adopted in 2018 to encourage innovation in Brazil is a type of pre-examination, “wherein the INPI formally requests the applicant to submit comments on prior art cited during carried out by other patent and trademark offices around the world, and also mirror the Brazilian application to the granted family of patents”.

Holfinger explains that the INPI’s “unofficial information” says that this pre-examination provides direct allowance four times more often than if the patent application had been normally examined, thus allowing the examiner to decide on a larger number of applications to assess.

Echoing previous sentiments made by Paiva Morette, Holfinger says that historically, the local private sector “does not assume great risks” when it comes to IP protection.

“Most Brazilian companies conduct R&D linked to the domestic market and with a reduced chance of worldwide repercussion, as opposed to technology-producing companies in developed countries,” he says.