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Cablegate: Embassy Caracas Comments On 2004 Special 301 Review

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS CARACAS 000627

SIPDIS


STATE FOR EB/IPC - WILSON; ALSO FOR WHA/EPSC, WHA/AND
STATE PASS TO USTR - BPECK,
STATE PASS TO USPTO - JURBAN/DLASHLEY-JOHNSON
STATE PASS TO LIBRARY OF CONGRESS - STEPP
COMMERCE FOR KSCHLEGELMILCH

E.O. 12958: N/A
TAGS: KIPR ECON VE
SUBJECT: EMBASSY CARACAS COMMENTS ON 2004 SPECIAL 301 REVIEW

REF: A. CARACAS 00555
B. CARACAS 03354

This cable is sensitive but unclassified. Please handle
accordingly.

-------
SUMMARY
-------

1. (SBU) The GOV continues to show signs of slippage in its
commitment to the protection of intellectual property rights.
In 2003 the government persisted in its policy of approving
domestic copies of internationally patented pharmaceutical
products for sale in Venezuela. Venezuela's anti-trust
agency ruled that this practice did not constitute an act of
unfair competition. The GOV also maintained its refusal to
issue second use patents to international pharmaceuticals in
2003. Industry contacts say the National Assembly is
debating proposed changes to the new Industrial Property Law
which would worsen the legal framework for protection of
intellectual property. Piracy and contraband have grown
increasingly problematic, while government efforts toward
deterrence and prosecution remain minimal. Venezuela's
ongoing political and economic troubles have resulted in a
large informal sector including ever-increasing numbers of
vendors who sell illicit products on the street. Based on
the GOV's demonstrated lack of willingness to take action
against piracy and its continued lack of adequate IPR
protection, we recommend that Venezuela remain on the special
301 watch list this year.


--------------------------------------------- -------
NO CHANGE ON DATA EXCLUSIVITY AND SECOND USE PATENTS
--------------------------------------------- -------

2. (SBU) Venezuela has ratified many of the relevant
international treaties for TRIPS compliance, however, the GOV
continues to pursue policies which demonstrate a lack of
commitment to international standards on IPR protection. The
Venezuelan government still allows data on internationally
patented drugs, most of which require lengthy and expensive
development, to be used by domestic companies seeking
approval for their own versions of the same product.
Venezuela's food and drug regulatory agency (INH) began
approving the commercialization of these copies in February
2002. In July 2003 the Venezuelan anti-trust agency
(PROCOMPETENCIA) ruled on one of the many cases alleging
unfair competition brought by international pharmaceutical
companies against domestic companies selling bioequivalents
of their products. PROCOMPETENCIA ruled that trading
replicas of anti-allergy drug Allegra in the Venezuelan
market did not constitute an act of unfair competition.

3. (SBU) PROCOMPETENCIA's president explained the ruling as
the inevitable result of a conflict between domestic health
legislation which mandates data revelation as part of the
regulatory process and existing legislation on IPR protection
which does not specifically protect test data. At least
three other cases brought by international pharmaceutical
companies are pending. The Association of Foreign
Pharmaceutical Companies (CAVEME) is one of the entities,
which has proposed explicitly including five year test data
protection in the new Industrial Property Law which is
currently being debated by the National Assembly. According
to CAVEME, government officials including the president of
Venezuela's Patent and Copyright Office (SAPI) have indicated
their opposition to this proposal. GOV officials have said
the five year rule would be detrimental to national health
concerns. International pharmaceutical contacts tell us the
length of protection afforded to data within the system is so
short that legitimate new products may enter the market after
illicit copies do.

4. (SBU) The GOV maintained its policy of refusing to issue
second-use patents on the basis that they do not qualify as
inventions. According to SAPI officials, only four patents
for new pharmaceutical products were issued in 2003. This
appears to be the result of new politically driven policy at
SAPI. Several long-serving SAPI officials, including the
head of the patent division, were fired in the final months
of 2003 for what, they claim, are political reasons.
Industry contacts tell us these officials have been replaced
by political appointees with much less experience in the

sector. We are told by a Ministry of Production and Commerce
counterpart that Venezuela is unlikely to ratify or implement
the two internet treaties; the WIPO Copyright Treat and the
WIPO Performances and Phonograms Treaty because of opposition
from the president of SAPI.

--------------------
PIRACY GETTING WORSE
--------------------

5. (SBU) Piracy and contraband trade remain significant
problems for Venezuela, which has still not moved
aggressively to implement an effective law enforcement
regime. The commission created by President Chavez in 2002
to address the problem did not generate viable
recommendations or solutions, despite GOV concern about
losses due to tax evasion on contraband. According to
Venezuela's association of authors and artists, 80 percent of
the optical media and 50 percent of the computer software
currently sold in Venezuela is pirated. Piracy of compact
discs and DVDs worsened as the economic downturn in 2003
forced more Venezuelans to seek work in the informal sector,
mainly as street vendors. In response to concerns raised by
the legitimate optical media industry, the GOV insisted on
finding a solution which included street vendor
participation. When private industry representatives
proposed making street vendors part of their supply chain by
allowing them to market legitimate products, government
representatives counter-proposed the creation of street
vendor cooperatives which would produce as well as distribute
product. More than 50 percent of working Venezuelans are
employed in the informal sector, amaking it unlikely the GOV
will take any effective action against piracy which would
deprive these a number of these citizens of their livelihood
in a potential election year.

-------------------------------
LAW ENFORCEMENT STILL A PROBLEM
-------------------------------

6. (SBU) The issue of enforcement of intellectual property
rights remains problematic in Venezuela, due to a lack of
political will and severe budgetary constraints. The entire
staff of the National Copyright and Trademark Protection
Police (COMANPI) was rotated to another unit in March, 2003.
The new team of seven inspectors for the entire country is
new to the field of IPR enforcement. It continues to operate
with extremely limited resources and only one special
prosecutor with jurisdiction over criminal IP violations.
Complicating their job is the fact that COMANPI has no
jurisdiction within Venezuelan ports and must coordinate
their actions with Venezuela's Customs and Tax Service
(SENIAT). In addition, the special prosecutor's workload
remains split between intellectual property cases and human
rights violations, which often take priority. As a result
the prosecutor's office is extremely slow to process charges
of criminal IP violations even when successful raids were
carreid out by the police and infringing goods are available
as evidence. Most cases of trademark infringement continue
to be settled out of court.

-------
COMMENT
-------

7. (SBU) The ongoing political confrontation between the GOV
and its opposition remains a significant factor in the
government's commitment (or lack thereof) to implementing
adequate IP protection. As part of his strategy to maintain
control, Chavez has placed ideologically motivated supporters
in key positions throughout the government, including in
SAPI. As a result, we are unlikely to see any softening in
Venezuela's position with regard to second-use patents and
data exclusivity. The GOV will most likely avoid taking any
action against piracy which could have negative impact on the
growing number of low-income informal sector workers who
depend on illicit sales for their livelihood. Accordingly,
we recommend that Venezuela's current status on the special
301 watch list be maintained.
SHAPIRO


NNNN

2004CARACA00627 - UNCLASSIFIED

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