Basch, Kenneth D.

van Schundel, Anton H.

English

Southern Methodist University

KENNETH D. BASCH*ANTON H. VAN SCHIJNDEL**The Brazilian Software Law of 1987Brazil's first software law has been in effect since December 1987.1Prior to that time software was not formally protected under Brazilianlaw. Although some legal scholars and lawyers argued that software wasprotected by the 1973 Brazilian Copyright Law, 2 no clear protection forsoftware ever developed in the courts. Other legal arguments for theprotection of software, founded on varying principles such as patent law,trade secrets, and unfair competition, never provided adequate protection.The new law places computer software squarely within the ambit of copy-right protection, in accordance with the legal protections now offered inmost of the developed countries of the world. A few unique provisionsin the new law, however, set it apart from the copyright protection avail-able in other countries. In general, the new law provides a new legalframework for the protection of computer programs and for the definitionof opportunities for marketing programs in the Brazilian market. Regu-lations pursuant to the law were published on May 16, 1988. 3 The followingis a general description of the law and the regulations pertaining thereto.I. Protection of ProgramsProtection of an owner's rights against infringement is granted for atwenty-five year period, beginning on the date of introduction of a program*Illinois Bar, practicing with Felsberg e Associados, Sdo Paulo, Brazil.**Netherlands Bar, practicing with Loeff & Van der Ploeg, New York.1. Software Law, Law No. 7.646 of Dec. 18, 1987, DIARIO OFICIAL [D.O.] 22, 221-22,224 (Dec. 22, 1987) [hereinafter Software Law].2. Copyright Law, Law No. 5.988 of Dec. 14, 1973, XXXVII LEX. 1917-34 (Dec. 1973)[hereinafter Copyright Law].3. Software Regulations, Decree No. 96.036 of May 12, 1988, D.O. 8457-60 (May 16,1988) [hereinafter Software Regulations].282 THE INTERNATIONAL LAWYERinto the market of any country of the world. 4 The law defines a "computerprogram" as an organized set of instructions in natural or codified lan-guage, contained in any type of physical media, necessary for the func-tioning of automatic data processing machines, devices, instruments, orrelated equipment based on digital techniques. 5The sole condition for receiving protection is the existence of an equiv-alent level of protection in the country of origin of the program. 6 There-fore, for example, a U.S. software author, to avail itself of protectionunder the new law, would have to show that the United States offerssimilar protection to authors of computer programs. No prior registrationis required to receive protection; however, owners of programs may, attheir discretion, register their products at an agency to be named by theNational Copyright Council. 7 Such voluntary registration is confidentialand likely to facilitate the effectiveness of future judicial or administrativemeasures taken to prevent infringement. Consequently, owners of pro-grams that are likely to be copied in Brazil should seriously considerobtaining such registration. The Software Law clearly dispenses with theneed for registration to obtain protection, although registration is requiredfor marketing programs in Brazil.The Software Law indicates four cases in which no infringement willbe deemed to exist. 8 The most important one is where there is a similaritybetween a particular program and a prior copyrighted program, whetherforeign or Brazilian. No violation exists when the similarity of the sub-sequent product is due to (i) functional characteristics in application, (ii)compliance with legal or regulatory rules or technical standards, or (iii)technical limitations on the possibilities for alternative forms of design. 9The scope of these broadly defined protection withholding provisions willdepend on administrative interpretation since the regulations are silent inthis respect.4. The Software Regulations, id. art. 6, state that "introduction" of a program occurswhen the author "uses or places a program at the disposition of another," whereas theCopyright Law, supra note 2, art. 4 refers to the "publication" of a copyrighted work. Thedifferences between these two concepts are not entirely clear, although the Copyright Lawconcept is more precise and easier to apply.5. Software Law, supra note 1, art. 1; Software Regulations supra note 3, art. 2.6. Software Law, supra note I, art. 3, § 2.7. Id. art. 4; Software Regulations, supra note 3, arts. 7-11. The National CopyrightCouncil is usually referred to as the "CNDA," an acronym for Conselho Nacional de DireitoAutoral.8. Software Law, supra note 1, art. 7.9. Id. § Ili. The other three cases are: (1) reproduction of a computer program rightfullyacquired, to the extent that such reproduction is necessary for use of the program; (2) partialduplication for teaching purposes, provided the author and program are specifically cited;and (3) integration of a program into a more comprehensive program or system, providedsuch integration is necessary for the user's end use and the integrated system or programis used exclusively by the party that undertook the integration.VOL. 23, NO. ITHE BRAZILIAN SOFTWARE LAW OF 1987 283II. Sales in the Brazilian MarketFrom a business perspective, one of the most important provisions ofthe Software Law is the one that defines Brazil's market reserve policy.All programs intended to be marketed in Brazil, whether foreign or do-mestic, must be registered with the Special Informatics Secretariat' 0 (com-monly called SEI).II Registration is necessary for business transactionsto be legally valid and, in the case of foreign program owners, to allowlegal remittances of payments through the banking system; 12 it is theadministrative act that creates the right to sell a particular type of programin the Brazilian market. SEI will classify programs according to theirdevelopment in Brazil or abroad, and will consider whether their devel-opment was the result of collaboration between Brazilian and foreignenterprises.13 The definitions of the basic computer law of 1984 (the so-called Informatics Law)' 4 will be used to determine the "nationality" ofan enterprise. 15Two significant impediments are imposed solely on non-Brazilian firms.First, the right to marketing can only be granted to a foreign firm whenthe programs concerned are intended to be used in equipment that haspreviously been marketed by foreign firms in Brazil.16 Second, and per-haps more significantly, registration of programs produced by firms dom-10. Id. art. 8.11. SEI is an acronym for Secretaria Especial de Informatica.12. Software Law, supra note 1, art. 8, § 3(11).13. Id. art. 8. The Software Regulations outline the procedures for such registration.Software Regulations, supra note 3, art. 13 divides programs into the following six cate-gories: (1) programs developed in Brazil, by individuals who are residents and domiciledthere, or by Brazilian companies; (2) programs developed as a result of "cooperation"between Brazilian and non-Brazilian companies pursuant to a SEI-approved project; (3)programs developed by a non-Brazilian company, which technology and marketing rightsin Brazil relating thereto have been transferred to a Brazilian company, in accordance withan administrative ruling or an appropriate contract, approved by INPI; (4) programs de-veloped in Brazil by non-Brazilian companies; (5) programs developed by a non-Braziliancompany, which rights as to marketing in Brazil have been granted to a Brazilian company;and (6) programs which cannot be included under the categories set forth above. Further,SEI may not require that trade secrets or other confidential information be divulged. Id.art. 24. Within fifteen days of filing at SEI, SEI must publish a record of applications receivedso that interested third parties may submit to SEI administrative motions or requests con-cerning such applications. Id. art. 22. Thus, software authors (both foreign and Brazilian)may wish to monitor SEI's publications to verify that no other person submits a programin violation of their property rights.14. Informatics Law, Law No. 7.232 of Oct. 29, 1984, XLVIII LEX. 534-43 Oct. 1984[hereinafter Informatics Law].15. Software Law, supra note 1, art. 8. The Informatics Law, supra note 14, art. 12,defines a Brazilian "enterprise" as: a company organized under Brazilian law, headquarteredin Brazil, under the control of Brazilian residents, with no less that 70 percent of all votingstock held by Brazilian residents.16. Software Law, supra note 1, art. 12; Software Regulations, supra, note 3, art. 10.SPRING 1989284 THE INTERNATIONAL LAWYERiciled abroad depends on SEI's ascertaining the absence of a similarprogram manufactured by a Brazilian enterprise. 17 This provision is par-ticularly relevant with regard to programs produced by Brazilian firmsthat can be used in equipment produced by foreign companies.The criteria to be used in SEI's decisions on the similarity question con-sist of vague norms. Initially, to give rise to a "similarity" decision SEImust find the existence of "functional equivalency." The three main con-siderations in determining "functional equivalency" are: whether the localproduct is original and independently developed; whether the Brazilianprogram exhibits substantially the same performance characteristics, con-sidering the type of use for which it is intended; and whether a domesticprogram will be used in equipment and processing configurations similarto equipment manufactured by foreign enterprises.1 8 Furthermore, factsshowing that a program follows "established national practices" may, ifdeemed pertinent, add to an inference of similarity. 19 Finally, the localproduct must perform the same functions; in this respect, considerationmay be given to the particular "characteristics of the domestic market." 20Foreign computer programs can be marketed in Brazil only by Braziliancompanies, 2 ' with one narrow exception. 22 Brazilian firms wishing to sellprograms produced by foreign enterprises must execute written contractsconcerning the sale or license of programs and such contracts must beapproved by the Brazilian Institute of Industrial Property (commonlycalled the INPI), 23 which should obtain the opinion of SEI in processingsuch registration. 24 Without such approval, payment of royalties abroad17. Id. art. 8, § 2; Software Regulations, supra note 3, art. 3.18. Software Law, supra note I, art. 10(a). The Software Regulations, supra note 3, art.3, shed some additional light on the similarity test, however, they continue to use subjectivelanguage. For example, the presence of "substantially the same performance characteris-tics" between two programs is clarified as producing "essentially the same effect." TheSoftware Regulations provide that the similarity test should consider the type of applicationof the software, the current conditions of the Brazilian market for such software, and thesimilarity of the equipment in which different programs might be used. The market conditionscriterion is especially vague and would seem to allow SEI to base decisions on political andeconomic factors (as opposed to strictly technical and objective considerations).19. Software Law, supra note I, art. 10(b).20. Id. art. 10(d).21. Id. art. 28. Foreign software can be directly imported into Brazil by the actual user,however, only one copy may be imported. Id. art. 30. Such programs are not subject toregistration with SEI and should require, as regards governmental approvals, only theissuance of exchange control approval by the Central Bank of Brazil. Software Regulations,at supra note 3, arts. 14, 25, § 2.22. Software Law, supra note 1, art. 12. The exception applies to programs designedfor use in hardware marketed in Brazil by non-Brazilian companies.23. INPI is an acronym for Instituto Nacional da Propriedade Industrial.24. Software Regulations, supra note 3, art. 7.VOL. 23, NO. ITHE BRAZILIAN SOFTWARE LAW OF 1987 285through the banking system 25 will not be permitted and the contractualrelationship between the foreign company and its Brazilian distributor willnot be legally recognized. 26 To receive approval, the royalties may notexceed the world market prices and must be based on an amount percopy. Payments may not be calculated on the basis of production, sales,or profits made by the Brazilian purchaser or licensee. 27 The agreementsmust take the form of license agreements or assignments and shouldallocate liability for collection and payment of applicable Brazilian taxes.In addition, such agreements cannot limit the Brazilian company's abilityto produce, distribute, or market the programs covered by the agreement.The Software Law also prohibits "exclusivity," which was probably in-tended to restrict the foreign licensor's ability to restrict Brazilian com-panies from carrying competing programs.28III. Procedural Rules and Other ProvisionsSEI must render a decision concerning registration of a program (which,in the case of a denial, must include the reasons for such denial), within120 days after a request is filed. 29 Its failure to take any action results ina deemed registration of the program in question. 30 Registration is grantedfor a minimum three-year period, and will be automatically renewed unlessa locally produced similar program has appeared in the domestic market. 3'The National Council on Informatics and Automation 32 decides on appealstaken from SEI decisions. 33In criminal or civil proceedings a judge may, as a preliminary measure,order the seizure of disputed products. 34 The Software Law also specifies25. The Central Bank of Brazil is responsible for issuance of all exchange control au-thorizations for payment of amounts due in connection with the importation by Braziliancompanies of software programs.26. Software Law, supra note I, art. 28.27. Id. art. 29.28. Id. art. 27(a). The drafting of this provision is not clear on its face and may beinterpreted in one of at least three ways. First, as mentioned in the text, it may bar theforeign company from prohibiting the Brazilian licensee/distributor from carrying otherproducts. Second, it could be read to mean that the Brazilian licensee/distributor cannot begranted exclusivity for production or distribution of a program. Third, it could be interpretedto mean that both sides are prohibited from demanding exclusivity from each other.29. Id. art. II.30. Software Regulations, supra note 3, art. 33. All decisions or registrations to berendered by the INPI, SEI, or the CNDA are considered approved if the agency concerneddoes not take any action within 120 days of the date of filing with such agencies. Id. art.34. The Central Bank is not included in this provision.31. Software Law, supra note I, art. 9.32. This council is commonly referred to as CONIN, an acronym for Conselho Nacionalde Informatica e Automacao.33. Software Regulations, supra note 3. art. 7.34. Software Law, supra note I, art. 38.SPRING 1989286 THE INTERNATIONAL LAWYERthe sanctions that may be imposed on persons violating its provisions 35and specifically authorizes injunctive relief (a relatively uncommon rem-edy in Brazilian law) as well as recovery of losses and damages. 36An unusual aspect of the Law is its imposition of certain obligationson the author of software being marketed in Brazil. 3 7 For example, authorsmust supply information relating to corrections in programs and mustguarantee the suitability of a program to the purpose for which it wasdeveloped. In addition, throughout a program's technical validity perioda copyright holder cannot withdraw the program from the market unlesshe indemnifies interested third parties for damages suffered as a conse-quence of withdrawal. 38IV. ConclusionThe Software Law and its regulations are important steps toward pro-tection of software in Brazil. Nevertheless, they leave many importantquestions regarding such protection unanswered. Their effectiveness willbe determined in the coming months as their provisions are put to practicaluse by software developers. Additional clarification will come throughjudicial contests that will arise under the new laws concerning its equivocalprovisions, and from additional rules and interpretations that may bepublished by the various governmental agencies involved in the regulationof software in Brazil.35. Infringement of a software copyright is punishable with a six month detention, plusa fine. Id. arts. 35 & 37.36. Unlawful importing or exporting of programs for sale, including those imported orexported for demonstration purposes is punishable with a one to four year detention, plusa fine. The statute of limitations for violations of the law is five years. Id. art. 40.37. Id. art. 24. Both the holder of the copyright and the distributor can be held liablefor failure of a program to perform adequately. Id. art. 26.38. Id. art. 25.VOL. 23, NO. I

The Brazilian Software Law of 1987

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The Brazilian Software Law of 1987

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