An end to the IP drama in Brazil? No chance…more like a beginning

Brazil has been the focus of a fair bit of intellectual property drama in recent months.  The Brazilian government has done quite a bit of saber-rattling lately on intellectual property issues, using its willingness to violate intellectual property rights as a sword in its international policy efforts.

A major development that appears to represent an end to some of the drama was announced yesterday. 

Before tackling that, though, it helps to review a little history.  Several recent acts by the Brazilian government have placed it in the IP hot seat:

• earlier this year, government officials threatened to invoke the compulsory licensing provisions of the TRIPs agreement to break the patents of several US companies on drugs the country distributes to AIDS patients for free.
• officials threatened to “suspend” the intellectual property rights of all American products if the US government didn’t address a WTO deadline to change its cotton subsidy practices.
• Brazil is leading an opposition charge in WIPO against the patent law harmonization agenda of the United States, Japan, and some European countries while attempting to advance its own development agenda in that organization.

Yesterday, a deal was announced between the Brazilian government and Abbott Laboratories that requires the drug maker to cut the price of Kaletra, the company’s popular protease inhibitor and AIDS treatment, nearly in half.  Abbott claims that the deal is a success for the company, a difficult position to defend in light of earlier claims that the company was selling Kaletra for a loss at the pre-discount price.  Perhaps Abbott sees the deal as a success because it successfully avoided a patent battle with the country that would likely have resulted in a dispute over the meaning of the language of the compulsory licensing provisions of TRIPs which, to date, has not been defined or tested.  Perhaps even the US government sees that result as a success.

Is this really an end to the drama, though?  I don’t think so.  I think it more resembles a beginning.

The threats by Brazil to violate intellectual property rights is a bold an unprecedented use of intellectual property in international policy.  The United States, of course, uses intellectual property in its policy efforts — seeking better protections for rights-holders based in the country — all the time.  But Brazil has done the opposite –– using its willingness to ignore intellectual property rights to accomplish its policy objectives.

And it succeeded. Abbott cut its price in half in response to the threats.

The country is also negotiating with Merck and Gilead Sciences over the price of their AIDS drugs.  What deal will these companies strike with Brazil?  What will happen two years from now when Brazil needs higher volumes of the medicines?

This issue will grow in importance for the medical-related industries considering the language of the TRIPs agreement and the WTO Doha Declaration in particular.  Brazil and other countries are likely to be emboldened by the Abbott deal.  When will Brazil or another country raise the TRIPs medical-emergency sword again?  Hard to predict, of course, but considering the success Brazil had in the Abbott deal, one thing is certain — it will happen.

But its not just the medical industries that should be interested in this issue.  Remember that Brazil also threatened to suspend the intellectual property rights of all American products in an effort to force the United States to take action on a WTO dispute over cotton subsidies, of all things.  This action was quite likely a simple posturing move, but it also provides clear evidence of the Brazilian government’s willingness to use the active violation of intellectual property rights as a sword.  And this threat was made before the Abbott deal.

All companies with investment and/or customers in Brazil, or thoughts of making such investments or building such a customer base, should carefully consider these actions of Brazil and keep a close eye on its actions in the future.