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17 September 2019CopyrightSarah Morgan

Patent backlog: Cracking the toughest nut

As WIPR goes to press, Latin America’s largest economy has narrowly escaped falling into recession. While the meagre rise in gross domestic product (0.4%) rebuts speculation of a recession, it has also dampened optimism for future growth prospects. As an anaemic economy and political protests loom over the country, Brazil’s IP office is battling its own demons, in the form of an infamous patent backlog.

With nearly 157,500 patent applications waiting for a final decision, according to June statistics from the Brazilian Patent and Trademark Office (INPI), some patents take more than 13 years from filing to grant.

There may be light at the end of the tunnel, however, in the form of a new plan aimed at reducing the patent backlog by 80% by 2021 and decreasing the average time to reach a final decision to two years from the request for examination.

Announcing the plan in June this year, Minister of Economy Paulo Guedes called the initiative a landmark in the Brazilian economy because IP is “the most important asset” in international negotiations.

The Big Bad

Patent applicants in Brazil require plenty of patience. Ten years is the average timeframe for a decision, with applications in the pharmaceutical and telecoms fields stretching to years beyond.

The backlog is thought to have originated in 1997, when a new industrial property law was enacted in Brazil, in line with the directive of the Trade Related Aspects of Intellectual Property (TRIPS) Agreement, and the country began to attract more filings.

Saulo Calazans, partner at Carioca IP, says that INPI wasn’t enabled to proportionally expand its examination capacity by hiring more examiners and modernising its structure as, in both cases, government approval is required.

The approval depends on the allocation of funds from the official budget, which is proposed and approved by the Congress each year, making an administrative issue political.

“As a consequence of this scenario, the amount of unexamined patent applications increased almost in an exponential manner,” Calazans claims.

Under article 40 of the Industrial Property Law, the term of a patent shall not be less than ten years from the date of grant. While this was originally intended to be the exception to the general rule determining 20 years from the filing of the patent, Calazans say that over time, it has become the rule.

"It is expected that the amounts charged for multiclass applications and the selection of each territory will be economically more appealing than the current scenario." - Luiza Duarte, Murta Goyanes

“Many companies think twice before filing a patent in Brazil because some technologies might become obsolete before the application is examined,” adds Bruna Lins, founding partner of Hallem Advogados.

After a considerable increase in the number of filings up to 2013, a five-year fall to 2018 followed. The inherent uncertainty for both applicants and examiners over whether a patent would be granted, and the impossibility of enforcing patent results, played a role in this, Calazans adds.

This isn’t the case across the board, according to Lins—for pharma companies the backlog can sometimes be a good thing. Under the article 40 exception, big pharma is guaranteed ten years of protection, an exception that’s proved controversial to the local generics industry.

Taking the unenviable second place in the backlog is the telecoms sector, with a 13.04-year time to grant on average.

“In a fast-changing field, such as telecoms, protracted examination renders most patents unusable,” argues Luiza Duarte, partner at Murta Goyanes, adding that the perspective is bleak for these applicants, who are uncomfortable with the long period of uncertainty. In turn, this discourages telecoms firms from investing in the domestic market, resulting in negative effects for the Brazilian economy.

On innovation, Brazil falls behind all BRICS nations (Brazil, Russia, India, China and South Africa), ranking 66th on a list of 129 countries, according to the 2019 edition of the World Intellectual Property Organization’s Global Innovation Index report.

There’s a disconnect between the government, the private sector and the academy, which “creates a scenario of uncertainty for investments in research and development and innovation, hampering the attractiveness for IP applicants”, warns Calazans.

Roberto Rodrigues, attorney at Licks Attorneys, has concerns over examination criteria. “If you consider that patent examiners are looking into applications filed a decade ago, it’s very hard to avoid hindsight bias when concluding whether a case is obvious or not,” he says.

INPI has previously made inroads into the backlog but, while the measures—which include a fast-track programme for ‘green’ patents and patent prosecution highways—were welcomed, the stubborn backlog remains considerable.

In 2017, the patent backlog was reduced more than 7%, driven by measures including the hiring of new examiners, optimised procedures and the implementation of electronic systems, says Lins. Productivity per examiner has also increased over the last four years—patent decisions have increased from 15,842 in 2015 to 41,503 in 2018.

Rodrigues is less convinced; he says that priority examination for specific cases has helped only a minority of applications.

“Other patent applicants decided to ask the courts to intervene (a judicial induced fast-track), which impacted the backlog too,” he adds.

The office’s latest plan will see INPI incorporate any prior art searches conducted abroad into the examination of patent applications in Brazil.

The patent office, which carried out a similar pilot project in 2018, said that 80% of the patent applications queued have already been evaluated in another country.

Brazilian lawyers are confident that this plan will bear fruit. For Duarte, the scheme has the advantage of not requiring any change to legislation or additional costs for the INPI, as well as maintaining the institute’s decision-making autonomy.

Duarte notes that there’s an optimistic atmosphere—stakeholders are hoping to solve, once and for all, this critical IP issue in order to improve investments in Brazil and decrease business uncertainties in the country.

Calazans cautions that a group of INPI examiners and other staff members, represented by an employee association, have already expressed their disapproval concerning the measures adopted by the plan.

"Some technologies might become obsolete before the application is examined." - Bruna Lins, Hallem Advogados

Despite this, in the four weeks following plan coming into force, more than 6,000 related office actions have been produced by INPI.

Rodrigues issues a word of warning to INPI: “The administration is waiting to see the impact of the current measures, but it should definitely consider stronger moves in case these do not work.”

Cutting out bureaucracy

INPI announced another measure, aimed at reducing the bureaucracy, costs and duration of trademark processes, on the same day the backlog plan was publicised.

Duarte says that bureaucracy and the need to contact multiple local agents have always represented obstacles for Brazilian IP owners to obtain trademark protection in other countries.

As part of its efforts, the country has acceded to the World Intellectual Property Organization-administered Madrid System, which can now count all of the world’s ten largest economies as members.

Brand owners in Brazil will be able to register marks in 120 other countries using one application, while overseas brand owners will benefit from lower costs when protecting their trademarks in Brazil.

However, Lins states, many of the required measures for implementation have not yet been taken before the system comes into force in October.

Duarte adds: “Even though the INPI has not yet made available the costs for filing international applications, it is expected that the amounts charged for multiclass applications and the selection of each territory will be economically more appealing than the current scenario.”

For foreign applicants, the Madrid System means three things, according to Duarte: less bureaucracy, a significantly faster process, and more options as to the scope of trademark protection.

It’s also worth mentioning that, to meet the Madrid System’s requirements, INPI had to drastically reduce its backlog. IP owners can now obtain a trademark application in approximately eight months.

Just one month later, INPI launched its digital plan, intended to expand and facilitate the provision of its services online. Each of its 24 measures is directed towards reducing the bureaucracy of the services; they include an artificial intelligence-based chatbot and an attendance scheduling tool.

“The plan further converges with the tools of the federal government’s digital citizenship platform that aims to expand and simplify Brazilian citizens’ access to digital public services,” says Duarte.

Meanwhile, in the copyright space, the Brazilian government has opened a new public consultation on the need to reform and update the 1998 Copyright Act.

This isn’t the first time the government has proposed a public debate on copyright reform, says Sérgio Branco, director of the Instituto de Tecnologia e Sociedade.

“About ten years ago, we went through a series of discussions, and we even had the first draft of an amendment to the law. However, due to a series of events, the government did not send it to the Brazilian Congress, and it is time to discuss the subject again,” he explains.

For the director, copyright reform in Brazil is essential. It’s not an old law but many of its topics need to be adjusted to be more compatible with contemporary practices and technologies, such as intermediaries’ liability.

Full copies of protected works for private use and the showing of movies in classrooms for educational purposes are not explicitly allowed under the act, says Branco.

“Moreover, artists, the cultural industry, and judges have difficulty in understanding and applying the law. We face a lot of inconsistencies regarding court decisions and the wording of agreements,” he adds.

Trade relations

Finally, an aura of expectation surrounds the EU-Mercosur (a bloc comprising Argentina, Brazil, Paraguay and Uruguay) free trade deal.

IP provisions within the agreement are not yet published but, says Rodrigues, from the information revealed by the government, it’s possible to gather that some strategic provisions might bring improvements to Brazilian IP practice, such as trade secret protection, border measures and enforcement.

“The bad news is that provisions on regulatory data exclusivity were not included in the deal,” says Rodrigues, although he adds that the deal is vital for harmonising other laws and practices among Mercosur countries.

A further aspect of the agreement refers to the mutual recognition of geographical indications of the two blocs, adds Calazans.

Thirty-eight Brazilian geographical indications will be protected in the EU as a result of the agreement, including terms related to iconic products such as Cachaça, Canastra cheese and Vale dos Vinhedos wines. A faster process for the recognition of new Brazilian geographical indications is also being considered.

This all promises a more palatable future, surely offering a sweeter end to years of a system blocked up with red tape and political inaction.

Fact file

Brazil’s patent backlog plan aims to:

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