On May 6, 2021, the Brazilian Federal Supreme Court (hereafter “Supreme Court”) ruled on the constitutionality of automatic patent term extensions. The ruling deemed the sole paragraph of Article 40 (hereafter “Art. 40”) of the Industrial Property Code of Brazil (Law 9.279 of 1996) unconstitutional.
Art. 40 defines the term for a patent as twenty years from the filing date. Further, the sole paragraph of Art. 40 states that if the examination by the patent office takes longer than ten years, the patent would be valid for at least ten years from the grant date. This provision created an automatic patent term extension in addition to the standard 20 years of protection when the examination took longer than 10 years. This patent term extension also applied to divisional applications, thereby extending the patent term even further. The Supreme Court found that the provision leads to an indeterminate patent term, which violates several constitutional principles such as free competition, equal treatment, and legal certainty.
The Supreme Court decided that the ruling on the unconstitutionality would not have retroactive effects, meaning the decision would be valid as of the publication of the sentence.
However, the Supreme Court exempted patents whose validity was already being judicially questioned before April 7, 2021, based on the unconstitutionality of the sole paragraph of Art. 40. For those patents, the decision has retroactive effects.
The exemption also applies to patents for pharmaceutical products, devices, and/or materials for use in field of health. This means that these patents no longer have the term calculated based on as in the sole paragraph of Art. 40, even though they were granted before the present ruling. In practice, patents in this particular technological field that have been granted based on the sole paragraph of Art. 40 will have their term of protection reduced to 20 years from the filing.
However, and on the grounds of legal certainty the Supreme Court stressed that concrete effects produced by valid patents during the term that exceeds 20 years form filing will be preserved. This means that third parties cannot seek compensation or damages for the extended term of a patent.
On April 6, 2021, the Brazilian Association of Soybean and Corn Producers in Mato Grosso - Aprosoja MT - filed a legal action with the Court of Justice of Mato Grosso. The action aimed to challenge the payment of royalties for using the patented technology known as "Intacta RR2 Pro" owned by Monsanto do Brasil.
This move was aligned with the legal discussion before the Supreme Court on the constitutionality of the sole paragraph of Art. 40. The assumption was that if the Supreme Court would declare the provision unconstitutional, the patents would be expired, and licensees could demand that royalties paid be returned.
Following the ruling on the unconstitutionality, the Court of Justice of Mato Grosso ordered Monsanto do Brasil, now controlled by Bayer, to deposit R$1.3 billion (ca. 200 million Euros, corresponding to one-third of the total amount of royalties it had received), because it had charged royalties relating to a patent that had already expired in 2018 (instead of 2022, as before the ruling on the unconstitutionality by the Supreme Court).
Monsanto do Brasil appealed before the Supreme Court against the order to deposit R$1.3 billion.
Monsanto do Brasil argued that the order to deposit R$1.3 billion was against the Supreme Court’s ruling, because the Supreme Court had expressly ensured that concrete effects produced by valid patents during the term that exceed 20 years form filing will be preserved.
On March 12, 2024 the Supreme Court ruled against Monsanto's appeal and confirmed that R$1.3 billion be deposited. The Supreme Court confirmed that retroactive effects on actions filed until April 7, 2021 apply. This means that requests concerning patents that had already expired, including requests for compensation, could be demanded.
Regarding the argument that the Supreme Court had expressly ensured that concrete effects produced by valid patents during the term that exceed 20 years form filing will be preserved, the Supreme Court stated that this exception was specific to patents related to the health sector. For patents alluding to agribusiness, the preservation of concrete effects shall not apply.
Aprosoja-MT has announced that it will now seek the payment of R$10 billion (ca 1.5 billion Euro) based on an average of R$2 billion (ca 307 million Euro) per year since 2018. However, Bayer has issued a statement clarifying that the decision of the Supreme Court simply affirms its obligation to provide a procedural guarantee in the lawsuit if it loses the dispute in the future, and that it is not related to the merits of the case.
We will keep you informed about further developments in this case.
