Industrial Property Law: Supreme Federal Court suspends paragraph regarding patent validity terms

​The Supreme Federal Court (STF) has preliminarily suspended regulations extending patents’ validity after the date they are granted. In a session held on April 7, 2021, Justice Dias Toffoli addressed Direct Unconstitutionality Action (ADI) 5,529, filed by Attorney General Rodrigo Janot on May 17, 2016. The ADI sought to have the sole paragraph of Article 40 of Brazil’s Industrial Property Law (LPI) declared unconstitutional.

Article 40 of the LPI determines 20-year and 15-year terms for patents for inventions and utility models respectively, counted from the date the application is filed. Meanwhile, Article 40’s sole paragraph – the subject of the ADI – guarantees minimum terms of validity of no less than ten and seven years respectively, counted from the date they are granted.

Attorney General’s argument and context of the decision

The Attorney General’s Office (PGR) argued for this unconstitutionality on the grounds that it goes against the principles of temporary patent protection (Art. 5, XXIX, of the Federal Consitution), free competition and consumer protection. It maintained that there would be a lack of definition surrounding the term of patent protection, leading to legal uncertainty and consequently creating obstacles for competing economic agents.

Judgment on the merits of ADI 5,529 was initially scheduled for May 26, 2021. However, on February 24, 2021, the PGR filed a request for the granting of an emergency provisional remedy to immediately suspend the sole paragraph, stating the Covid-19 pandemic crisis justified the need for such an injunction. The PGR’s understanding was that until patents held by large laboratories expire, the pharmaceutical industry would be prevented from producing generic drugs for the coronavirus and any future variants. The rapporteur brought the judgment forward to the session held on April 7, 2021, in light of the preliminary injunction request.

Main points of the provisional remedy request

Due to delays in the trial of ADPF 811 – which addressed the emergency containment measures for Covid-19 imposed by the government of the State of São Paulo – the analysis of merits of ADI 5,529 had to be postponed. However, understanding the urgency of the issue, Justice Dias Toffoli partially granted the preliminary measure, suspending the legal provision specifically in regard to pharmaceutical products and health-related equipment and materials.

In his decision, Justice Dias Toffoli referenced the vote he would cast, should the merits of the case be judged.  He stressed that by making the patent terms relative to the moment of concession, the rule is arbitrary and favors the formation of monopolies, violating constitutional precepts such as the principle of economic order and the principle of the right to health. Justice Dias Toffoli also established a relationship between the backlog in analyzing patents and the provision under examination. He understood that guaranteeing a minimum 10-year or 7-year protection period after the patent is granted mitigates the consequences of the administrative delay. This benefits applicants by extending the period of protection they enjoy, thus fostering conduct that could perpetuate the chronic backlog in proceedings.

The vote focuses on the impacts of the sole paragraph of Article 40 on the pharmaceutical sector. While not intending to reduce the scope of the discussion specifically to drug patents, Justice Dias Toffoli did indicate that that industry is subject to some of the longest technical decision times at the National Institute for Industrial Property (INPI), therefore being particularly affected. Additionally, he stated that the provision under analysis burdens the public health system, by both eliminating competition and imposing unilaterally stipulated prices on pharmaceutical items, along with the royalties the government pays on patented items it purchases and distributes. It would result in an excessive burden on public coffers, impairing the state’s ability to carry out public health policies and putting the right to health and life at risk.

Justice Dias Toffoli, therefore, concluded the existence of fumus boni iuris and periculum in mora – the latter evident because of the current Covid-19 public health emergency, which demands the efficient management of resources and the adoption of public policies to end the health crisis. As a result, he partially granted the precautionary measure, suspending the rule’s effectiveness concerning patents for pharmaceutical products, health-related equipment and material granted as of April 8, 2021, until a final judgment on its merits at a later date. With the decision, subject patents will be protected for a 20-year period commencing from the date the application is filed, irrespective of when the patent is granted.

Effects of the decision

The decision was issued with ex nunc effects. That is, it immediately prevents the INPI from applying the sole paragraph of Article 40 of the LPI to patent applications for pharmaceutical products, health-related equipment and material that are yet to have been granted (i.e., all health-related patents granted after April 8, 2021 will be regulated exclusively by the caput of Article 40).

Despite Justice Dias Toffoli highlighting the ex nunc effects of the decision, future judgment on the rule’s merits may have ex tunc effects. In this case, if a final decision confirms the contested provision as unconstitutional, it may be applied retroactively to patents for inventions and utility models that have already been granted.

The trial of ADI 5,529 has already been rescheduled and is due to take place on April 14, when the STF will either endorse or reverse the decision of Justice Dias Toffoli.

For more information about the Industrial Property Law, contact Mattos Filho’s Intellectual Property, Life Sciences and Healthcare and Litigation and Arbitration practice areas.

*With the collaboration of Lorena Sampaio Pereira