The project works on 2 basic principles:
Apparently the US didn't like the idea and has filed suit with the WTO. To further complicate matters, the whole issue hinges on subjective interpretation of WTO's charter.
- AIDS medicine is manufactured locally by government operated labs WITHOUT paying any royalties to the pharmaceutical companies which developed the drugs (and therefore own their patents). This is done legally because a loophole in WTO's charter which explicitly states that in case of national emergency a nation can disregard intellectual property rules and start manufacturing drugs on its own.
- AIDS treatment with relatively cheap locally manufactured drugs ends up being profitable because hospitals end up having a very small number of AIDS patients.
Check out the full scoop here (in Portuguese). [Babelfish gives a decent translation, so I recommend you use it. I couldn't find coverage of this elsewhere, but the link I provide is absolutely trustworthy.]
To further complicate matters, Brazil already has open litigation in WTO. In theory this [also controversial] matter shouldn't affect any other decision because it regards the legality of Brazil's government subsidy to Embraer, a national airplane manufacturer. In practice both lawsuits make it more likely that the US and Canada will get what they want.
Considering Brazil has in the past exercised moments of blatant disregard for North America's capitalist influence but also succumbed in very peculiar ways, one can't be sure on what to expect of this.
 Embraer has recently won large contracts which would've been otherwise awarded to Bombardier (a Canadian airplane manufacturer). Brazil and Canada are starting to retaliate commercially and judicially on different sectors of their economies and the situation may get ugly.
 which, albeit "the right thing to do", never turned out to be a profitable or pleasant choice