The Biotechnology Industry Organization (BIO) submission (7 February 2014, USTR-2013-0040) to USTR’s 2014 Special 301 Review requested USTR to place Brazil on the Priority Watch List.
Brazil
When considering Brazil’s history of intellectual property protection, Brazil has made significant improvements. In fact, the reforms have reaffirmed the fact that changes in the patent law have encouraged Brazilian biotech innovation.23 While BIO is encouraged with Brazil’s progress led by the Brazilian Patent Office, biotechnology companies remain disappointed with efforts by other ministries in the Brazilian government to roll back IP protections domestically, regionally, and internationally. BIO recommends that USTR place Brazil on the Priority Watch List
23 For example, this study provides five post-patent law reform bio-medical technology and innovation projects in the state of Sao Paulo that all show how patents incentivized Brazilian entrepreneurs to bring Brazilian biotech innovation to the market. See Ryan, Michael P., Patent Incentives, Technology Markets, and Public-Private Bio-Medical Innovation Networks in Brazil, World Development Journal 38 (2010).
Brazilian Patent Office (INPI)
In September 2013, INPI issued a binding opinion “clarifying” that the patent term for applications filed between January 1, 1995, and May 14, 1997, is limited to 20 years from the filing date. The opinion distinguishes “mailbox” patents from subsequent patents, which are guaranteed a patent life of 20 years from filing with a minimum term of 10 years from patent grant, under Article 40 of Brazil’s patent law. More than 250 of these “mailbox” patents were filed as part of Brazil’s obligations created by its WTO ascension. Prior to this time, Brazil did not issue patents for pharmaceutical or agricultural products.
As INPI’s opinion is not self-executing, INPI then filed more than 30 lawsuits against at least 120 companies and institutions, seeking to alter the patent terms on these patents or have them declared invalid. This raises significant process and fairness issues as INPI previously approved these patents and the corresponding patent term and now seeks to change these terms retroactively. Many of our members in the biopharmaceutical and agricultural sectors are named defendants in the suits. INPI has requested a preliminary injunction to nullify these patents pending resolution of the case. Our understanding is that, thus far, the judges in Brazil have rejected these requests for injunctions.
INPI recently released proposed rules which would result in new Biotechnology Patent Examination Guidelines.24 BIO requests the U.S. Government ensures that innovative biotechnology companies are adequately protected in the new Guidelines.
We understand that the Brazilian Patent Office has also increased hiring of biotechnology trained patent examiners. However, a large backlog (especially in small molecule pharmaceutical inventions) still exists which is estimated at 20,000+ in pharmaceutical cases. Companies routinely wait for eight to ten years before examination occurs. One biotech company reported that they filed 335 cases over 30 years with only 5 being granted. Only 2 patents have not expired with about 80 cases being abandoned by the company. Another company reports filing 200 patent applications with only 2 patents issued in the past dozen years. While conditions are improving, biotechnology companies are still hesitant to seek market authorization for their products in Brazil.
Another problem involves an INPI interpretation that states that if an unfavorable decision exists in the parent case, a divisional application may be directly rejected without regard to the claimed subject matter. INPI also limits applicants to claims present when examination was requested. The examiners reject amendments or added claims. This prevents the applicant from adding claims to preferred embodiments that cover actual drugs sold in Brazil that were present in the application initially filed.
Some Brazilian lawyers claim that the patent examiners often fail to follow their own INPI guidance when examining patent applications. Our companies have to navigate difficult administrative hurdles. One company reported that they had to file multiple appeals to the President of INPI before allowance. These particular administrative hurdles are not found in other developed patent systems like Brazil. Some members of BIO also report that examiners abuse the obviousness standard. Some members state that in their experience, examiners often rely heavily on hindsight reasoning to make obviousness arguments in biotech cases.
24 For BIO’s Comments see, http://www.bio.org/advocacy/letters/bio-comments-inpi-guidelines-examination-patent-applications
BIO Members also have other prosecution concerns. INPI prohibits amending claims to include classes or categories of claims not included in the original claim set. The applicant cannot broaden the claims after the examination request. Finally, members have inadequate access to INPI patent prosecution records. One company reported receiving notice of rejection of claims in a pending application but not receiving the substantive action until after the deadline for responding. There also is no way to access electronically INPI prosecution records or issued patents and claims. Viewing patents and file wrappers requires a physical visit to INPI to order the patents/file wrappers and then waiting a couple of months to receive the requested documents.
Finally, biotechnology companies would greatly benefit from any possibility of Brazil joining with the U.S. or other countries in harmonization efforts.
Patent Law
Representatives of the lower House of Congress proposed a bill to revise Brazilian patent law to take into account the country’s “social interest” and “technological and economic development.” The bill represents many of the policy asks of the generic industry and anti-IP NGO community. These provisions include reducing the scope of patentable subject matter, restrictive patentability requirements, solidifying the drug regulatory agency’s duplicative role in the review of patents, expanding the ability to use compulsory licenses, additional patent opposition procedures, and other anti-innovator positions, such as removing Brazil’s 10-year guaranteed minimum patent term.
The bill was launched with a hearing that included supportive statements from the Ministry of Trade, Ministry of Health, and the Brazilian health regulatory authority (ANVISA). Representatives from the governments of South Africa and Argentina also participated, signaling a broader international effort.
The patent term in Brazil is 20 years from priority date instead of filing date for pipeline patents. This effectively cuts off one year of patent life to the patent. BIO is concerned with this interpretation as it is inconsistent with the Paris Convention of which Brazil is a signatory.
Brazil also lacks meaningful patent protection for secondary claims covering novel uses. In fact, two proposed bills seek to exclude second medical uses altogether.25 This deters product development by innovator companies as it disincentivizes biotech companies from further developing their products to find new applications or to adjust the products to serve unique and underserved customers. Lack of secondary claims covering novel uses impedes biotechnology companies’ progress in Brazil.
Exemptions for patent infringement are excessive in Brazil which unfairly curtails patent holder’s enforcement rights. Private non-commercial use that does not “result in prejudice to owner’s economic interests” is exempted. Experimental use related to technological research is exempted. Use of inventions placed into the domestic market by the patent owner under owner’s consent is exempted. Use of the subject matter of patents related to living matter as a source to obtain new products is exempted. Use or distribution of patented biological material that has been legally introduced into the market by owners, except for commercial propagation is exempted. Finally, the use of patented medicines by pharmacies for ‘individual cases’ are exempted. These exemptions go beyond the global norm.
25 2.511/07 and 3.995/08
In 2007, Brazil granted a compulsory license for SUSTIVA (efavirenz). This act raises significant concerns about whether intellectual property rights can be adequately and effectively protected in Brazil. Brazilian law also requires a patentee to “make use of” a patent or allow others to do so within three years of issuance. Failure to comply results in INPI issuing a compulsory license to a third party with technical and economical capacity and legitimate interest in using the technology of the patent (in other words, the noninnovative competitor). In addition, according to Decree N0 4.820 of September 4, 2003, the patent holder may also be obligated to supply technical know-how to perform the invention or potentially have the patent declared invalid.
While BIO understands the challenges that countries face in providing affordable healthcare systems, BIO continues to believe that the most effective solutions will result from policies that respect and encourage innovation. The granting of compulsory licenses in this manner will undermine incentives needed to develop new medicines.
ANVISA Review of Patentability
Brazilian law dictates that the regulatory authority (ANVISA) must provide prior consent on the grant of a pharmaceutical patent. Traditionally, ANVISA has interpreted this requirement as an obligation to review patentability criteria in a patent application. Innovators have always maintained that such actions are inconsistent with TRIPS Articles 27 and 62.2, as ANVISA required applicants to reargue their claims already deemed allowable by INPI.
On January 25, 2010 the Brazilian Attorney General of the Union (AGU) provided a legal opinion to resolve this issue and determined that ANVISA’s review should be restricted to an analysis of the sanitary risks of the patented drug to health.26 The Attorney General found that any other analysis would entail an invasion of INPI’s competence and be contrary to Brazilian law. BIO understands that an Inter-Ministerial Working Group formed to resolve this issue. The Working Group issued a statement reaffirming the involvement of each Agency in the patent review process and indicating that ANVISA and INPI would propose rules for public comment on how each agency would proceed. On October 16, 2012, ANVISA issued Public Consultation No. 66 detailing how they would approach their mandate to provide prior consent for pharmaceutical patent grants.
BIO remains concerned about two key provisions of the proposed rule. ANVISA’s proposed rule defines “contrary to public health” as;
I “The pharmaceutical product or process contained in the patent presents a health risk
II. The patent application of the pharmaceutical product or process is of interest to the policies regulating the universal access to medicine and pharmaceutical assistance as provided for under SUS – Universal Public Health System – and that do not meet the patentability requirements and other criteria as established in the IP Law 9.279/1996.”
First, how does a patent “present a health risk?” Risks and benefits of a biopharmaceutical only become clear after years of clinical and toxicological testing. Or is ANVISA only referring to those products whose only application is dangerous to the public health? BIO also does not understand which patents are “of interest to the policies regulating the universal access to medicine and pharmaceutical assistance as provided for under SUS.” BIO understands that the Brazilian Health Ministry recently published a new Ordinance 3089/2013 which creates a new list of essential drugs delving into new therapeutic categories and almost doubling the number of API. Further, the ordinance does not include a specific list attached to the ordinance but merely refers interested parties to the Ministry of Health’s homepage. BIO is concerned that this could potentially allow the Ministry of Health to change the list at will and without notice.
Finally, the rules seem to implement previous ANVISA practice of reviewing patent applications for patentability requirements which is outside their competence and directly contrary to the Attorney General’s opinion. With the new strategic list of essential drugs, ANVISA’s duplicative patent analysis list has almost doubled.
26 Accessed on February 10, 2011 and found at: http://translate.google.com/translate?sl=auto&tl=en&u=http://www.agu.gov.br/sistemas/site/TemplateImagemTextoThumb.aspx?idConteudo%3D153676%26id_site%3D3
Regulatory Issues
Biotechnology companies find operating in the current regulatory environment difficult; especially when unauthorized copies of products receive registrations on undisclosed tests and other confidential data. Brazil’s lack of data protection for biopharmaceuticals is inconsistent with TRIPS Article 39. Article 39.3 requires that members, requiring approval for pharmaceutical or agricultural chemical products, “protect data against unfair commercial use.” While Brazil implemented 10 years of data exclusivity for agrochemical and veterinary products, it has yet to provide similar protections for biopharmaceutical products. Allowing companies to have 5 years of data protection for pharmaceutical innovators and 12 years for biologics reflecting U.S. law with some form of patent linkage would help biotechnology companies enter and succeed in the Brazilian market.
Enforcement
Licensing and IP enforcement laws remain difficult to navigate and weighted against the interests of the IP owner. For example, INPI requires registration of license agreements before they can be enforced, before royalty revenues can be exported, or before companies can utilize favorable tax rates. Further, INPI can dictate terms prohibiting parties from freely contracting and restricting the owner from fully exploiting their IP. For example, INPI can stipulate that royalty rates not exceed 5% of gross income per unit. Finally, confidentiality provisions extending beyond the term of the agreement are limited to five to ten years.
Genetic Resources
In 2001, a Provisional Act for the implementation of access and benefit sharing regime in Brazil was issued. The Provisional Act represents the current law in Brazil but the Act also requires the legislature and regulatory agencies to better define and create an access and benefit sharing regime. However, although the regulatory agencies have issued internal norms and regulations, the legislature has not acted to clarify the Provisional Act for the past 10 years. This has created significant uncertainty for the protection of inventions that rely on genetic materials.
The Act prohibits access of Brazilian genetic resources without authorization by Brazil’s Council for the Management of Genetic Patrimony (CGEN), a regulatory agency under the management of the Ministry of Environment. Authorization by CGEN has taken 2 to 3 years although there are reports that this delay is diminishing somewhat. Under the Act, researchers may not, in theory, start their research on the genetic resource while they are waiting for authorization. It is not possible to on obtain a patent without such Authorization.
On April 30, 2009, the INPI implemented the Act by stating that any applicant should inform the patent office of authorization in the patent application. Failure to provide such an authorization will lead to an immediate administrative office action requesting a copy of the authorization which may ultimately result in the patent being cancelled or suspended. The Act then requires that once authorization and the patent have been granted, the patent owner must share benefits through the payment of royalties. However, the Act does not delineate, and regulations have not yet been promulgated to address, whom or what entity should receive these royalties. In short, the access and benefit regime in Brazil is fragmented and uncertain. The definition of a Brazilian genetic resource remains unclear. The timing of acquiring authorization from the government to access a genetic resource remains unclear. The Act contains penalties to those who do not comply and companies such as Natura have been fined U.S. $12.6 million.27 This uncertainty is detrimental to U.S. business and university researchers trying to perform biotechnology research that results from the access to Brazilian genetic resources and trying to commercialize that research for future use.
BIO has heard that a federal court in the State of Acre issued a decision restricting the definition of “access” of a genetic resource. The court held that simply exploring features/properties of a genetic resource that was disclosed beforehand in the scientific literature is not “accessing” a genetic resource triggering requirements under Brazilian law. We have been told that this may affect the above mentioned litigation against companies that were merely utilizing products with properties that were previously disclosed a long time ago.
For all of these reasons, BIO requests that Brazil be placed on the Priority Watch List