Tuesday, 16 February 2010

LIMITATION AND SUSPENSION OF PATENT RIGHTS: BRAZIL’S CROSS RETALIATION IS SET TO START. WILL THE GOVERNMENT REALLY APPLY THEM?


As announced earlier by IP Tango (see its contents here), the Brazilian government took a serious step forward to apply trade barriers against American products in the amount of US$ 560 million and to further impose US$ 270 million retaliatory sanctions on services and intellectual property rights, as the WTO condemned US subsidies to cotton producers.

Firstly, CAMEX (Câmara do Comércio Exterior – the Brazilian Board Trade) approved on February 9 an updated list of 220 American products that will suffer tariff increase of up 100% of the value when imported into Brazil.

One day after, the President Mr. Lula da Silva signed provisional measure or interim measure 482 of February 10, 2010 (see full text in Portuguese https://www.planalto.gov.br/ccivil_03/_Ato2007-2010/2010/Mpv/482.htm ) allowing the suspension and limitation of IP rights of citizens or companies domiciled in countries that violate WTO’s trade rules. Such interim measure comprised the following weapons: (a) suspension and limitation of IP rights; (b) alteration of the rules and procedures that secure IP protection, mainly provided by the Brazilian Patent Office and the Ministry of Agricultural for plant variety; (c) alteration of the measures to apply the IP rights; (d) temporary prohibition of royalty remittances from licensing and technology transfer and (e) additional tax application to remuneration of IP owners.

Interim measure 482/2010 has been in force since February 11 and it needs to be reinforced by the Brazilian Parliament during the next 45 days. (see earlier IP Tango information here).

Despite the victory at the WTO, the Brazilian authorities seem to be driven by caution or, maybe, fear. You may choose the adequate feeling, but please bear the following facts. The day after interim measure 482/2010 was published, the government delivered a statement informing that the final list of retaliation products will be published on March 1, since the “list needs to pass through technical adjustments”, as informed by CAMEX’s Executive Secretary Mrs. Lytha Spíndola.

Further to that, the local authorities informed that solely patents related to medicines will be affected this time, but the final list of medicines will be delivered by the Health Ministry to CAMEX for publication on March 1.

In my viewpoint, the Brazilian government is being cautious and wise as it wants to gain time to convince the Americans to end up the subsidies. That would decrease the pressure to retaliate the maximum permitted amount: US$ 830 million. The Brazilian diplomacy is working hard in Washington and Brasilia, as one may imagine how unpleasant it is to retaliate a main trade partner.

Brazil will most probably be the first country to apply the cross-retaliation concerning IP rights, despite the fact that the WTO authorized it twice before. The first country to enjoy it was Ecuador against the European Union, but the sanctions were never applied. The second one granted to Antigua against the US, but no signs of sanction.

The government is also concerned about the side effects of the retaliation, which may range from US reaction to cost increase of industrial production. To prevent any side effects, the authorities have eliminated capital goods from the list and agreed to add a greater deal of agricultural goods, as the WTO complaint was on cotton farmers.

As to IP rights, the government has so far deviated from any allegation of illegalities, since interim measure 482/2010 gives the proper mechanisms for limiting and suspending such constitutional rights.

Nevertheless, there are important questions that have not been yet answered: Will the Brazilians be brave enough to apply any of the IP weapons? Will they be wise and sensible to measure the damage? One has to remember that retaliations at WTO are not punitive, bur rather compensatory to the losses from illegal trade practices.

These answers will be surely provided, but we shall need to await March 1, as this date seems to be the deadline set by the Brazilian government against the cotton subsidies.

No comments: