Brazil’s Supreme Court rules that infringement courts can hear invalidity arguments

In the past decade In Brazil, the number of patent disputes has increasedwhile the local economy grows and stabilizes. As more companies see Brazil as a strategic country for protecting intellectual property, the patent system is coming under greater scrutiny and more complex patent cases are being filed.

On June 12, 2024, the Supreme Court (Superior Tribunal de Justiçaor STJ), Brazil’s highest court with jurisdiction over non-constitutional matters, has issued a ruling allowing a nullity defense in a lawsuit for infringement of an industrial design. Although the case concerns industrial design, the court’s decision contains non-precedential rulings that apply to patent cases.

This ruling follows ongoing discussions between federal and state courts in Rio de Janeiro, which have formed a working group, coordinated by Federal Judge Marcia Barros, to discuss possible cooperation in the field of intellectual property. On August 2, 2024, the working group organized a seminar with the participation of academics, representatives of the Instituto Nacional da Propriedade Industrial (INPI)/Brazilian Patent and Trademark Office (BRPTO)) and leading lawyers to discuss cooperation proposals, including how to improve the interface between infringement and disability disputes.

Background and legal framework

As a rule, Brazil has a bifurcated patent litigation system, with infringement cases falling under the jurisdiction of state courts, while federal courts have jurisdiction to hear patent invalidation disputes.

This split results from personal jurisdiction rules established in the Brazilian Constitution, which establishes that federal courts have power over disputes involving federal agencies, including INPI, which is a mandatory party in nullity cases, pursuant to Article 57 of the IE Statute (Law No. 9,279). /96). This legal provision also reinforces that invalidity challenges must be brought before a federal judge.

However, it has long been a point of contention whether the law also allows a patent (or industrial design) invalidity claim to be brought as a defense statement in an infringement case in state court.

At the heart of this discussion is Article 56(1) of the IP Statute, which states that “the invalidity of patents may, as always, be raised as a defense.” Article 118 provides that Articles 56 and 57 apply to industrial design disputes. The apparent contradiction between Articles 56, 57 and 118 has given rise to differing interpretations in case law.

The Supreme Court ruling

The STJ decided on one and sofa motion filed against a decision of the Fourth Panel of the STJ (Appeal No. 1,332,417/RS), which had denied the possibility of asserting the invalidity of an industrial design in an infringement case, as a defense statement.

According to the Brazilian Code of Civil Procedure (Civil Process Code – CPC), when a ruling by a panel in an appeal to the STJ differs from another ruling by another panel, the losing party can submit a request to have the case reheard by a larger group of judges.

The hearing on the motion lasted two days. Reporting Judge Nancy Andrighi wrote the main opinion in which she confirmed that the legal provision of Article 56(1) of the Brazilian IP Statute, combined with Article 118, expressly gives the defendant in an industrial design infringement action the power to to claim nullity as a defense. Thus, there would be no violation of the jurisdiction of the federal courts, as “the BRPTO’s participation in (an infringement case) would not constitute a statutory requirement.”

The opinion further notes that although the judgment rendered in an invalidity proceeding would have consequences for third parties (i.e. erga omnes effects), a recognition of the invalidity of the industrial design in the context of an infringement proceeding would only apply to the parties involved in that dispute as a basis for dismissing the claim of infringement.

Impact of the STJ decision

Defendants in infringement cases can now invoke nullity as a defense, without the need for separate federal action. This makes it easier and potentially cheaper for defendants to challenge the validity of patents they are accused of infringing.

However, raising a claim of invalidity in an infringement case will entitle the patent holder to bring a federal action to obtain a declaratory judgment on validity. Because federal courts have erga omnes jurisdiction, the state court would no longer be allowed to hear the nullity claim in this case; otherwise there is a risk of conflicting decisions being made.

Likewise, if the alleged infringer files a claim of nullity in an infringement proceeding in state court and simultaneously files a nullity proceeding in federal court, the state court must decline to entertain the claim of nullity.

In this sense, the case law of the State Court of Appeal of Sao Paulo confirms that if there is a pending invalidity proceeding before a federal court, the state court should not conduct an independent analysis of validity, but should wait for the outcome of that dispute (for example, appeal # 1008081-96.2017.8.26.0624.)

Federal and state courts are willing to cooperate in validity discussions

The STJ case law that led to this ruling shows that courts are concerned about the conflicting outcomes of the split system. Namely the so-called burden imposed on alleged infringers to bring a new action to challenge the validity of patents.

Such concerns are shared by lower courts. In 2023, as part of broader efforts by courts in Rio de Janeiro to improve judicial cooperation, a working group was established with the aim of seeking solutions to IP issues. This working group is coordinated by Federal Judge Marcia Nunes de Barros; Other members include Federal Judge Laura Bastos Carvalho, State Judge Paulo Assed of Rio de Janeiro and Registrar Raineri Ramalho.

The working group promoted an academic seminar in early August. The first panel discussed cooperation between courts, universities and the BRPTO. The President of the BRPTO, Mr. Júlio Cesar Moreira, was part of this panel and emphasized the importance of integration between the Patent Office and the courts, “to avoid the problems we face when we receive notification of (new invalidity) lawsuits.” He also defended the regulation of the profession of patent attorneys.

The second panel discussed innovation and opportunities for collaboration in IP. This panel delved into labor and criminal law issues related to IP disputes, with the participation of the BRPTO’s Chief Counsel, Mr. Antonio Cavaliere. One of the panelists, Professor Christiano Fragoso (UERJ – State University of Rio de Janeiro), criticized the lack of a legal provision in the Criminal Code for trademark infringement. Given the importance of intellectual property to the economy, Professor Fragoso argued that the law should undergo changes to establish sanctions proportionate to the severity of crimes against intellectual property rights.

The third panel, led by Judge Assed, discussed the split system. Ms. Elizabeth Kasznar, IP lawyer, spoke about the so-called risks in issuing interim orders, “as they are provisional and granted under pressure, without analysis of the merits.” For his part, Professor Pedro Barbosa (PUC-Rio – Pontifical Catholic University) focused on the issues related to the publicity of lawsuits and the values ​​attributed to the case, claiming that it is not unusual for the plaintiff to case seals to maximize the case. the changes to a provisional measure. So he argued that “the most sensible thing to do is to separate the relevant documentation (that needs to be protected) and keep the rest (of the files) fully public.”

Finally, the fourth panel, chaired by Judge Carvalho, discussed collaborative evidence production. One of the topics discussed was establishing a uniform list of experts that would be used by state and federal judges when deciding whom to appoint to impartial technical investigations. Professor Allan Rocha de Souza (UFRJ – Federal University of Rio de Janeiro) emphasized in this regard that “there is a gap that is much more common than you might think between the expertise of court-appointed experts and the subject of investigation.”

Another topic discussed in this panel concerned the potential for cooperation between state and federal courts in the production of evidence in infringement and nullity cases. Ms Tatiana Alves, patent lawyer, noted that ordering a joint court-appointed expert investigation may not be possible when infringement and invalidity cases are not at the same stage. Furthermore, Ms. Alves emphasized that although there is a link between infringement and nullity, the scope of proof is not the same.

Looking ahead

The STJ ruling raises a number of important questions that will need to be clarified by the court in the future. Although this decision has temporarily opened the doors of state courts to claims of invalidity of industrial designs (and patents), there is a chance that the court will limit the scope of this interpretation in the future. After all, the STJ did not dare to conduct a deeper investigation into the risks of conflicting decisions and the legal uncertainties that this insight could entail.

An important point to emphasize is that in appeal No. 1,332,417/RS, the only option left to the defendant in that infringement case was the claim of nullity. Because the industrial design had already expired, the defendant could no longer initiate invalidity proceedings. According to Article 56, an invalidity action can only be brought in federal courts during the term of the patent (or industrial design). Therefore, this case creates a specific fact pattern that could lead to distinctions in other pending cases.

In any case, the initiatives of lower courts seeking to increase cooperation in IP disputes, especially between federal and state courts, represent a change in the paradigms of IP litigation in Brazil. Understanding these changes will be of utmost importance to those who consider Brazil as a relevant jurisdiction for patent activities.

Image Source: Photos Deposit
Author: Alexeynovikov
Image ID: 414651216