Recently, Brazilian Patent and Trademark Office – BRPTO, issued and published the Normative Act Nº 70/2017, which will take effect on July 1, 2017 and as a result will change some rules concerning the actual proceedings of the Autarchy

The Normative Act Nº 70/2017 establishes the administrative procedure for registering license agreements involving trademark; patent; industrial design; and technology, and also for technology transference and franchise agreements.

The main change brought by Normative Act Nº 70/2017 is that BRPTO will not apply the fiscal and tax provisions it used to do it.

In fact, the BRPTO will not analyze the merits of the agreements, and the information regarding the term, as well as the remuneration, will be the responsibility of the party which apply for the registration, and there will be no interference from the Autarchy.

The BRPTO will simply record the agreements as they are and the Certificate of Recordal shall contain the following information note:

“The Brazilian Patent and Trademark Office did not analyze this agreement in light of the legislation relating to fiscal and tax matters and to remittance of moneys to abroad”.

Note that the normative act just confirmed what is stablished by the article 240 of the Brazilian Industrial Property Law, as follows:

“Article 240. Article 2 of Law No. 5,648 of December 11, 1970, shall henceforth read as follows:

“2. The principal purpose of the BR PTO is to enforce, at the national level, rules regulating industrial property, taking into account its social, economic, legal and technical role, and to offer comments regarding the advisability of signing, ratifying and terminating conventions, treaties, accords, and agreements on industrial property.”

Thus, the BRPTO will not interfere in aspects that were never within its competence, and the Parties may have their agreements registered faster and without any questioning about the merits, and especially in what concern the terms and remuneration of the agreement. But, if in the future there are questions about any irregularity in the agreement, these questions should be analyzed by the competent authorities, who will certainly be able to count on BRPTO technical support.

It is important to observe that the federal rules (Ordinance 436/58 and Law 8383/91) which stablishes the percentages of the royalties and the term of technology transfer agreements are still in force and that is why we did not encourage our clients to submit agreements with higher terms and percentages, despite the new BRPTO positioning.

In other words, the percentage of deductibility of the royalties to be paid by Brazilian Companies, is limit to 5% over the net sales of the licensed products/services. Knowing that, is up to 1% for trademarks and up to 5% for patents and technology transfer agreements, depending on the technological or business area.

Also, the maximum term for deductibility of royalty payments abroad by the Brazilian Companies in a Patent and/or Trademarks License Agreements is the same of the validity period of the patent and/or trademark, and in a Technology Transfer Agreements, is five years, which can only be extended for an additional term of five years provided that the Parties has justifiable reasons.

Therefore, although it sounds conservative, Clarke Modet & Cº Brasil maintains the advice to its clients, that it is always necessary to observe the limit of the royalties to be paid abroad and the term of the technology agreements.