The (Lack of) Encouragement to Technological Development in Brazil

by | May 8, 2018 | Contracts, Intellectual Property, Legal, Software and Telecom, Technology

The Superior Court of Justice (STJ) recently issued a decision involving the multinational company Unilever. This reversed forty years of economic policies and represents a significant discouragement to business and technological development in Brazil.

The decision by the judge-rapporteur, Justice Francisco Falcão, was doubly ineffective, in neither pacifying nor evolving a highly controversial subject in the legal field: the operating limits of the Brazilian Patent and Trademark Office (BPTO) in the registration of technology transfer agreements that involve the remittance of payments abroad.

Placing this into context: the BPTO was created in 1970, in the middle of the military dictatorship, by a law that impeded contractual clauses that were considered by the BPTO as onerous to the Brazilian party. In 1996, this law went through a significant change, which eliminated the legal duty of the BPTO to regulate technology transfer and established better conditions of negotiation and use of patents. Nowadays, the BPTO has a principal purpose to enforce, nationally, the rules that regulate industrial property, taking into account its social, economic, legal and technical function.

STJ issued its decision in a Special Appeal (REsp 1200528), which originated from a writ of mandamus brought by Unilever against the BPTO that, by the registering of technology transfer agreements between Unilever companies in Brazil and abroad, clauses were altered unilaterally that changed these agreements from being onerous to gratuitous. According to the companies, the BPTO made technology transfer impossible by impeding the initially estimated remuneration. They also claimed that, from 1996, the BPTO no longer had powers to intervene in what had been freely agreed between them.

Even though this understanding would be upheld by a large number of Brazilian jurists, the judge-rapporteur stated that the legislative alteration from the 1990s only removed from the BPTO the judgment of the advisability and opportunity of the contract – with the power remaining to repress clauses that the BPTO believed to be abusive. Therefore, it should be noted that the maintenance of the generic concept of “attending to social, economic, legal and technical functions” is sufficient to justify the intervention of the BPTO in private agreements.

A profound knowledge of the legislation is not required to infer that the rules of 1958 are ill-suited to the current reality. Brazil and the rest of the world are experiencing a new period of economic and industrial development. In our complex economic context, merely legalistic practices cannot be sustained that do not consider the economic and financial equation, which the contractual parties have understood as being correct.

What is not being considered by the Brazilian judicial decisions is that technological production requires a substantial investment of time, money and labor. Furthermore, the result of the effort will incorporate the property of the developer of the technology, who will be the legitimate holder of a legal asset that only he (the owner) can decide how to use.

Therefore, does it make sense that the owner of a foreign technology, when negotiating with Brazilian companies, supplies its technology without the return that it considers fair? Is this the logic of a modern economy?

As a consequence, a negotiation between equals ends up becoming a negotiation where the owner of the technology is at a disadvantage, because restrictions are imposed and are non-negotiable. Is this the type of policy that will encourage technological innovation in Brazil? For how long do we need the public authorities to intercede in agreements between private companies in order to favor Brazilian industry?

The answer is not only in the preparation of laws and programs to encourage innovation, whose effectiveness is hampered by the lack of quality technical centers. In the face of our difficulties, international technology transfer agreements, celebrated with more flexible bases, would be an efficient method of training Brazilian technicians through the acquisition of knowledge developed abroad.

Therefore, the recent decision of the STJ reinforces the role of the BPTO as a regulating agent and as a supervisor of negotiations regarding technology transfer, when the BPTO operates as a fiscal authority, especially in the case of the remittance of funds abroad. Contrary to the development of the country, the flexibility of the policies surrounding technology transfer appears a little more distant at this time.

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