2003 SPECIAL 301 REVIEW - CANADA

UNCLAS SECTION 01 OF 02 OTTAWA 000619 SIPDIS SENSITIVE STATE FPR WJA/EPSC; EB/IPC - WILSON; WHA/CAN EB/DBT-CLTURNER AND EB/BTA/TDC STATE PASS USTR FOR ALVAREZ USDOC FOR LASHLEY USDOC ALSO USPTO - URBAN STATE PASS LIBRARY OF CONGRESS FOR TEPP E.O. 12958: N/A TAGS: KIPR ETRD ECON CA SUBJECT: 2003 SPECIAL 301 REVIEW - CANADA REFS: (A) STATE 43677 (B) OTTAWA 0501 (C) 02 OTTAWA 3439 (D) 02 OTTAWA 3576 (E) 02 OTTAWA 3602 (F) 02 OTTAWA 3172 ¶1. SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY. ¶2. (SBU) Summary and Introduction - Post recommends that Canada not be placed on the Special 301 Watch List. Recent Canadian legislation has addressed several of the concerns outlined in previous 301 reports, such as the exclusion of Internet retransmission from the compulsory licensing regime, and thereby enhanced intellectual property protection in Canada. Several long-standing 301 issues, including national treatment of U.S. artists in the distribution of proceeds from Canada's private copying levy and "neighboring rights" regime, have received little private sector support (Post has received no queries from U.S. interests on either of these issues) and may no longer warrant a Watch List recommendation. Other high-profile issues that are of concern to U.S. interests, including the delisting of pharmaceutical patents and patenting of higher life forms, are currently being reviewed by the GOC and are not ripe for inclusion in the Watch List at this time. Post is mindful of the various IP concerns and will continue to closely monitor these issues and raise them in meetings with GOC officials. End Summary and Introduction. -- LEGISLATIVE AND JUDICIAL SUCCESS -- ¶3. (SBU) Canada has made real progress in improving its IPR regime over the last couple of years. In December 2002, the GOC revised its Copyright Act (Bill C-11) to explicitly exclude Internet retransmissions from its compulsory licensing regime to the satisfaction of U.S. interests (ref E). An Order-In-Council is expected on March 21, 2003, which will make C-11 enter into force immediately. In 2001, the government amended its patent law to provide at least a 20-year term of protection for patents filed before October 1, 1989. ¶4. There are legitimate concerns about Canada's border measures and weak enforcement of IP, both at the borders and throughout the country. Canadian Customs and the Royal Canadian Mounted Police (RCMP) are required by law to take a passive approach to border enforcement and have not committed the necessary resources to address counterfeiting and piracy. A recent judicial decision, however, is a step in the right direction. In April 2002 the Supreme Court decided that Canadian law prohibits the decoding of all encrypted satellite signals. Since this time the GOC, working with several cable associations, has stepped up efforts to both improve enforcement and address underlying legislative issues. These efforts have not yet crossed over to problems related to border enforcement. -- LIMITED PRIVATE SECTOR INTEREST -- ¶5. (SBU) The GOC has not resolved the outstanding issue of national treatment of U.S. artists in the distribution of proceeds from Canada's private copying levy and its "neighboring rights" regime and considers these issues to be relatively low priorities (Ref F). Post has not received any support from U.S. industry on these issues in the five years that we have recommended Canada be placed on USTR's Watch List. Since U.S. industry does not consider these issues significant enough for their involvement, we do not believe they warrant a Watch List recommendation. -- ISSUES NOT YET RIPE FOR INCLUSION ON THE WATCH LIST -- ¶6. (SBU) Health Canada is currently engaged in an internal policy review of several patent issues, including delisting specific patents, and Notice of Compliance "linkage" regulations. At the same time, Industry Canada is holding public hearings this month on a number of IP issues and will focus on linkage regulations. Until the GOC publishes a report that indicates in what direction it will actually move, we believe it would be premature at this time to recommend placing the GOC on the Watch List because the GOC is, in fact, addressing these issues. In their response to PhRMA's 301 submission, the GOC noted the complexity of the issues and regulations at hand and the fact that "Canada is not alone in facing difficult issues regarding patent eligibility as it relates to its linkage regime. Issues surrounding patent eligibility and abuse are often the subjects of debate in US Congress. For example, on October 21, 2002, President Bush announced US intentions to address problems relating to perceived delays in the market entry of generic drugs." ¶7. (SBU) In December 2002 the Canadian Supreme Court decided against allowing the patent on the "Harvard Mouse" on the basis that "a higher life form is not patentable because it is not a "manufacture" or "composition of matter" within the meaning of "invention" in s.2 of the Patent Act." (See ref C) U.S. biotech companies are concerned that the Court's decision, if left intact, would exclude from patent eligibility any invention that is a higher life form. In their decision the Supreme Court Justices made it explicit that their word is not the final one on this issue; that it is up to Parliament to bring in new legislation to deal with the patentability of higher life forms. As reported in ref D, the GOC has stated its intent to modernize Canada's Patent Act. While no definite timeline has been announced as yet, we do not see a justification to place Canada on the Watch List unless the GOC fails to make clear this year its determination to amend the Act. Cellucci