The BR PTO (the Brazilian Patent and Trademark Office) has just released new instructions about the registration of international agreements involving industrial property. It appears that the BR PTO will adopt a less interventionist character, especially with respect to the limitation imposed on the remittance of royalties abroad.
With the publication of Normative Act 70/2017, on April 12, 2017, the BR PTO has established a new administrative procedure for the recording of licences and assignments of industrial property rights, as well as for the registration of unpatented technology and franchise agreements.
It is important to remember that, since its formation, the BR PTO has had the jurisdiction and the authority to record and/or register agreements that involve industrial property rights, as established by Law 5648, of 1970. The prior registration of these agreements is mandatory and indispensable in order for BACEN to authorize the remittance of payments in a foreign currency.
Considering the time that the BR PTO has operated in the recording of agreements, it cannot be said that the issue of formal instructions about the subject matter is a novelty. Before Normative Act 70/2017, the most recent instruction for the recording and registration of agreements was published in 2013, i.e., not long ago. So much so, that it is not difficult to recognize in Normative Act 70/2017 several instructions that were already applied in 2013.
Even so, although it does not deal with precisely new subject matter, the publication of Normative Act 70/2017 represents a significant landmark in the history of the BR PTO, especially with respect to its well-known role as a regulator of technology transfer and as an intervenor in the conditions of contractual negotiation.
This is because a large part of the restrictive understandings of the BR PTO, especially those referring to the remittance of royalties abroad that resulted in interference in the free negotiation of agreements by parties, were based on the interpretation of the tax legislation and monetary control.
For many years, the BR PTO applied the deductibility percentages described in Ordinance 436/58, of the Ministry of Finance, as limits to the amount of remuneration due in agreements that involved technology transfer.
As is well-known, Ordinance 436 established percentages that varied from 1% to 5% to determine the deductibility of expenses for legal entities that remitted royalties abroad and collected taxes by the system of taxable income – which had nothing to do with a limitation of remuneration determined in a private agreement, established at the volition of the parties.
However, even in the face of highly restrictive historical practices, the publication of Normative Act 70/2017 demonstrates the clear will of the BR PTO to adopt a less interventionist role. As established in article 13, item XI, the BR PTO specifies that the Recording Certificates shall contain the following information: “The BR PTO has not examined the agreement according to legislation regarding fiscal and tax matters or the remittance of capital abroad”.
With this, it can be deduced that the BR PTO will no longer intervene in what was agreed between the contractual parties, especially with respect to the restrictions that are applied today to the payment of royalties abroad. Nevertheless, not all of Normative Act 70/2017 represents flexibility.
With respect to the formal requirements that are listed in the Normative Act as obligatory for the processing of an application for the recording or registration of agreements, it appears that the BR PTO will be more rigorous in the analysis of the company’s documents that demonstrate the legal situation of the contracting companies and their legal representatives, especially those domiciled abroad.
Taking into account that Normative Act 70/2017 will only come into effect on July 1, 2017, the manner of the practical execution and the objective effects of each new provision will only be confirmed in the future. Until then, the current understandings of the BR PTO remain as they are.