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Cablegate: Poland: 2005 Special 301 Submission - Gradual

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



E.O. 12958: N/A
SUBJECT: Poland: 2005 Special 301 Submission - Gradual
Progress in Fighting Piracy and Improving IPR Protection

REFS: a) State 23950, B) Warsaw 378, C) 04 Warsaw 4488


1. (SBU) Poland's efforts to improve its IPR protection
continued through the fourth quarter of 2004, with increased
activities by customs and police authorities to curb IPR
violations in the optical disc area. It is clear that
copyright and trademark protection is significantly better
than several years ago. Since May 1, 2004, Poland also has
doubled its period of pharmaceutical data protection to six
years to meet EU requirements. Progress on other
pharmaceutical IPR issues is less pronounced, with Poland
still lacking official linkage between Polish patent
authorities and offices responsible for drug registration
and market approval. Although U.S. industry has reported no
new infringing generics making their way on to the
reimbursement list since last year's out-of-cycle review,
one major U.S. research pharmaceutical firm is concerned
marketing approval may soon be granted to a generic version
of one of its blockbuster drugs.

2. (U) In a major new market access development, the U.S.
generics drug manufacturer Ivax has taken over Polfa Kutno,
one of Poland's largest generics drug companies. The
takeover gives the U.S. firm a major share of the Polish
generics market for the first time. In addition, a U.S.
logistics firm UTI, which specializes in the direct shipment
of drugs from manufacturers to pharmacies and hospitals,
started operations in Poland in January 2005. The firm
offers services designed to allow drug manufacturers and
Poland's independent pharmacies to entirely bypass the
current wholesale distribution system, which is dominated by
a handful of wholesalers. The move was warmly welcomed by
the Polish Association of Pharmacies. Finally, although we
still have no confirmation of this (and likely will not
until March), Health Ministry officials have stated that new
innovative drugs will be on the public health system's
revised reimbursement list due out in March 2005. The move
would break a de facto moratorium in effect since 1998.

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3.(SBU) Taking into account the progress Poland has made in
copyrights and trademarks, and distance it still has to go
to adequately protect pharmaceutical property, the Embassy
recommends that the country remain on the Watch List.

OD Piracy Efforts

4.(SBU) As reported in reftel C, Polish authorities have
targeted Warsaw Stadium and bazaars along the Polish-German
border for increased OD investigations. In a major
development, two illegal CD production facilities supplying
Warsaw Stadium were identified and closed. To demonstrate
their commitment to stamping out piracy, Polish police
authorities have for the first time invited the Embassy's
trade officer to accompany them on an upcoming raid on a
provincial open air market where pirated CD's and other
goods (primarily liquor and apparel) are trafficked. Police
continue to work closely with industry representatives to
coordinate enforcement efforts.

Other Anti-piracy Actions

5. (U) In the last quarter of 2004, police officers from
Warszawa-Praga Poludnie Division apprehended 35 suspects for
piracy, and on the basis of secured evidence, initiated 30
criminal proceedings (although trials have not yet begun).
Merchandise confiscated in these arrests included:

CD 16,481
CD-R 3,619
DVD 5,808
MP-3 522
Play-Station 665

The estimated total value of these seizures is about

6. (U) In addition, during the fourth quarter of 2004,
Polish courts also started eight criminal proceedings
involving eight suspects for which the following evidence
has been seized:

CD 26,650
CD-R 2,317
DVD 13,176
MP-3 201
Play-Station 533

The estimated total value of these seizures is approximately
$1.03 million.

Official Reporting and OD Law Compliance

7.(U) The Union of Producers of Audio Video (ZPAV), the
International Federation of the Phonographic Industry (IFPI)
representative office in Poland, reports that a number of
anti-piracy activities have been undertaken after the
amendments to the Law on Copyright and Neighbouring Rights
and a Decree of the Ministry of Culture on conducting
inspections by authorised employees came into effect.

8.(U) The Legal Department of the Ministry of Culture has
officially notified various OD plants about new reporting
obligations stemming from the amended law and a Ministerial
decree. These will require factories to submit information
about the production of optical discs and any movement of
pressing equipment and accessories.

9.(U) Inspectors from the Ministry of Culture, authorized by
the Legal Department of the Ministry, conducted formal
inspections of five OD plants. Inspectors prepared reports
of their activities and documented collected samples.
Inspection reports together with recommendations for further
action were forwarded to all inspected entities. ZPAV
prepared inspectors of the Ministry of Culture for these
inspections by providing the Ministry with a database for
storing information required in Ministerial Decree. ZPAV
representatives also participated in inspections of selected
CD plants.

Pharmaceuticals IPR Protection

10.(SBU) Pharmaceutical industry complaints over the last
several years have focused largely on two patent-infringing
generics that have been given marketing approval several
years ago and placed on the reimbursement list. In one
case, the Polish courts subsequently upheld the rights of
the U.S. manufacturer and ordered the competing product
removed from the market (the foreign competitor is appealing
the verdict). In the second example, the U.S. company lost
its case in the lower courts and is appealing the case.
(Note: The same U.S. firm appears to have lost a patent case
in the United States involving the same product against a
U.S. generics producer in 2003.)

11.(SBU) These cases have been reported in previous Special
301 reviews as a major obstacle for the innovative
pharmaceutical industry in Poland. We share these concerns
with industry, and have reinforced the message that market
approval and placement on the reimbursement list for
infringing generics is a serious IPR violation. However, we
have no knowledge of any new patent violations over the past
year, echoing our finding in the 2004 out of cycle review.
Nevertheless, one major U.S. drug-maker is concerned that
Polish authorities may soon grant marketing approval for a
copy of one of its signature drugs may soon be given. The
particular drug is protected by a process patent in Poland,
and the U.S. company fears that a local competitor will
obtain marketing approval for an alternative manufacturing
process for the active ingredient without doing all of the
detailed clinical work and certifications required of the
U.S. manufacturer during its original submission. The U.S.
firm confirms, however, that the copy has not yet appeared
on the market as of late February 2005. Finally, we note
that since May 1, 2004, Poland has adopted the six-year EU
standard for data protection, effectively doubling the
period of protection.

Pharmaceutical Market Access

12.(U) The Polish national health system's official
reimbursement list, which effectively accounts for an
estimated 60 percent of the $4.5 billion annual drug market
in Poland, has not included an innovative drug since 1998.
This is a major concern for U.S. manufacturers who feel that
their new products are unfairly denied market access. (The
Polish government argues that the Health system's budgetary
crisis is the only reason for the freeze on newer, more
costly products.) We have learned that the Ministry of
Health recently circulated for public consideration a draft
reimbursement list, which will close for comment on February
21. The final official list is expected to be announced in
early March.

13.(U) As of the February 9 Legal Affairs Working Group
(LAWG) meeting of the AmCham in Warsaw (the group that
represents pharmaceutical companies), U.S. firms indicated
that they have no information regarding the presence of any
new patent-infringing products on the proposed reimbursement
list. While the comment period is still open, we find
industry's silence on this issue telling. The Polish Health
Ministry maintains that some new innovative drugs will be on
the list. If confirmed, the move would represent the end of
the de facto moratorium on listings for innovative drugs in
effect since 1998.

14.(U) Finally, perhaps the biggest new development in the
area of market access has been the entry into Poland of the
U.S. Miami-based generic drugs and veterinary products
manufacturer Ivax. On October 22, the Board of Governors of
the Warsaw Stock Exchange approved Ivax's application for a
listing on the Warsaw Stock Exchange (WSE). In November,
the U.S. firm became the first American company listed on
the Warsaw Stock Exchange, when it acquired a majority of
the shares of one of Poland's largest generic drugmakers,
Polfa Kutno. Ivax has now replaced Polfa-Kutno's listing on
the exchange. The takeover--which valued Polfa-Kutno at
around $160 million-- gives the U.S. firm a significant
share of the Polish generics market and represents the
largest U.S. direct investment in drug manufacturing to date
in the Polish market.

15. (U) On the distribution side, the U.S. firm UTI--a
logistics firm specializing in, among other things, the
direct shipment of pharmaceuticals to pharmacies and
hospitals--recently started operations in Poland. The U.S.
firm plans to create a logistics network that will allow
pharmaceutical firms to bypass Poland's current
distributions system, which is dominated by a handful of
wholesalers. The set up of the operation was welcomed by
Poland's Association of Pharmacies whose members have been
under increasing pressure from wholesaler-operated chains.

Intel Trademark Infringement

16.(U) In reviewing the Intel submission, post notes that
none of the problems mentioned appear to be current. The
complaints seem to concern events which took place several
years ago and which were resolved -- after some trouble and
expense - in Intel's favor by 2003. As far as we are aware,
Intel has not come to the embassy with any complaints since
at least mid-2003. We are therefore uninformed about any
more recent trademark infringement issues that the firm may
have in Poland. However, if these exist, we would recommend
that the firm would inform us of them.

17.(U) The main remedy Intel seeks seems to be reform of
Poland's court system. The desire to make Poland's legal
system more honest and efficient in all respects is a goal
shared by the U.S. Embassy, the American Chamber of Commerce
in Poland, and the local Polish business community. The
World Bank has noted that Polish firms have great problems
enforcing even routine financial contracts in the court
system - a process which can take up to four years. Reform
of the court system is a long-standing politically complex
issue. However, it is difficult to regard this problem as
fundamentally an IPR or market access issue.

Comment and Recommendation

18.(U) Poland continues to make clear measurable progress in
improving IPR protection of optical discs. Over the past
six months, the Culture Ministry has made efforts to inform
OD producers of their reporting obligations and sensitize
police authorities on the need for strict enforcement of IPR
laws. To our knowledge, Poland is the only EU country with
an OD law. For their part, the Polish Police appear to be
making more serious efforts to break up rings trafficking in
pirated merchandise and shut down open-air trade, including
a major case involving FBI cooperation.

19.(U) In the area of pharmaceuticals, progress has been
less noteworthy. While no new patent-infringing drugs have
appeared on the market, there continues to be a lack of
formal coordination between the Ministry of Health and the
Patent Office. Thus U.S. research pharmaceutical firms
continue to lack certainty that protection of their
intellectual property will be upheld in each case. On the
positive side, Poland has now lengthened the period of data
protection to six years. It appears about to break its six-
year moratorium on placing innovative drugs on the
reimbursement list. It has welcomed the acquisition of a
major Polish drug firm by the U.S. generics firm Ivax. The
Polish Association of Independent Pharmacies is enthusiastic
about the recent opening of UTI's direct distribution
channel in Poland. The presence of US firms on the Polish
pharmaceutical market is expanding.

20. Taking into account the progress Poland has made and
the distance it still has to go to adequately protect
pharmaceutical property, the Embassy recommends that the
country remain on the Watch List.

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