Patentes

Brazilian scenario on Patent Term Adjustments and necessary definition on the subject

Having a definition at the judiciary or by enacting new legal provisions will be productive for safety and predictability for all the players in the market, whether by admitting or closing the PTA routes.

By Paulo Armando Souza & Isabelle Ilicciev Lage, Di Blasi, Parente & Associados

Since the Brazilian Supreme Court ruled for the unconstitutionality of the sole paragraph of article 40, from the Brazilian Intellectual Property Law (BIPL) on May 12^th, 2021, patents granted by the Brazilian Patent and Trademark Office (BPTO) are no longer entitled to the automatic 10-year-term protection in case the examination lasts more than half of the general rule of 20-year-term from the filing of the patent application (or 15-year-term in case of utility models applications).

The Supreme Court modulated the effects of the binding ruling in ADI 5.529, as the provision was in force for more than 25 years. In the context of constitutional actions, if a rule is declared unconstitutional its effects retroact, but the longstanding existence of sole paragraph of article 40 motivated the Justices to safeguard its past effects, and the decision became effective from the publication date, except for pharmaceutical and health related patents.

The modulation did not apply to pharmaceutical and health-related patents especially due to the pandemic scenario faced at the time, as there was a concern that such patents could be an obstacle for Brazilian pharmaceutical companies to eventually manufacture medications and supplies for the treatment of COVID-19, impacting the health system in general.

Therefore, many patents of this sector that were enjoying the protection of 10 years after grant were extinct due to the ruling. However, new grants for all industries will also be entitled of 20-year protection from the filing date, leaving no permanent heirs of the revoked provision. Especially because the Justices cited Patent Term Adjustments (PTA) to justify that the sole paragraph was a TRIPS-Plus provision, and no similar rules were in force in other jurisdictions. Hence, after several big pharma filed court actions to request the adjustment of the protection terms at Federal Courts, the Supreme Court or the respective Appellate Federal Courts have been denying injunctions to reinstate these patents, but no final decision was handed down yet and the debate is still open for judicial definition.

Considering this scenario, where the protection is counted from the filing of the application, and no extensions have been allowed so far, applicants interested in overturning rejections or maintenance of rejections of patent applications by the BPTO at the Federal Courts must be aware of the new deadlines in case some practical effects arising from potential protection is desired.

For instance, if a rejecting decision is upheld by the BPTO in connection with a patent application filed in 2009, after an examination that lasted 9 years and analysis of an appeal that lasted 2 years (11 years counting both stages), the 5-year statutory deadline for challenging the rejections in court may not be useful if complied with its limit. This is because even if the rejection is contested at the Federal Court until 2025 and a final judicial decision reversing the rejection is delivered in 2 years, eventual protection by a patent granted in Court will only last for a couple of years before being extinct.

Moreover, if the case had more than 15 years of prosecution at the BPTO, filing the court action in the limit of the deadline may result in the reversal after 20 years from the application date, meaning that the patent may be granted in the peculiar situation of already being extinct according to the remaining general rule, that means, the patent is dead on arrival. In view of this, a definition of whether patent term adjustments are feasible or not is desired for markets’ and industries’ predictability.

Notwithstanding, since the Supreme Court’s ruling PTA legal actions at the Brazilian Federal Courts have been piling up to around 60 claims from pharma companies aiming at preventing valuable patents to expire earlier or restore patents canceled due to the ruling. However, Federal Judges are reluctant in granting extensions, and this also results in the rejection rate (approximately 80%) of preliminary injunction requests. As a result, less than half of the PTA cases in progress contain a request for injunction relief.

The few preliminary injunctions that were granted were challenged through Constitutional Complaints aiming to preserve the jurisdiction and authority of the Supreme Court’s decisions. A good example was the Constitutional Complaint 56378, raised by Bristol-Myers Squibb Holdings Ireland Unlimited Company, where initially, Justice Luiz Fux understood that the Federal Court of Brasília would have incorrectly applied the Supreme Court’s rationale in ADI 5.529, granting a preliminary injunction to suspend the effects of the Federal Court’s decision.

Justice Fux's understanding was that ADI 5.529 would not prevent the lower Courts from extending the patent for a punctual and reasonable period. He believed that the Federal Court would have made an inaccurate interpretation and application of the ruling in ADI 5.529 and also acknowledged the likelihood of irreparable harm if a competitor began to market the product.

However, Justice Fux's decision was subject to referral and, by majority, was overturned, with the Federal Court's understanding being maintained. The argument for overturning Justice Fux's decision was that the extension of the patent's validity period should adhere to specific criteria established in BIPL and could not be based solely on the delay of the BTPO in analyzing the patent application, as this parameter alone would prevent, in the Supreme Court’s point of view, rational decisions from being made by market players.

This preliminary scenario of PTA actions can be explained by the grounds that led to the unconstitutionality of the sole paragraph of Article 40 from BIPL in ADI 5.529, when the Supreme Court ruled based on its understanding that the automatic extension of cited provision would increase costs in the health system and provoke distortions in access to essential medicines, affecting public health in general; also, the Justices observe that the current legislation lacks legal provisions that would allow extensions or timely adjustments.

On the other hand, big pharma companies that own several patents impacted by cited ruling have strong arguments to request punctual and specific extensions through judicial determination due to circumstances and delays not provoked by the patent holder. According to some pharma companies, the referred ruling in ADI 5,529 prohibits the automatic and indiscriminate extension of the patent's validity by ten years, whereas, in specific cases, injunctions would only suspend the effects of the BPO's decision declaring the patent's extinction, adopting a more permissive interpretative technique of ADI 5,529 regarding the extension of the patent’s validity.

This understanding was, to some extent, applied to constitutional Complaint 50546 matters as well, as former Justice Lewandowski denied the cited Constitutional Complaint reasoning that the preliminary injunction challenged by the BPO did not contradict ADI 5,529.

Thus, the understanding of former Justice Lewandowski proved to be sensitive and attentive to the potential discouragement of innovation resulting from the reduction of patent validity in the case of administrative delay, which could have an adverse effect on the social and economic levels, leaving an open door for patent owner in pharma industry that hope to obtain extensions for key assets in the Brazilian market

And although the backlog of the PTO is known by the IP community in Brazil, the judiciary currently understands that this delay in examination could not indirectly transfer damages to society, as exceeding periods of patent protection is atypical in other jurisdictions. Furthermore, if enforcement is at stake, Article 44 of the BIPL would, in the Supreme Court’s opinion, allow measures to at least safeguard compensation for damages retroactive to the filing date of the patent application.

And if, within the Judiciary, the outlook on the extension of patent validity remains open, companies are casting their hopes in the legislative framework, which can be decisive for the subject if specific rules are enacted before consent by the courts. There are some Bills aimed at regulating the extension of patent validity, but the debates on sufficiently establishing concrete and objective parameters for patent extensions are still under development.

As an overall assessment, since the BPTO’s administration and public authorities have been working to fight the backlog, and provisions demanding the Health Regulatory Entity to provide preliminary opinion on pharmaceuticals were also revoked, there is an optimistic tendency regarding the impacts of ruling in ADI 5.529 going forward. However, for the patents reached by said binding decision, or players in the market aiming at launching products with the same (or similar) technology, having a definition at the judiciary or by enacting new legal provisions will be productive for safety and predictability for all the players in the market, whether by admitting or closing the PTA routes.