Brazil: a rising star for outsourcing

Transcription

1 Brazil: a rising star for outsourcing by Andrew John Bellingall* and Silvia Boechat ** Introduction Outsourcing is the placement of a business process which was previously performed internally, to an outside organization, where the process is purchased as a service. In the case of IP services, we will not look at simply using law firms to perform legal services which could have been performed internally, but the placement of those services in organizations outside the company s country of origin in order to minimize cost. The outsourcing of IP services has been growing steadily over the last decade or so, and although India and the Pacific Basin may be seen as the more obvious destinations, Brazil is becoming an increasingly attractive alternative. It is a well known fact that the United States has more lawyers per capita than any other country in the world, with one lawyer for every 265 Americans. But few would suspect that Brazil is in second place with a lawyer for every 326 Brazilians. While this is good for the Order of Brazilian Lawyers, with 710,000 fee paying members, it also shows the high level of education many Brazilians attain, and provides a great pool of human resources for those wishing to outsource legal services to Brazil. In tandem with the improvement of educational standards in Brazil, the Brazilian economy has been growing substantially over the last ten years. After years of strong growth, the onset of the global financial crisis hit Brazil in 2008.

2 But in 2010, consumer confidence and investors returned and GDP growth reached 7.5%, the highest growth rate in the last 25 years. Despite slower growth in 2011, Brazil surpassed the UK as the seventh largest economy in terms of GDP. Brazil has officially joined the First World. Also, with the World Cup in 2014 and Olympic and Paralympic Games in 2016, the investment in Brazilian Infrastructure has never been greater. All of which make Brazil an attractive destination for outsourcing. Enforcement of IP and Other Rights In order to be a suitable environment for investment and to outsource IP services, it is a perquisite that the country in question provides an environment in which intellectual property rights are respected and easily enforced. Whereas this may be questionable in certain areas of the world, Brazil s enforcement of IP rights is refreshingly robust. The Brazilian government has long recognized that the enforcement of intellectual property rights is essential in order to attract investment and speed Brazil s transformation from a third world country to a first world economy that will finally assume its rightful place at the political and economic top table. Brazil is a signatory to TRIPS and is fully TRIPS complaint, which means that it demonstrably provides strong protection for copyright, computer programs, patents for inventions in all "fields of technology, along with trademark rights. Brazil s current Law of Industrial Property, (Law No. 9279/96) which was introduced in 1997, brought its patent and trademark regime up to par with the international standards specified in TRIPS. Brazil is also a signatory of PCT and the Paris Convention, and should be signing up to the

3 Madrid Protocol in the foreseeable future. It also conforms to International Classification of both trademarks and patents. Brazil was the first country in Latin American to enact specific legislation for the protection of software though copyright. Its Software Law (Law No /98), of February, 1998 regulates Copyright and Related Rights (Neighboring Rights), Enforcement of IP and Related Laws, IP Regulatory Body, Transfer of Technology. Not only can software be registered at the PTO, but under Law No , of May 2007 the Topography of Integrated Circuits may also be registered. Such measures have undoubtedly helped foster a strong and prospering IT industry. The enforcement of IP rights in the courts in Brazil is also on a par with most developed countries, with specialist IP courts in Rio de Janeiro (First and Second Instance) and São Paulo (Second Instance). Injunctions are readily available, if the plaintiff has a strong case, and damages may be calculated on the basis of lost royalties, lost sales, or sales which the defendant unduly gained, depending on which method is most advantageous to the plaintiff. A first instance decision may be expected within typically 18 months. The liberal access to appeals can cause delays until a final decision is reached, but a new civil code is currently on the books which should limit this overgenerous facility and streamline court procedures. Also, the adoption of Alternative Dispute Resolution (ADR), such as foreign arbitration, has been on the increase in Brazil, and is perfectly enforceable where it is clearly identified in an agreement between the parties. The benefits to both parties are that ADR is more efficient, quicker and cheaper

4 than litigation. The added advantage to foreign rights owners is that the results are more easily predictable, which is an important consideration when dealing in the more distant areas of foreign countries. The Greater Brazil Initiative The "Greater Brazil Initiative" was launched at the end of last year by the Brazilian Government with the slogan "Innovate to compete. Compete to grow". It sets out new industrial, technological and foreign trade policies aimed at sustaining Brazil s remarkable growth and insulating it from an unfavorable world economic climate. The initiative adopts measures to promote investment in areas that lead to improvement in exports and technology, by improving and simplifying the regulatory framework related to innovation; the expansion of tax incentives; and facilitation of the financing and development of value-added services and productions facilities. Brazil currently relies heavily on the export of commodities, and one of the key aims of the Initiative is to move towards the export of value added goods and services. The Brazilian PTO will participate in the initiative and recently announced substantial reforms in its Intellectual Property system, including the harmonization of certain provisions of the current IP law with those of leading legislations. Currently, the great complaint made by users of the Brazilian IP rights protection system is related to the delay in the issuance of patents and trademarks. Patent applications are taking around 8 years to be issued and

5 trademarks requests are being issued in approximately 4-5 years time. Unfortunately, the backlog is currently a Brazilian reality. However, this scenario is about to change. The Brazilian government is aware of the importance of IP rights protection and knows that in today s rapid world, if the acquisition of said protection does not accompany the world s expectations, it will no longer be interesting, and so is searching for a solution to the problem. On December 5, 2012, the Brazilian Deputy Chamber approved the Proposed Law n 4365/2012, which created 475 new positions at the Brazilian PTO, comprising of 385 vacancies for researchers (examiners) and 90 for technicians. The creation of said jobs is extremely important for definitively overcoming the mentioned backlog, assuring the agility in the issuance of IP rights required by users and placing the Brazilian PTO as a global reference. At the moment, there are 242 new positions, in which 70 are for researchers. Green patents are also an important avant-garde pilot program recently launched by Brazilian PTO in an effort to accelerate the examination of patent applications which contribute to the control of global climatic alterations. The intention is that applications submitted and approved in this program have their final decision in approximately 2 years. By using this initiative, not only will the Brazilian PTO will expedite the prosecution of applications aggregated to this program, but also it will have the chance to identify new technologies that can be quickly used by society, stimulating the innovation and development process in the country. Additionally the Brazilian PTO is promoting public consultations related to patents, as part of the reform project, searching for more uniformity and

6 foreseeability in the analyses performed by their Examiners. In this regard, in 2012 four patent public consultations were made related to the following subjects: examination guidelines for inventions implemented by computer; examination guidelines for utility models; examination guidelines for patent applications; and examination guidelines for biotechnology patent applications. Before the beginning of each public consultation, the whole content of the examination guideline is prepared and reviewed by technicians of the Patent Division and interested parties have the chance of indicating the portions which they do not agree with together with their reasons. The divulgation of these public consultations is of great importance to the harmonization of patent guidelines allowing its knowledge and the participation of Brazilian society. Another important change also planned for the beginning of next year is the entrance into operation of the E-patent system for filing applications, which will allow patent fillings via Internet. E-trademark system for requesting trademarks via internet has been implemented since 2006 and represents 70% to 80% of the requests, which is considered a success. This innovation will certainly expedite the prosecution of patent applications in Brazil. As can be seen, the Brazilian PTO is taking various measures in order to update and modernize its systems, improve quality and satisfy users, aiming to be globally known by the excellence of the services offered. The Proposed Law n 2126/2011 establishing rights and duties related to the use of the Internet in Brazil should also be pointed out as one of the

7 Brazilian Government s efforts to safeguard IP rights. Already referred by some as the Internet Constitution, this project is currently before the Brazilian Deputy Chamber and expectations around its approval and how the society will deal with the modifications implemented by it are very high. Brazil and the Volume of IP rights Despite the financial crisis plaguing the world today, Brazilian numbers related to Trademarks requests and Patent filings reached historical levels last year and the expectations for 2012 are even higher. According to information available at the Brazilian PTO website, 31,765 patent applications were filed in 2011 against 28,141 patent filings in 2010, which represents an increase in patent filings of almost 13%. Speaking of trademarks, the increase was even greater, approximately 18%. In 2011, 152,735 trademarks requests were submitted against 129,620 requests in These numbers corroborate what was previously mentioned consolidating Brazil as a country with stable and growing economic situation being a highly attractive alternative for foreign companies to invest their money in outsourcing IP services. The Advantages of Brazil There are also many advantages which Brazil enjoys in relation to outsourcing which are not limited to the outsourcing of IP services, most notably:

8 Brazil is between one to four hours different from the US in terms of time zones, and three to five hours different from Europe. This means it is easier for telephone calls and other real time communication between these locations. The flight time from Miami to Rio de Janeiro is eight and a half hours, and so jet lag is minimized on trips to Brazil. The cultural differences between the US or Europe and Brazil, are far less than with India or China. Brazilians have a great inherent understanding of US and European culture. The majority of university graduates speak good English, and English is now on the school curriculum which shows how the government is committed to a society where all have a working knowledge of English. Brazil has one of the most stable economies and societies in the world, without radical political changes in policy when new governments are elected. to! Brazil has Rio de Janeiro, not a bad place for managers to be outsourced Outsourcing to Brazil; What the Experts Say The leading experts in the outsourcing field have also come to the conclusion that Brazil is becoming one of the destinations of choice. Frank J. Casale, Founder & CEO, The Outsourcing Institute recently stated: Technologically sophisticated and globally savvy. Geographically close and culturally aware. For these reasons and more, all well-reasoned roads point

9 toward Brazil as an essential sourcing destination. As Latin America's largest and arguably most progressive nation, Brazil's long IT legacy and proximity to domestic markets make the country a key near-shore provider. For buyers hoping to capitalize on cost efficiencies, diversify sourcing solutions, mitigate potential geopolitical risks and enjoy a culture known for its annual Carnival celebration, Brazil is the near-shore solution. As interest in Brazil grows, The Outsourcing Institute has provided this section, rich with research and the insights of seasoned in-country players, visitors will discover why Brazil is no longer an "alternative," but an important part of any organization's global sourcing strategy. Atul Vashistha wrote in Near Shore Americas: Outsourcing to Brazil: Seeing the Complete Picture that: Diversify your stock portfolio. This is a mantra we have been hearing for ages. Well, it is now ringing true in sourcing too! As global sourcing continues to grow, so does the interest in new locations. Companies are interested in new locations to diversify risk but also to better serve their own diverse operations or diverse needs. Brazil is emerging as an alternative (or complement) to other offshore locations, with an interesting combination of characteristics that are similar but also very different from the traditional low-cost locations, such as India and the Philippines. Brazil has a very strong economy domestically, which was one of the least affected in the world by the economic downturn. Many of its Latin American

10 neighbors are also experiencing strong growth in their GDP. The Latin America services market will reach $31 billion in 2010, with a 10.4% CAGR through Brazil comprises about 40% of this total, with an expected growth rate that is higher than the region s average. Summary A popular joke about Brazil was this: one Brazilian tells another Brazilian that Brazil is a country with a bright future ahead of it, and the other responds and it always will be. Well it appears that Brazil is no-longer a joking matter because that bright future has arrived. International companies ignore Brazil at their peril, because the chances are that their competitors will not. Brazil is one of the BRICS countries, and its major trading partner is now China, which in turn has an acute interest in Brazil, and particularly it s foodstuff, minerals and petroleum industries. As such, not only is Brazil attractive IP outsourcing destination for US and European countries, it could also be attractive to Chinese companies looking to get closer to Europe and the US, and to Brazil itself. For companies looking to outsource IP services, there can be no better destination that Brazil. It is conveniently located between the time zones of the United States and Europe, has a well educated population, a booming economy, a higher per capita number of lawyers than anywhere outside the US; solid IP legislation and with straightforward and reasonably priced enforcement. Costs are reasonably low, and expectations are sky high.

11 The Brazilian PTO is trying to identify problems and solve them as soon as possible so that the protection of IP rights accompanies this excellent moment experienced by Brazil. New programs, updates, proposed laws and guidelines revisions related to IP rights protection are being implemented enabling and ensuring that Brazil is definitively established in the group of developed countries. According to the president of Brazilian PTO, Mr. Jorge Avila: the object is to assure that IP rights are issued more efficiently, faster and without generating juridical uncertainty * Partner at Daniel Advogados Rio de Janeiro and São Paulo, Brazil, andrew.bellingall@daniel.adv.br ** Patent Engineer at Daniel Advogados Rio de Janeiro and São Paulo, Brazil, silvia.boechat@daniel.adv.br