1. © 2011 Leonardos & Licks Prepared for the Seminar on the Latest Developments of the Brazilian Patent System October, 2011 Otto Licks Partner of Leonardos & Licks (Brazil) Former Adjunct Professor at George Washington Law School

2. General background about Brazil. The Brazilian government’s interface with the pharmaceutical sector. The players and the products in Brazil’s pharmaceutical market. Patent protection. The WTO TRIPS Agreement Exclusive Marketing Rights, (Section 70.9). Data Package Exclusivity – DPE. Other forms of IP protection as applied to the pharmaceutical industry. Citizen's petitions. Enforcement. Overview 2 | © 2011 Leonardos & Licks

3. Brazil is the 5th largest country in the world (larger than the continental U.S.) The U.S. was the first country to recognize Brazil’s independence from Portugal. Brazil has been a republic since 1889 with a legislature called National Congress (Senate and House of Representatives). Brazil is an original signatory of the Paris Convention and its patent law dates from 1809. Brazil is a founding member of the United Nations, OAS, GATT, WTO. Host for the World Cup of 2014 and Olympic games of 2016. The Federative Republic of Brazil 3 | © 2011 Leonardos & Licks

4. 4 | © 2011 Leonardos & Licks The Brazilian pharmaceutical market The Brazilian economy is the world's eighth largest economy by nominal GDP, (USD $1,543.7 billion in 2009). Brazil’s economy performed well in the global crisis, is stable, and shows growth potential. Brazil spent 10.8% of its 2009 GDP on both retail and hospital prescribed pharmaceuticals, reflecting the government's prioritizing healthcare including initiatives to expand access to medicines. Forecasts for growth in the coming years are above those for the pharmaceutical markets in North America, Western Europe and Japan. Brazil's retail pharmaceutical market was valued at $12.6 billion in 2009, having grown by 14.3% between 2008 and 2009 (52k pharmacies in the country). Health Expenditure Per Capita in 2007 of USD $837 (55 th ).

5. 5 | © 2011 Leonardos & Licks Regulatory agency ANVISA - Brazilian Food and Drug Administration Industrial, health and consumer policy Ministry of Health and BNDES Profarma Price control The Brazilian government Interagency board CMED Prior approval for patents claiming pharmaceutical inventions ANVISA Brazilian Food and Drug Administration Major client and healthcare provider Brazilian unified public health system SUS, MoH, States, municipalities Local Competition 21 state-owned pharmaceutical industries Pharmacovigilance police, research and development, consumer protection

6. 6 | © 2011 Leonardos & Licks Almost 300 participants in the Brazilian market ANFARMAG (Compounding pharmacies) ALANAC (Brazilian non- interchangeable “similar”) Pro-Generics (3 foreign and 6 Brazilian) Interfarma (34 foreign research based) ALFOB (21 state-owned pharmaceutical industries) There are approx 270 private and 21 state- owned businesses in the pharmaceutical sector, many represented by one of the four large associations. Multinational companies are using Brazil as a production platform, exporting to Latin America, North America and Europe. Brazilian companies also export to more than 40 countries. Brazilian state-owned pharmaceutical industries manufacture or import the majority of the vaccines used in the country. Compared to the U.S., compounding pharmacies in Brazil are more developed and are able to impact market share of certain products.

7. The different marketing approvals in Brazil 7 | © 2011 Leonardos & Licks The Brazilian food and drug statute, (Law # 6360 of 1976) establishes three types of marketing approvals (MAs), in addition to vaccines and biologics. No Orange Book in Brazil. Amoxicillin used as an example: New drug GSK’s Amoxil® Brazilian and foreign non- interchangeable branded copy,“similar” 65 marketing approvals Brazilian and foreign generic 88 marketing approvals

8. Brazilian Public-Private Partnerships PPP 8 | © 2011 Leonardos & Licks Brazilian Public-Private Partnerships PPP The development of public private partnerships (PPPs) in the pharmaceutical industry is a diversion of the statutory intent of Law #11,079/2004 on PPPs. This scenario can be a challenge to IP rights or an opportunity not to lose market share. When the legislation was enacted, its purpose was to allow public services to be explored by private companies by means of concessions. Article 2 allowed for what is called an “administrative concession”. With regard to the pharmaceutical industry, a presidential decree of 2008 created the Executive Group of the Health Industrial Complex – GECIS. The GECIS’ main purpose was to promote the development of the Brazilian national pharmaceutical complex, taking advantage of the country’s health budget to finance technological development. After the 2008 Presidential Decree the PPPs were diverted to enable Brazilian state-owned pharmaceutical industries to manufacture and distribute “strategic medicines”, according to ordinance #978/08 from the Health Ministry.

9. 9 | © 2011 Leonardos & Licks Patent and non-patent remedies available for exclusivity -Patent Rights -Exclusive marketing rights -Data Package exclusivity Other IP -Design -Trademark -Trade dress -Unfair competition -copyright Citizen's petition -Substandard drugs -Violation of food and drug legislation -Illegal MAs - Corruption

10. 10 | © 2011 Leonardos & Licks 15 years of patent protection for pharmaceutical industry 1994 The WTO TRIPS Agreement was implemented into the Brazilian legal system (Decree 1,355). 1995 Mailbox applications (without implementation of section 70.2 of the WTO TRIPS Agreement). 1996 Pipeline patents (extra time to claim priority, same novelty in addition to commercial novelty). 1997 Pharmaceutical products and processes as patentable subject matter (Law 9,279): No patents for medical treatment or diagnostic (Art. 10, VIII); No patents for natural living organisms, biological material (even if isolated), and natural biological processes (Art. 10, IX); No patents for parts or whole living beings, except for genetically modified microorganisms and plants (Art. 18, III). Statutory doctrine of equivalence, no international exhaustion, infringement as criminal felony. 1999Regulatory review exception and political prior approval for pharmaceutical patents (Law 10,603) taking public health and economic factors in consideration. 2002Brazilian PTO guidelines for pharmaceutical and biotech inventions.

11. 11 | © 2011 Leonardos & Licks 15 years of IP protection for pharmaceutical industry Two government agencies involved in the examination and grant of pharmaceutical patents: The Brazilian Patent Office, INPI (1970) and The Brazilian Food and Drug Agency, ANVISA (1999). First-to-file system, 20 years from filing or 10 from grant. Law on obviousness is not settled. a Swiss type claims, selections and polymorphs allowed by INPI but problematic with ANVISA. INPI strict with applicants deadlines but takes approx six seven years to examine applications. Very large backlog. Examination lacks quality, transparency and rule of law. Limited ability to rely on post-filing data. Obtaining a patent is still a problem. Enforcement not as difficult. Injunctions widely available. Patent infringement is a felony. Penalty: 3 months to 1 year imprisonment, or a fine. No specific law on patent linkage in Brazil: no patent listing; no public database listing patents for a specific product (e.g. Orange Book); no certification requirement that patents are not being infringed or “paragraph IV” certification; no notice requirement. ANVISA is not required by law to respect third parties patent rights (Memo 197/GGMED/ ANVISA of Dec 2, 2003).

12. 12 | © 2011 Leonardos & Licks ANVISA’s interpretation of article 229-C and its practice “Article 229-C - The grant of patents to pharmaceutical products and processes will depend on the previous approval of the National Health Surveillance Agency - ANVISA.” (as amended by Law 10196 of 2001) Change a ministerial act into a discretionary one. Impose an additional patentability requirement for pharmaceutical patent applicants and discriminates against a specific field of technology, infringing many sections of the WTO TRIPS Agreement. ANVISA lacks expertise on patent law. Extrapolate INPI’s exclusive statutory authority to examine patent applications. Violate the Brazilian Constitution and the Brazilian Patent Law. Best construction is to limit ANVISA’s role to examination of pipeline (commercial novelty)

13. 13 | © 2011 Leonardos & Licks Recent court decisions established that ANVISA´s role in examination under 229-C is limited to patentable subject matter, under article 18, I, of the patent statute (inventions against public health). ANVISA’s administrative decisions on patent applications have always been political and discretionary. ANVISA maintains that it should provide checks to the Brazilian patent system to protect the Brazilian people and the local interests of public and private pharmaceutical industries, collectively known as “public interest” in the agency’s statements. The Federal Court of Appeals for the First Circuit decided a case in June 2010, in which it established that ANVISA should limit its “prior approval” to assessing possible risks to public health. According to Judge Gallotti, the scope of ANVISA’s prior approval for the grant of pharmaceutical patents for products and processes is confined to the legal ban on patenting inventions harmful to public health, as provided by Brazilian patent law. ANVISA’s interpretation of article 229-C and its practice

14. 14 | © 2011 Leonardos & Licks The opinion rules that ANVISA does not have jurisdiction to deny its approval by finding a lack of patentability requirements, when INPI has already declared the product patentable. Judge Gallotti also warned of the dangers of an incorrect interpretation of Article 229-C: “…over the short term, it might seem that the absence of patent protection would favor consumers, insofar as this eliminates the remuneration paid to the inventor and steps up competition, but over the medium and long term, it hampers the entry onto the Brazilian market of discoveries that are crucial for progress and upgrading the living conditions of the population, especially in today’s globalized world”. The decision is a necessary limitation to the political and discretionary use of ANVISA’s statutory authority. ANVISA has frequently exceeded its statutory powers to re-examine pharmaceutical applications in light of the agency’s own patentability standards, which include bans on second use, among many others. While some divergence remains, many cases in which INPI decides to grant pharmaceutical patents are hindered by ANVISA’s unfavorable opinions. ANVISA’s interpretation of article 229-C and its practice

15. 15 | © 2011 Leonardos & Licks Legal systems in Brazil to support suing local institutions Brazil, just like the U.S., has two independent judicial systems: Federal and State. Unlike in the U.S., patent infringement cases are brought in the State courts. Patent invalidity lawsuits are only brought before the Federal courts. During litigation there no U.S.-style trials, but rather a series of short hearings, each of no longer than a day. It is common practice to submit expert witness opinions and affidavits. Invalidity is a statutory defense. However, any decision from a infringement lawsuit on validity issues only affects the parties. It does not render the patent invalid vis a vis third parties (erga omnes). The patent holder has the right to seek injunctive relief and damages. Injunctive relief can be obtained at the beginning of the litigation, via an ex parte ruling, or at any time before the end of the trial. Evidence is generally available to plaintiffs, although Brazil does not have U.S.-like discovery. There is a reversal on the burden of proof for infringement of methods (process) claims.

16. 16 | © 2011 Leonardos & Licks TRIPS Agreement Exclusive Marketing Rights (EMR) The EMR was established by the implementation of the WTO TRIPS Agreement, Decree 1,355 of 1994. The Brazilian government and courts have construed a TRIPS-plus EMR: No need for acquisition of EMR. Can be enforced by courts just showing eligibility under the statutory requirements. Applications filed before 1995 and after 1997 also eligible according to the government. New indications also eligible. Enforceable against the Brazilian FDA to enjoin from issuing generic and similar marketing approval s. Enforceable against infringers, with request for preliminary injunction and damages. EMR 1- Pending applications in Brazil with product claims (Swiss type and product by process too) 2- Issued patent abroad 3- Marketing approval abroad 4- Marketing approval in Brazil

17. 17 | © 2011 Leonardos & Licks Data package exclusivity rights in Brazil Introduced into the Brazilian legal system by Decree 1355 of 1994 implementing the WTO TRIPs Agreement (Section 39.3). Law 9279 of 1996 expanded DPE with TRIPS-plus provisions: Article 195, XIV. … crime of unfair competition… by those who divulge, exploit or use, without authorization, the results of tests or other undisclosed data, of which the elaboration involved considerable effort and have been presented to government entities as a condition for approving the commercialization of products. Penalty: 3 months to 1 year imprisonment, or a fine. No defined protection term. No need limitation to new chemical entity. New indications also covered. Enforcement of DPE needs litigation, as ANVISA and the Brazilian government disregard it. DPE Requires local due diligence License to local partner/entity No need to seek registration No term limitation Enforceable against issuance of marketing approvals or infringers

18. 18 | © 2011 Leonardos & Licks Other IP rights Other IP -Design -Trademark -Trade dress -Unfair competition -copyright Industrial design and trade dress Trademark Unfair competition Copyright

19. Thank You. Otto Licks otto.licks@leonardoslicks.com