The New Technological Innovation Act In Brazil

The Brazilian Congress enacted the Technological Innovation Act, Law No. 10.973/04 on December 2, 2004, which creates incentives for scientific and technological innovation in a productive environment. The new law, seeking Brazil's technological autonomy, establishes special measures for technological development. Among the measures contemplated in the law are support for the establishment of strategic alliances and the development of cooperation projects involving Brazilian companies.

Specifically, the law creates several tools in order to allow, among others, the sharing of laboratories among very small and small companies, the participation of the federal government in the stock capital of companies aiming at developing scientific projects as a way of injecting money in such enterprises, differentiated remuneration system for public employees who participate in such researches, a guaranteed minimum of 5% of the royalties on the profit for the inventor, partnerships between Scientific and Technological Institutions and private companies for the development of new and innovative technologies and other important incentives for the creative environment in the scientific area.

The impact of such law in the licensing of technology in general, especially know-how and patents has yet to be tested since the enactment occurred only less than one year ago. However, the prospects are very positive for the enhancement of the very shy licensing market of Brazilian technology. According to a survey by the LESI Committee of the Americas and the LES (USA & Canada) International Committee, one of the leading and largest Brazilian Universities, the Universidade de Campinas - UNICAMP, currently holds only 322 patents and, out of this already small number, only 8 are licensed. The Universidade de São Paulo - USP, another very important university holds a little less than 100 patents but no license at all.

Brazil - Technical assistance and transfer of technology agreements may have another tax burden

Law no. 10,865, of April 30, 2004 (former provisional measure no. 164, of January 29, 2004) regulated the (i) Contribution to the Social Integration and Formation of the Public Workers' Wealth Programs which is levied upon the importation of foreign products or services (PIS/PASEP-Importação) and the (ii) Social Contribution for the Financing of the Social Security owed by the importer of foreign goods or serices (COFINS-Importação).

Since May 1st, 2004, the PIS/COFINS-Importação began to be levied upon the services rendered by individuals or legal entities domiciled outside Brazil to contractor domiciled in Brazil. In order for the tax to attach it is essential that (1) the services be rendered...