Patents in Brazil: Part 3 – licensing

Are there any laws which limit the terms on which parties may agree a patent licence?
Yes. Licence agreements are subject to recordation at the Brazil Patent and Trademark Office (BPTO) in order to produce effects against third parties (Article 62 of the Patent Law) and whenever payment is remitted abroad. In the process of recording, the BPTO may provide limitations to which parties may agree. The most critical limitation is on the consideration clause. The BPTO often issues office actions questioning payment methods whenever the licence agreement does not establish a “fixed amount per unit sold” or “a percentage on the net selling price”. The BPTO also limits tax deductions in order to limit the remittance of payments among colligated companies. Further, the BPTO does not permit any compensation for patent applications.

Another limitation provided by the law refers to improvements. Licence agreements executed in foreign countries often contain a clause providing that improvements belong to the licensor, even if made by the licensee. Nevertheless, the Brazilian Patent Law determines that any improvement on a licensed patent belongs to the person who made it, thus guaranteeing the other party the right of preference with respect to a licence (Article 63 of the Patent Law).

If there is an antitrust concern, the BPTO often questions non-compete clauses when the period extends beyond five years after the end of the licence, and limits the term of the licence by the respective patent term.

Can a patent be the subject of a compulsory licence, and if so, how are the terms settled and how common is this type of licence?
Yes. Patents may be subject to compulsory licence. There are several grounds for granting such licences, including in cases of:

• abuse of patent rights or abuse of economic power;
• non-exploitation of the subject matter of the patent in the Brazilian territory; or
• a lack of manufacture or incomplete manufacture of the product.

In these cases, the licence can only be requested by a party with a legitimate interest, and this has the technical and economic capacity to carry out the efficient exploitation of the subject matter of the patent that should be destined predominantly for the internal market. A compulsory licence, based on lack of local or incomplete manufacture, may be requested only three years after the grant of the patent.

Compulsory licences may also be declared by the executive power, independent of any request, in cases of national emergency or public interest, as long as the patentee or its licensee does not meet such necessity.

Compulsory licences will always be granted without exclusivity; sublicensing is not permitted.

Although there are numerous hypothetical situations when a compulsory licence may be granted, this kind of licence is rare. There was one case in 2007 where a compulsory licence was granted on a pharmaceutical patent on the grounds of public interest.

"Patents in Brazil: Part 4 – prosecution and opposition" will appear in the IAM Weekly next week.

An earlier version of this article first appeared in the seventh edition of The International Comparative Legal Guide to Patents published by Global Legal Group Ltd, London (www.iclg.co.uk).