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INTERNATIONAL TRADE : Tougher Patent Law Expected From Brazil : Reform: But some say the action would be too little too late, and U.S. blacklisting looms again.

April 26, 1993|MAL MARGOLIS | SPECIAL TO THE TIMES

RIO DE JANEIRO — Reviled as a trademark pirate and bracing for trade sanctions from Washington, Brazil is finally poised to enact a law that would extend patent protection to pharmaceutical products, software and biotechnology.

The Brazilian congress is expected to vote Wednesday on legislation for patenting such "intellectual property." Patent laws have been on Brazil's books since 1883, but critics have charged that the current rules are badly outdated and so rent with loopholes that they are an open invitation to banditry.

Foreign companies argue that Brazil's failure to protect intellectual property has cost them more than $300 million in everything from bootleg Nintendo games to pirated drug store remedies.

Even more is at stake. The gradual opening of the tomblike economies of Latin America represents a "historic opportunity to reshape trading relations," according to the International Intellectual Property Alliance.

Action on the legislation will come none too soon. On Thursday, the U.S. trade representative's office will issue a list of "priority" countries that practice unfair trade policies. Once again, Brazil may be blacklisted.

In 1989, for the fifth time, Brazil was slapped with stiff sanctions under Section 301 of U.S. trade law for failing to respect patents on pharmaceutical products. Surcharges of 100% were levied on exports to the United States, mostly pulp and paper.

Sanctions were lifted in 1990 when Fernando Color de Mello became president, promising to reform patent laws. But the effort languished as Collor de Mello became entwined in a corruption scandal that ended with his impeachment last December.

Now, some say, the legislation may be too little too late.

"There is very little patience in Washington," said a foreign diplomat in Brasilia, the nation's capital. "There is a high probability that trade sanctions will be imposed."

The row over intellectual property rights has not only soured relations between Brazil and its largest trade partner, but also embroiled Brazilian society in a bitter controversy.

Some nationalist politicians reject the current pressures for new patent laws as caving in to foreign demands. Brazil "cannot be prey to the whim of those who today control technology," influential labor leader Luiz Ignacio (Lula) da Silva recently told U.S. officials.

Yet an emerging consensus here argues that current laws, though couched in the language of sovereignty, have coddled national industries. Brazilian drug companies' share of the domestic market has actually dropped from 60% to barely 14% in 20 years.

Another critical area is biotechnology, including genetically engineered products for agriculture. The U.S. patent office recently celebrated its 5-millionth patent, awarded for the discovery of a microorganism that produces alcohol from plant byproducts, such as corn husks or sugar cane compost. One of the inventors was Brazilian biochemist Flavio Alterthum.

The product was a potential treasure for Brazil, where half of the automobiles run on alcohol fuel distilled from sugar cane. Alterthum, who was trained at the University of Sao Paulo, approached his alma mater for a patent, but soon gave up. The problem was not only university red tape, but also the lack of a Brazilian patent law.

"As a Brazilian university graduate, I felt frustrated," he said. "Inventors have no protection."

A few years ago, Antonio Paes de Carvelho, president of the Brazilian Assn. for Biotechnology Cos., nearly closed a deal to develop a pest-resistant strain of tomato. But the investors begged off when they learned the product could not be copyrighted.

"What this means is that Brazilian scientific research is totally disconnected from production," Carvelho said. "That's something straight out of the Third World."

There are other hurdles.

One is a "pipeline" clause in the trade law pushed by the United States, which calls for retroactive recognition and royalties for foreign drugs already on the market in Brazil. Brasilia rejects the clause on grounds that a new law would mean a new ballgame.

A thornier problem is the patenting of genetically altered life forms. Some scientists and the Catholic Church object on moral grounds, arguing that living things cannot be treated like Nintendo games or new mousetraps.

"Patents for living things?" said Archbishop Lucas Moreira Neves. "They come already with an inscribed patent. That of the Creator."

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