[Guest Post] The Brazilian Supreme Court: The Direct Action for the Declaration of Unconstitutionality of the sole paragraph of article 40 of the Industrial Property Law

IPTango is pleased to publish a guest post by Pedro Matheus and Leonardo Cordeiro (Gruenbaum, Possinhas & Teixeira), discussing the Direct Action for the Declaration of Unconstitutionality concerning the sole paragraph of article 40 of the Industrial Property Law of Brazil. The provision establishes the minimum validity term of 10 years for patents and 7 years for utility models (counted from the granting date) to compensate for an excessive delay of the Brazilian National Institute of Industrial Property (INPI) to grant them.

On 28 April 2021, the Supreme Court heard the Direct Action for the Declaration of Unconstitutionality No. 5529 (ADI No. 5529) concerning the sole paragraph of article 40 of the Industrial Property Law (LPI), which establishes the minimum validity term of 10 years for patents and 7 years for utility models.

Background

The action was filed in May 2016 by the Attorney General’s Office (PGR), claiming, among other reasons, that the rule of the sole paragraph of article 40 violates the constitutional provision established in item XXIX of article 5th of the Brazilian Constitution, which grants “to the authors of industrial inventions a temporary privilege for its use”.

In the PGR’s opinion, by establishing a minimum term of validity of 10 years counted from the granting (that is, an uncertain date), the IP Law creates an unconstitutional rule since it would not be possible to determine the validity term of a patent, allegedly violating the temporary nature established in the constitution.

The PGR also argues that the challenged rule interferes with consumer’s rights and free competition, since the provision generates instability and unpredictability in the market, passing to the Brazilian society the burden caused by an eventual delay in patent examination by the Brazilian National Institute of Industrial Property (INPI), binding the consumer to the prices determined by the patent holder, for an undetermined time.

Moreover, according to the PGR, the rule violates the constitutional principle of isonomy since economic agents in identical situations receive different treatments depending on the duration of the administrative proceedings. The PGR also claims the rule stimulates the delay in the administrative analysis of patent applications.

The Preliminary Injunction

ADI No. 5529 received a record number of amicus curiae requests by civil organizations (with entities against and in favour of the PGR’s opinion), a situation highlighted by Justice Luiz Fux (President of the Court), which demonstrates the relevance and the controversy of the case.

In this context, the Supreme Court scheduled to hear ADI No. 5529 on 7 April, with Justice Dias Toffoli as rapporteur. However, the Court heard another constitutional case regarding the fight against the COVID-19 pandemic and postponed the decision on the merits of ADI No. 5529.

Nevertheless, and despite the postponement, Justice Dias Toffoli issued his opinion in advance, in which he recognized the unconstitutionality of the sole paragraph of article 40.

Justice Dias Toffoli also granted a preliminary injunction to suspend the validity of the challenged rule only concerning “patents related to pharmaceutical products and processes and medical equipment and/or materials for the use in healthcare with ex nunc effects [i.e. no retroactive effects]”.

The Declaration of Unconstitutionality

After further postponements in the following weeks due to the judgement of other cases with relevant political and social repercussions, the hearing was held on 28 April.

In such session, oral arguments were presented by the PGR (the action’s plaintiff), the Union Advocate General, the Federal Union (in favour of the dismissal of the action and maintenance of the rule), and the 15 amici curiae (defending both the constitutionality and unconstitutionality of the rule, depending on the interests of their associates/affiliates).

Once the oral arguments were presented, which extended throughout the afternoon of 28 April, Justice Fux (the President of the Court) ended the session and adjourned the judgement to the next day.

On 29 April, Justice Dias Toffoli started reading his opinion (more than 80 pages long), recognizing the unconstitutionality of the sole paragraph of article 40.

Since the rapporteur had already divulged his opinion, there were no surprises regarding its content. He advocated for the recognition of the unconstitutionality of the rule, arguing, among other things, that patent protection does not start with the granting since article 44 of the LPI establishes that the protection granted by the patent is retroactive to the date of publication of the application.

The rapporteur also argued that there are no similar rules in other jurisdictions, characterizing the minimum term of 10 years established in the sole paragraph as a rule exclusive to Brazilian legislation, and he further mentioned that its eventual exclusion from the national legislation would not conflict with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Moreover, the rapporteur agreed with the PGR’s opinion that the rule violates some constitutional principles relating to the efficiency of public administration. He alleged that the existence of the rule could induce the Brazilian National Institute of Industrial Property (INPI) to delay the analysis of patent applications and allow applicants to postpone the administrative proceeding to obtain a longer term of protection.

The judgement was adjourned again on 29 April and 5 May. Thus, another session was held on 6 May in which the Supreme Court decided, by a majority of votes, that the sole paragraph of article 40 is unconstitutional.

In this sense, Justices Kassio Nunes Marques, Alexandre de Moraes, Edson Fachin, Rosa Weber, Cármen Lúcia, Ricardo Lewandowski, Gilmar Mendes and Marco Aurélio Mello agreed with Justice Dias Toffoli’s opinion. On the other hand, Justices Luis Roberto Barroso and Luis Fux dissented, recognizing the constitutionality of the rule.

Due to the declaration of unconstitutionality of the rule, the Court began analyzing the proposal to modulate the effects of the decision, i.e., if the decision will have retroactive or prospective effects and if such effects will be applied to patents and utility models in all technological areas.

However, considering the possible consequences arising from the declaration, the Justices decided to resume discussing the modulation of the effects of the decision in the next session, to be held on 12 May 2021.

Stay tuned!

Credits:

Second image by Steve Buissinne from Pixabay.

Third image by succo from Pixabay.