Normative Instruction No. 70/2017 of the INPI (National Institute of Industrial Property), which comes into force on July 1, should limit the agency's interference in the definition of the percentage of remittance of royalties abroad in technology transfer contracts.

The new regulation repeals Normative Instructions Nos. 16/2013 and 39/2015 and deals with the administrative procedure for registration of license agreements and assignment of industrial property rights and registration of technology transfer and franchise agreements.

The biggest change is in item XI of article 13. It establishes that the certificate of registration of technology contracts shall contain the following informational note: “The INPI did not examine the contract in light of tax legislation, taxation, and remittance of capital abroad."

Currently, even without legislation or a normative instruction by the INPI itself, the agency interferes in contractual issues that involve the payment of royalties. In order to register or enter into industrial license and technology transfer and franchise license agreements, the INPI limits the royalties that may be remitted abroad if such agreements are signed between companies with a corporate relationship in which the transferor of the technology or licensor of the trademarks or patents (among other industrial property rights registered with INPI) is headquartered abroad and the company receiving the technology or license is in Brazil.

In its analysis of the contracts, the INPI uses the tax legislation that deals with the limitation of the tax deductibility of royalties, Ministry of Finance Ordinance No. 436/58, to apply the same rule to the remittance of royalties abroad. The ordinance establishes maximum percentages for deduction of royalties as expenses. These percentages vary according to the type of industry and are set between 1 and 5% of the revenue of the company receiving the technology or industrial property rights license registered with the INPI (revenue obtained through the use of technology or rights).

Our understanding of the new regulations, and what has been stated by representatives of the INPI in events relating to publication of these regulations, is that, as of the entry into force of Normative Instruction No. 70/2017, the agency will no longer interfere in the percentage of royalties to be remitted abroad, leaving that issue to be dealt with only by the tax authorities.

On the other hand, Normative Instruction No. 70/2017 brings in a new requirement in article 10, item I, applicable to persons domiciled abroad, which represents an apparent obstacle: the appointment of a duly qualified attorney-in-fact domiciled in Brazil, "empowered to represent it in administrative and judicial spheres, including to receive service of process." That is, when the company that licenses industrial property rights or the owner of the technology is headquartered abroad, it must appoint an attorney-in-fact in Brazil for the contract to be registered by INPI.

It is worth noting that Normative Instruction No. 70/2017 does not deal with other requirements without legal provisions made by the INPI to register contracts, such as the need for effective and permanent transfer of technology not protected by industrial property rights or software rights, rather than a mere license and fixation of maximum terms for such contracts.

In the coming months, it will be possible to better understand the effects of the new regulation by observing the practices that the INPI comes adopt to comply with it. However, the agency's attempt to simplify and de-bureaucratize the registration of technology transfer contracts, and to reduce the degree of interference in private contracts subject to its registry oversight, is a welcome step forward.