The Covid-19 pandemic triggered the issuance of new compulsory license rules for patents in Brazil

On Sept. 2^nd, 2021, Law No 14,200 was enacted to amend the Brazilian Patent & Trademark Act (BPTA) in order to change the rules governing the issuance of compulsory patent licenses. Even though the current pandemic created the political momentum for approval of such law, the new rules shall apply to all future cases in which there is a national or international emergency, public calamity, or public interest.

Firstly, it is important to bear in mind that compulsory licenses are always non-exclusive and royalty-bearing. They are a limitation to the exclusive rights of a patent owner, but they are not an expropriation of such rights. This has not been modified.

Since Brazil started to accept pharmaceutical patents, in 1996, only 1 (one) compulsory license was ever granted. That was back in 2007 for a drug used in the treatment of HIV/AIDS. A compulsory license is considered to be an important tool used by the Government in negotiating the reduction of prices with laboratories that own patented drugs which the Government wishes to procure.

In practice, however, it is widely known that it may take several years until the licensee successfully achieves the technical capability to manufacture and distribute the patented drug without the active cooperation of the patent owner. Thus, we may say that compulsory licenses are rarely used in Brazil, and this scenario is not expected to change.

As already mentioned, the Covid-19 pandemic triggered the Brazilian Congress to act, and the new Law amends the BPTA in order to:

(a) Whenever there is a national or international emergency, public calamity or public interest, a compulsory license may now be immediately granted without the need for the Administration to present evidence that the patent owner is not capable to satisfy the demand for the patented product;

Our comment: this rule was already included in the implementing guidelines of the BPTA since 1999 (Decree 3,201) and, as such, it is not really a new rule. The objective of Law 14,200 is simply to avoid a possible future challenge based on formal grounds, i.e. that such rule was not foreseen in a law approved by Congress.

(b) Taking into account the situations mentioned above, the Administration shall publish a list of patents that are of potential interest for compulsory licensing, and any public or private legal entity may then request that a compulsory license be granted;

(c) Patent owners who satisfy the local demand, or who have granted voluntary licenses may request that patents be excluded from the aforementioned list;

(d) Public institutions in possession of confidential data related to patents that are compulsory licensed are obliged to surrender such data, and trade secret protection will no longer apply;

Our comment: this shall apply e.g. to ANVISA (the Brazilian FDA) that will be obliged to disclose the data package submitted by pharmaceutical companies in order to obtain regulatory approval for commercialization in Brazil. This is probably the worst provision for innovative companies contained in this new law.

(e) The royalty rate due to the patent owner is provisionally fixed at 1.5% of the net sales of the product, but it may be ultimately fixed at a different rate;

(f) Besides granting a compulsory license of the patent, the Administration may also negotiate with the patent owner a voluntary know-how license; and

(g) A compulsory license might be granted not only to meet the Brazilian domestic needs, but also for export of the product to lesser-developed countries.

The Brazilian President vetoed some provisions, and the most important ones are the following: a provision that obliged a patent owner to surrender all know-how and test results pertaining to the use of the patent, and a provision that obliged the patent owner to provide the biological material, if any, to the licensee. In both cases, failure to comply by the patent owner would cause the annulment of the patent.

We certainly welcome such vetoes, which avoided that the new law – that is obviously already hostile to pharmaceutical patents – became even harsher and created grater insecurity to investments in innovation. However, the Congress must still examine those vetoes, which may still be overruled.

We remain at your disposal for any assistance regarding this matter. Please feel free to contact your regular spokesperson in our firm, or email us to mail@kasznarleonardos.com.