Identifier
Created
Classification
Origin
03BRASILIA698
2003-03-02 10:52:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Brasilia
Cable title:  

BRAZIL: SPECIAL 301 RESPONSE

Tags:  KIPR ETRD ECON BTIO 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 04 BRASILIA 000698 

SIPDIS

SENSITIVE

DEPT FOR EB/IPC WILSON
DEPT PLEASE PASS TO USTR KALVAREZ, DOC LASHLEY, USPTO
URBAN, LOC TEPP

E.O. 12958: N/A
TAGS: KIPR ETRD ECON BTIO
SUBJECT: BRAZIL: SPECIAL 301 RESPONSE

REF: A) SECSTATE 43420 B) 02 BRASILIA 1869 C) 02
BRASILIA 2290 D) 02 BRASILIA 2590 E) 02
BRASILIA 2940 F) 02 BRASILIA 4170 G) 02
BRASILIA 4470 H) 02 BRASILIA 4473 I) RIO DE
JANEIRO 198 J) 02 RIO DE JANEIRO 1030 K) 02
SAO PAULO 268 L) 02 SAO PAULO 807 M) 02 SAO
PAULO 894 AND PREVIOUS N) 02 SAO PAULO 1709

SENSITIVE BUT UNCLASSIFIED

UNCLAS SECTION 01 OF 04 BRASILIA 000698

SIPDIS

SENSITIVE

DEPT FOR EB/IPC WILSON
DEPT PLEASE PASS TO USTR KALVAREZ, DOC LASHLEY, USPTO
URBAN, LOC TEPP

E.O. 12958: N/A
TAGS: KIPR ETRD ECON BTIO
SUBJECT: BRAZIL: SPECIAL 301 RESPONSE

REF: A) SECSTATE 43420 B) 02 BRASILIA 1869 C) 02
BRASILIA 2290 D) 02 BRASILIA 2590 E) 02
BRASILIA 2940 F) 02 BRASILIA 4170 G) 02
BRASILIA 4470 H) 02 BRASILIA 4473 I) RIO DE
JANEIRO 198 J) 02 RIO DE JANEIRO 1030 K) 02
SAO PAULO 268 L) 02 SAO PAULO 807 M) 02 SAO
PAULO 894 AND PREVIOUS N) 02 SAO PAULO 1709

SENSITIVE BUT UNCLASSIFIED


1. Summary. Post recommends that Brazil remain on the
Priority Watch List for the 2003 Special 301 Review. New
attention to entrenched IPR problems, particularly in the
copyright area, may be forthcoming under the new Lula
government. Driven largely by concern over lost tax
revenues, impact on formal sector jobs, and harm to Brazilian
artists, the new administration, which assumed office January
1, has publicly acknowledged rampant piracy and
counterfeiting to be a Brazilian problem, and has vowed
action. However, it is too early to assess the GOB's new
level of commitment. Furthermore, despite some positive
groundwork laid by the Cardoso administration, the level of
IPR enforcement within Brazil remained grossly inadequate
during the last year. Despite its new leadership and
staffing, the Inter-Ministerial Committee for Fighting Piracy
(IMC) has not yet proven its capacity for effecting
substantial, tangible improvements in copyright enforcement.
Likewise, the backlog of pharmaceutical patents continues to
grow due to the two-step patent application process, which
requires Ministry of Health approval, and insufficient
resources within Brazil's patent institute. Maintaining the
status-quo on Special 301 status for Brazil strikes the
appropriate balance between recognition of a continued poor
IPR record, hopes that the new government will tackle the
issue in earnest, and reinforcement of the USG message that
IPR remains a priority within our bilateral agenda.

Copyright - The Groundwork

- Inter-Ministerial Committee: An Enigma or Force for Change?


2. As IIPA notes in its submission, much stock was placed in
the creation of the Inter-Ministerial Committee to Fight
Piracy (IMC) in March 2001. There was an expectation that
the IMC would provide the vehicle through which the GOB could

finally articulate and act on a national strategy for
copyright enforcement. However, far from being a dynamic
force for change, the IMC was not a functioning entity in

2001. Even GOB officials have acknowledged the IMC's less
than stellar 2001 performance, during a November 2002
Bilateral Consultative Mechanism meeting and more recently in
meetings with DOC A/S Lash on February 27. While copyright
industries are correct in asserting that tangible results
still remained elusive in 2002, the following changes in the
IMC should be noted as having positive potential.


3. In March 2002, a new coordinator, Clovis da Silva
Monteiro, was named to head the IMC. Monteiro was tasked
solely with running the IMC, in contrast to his predecessor,
who had retained his drug-fighting responsibilities as a
senior police official in Rio de Janeiro during his IMC
tenure. Monteiro established within the Ministry of Justice
an IMC office staffed with four assistants, and had managed
to convene 10 IMC meetings by the end of 2002, many with
private sector representatives. In November 2002, the IMC
produced an action plan for 2003 (USTR received a copy during
the Bilateral Consultative Mechanism meeting the same month).


4. The action plan, a nine-page document, on first read
appears to suffer from over-generality; actions are only
described in broad terms. For example, one action item is to
examine existing proposals for legislative reform and to
identify the need to improve other legal texts. The item
fails to provide IMC views on specific IPR legislative
proposals or to identify actions to promote their adoption or
defeat. This generality, at least in part, reflects the fact
that the IMC is a coordinating body ) it does not have the
authority to direct action by any other government body.


5. As explained by Elza Marcelino de Castro, chief of
Itamaraty's Intellectual Property Division and Itamaraty's
representative to the IMC, specific actions are not
identified in the IMC action plan because implementation is
the responsibility of the individual ministries that comprise
the group. She notes, for instance, that after IMC
discussions and consensus, Itamaraty recently sent a note to
the Brazilian Congress urging action on long-pending
legislation on integrated circuitry. She also claims that an
action plan with greater specificity exists, but is not
public. Likewise, it is difficult to find the imprint of the
IMC on police enforcement actions. Monteiro, who hails from
the Federal Police corps, claims to be intimately involved in
promoting and coordinating police activity country-wide. He
admits, however, that he generally obtains results more from
drawing on his personal credibility and experience within law
enforcement than as head of the IMC.


6. Monteiro has apparently succeeded in elevating IPR as an
issue within Mercosul. Due to his efforts, IPR was included
for the first time within a Mercosul Presidential Declaration
during the group's summit in Brasilia in December 2002.
Itamaraty has confirmed that the issue is on the Mercosul
agenda for follow-up at the ministerial level. Brazil's
actions in this regard are driven by its concern over pirated
materials being smuggled across its borders, principally from
Paraguay.


7. Another action under IMC discussion is formation of a task
force to deal with counterfeit products. In a conference on
IPR enforcement held in Rio de Janeiro in late November 2002,
tax losses and potential harm to consumers from counterfeit
products figured prominently. A representative of Receita
Federal, the GOB's IRS, was quoted extensively on the
substantial tax losses from counterfeit products, principally
cigarettes and gasoline. Given the federal government's
tight budget situation and focus on tax issues, greater GOB
attention can logically be expected in this area during the
coming months.


8. The Ministry of Justice is reportedly looking into the
possibility of forming a task force comprised of
representatives from the country's various police units.
This would be a welcome complement to the more
policy-oriented IMC. Monteiro also claims that the IMC is
encouraging other municipalities to establish IPR task
forces, similar to Sao Paulo's, but admits that convincing
local authorities with tight resources that investments
should be made in this area is an uphill battle.


9. An area of increasing focus by some of the copyright
industries is Brazil's judicial system, in particular, the
lack of convictions and of deterrent sentencing. According
to Itamaraty's de Castro, while establishment of separate IPR
courts is not envisioned, the IMC is discussing how to
cultivate IPR expertise within the judicial system. She
notes, however, that executive branch initiatives in this
area are not always welcomed by the independent judiciary.


10. While the IMC's lack of overarching authority will
continue to undermine its ability to forcefully carry out a
nation-wide strategy for improving IPR protection within
Brazil, it still represents the best vehicle at present for
focusing IPR enforcement issues at the federal level.
Private sector associations interested in IPR issues are
seeking increased involvement in the work of the IMC, with
some requesting a seat on the committee. Enhanced
involvement in the IMC by the private sector could lead to
better focus and more concrete results.

-Optical Media: New Digital Codes Requirement


11. The promulgation of Presidential Decree 4533 on December
19, 2002 provides implementing regulations for Article 113 of
Brazil's 1998 Copyright Law concerning identification codes
for copyright products. The decree requires that music and
audiovisual works, whether optically read or not, include
codes identifying the original work, the production company,
catalogue number, the lot code and number of copies contained
within the lot, as well as an International Standard
Recording Code providing information on the respective
artists and other information provided by the producer. The
decree is due to become effective April 22, 2003. Local
industry is divided on whether or not this requirement will
prove to be an effective IPR enforcement tool, or merely a
mechanism for better accounting between production companies
and artists. The local software industry association (ABES),
for instance, opposes the decree. However, Castro argues
that the decree will help reduce illegal sales of works that
are stolen from legitimate production facilities, which she
claims have been significant.

Patents ) No Recovery Expected Soon


12. Despite GOB officials -- such as the acting head of
Brazil's National Institute of Industrial Property (INPI),
Minister Furlan who oversees INPI as the head of the Ministry
of Development, Industry and Trade (MDIC),Under-Secretary
Hugueney of Itamaraty's U/S of Integration, Economics and
Trade, and Senator Mercadante (PT)- recently acknowledging
the magnitude of the problem, no immediate reduction in the
pharmaceutical patent backlog is expected. Firm figures on
INPI's pending patent applications are hard to come by, but
PhRMA's estimate of 45,000 pending patent applications, of
which approximately 18,000 are pharmaceutical patents,
appears reasonable.


13. INPI claims the backlog is due to its lack of resources;
INPI currently has 80 examiners and only a few computer
terminals. INPI has requested approval from the central GOB
to hire 350 examiners over the next five years and expand its
number of computers. However, the government's tight budget
situation casts doubt on the likelihood of this occurring.
Even Itamaraty's de Castro admitted to econoff that without a
dramatic increase in resources for INPI, the patent backlog
will persist for many years. INPI is currently training 27
new examiners, 20 of which will reportedly focus on
pharmaceutical patents. The required approval of the
Ministry of Health's regulatory agency, ANVISA, in addition
to raising TRIPS compliance concerns, also adds to patent
processing uncertainty and delays. However, in a February 27
meeting with DOC A/S Lash, Hugueney reported that the GOB
will be initiating a review in March of its policy regarding
ANVISA's role in the patent approval process.

Biotechnology


14. As noted in the American Soybean Association's (ASA)
Special 301 submission, piracy associated with Roundup Ready
has been a burgeoning trend. Past denial by the GOB of the
existence of illegal plantings of Roundup Ready, which is
estimated to have reached as high as 70 to 90 percent of the
soybean crop in the state of Rio Grande do Sul, has hindered
Monsanto's ability to exercise its patent rights. The Lula
administration has recently recognized the widespread use of
Roundup Ready and is deliberating on what to do about the
"illegal" GMO plantings within the 2002-2003 crop. It is
unclear at this point to what extent if any this
acknowledgment of the pervasive use of Roundup Ready will
assist Monsanto in pursuing its patent claims.

TRIPS Compliance: Data Confidentiality


15. On December 17, 2002, the Brazilian Congress passed Law
10,603 intending to bring the data confidentiality portions
of the industrial property law fully in line with TRIPS. The
law provides data protection for 10 years from the date of
patent registration for products utilizing new chemical
molecules or new biological organisms or until the first
release of the information by the patent holder, with a
minimum guaranteed period of protection of one year. For
products not utilizing new molecule or organisms, the period
of protection is five years or until the first release of
information by the patent holder with a one-year minimum
period of protection. For data generated after patent
registration, the period of protection will coincide with the
patent period or one year from when the data was divulged,
whichever is longer. USTR is evaluating whether or not the
legislation is TRIPS compliant.

Treaty Ratification


16. Itamaraty has confirmed that the GOB does not currently
have plans to ratify the 1996 WIPO Copyright Treaty or the
WIPO Performances and Phonograms Treaty.

Recommendation


17. Post believes that the lack of tangible improvements in
IPR protection and enforcement in the last year manifestly
precludes lowering Brazil's Special 301 status. We concur
with industry submissions that suggest that retaining Brazil
as a Priority Watch List country will appropriately highlight
for the new government the importance of the issue in our
bilateral relationship, without appearing to prejudge its
policies and actions in this area. Nonetheless, we request
that, should Brazil's status be maintained, USTR's
announcement highlight the USG's recognition of the positive
intentions expressed by the Lula administration regarding IPR
and the USG's desire to work collaboratively with it to
improve its IPR regime in the coming year.
GOUGHNOUR