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