Intellectual Property Protection

Chile implemented a flawed patent law in 1991 which provides limited product patent protection for pharmaceuticals. This law is flawed because it offers an inadequate patent term (15 years from filing) and no transition (i.e., pipeline) protection for pharmaceuticals. Due to the ten to twelve-year development time before launching pharmaceutical products, the net effect of this law will not occur until after the year 2000 and, then, for a very limited period of exclusivity. A bill was introduced in the Chilean Congress in recent weeks, directed at implementing the countries TRIPs obligations by adapting the deficient 1991 law. The new bill, which is currently before the Economy Committee of the Congress, has several significant problems:

1 - Time period for substantive analysis and response

The current time period for substantive analysis of the applications by patent office experts has been maintained, as has the time available to applicants to respond (120 business days in both cases), considered excessively long.

Notwithstanding the above, the new version of Article 7 proposed in the bill specifies that the patent office expert may respond at his discretion to comments made by the applicant in response to the patent office's substantive analysis.

The current system of opposition will be replaced by an observation period in which third parties desiring to impede the grant of a patent may provide comments and "observations" on a patent application. In practical terms, the result will be that [applications] will never leave the realm of the patent office, contrary to what happens currently when each time an opposition is presented, the applcation must be forwarded to the Legal Sub-department at the Industrial Property Division, resulting in considerable delays in processing.

2 - Exclusive rights granted by a patent

Although the bill incorporates a new Article 49, which sets forth the exclusive rights of a patent owner, including a new exclusive right conforming to the TRIPS agreement, that is, the right to offer the patented product for sale, the new article does not include the exclusive right to import patented products, which is provided for in Article 28 of the TRIPS agreement. Moreover, in reference to the compulsory exercise of the exclusive rights derived from a patent, the new Article 52 proposed in the bill does not include any provision giving the patent holder the power to prosecute anyone who imports the patented invention with the intent to sell it without the proper authorization (paradoxically, the current law does provide for this).

As such, the proposed articles meet the minimum standards set in the TRIPS agreement, but they also lower the current levels of protection.

Finally, with respect to the compulsory exercise of the rights derived from a patent, two positive changes have been made: first, an increase in the fines applicable to violators, currently set at 100 to 500 monthly tax units, to 100 to 1,000 monthly tax units.

Secondly, any obligation to prove bad faith on the part of the applicant has been eliminated, meaning that it is sufficient to prove that his activities had a commercial purpose. This change is significant, since proving the existence of a subjective factor like "acting in bad faith" has always been burdensome for the complainant.

3 - Process patents

A new Article 49 bis covering process patents has been incorporated in the bill, and it specifically sets forth that protection accorded process patents also covers the products obtained by those processes.

This is regarded as a positive provision and should lead to better protection of this type of patent.

4 - Procedural aspects

A new Article 31 bis is included, which empowers the judge to reverse the burden of proof in cases of violation of process patents.

The wording of this article matches the provisions of Article 34 of the TRIPS agreement, and as such, we believe that it conforms to the principles of the agreement pertaining to this matter.

5. - Undisclosed information

As regards this subject matter, the bill contains an obvious error inasmuch as it does not implement the provisions of Article 39 of the TRIPS agreement, which sets forth the rules for the protection of this type of information. This matter is not covered by another law, with the same time frame as that within which Chile agreed to implement the rules of the TRIPS agreement, that is, by January 1, 2000, leaving Chile at risk of a flagrant violation of the agreement.

In point of fact, Chapter I of the bill entitled, "Background on the Presidential Message to the Honorable House of Representatives" states "Protection of Undisclosed Information" is one of the topics covered by the [TRIPS] agreement and within the scope of this bill.

In Chapter IV, "Contents of the Bill," item 1a specifies that the bill will include two new titles: the first has to do with "Layout Designs" (integrated circuit topography) and the second, "Undisclosed Information."

It seems clear, therefore, that the there is an error of omission that could easily be to fully incorporating the entire contents of the provisions of Article 39 of the TRIPS agreement.

An increasing number of patent applications are being granted, a qualitative improvement from the situation since 1991. Numerous products are already being marketed in Chile, while their patent applications remain pending. With renewed leadership, the review and approval (or disapproval) of patent applications appears to be accelerating, but will remain an issue, so long as it is not fully consolidated as both policy and practice.

One way in which this situation could be ameliorated is to require that "linkage" regulations be adopted in Chile. "Linkage" would require that "second applicants" (i.e., generic, or in some cases, "pirate" applicants) be required to demonstrate that the product for which they are applying for market approval is not the subject of a valid patent or pending application. "Linkage" exists in the United States and Canada, and has proven to be a useful adjunct to maintain the integrity of the intellectual property and patent system. A recent response by the Ministry of Health's Public Health Institute rejecting the submission of a company not owning the patent rights, suggests that there is effective linkage between regulatory approval and patent status. Yet, it remains unclear whether this is regulation or simply the interpretation of current officials.

A second way in which the intellectual property environment could be improved in Chile, until improved, adequate and effective de jure patent protection is in place, is for the authorities to implement and enforce provisions guarding against the unauthorized commercial use of company proprietary data, as per the principles outlined in TRIPS Article 39. As is described in several other country sections in this submission, allowing the registration of "generic" products that use, or incorporate by reference, the company proprietary data of the innovator is an unfair trade practice that severely if not completely undercuts intellectual property protection for pharmaceuticals. Chile should adopt a ten-year period standard against the use of proprietary data submitted for registration purposes, as is the case in several EU countries.

In addition, Chile has not included an exclusive right to import patented products in its draft intellectual property bill that is designed to bring its intellectual property protection in line with TRIPS by January 1 2000. Nor has it included provisions allowing patent holders to pursue legal actions against those importing the patented product.

Other Barriers

The Chilean health registration system (e.g., Sanitary Code/Decree 435) demands more requirements for innovators before their products can be registered in Chile. This process discriminates against the research-based pharmaceutical industry when introducing original products into Chile, whereas it allows the swift introduction of copies in the Chilean market.

Potential Exports/Foreign Sales

At this time it is estimated that if current barriers were removed, sales of PhRMA company affiliates could increase in the range of US $50 million to $100 million dollars.