Cablegate: Argentina's 2007 Special 301 Review


DE RUEHBU #0335/01 0521641
R 211641Z FEB 07




E.O. 12958: N/A

REF: A. STATE 7944


1. (SBU) In 2006, Argentine authorities responsible for providing
"adequate and effective protection to intellectual property rights"
made few meaningful improvements in IPR legislation, regulation and
enforcement and there remain serious weaknesses in each of these
areas. Proposed legislative amendments and regulations to
strengthen the IPR regime were not implemented in 2006. On patents,
the application process continued to improve, with more and more
timely adjudications. However, the application backlog remains
large, effectively curtailing the period of patent protection, and
injunctive relief for patent infringement has been slow and variably
enforced. On the key issue of "data confidentiality," there has
been no progress, with proprietary third-country pharmaceutical data
routinely used by domestic competitors in violation of TRIPS Article
39.3. On copyrights, CD and DVD piracy remains prevalent, illegal
internet downloading/distribution has jumped in line with expanded
broadband access, and a court decision has sanctioned some
photocopying of copyrighted printed material. Trademark
falsification remains widespread, with illegal markets poorly
policed. Minimalist fines and penalties offer little deterrent to
falsification. While Customs authorities were granted broader
trademark enforcement powers in 2006, and there were a number of
highly publicized seizures of blank and pirated discs, these efforts
at best had marginal impact. The Embassy therefore recommends that
Argentina remain on the Priority Watch List in 2007, where it has
remained since 1996. An Embassy IPR action plan will be detailed
Septel. End Summary.


2. (SBU) Argentina's patent and trademark agency, the National
Institute of Industrial Property (INPI), made significant progress
toward streamlining Argentina's patent system over the past several
years. That system appeared close to breakdown until 2002, with
patent applications coming in much more quickly than they could be
processed. From 1995 until 2002, for example, INPI received 47,573
patent applications but was able to resolve only 28,190 of those in
the queue, for a deficit of over 19,000 applications in those eight
years alone. According to the World Intellectual Property
Organization (WIPO), in 2005 Argentina ranked 18th in the world in
patent applications received. The backlog has since declined, with
INPI receiving 15,483 patent applications during 2003-2005 and
resolving 20,118 during the same period. (Note: This represents
total resolutions, which include cases rejected for procedural
reasons or abandoned. End Note.) Final approvals and denials after
full investigation in 2003-2005 totaled 1,061, 1,778, and 2,670
respectively. In 2006, final approvals and denials jumped to 4,468.
INPI officials are targeting 6,000 final approvals and denials in

3. (U) INPI's improved efficiency stems from a number of reforms
implemented beginning in 2003, including fast-track procedures to
reduce a patent application backlog of over 30,000 cases. All
applicants with more than one patent application pending were given
the opportunity to rank-order their applications (with some
restrictions), allowing them to jump the application of a
potentially more-valuable product ahead of a less-promising
application that had been submitted at an earlier date. A second
such opportunity was announced in December 2006. Since 2003, U.S.
and other research-based pharmaceutical companies are also allowed
to present studies used in third country patent applications to
support patent requests in Argentina, significantly easing INPI's
investigation requirements.

4. (SBU) The GOA also increased INPI's real budget resources to
allow the hiring of 27 new patent examiners in 2004, doubling the
number of pharmaceutical examiners from 10 to 20. According to
INPI, improved in-house training has boosted the average number of
applications resolved per examiner per year from 52 in 2004 and 69
in 2005 to 84 in 2006, a 62% improvement in two years. As a
consequence, the time for a patent application to receive a
preliminary examination fell from fifteen months in 2004 to eleven
months in 2006. In another positive development, INPI sent two of
its pharmaceutical inspectors to the U.S. Patent and Trademark
Office's (USPTO) academy for training in 2005. That training,
arranged by the Embassy and jointly funded by the USPTO and
research-based pharmaceutical companies, was a first for Argentine
patent inspectors. Post is currently working with INPI to explore
sending more patent and/or trademark examiners for USPTO training in
2007, which the pharmaceutical chamber has again agreed in principle
to support. Post is also working with Argentine Customs authorities
to identify appropriate candidates for a customs border enforcement
training class, also provided by USPTO.

5. (SBU) These gains, while undeniably positive, proceed from a
very low baseline. The right to patent pharmaceutical products in
Argentina was recognized only in 1996, and the first pharmaceutical
patents for approximately 80 products of marginal commercial value
were only issued following the expiration of the TRIPS transition
period in October 2000. A small number of other pharmaceutical
patents of greater value were granted in subsequent years, but only
after long and arduous processes. Many of the patent applications
INPI counted as "resolved" during 2005 were simply discarded after
the applicant failed to respond to an INPI instruction to formally
reaffirm the application. CAEMe (the Argentine Chamber of Medicinal
Specialties, an association that represents U.S. and other
research-based pharmaceutical companies) estimates this number as
approximately 4000. (Note: While INPI declined to share their
estimate of the current year-end 2006 patent application backlog,
local industry sources estimate it to be in the 23-24,000 range. End

6. (U) With the Argentine 15 year patent protection clock starting
at the time of application, U.S. research-based pharmaceutical
companies operating here complain that INPI's extended patent
processing backlog effectively curtails their period of exclusive
patent protection. For example, all patents issued by INPI in 2006
had been applied for no later than in 2001 (and applications for
pharmaceutical and other chemical products take longer than average
to process). INPI faces the continuing challenge of maintaining
adequate human resources, with trained examiners frequently hired
away by the private sector and long in-house training periods
required to bring newly hired examiners up to competence. However,
for 2007, INPI's budget for patent examiners increased 58%,
including funds for new examiners and incentives for examiners to
complete more cases.

7. (U) The lack of patents for many products, coupled with
Argentina's devaluation in 2002, which resulted in sharp price
increases for imported products, increased incentives for local
pharmaceutical companies to produce unlicensed copies of products
that had been patented or for which patents were pending. The
combination of these factors has had a negative effect on the
Argentina-derived business of U.S.-based pharmaceutical companies.
According to CAEMe, local pharmaceutical firms now have over 50
percent of the Argentine market and have reached almost 50 percent
of the export market. (Note: not all local pharmaceutical firms are
perceived as patent infringers. Some of the producers/exporters,
according to CAEMe, deal only in products which are either licensed
or have expired patent protection, and therefore are legitimate
generics. End Note.) Argentina amended its patent law (Law 24,481)
in December 2003 to implement an agreement between the USG and the
GOA that had been signed in May 2002. That agreement came after
approximately three years of consultations under the WTO's dispute
settlement mechanism.

8. (SBU) The most important remaining unresolved pharmaceutical
patent issue relates to the effective legal protection of
confidential and proprietary data developed by pharmaceutical

companies to demonstrate the efficacy and safety of new medicines
(i.e., "data protection"). U.S. and other research-based
pharmaceutical companies believe this to be a critical issue and
Argentina and the U.S. have agreed to leave this issue within the
WTO dispute settlement mechanism for future action. GoA policies
have led research-based pharmaceutical companies to complain that
Argentine health regulatory authorities (in particular ANMAT, the
National Administration of Medicines, Food, and Medical Technology,
the equivalent of the FDA) rely inappropriately on data developed by
research-based companies and presented by companies which did not
participate in such research to ANMAT to obtain marketing approval
of unauthorized copies of innovative medicines. According to CAEMe,
ANMAT interprets the public disclosure of partial data as an
indicator that the data should be regarded as in the public domain.
Article 39.3 of the TRIPS agreement requires WTO members to protect
data submitted for pharmaceutical marketing approval "against unfair
commercial use" and "disclosure." The GoA argument appears to be
based upon the fact that infringing companies need only present
publicly-available information, such as an existing FDA approval of
a product, rather than confidential clinical studies results. This
might seem to be protection against "disclosure" on the part of the
GoA, and also avert the issue of "unfair." The question remains,
however, as to what exactly constitutes unfair use of protected
data. If an infringer can obtain permission to market their copied
products doing what is legal, there appears to be no need to even
attempt "unfair" methods.

9. (U) U.S. pharmaceutical companies also remain concerned about
the legal implications of two specific clauses in the 2003
amendment. Specifically, it mandates an expert opinion, and
requires consideration of the economic impact of an injunction on
both parties to determine whether or not goods alleged to violate
the patent law should be seized. When the amendment was passed into
law, research-based pharmaceutical companies feared that those
clauses could preclude the granting of preliminary injunctive relief
and limit the success they have achieved in protecting their
products through the use of preliminary injunctions.

10. (SBU) Those fears have been realized. In 2005, Eli Lilly
discovered several Argentine competitors selling copies of its lead
oncological drug, and sought injunctions to prevent those sales. An
injunction against one infringer was issued after an 18 month
judicial process, but was later revoked when the infringer presented
what it claimed was an alternate process to produce the medication
(the patent is based on the process, not the molecule), without
evidence that the process was in use, or that it even worked. For
another infringer, the application for an injunction was rejected by
a judge convinced by a local expert hired by the defense, who
claimed that the copycat drug did not violate the U.S.
pharmaceutical company's patent. Of the three known infringers of
Eli Lilly's medication, two had already signed agreements in court
not to produce copies, and proceeded to violate those agreements.
In another instance, Merck Sharp and Dohme went to court in 2005 to
remove five copies of one of its joint-venture drugs from the
Argentine market. In a promising ruling, the judge issued
injunctions ordering the copies off the market. More than 18 months
after the decision, however, those injunctions have yet to be
enforced - despite the fact that the judge in the case ruled the
legal basis for the copy drug's approval unconstitutional, as well
as in violation of TRIPS Article 39.3. (Note: the injunction
ordered ANMAT to rescind marketing approval of the copied product,
which ANMAT has not yet done. According to CAEMe, the only further
legal recourse available to Merck would be to demand the arrest of
those responsible for the GoA's failure to comply with the court
order- the Director of ANMAT and/or the Minister of Health. Merck
is unwilling to pursue this course of action. End Note.)

11. (SBU) A frequent complaint of U.S. pharmaceutical companies is
that there remains in Argentina no regulatory linkage between INPI
and ANMAT. While such linkage is not explicitly required by TRIPS,
its absence in Argentina allows ANMAT to grant local pharmaceutical
producers authorization to manufacture and sell products that have
already been patented or for which a patent has been requested. The
Embassy and multinational pharmaceutical companies have urged the
GOA to establish a linkage between ANMAT and INPI that would prevent
ANMAT from continuing to authorize local pharmaceuticals to produce
products for which an INPI patent has been granted or is pending.
There were hints during 2005 of the beginnings of a cooperative
relationship between INPI and ANMAT, but the Embassy has no evidence
that such cooperation has developed. (Note: the head of INPI told
Econoff in late 2006 that INPI and ANMAT were in close
communication; the head of ANMAT told Econoff that there is no
communication at all between the agencies. The head of INPI also
told Econoff that ANMAT's decisions were constrained by applicable
laws - the most relevant of which doesn't just allow but requires
marketing approval of drugs already approved in certain other
countries, including the U.S., and makes no mention of patents - and
that the proper authority to make decisions over potentially
conflicting patents was the court system, not ANMAT. End Note.)
U.S. and other research-based pharmaceutical companies must incur
the legal costs of obtaining injunctions to stop the production and
sale of products produced by local pharmaceutical companies for
which the research-based companies have INPI patents.

12. (U) Law 25,649 adopted in 2002 requires medical doctors to use
a drug's generic name in all prescriptions. Doctors may also
include a trademarked version of a drug (and no more than one) in
their prescriptions, but pharmacists may still offer a substitute.
If a medical doctor does not want a substitute provided, the reason
must be indicated on the prescription. U.S. and other
research-based pharmaceutical companies operating in Argentina
believe this law diverts sales from innovative medicines to
TRIPS-infringing copy products. Some of these firms argue that true
generics do not exist in Argentina because copy products are not
required to demonstrate their bioequivalence or bioavailability with
original products, meaning local producers can sell drug copies that
lack quality and safety assurances.
13. (U) Argentina has yet to become a contracting state to the
World Intellectual Property Organization's (WIPO) Patent Cooperation
Treaty. The WIPO treaty's mutual patent recognition provisions
among 135 Contracting Parties would eliminate much of INPI's current
patent application backlog.


14. (U) The incidence of Argentine copyright piracy via
"traditional" CD and DVD copying does not appear to have declined in
Argentina, while the frequency of illegal electronic downloads has
expanded in line with the penetration of broadband access and the
copying of copyrighted books and documents has acquired some
domestic legal sanction. On the positive side, the Argentine
Customs Service made some large seizures of blank and pirated
optical disks, and local police raids netted more pirated disks in
2006 than in 2005.

15. (SBU) Optical Media Piracy: Problems in this area include the
widespread and open sale of pirated copies of CDs and DVDs, and
increasing number of businesses offering home delivery (often
coordinated entirely online) of pirated artistic content.
Argentina's copyright regime, largely based on the 1933 Copyright
Act (as amended), provides generally good nominal protection.
However, the lack of any real enforcement bite (in current practice,
pirates will only face jail time if their involvement can also be
defined as organized crime), coupled with the 2002
devaluation-linked disincentive to purchase legitimate - but now
more expensive - imported products, has spurred piracy. A survey
sponsored by the Local American Chamber of Commerce in 2006 showed
that, while more than half the population believes that piracy
precludes job creation and facilitates tax evasion, two thirds of
Argentines have knowingly bought pirated products. A local attorney
specializing in copyright issues told Econoff that, while the
Argentine legal system does not function at a first-world level, it
is "not bad for the region." The legal system will generally
respond when needed to seize counterfeit media, the attorney said,
but the existence of a personal relationship with relevant
authorities is helpful. Still, his client (an IP content trade
association) worked with police to effect over 200 raids in 2006
that seized over 240,000 pirated discs and videotapes (about 4% of
the estimated piracy market), up from roughly 100,000 in 2005.

16. (SBU) In addition to local police actions, there were also
notable seizures of materials by the Argentine Customs Service. In
August 2006, they seized a million blank discs which had been
misclassified by the importer. The importer was also determined to
have brought in similar shipments previously. A shipment of over
500,000 pirated CDs and DVDs was seized in late 2006 in the
tri-border area (near Brazil and Paraguay) and destroyed. In early
2007, another shipment of blank discs was seized, this one with over
three million discs, which represents approximately half the pirated
discs sold in Argentina each year. (Note: Argentine customs
authorities told Econoff that the majority of the discs, once
protected materials had been copied on them, would likely have been
sold in Brazil, so the dent in the Argentine piracy market will
likely be less. End Note.)

17. (U) Illegal Downloads: Electronic delivery of copyright
infringing materials is on the rise. CAPIF (the Argentine Chamber
of Phonograph and Videograph Producers) estimates that there were
over 600 million illegal song downloads in Argentina in 2006, a
nearly 50% increase from 2004. This growth is roughly in line with
the increase in broadband internet access, which reached 13 million
lines by the end of 2006. CAPIF leaders say that the legal
downloads in Argentina total less than 1% of the illegal ones.

18. (U) Use/Procurement of Government Software: The GOA has yet to
fully comply with its 1999 agreement with the local software
industry to legalize unlicensed software used in offices of the
national government, and many GoA offices continue to use pirated
software. GoA sources estimated in 2005 that over 90 percent of GoA
agencies employing licensed software are using it illegally. GOA
legislation to require use of open source software was introduced in
2001 but never passed.

19. (U) Legal Sanction of Photocopying: A new area of concern in
the copyright area is based on a 2006 Appeals Court ruling that
students at the primary Argentine public university could legally
make copies of copyrighted works (i.e., textbooks). The ruling,
which argued that this practice "facilitated the access of study
materials to all," extended to those who made copies and sold them
to the students.

20. (U) Artist's Legal Rights: Draft legislation titled the "Law of
the Musical Performer," introduced in late 2005 but yet to be
formally considered by congressional committees, created some
controversy when rumors surfaced that it would receive expedited
treatment in late 2006. One potential drawback of the draft (as it
relates to intellectual property protection) would be its
restriction of copyright-holders' "right of making available" via
digital media. It would also delegate that right exclusively to a
performers' group, though this could violate Argentina's obligations
under the WIPO Performances and Phonograms Treaty (WPPT) to provide
that right to producers as well. CAPIF is preparing a new bill
which would codify rights for both producers and performers and
expects this alternative draft legislation to be submitted for
congressional review in the first half of 2007.

21. (U) Proposed Augmentation of Copyright Penalties: Motion
picture and recording industry representatives inform Post that they
plan to propose to congress a modification of the criminal code in
2007 that would increase currently nominal criminal penalties and
fines for copyright violations. It would also facilitate the
destruction of pirated goods by providing discretion to the rights
holder over disposition of infringing goods as well as make updates
the law to address modern technologies.


22. (SBU) According to a former head of INPI who continues to work
in the IPR field, Argentina's 1982-era trademark law (Law 22,362)
does meet international standards, but amendments to the Penal Code
limiting penalties to probation periods have rendered it less
effective, and a schedule of nominal fines have not proven
significant deterrents to falsification. On a positive note, the
process of renewing trademarks is another area where INPI's
increasing efficiency has become evident. Whereas an applicant for
renewal had to wait five months only a few years ago, the process is
now completed in less than two months. Raids by local police on
flea markets where counterfeit merchandise is openly sold have not
been frequent or widespread enough to lessen the availability of
pirated goods. Representatives of industries frequently targeted by
counterfeiters claim that over forty large, well-established markets
exist in Buenos Aires alone that are almost completely dedicated to
the sale of counterfeit goods (in addition to innumerable smaller
points of sale throughout the country). The largest of these
markets, which is reputed to be the largest in South America, is
called "La Salada." According to reports, 6,000 people work there,
and 20,000 customers visit and make USD 9 million in purchases
daily. (Note: The EU highlighted this market in its October 2006
301-equivalent report, which received considerable press attention
in Argentina. End Note.) "La Salada" has a dangerous reputation,
and post IPR contacts tell us that police conduct no enforcement
operations there due to fear of organized crime elements which
allegedly operate within the market.
23. (SBU) Amendments to Existing Legislation: Proposed legislation
to modernize Argentina's trademark law died in committee in 2005.
That draft law, introduced in August 2004, contained several
measures that would have strengthened Argentina's anti-trademark
piracy regime. Specifically, the draft law would have: involved
Argentina's tax agency (AFIP) in trademark piracy (counterfeit
merchandise) investigations; expanded the authority of Argentina's
Financial Investigations Unit (UIF) to include trademark piracy
among the crimes that entity is able to investigate; and increased
penalties for those convicted of trademark piracy (eliminating
community service as a possible sentence). An attorney who helped
draft the text blamed the failure of the bill on the lethargy of
local Argentine business chambers, which he said did not actively
support the effort. The bill was, in fact, viewed negatively by
several members of the American Chamber of Commerce's (AmCham)
Intellectual Property Committee, some of whom preferred that more
discretion be granted to the trademark holder to determine the
degree of the penalty and the disposition of infringing goods.
While the legislation has not been re-introduced, the same
congressman who originally submitted the draft bill in 2004 proposed
in September 2006 the creation of a public attorney's office
dedicated specifically to trademark crimes. The proposal has not
moved forward. Meanwhile, the AmCham committee created a new draft
trademark law, using the 2004 proposal as a base, which has not yet
been introduced in Congress. (Note: An AmCham leader indicated that
it will likely not be introduced unless it can gain support from
leading domestic business chambers. End Note.)

Enforcement actions

24. (U) Law 25986, which took effect in January 2005, prohibits the
import or export of merchandise which violates international
property rights. However, regulations to implement this law have
yet to be issued two years later. In October 2006, AFIP (the
Federal Administration of Public Revenue, an IRS-equivalent and with
authority over Argentina's Customs agency) issued a decree which
allows Customs to detain potential trademark violating merchandise
until the holder of the locally registered trademark authenticates
the shipment, and seize it if the holder does not. However, while
regulation of the law would also allow detention and seizure of
merchandise which violates copyright and patent norms (such as
copied pharmaceutical products), the decree only applies to

25. (U) There were some notable IPR-related prosecutions in 2006.
Two music pirates (who operated in the "La Salada" market) received
two-year prison sentences, albeit three years after their initial
arrest. In Rosario, Argentina's third largest city, four people
were arrested for running a large "home delivery" operation via
internet sites. The head of that organization has been charged
under organized crime laws, as well as tax evasion and money
laundering statutes. A six-country effort initiated by the
international recording industry had a limited impact in Argentina,
as a judge's ruling in favor of internet cafes (the focus of the
operation) prevented nearly all planned raids in the country. Out
of 213 cafes raided overall, only 12 were in Argentina.

GMO Rights Protection

26. (SBU) Argentine farmers have the legal right to replant -
although not to sell - seed generated from a harvest originating
from registered seeds without paying additional royalties. However,
Argentine farmers have long sold registered seeds without payment of
required royalties, a practice which continued in 2006. This is a
widespread problem with soybean seed, and it underlies Monsanto's
recent court actions in Europe, which have resulted in ships
carrying Argentine soy being stopped and the cargo seized.
Monsanto's actions are aimed at collecting royalties that Argentine
farmers are not paying via legal challenges in countries in which
Monsanto has patent protection for the Roundup Ready soybean
technology. According to the president of an Argentine seed
producer association (in which Monsanto participates), 65-70% of all
soy grown in Argentina is produced from Rounup Ready seeds for
which no royalties have been paid. Farm associations and industry
representatives generally agree that Argentina must elaborate and
enact a new seed law that better protects intellectual property, but
negotiations toward that end have not prospered. The sale of
registered seed from Argentina to neighboring countries, also
without payment of royalties, has led to significant planting of
unregistered biotech soybeans in Brazil and Paraguay. Argentina is
a party to the 1978 Act of the International Union for the
Protection of New Varieties of Plants (UPOV), but has not signed the
1991 UPOV convention revision. Monsanto reps have told post that
they do not intend to introduce the next generation of Roundup Ready
until a GoA-sanctioned agreement with local growers is signed which
will ensure that Monsanto receives proper royalty payments.
Ambassador, Embassy officers and visiting Congressmen have raised
the Monsanto problem regularly in recent months, but without
achieving progress.

Embassy IPR Initiatives

27. (SBU) Beyond significant regulatory and enforcement
deficiencies detailed above, reluctance by the various GoA
enforcement entities to cooperate with each other is a problem that
has long contributed to ineffective anti-piracy action in Argentina.
The Embassy therefore encourages IPR training that brings together
representatives from the full range of GOA institutions involved in
anti-piracy efforts. The trust and familiarity resulting from such
cooperation would help foster GoA inter-agency teamwork of the sort
necessary to effectively combat piracy. One such training
opportunity is tentatively scheduled for 2007: With the assistance
of the U.S. Department of Justice, Post hopes to bring GoA and
Argentine private sector officials together to explore and develop
innovative IPR enforcement methodologies consistent with Argentina's
legal and regulatory framework. A broader Post IPR 2007 strategic
plan will be detailed septel.

Comment and Recommendation

28. (SBU) Argentina has been on the Special 301 Priority Watch List
since 1996, and few meaningful improvements were made in 2006 to
merit an upgrade in this designation. There was no movement on the
key issue of pharmaceutical patent data protection that appears to
violate TRIPS Article 39.3. While INPI continues to function more
efficiently and has won additional budget resources this year,
procedural improvements to date have only made minor inroads into a
patent application backlog that significantly curtails the periods
of patent protection. Patents that do get issued carry a
questionable legal weight, as evidenced by ongoing problems with
copied products, the lack of legal resolution of some infringement
cases, and variable enforcement of those infringement cases where
injunctions have been obtained. The volume of copyright and
trademark violations has not diminished; Argentina's legislature and
enforcement arms have not undertaken measures necessary to
discourage new violations; and the Argentine judiciary remains an
uncertain ally in the fight to protect intellectual property. While
the decree allowing trademark enforcement by Customs, industry
proposed legislation to increase currently nominal criminal
penalties and fines for copyright violations, and highly publicized
2006 seizures of blank and pirated discs are positive signs,
improvements in Argentina's IPR regime this year weren't
particularly significant. The Embassy therefore recommends that
Argentina remain on the Special 301 Priority Watch List for 2007.
End Comment.

22. To see more Buenos Aires reporting, visit our classified
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