BRAZIL - 2004 SPECIAL 301 RESPONSE

UNCLAS SECTION 01 OF 03 BRASILIA 000445

SIPDIS

SENSITIVE

STATE FOR WHA/BSC AND EB/IPC WILSON
COMMERCE FOR KSCHLEGELMILCH
PLS PASS USTR BPECK, USPTO JURBAN/DLASHLEY-JOHNSON,
AND LOC STEPP

E.O. 12958: N/A
TAGS: KIPR ECON ETRD KCRM PGOV BR IPR
SUBJECT: BRAZIL - 2004 SPECIAL 301 RESPONSE

Refs: A) State 29549 B) Sao Paulo 276 C) Rio de Janeiro 128
D) Brasilia 313 E) Brasilia 222 F) Brasilia 202 G) 2003 Sao
Paulo 2199 H) 2003 Brasilia 3868 I) 2003 Brasilia 3138 J) 2003
Brasilia 3122 K) 2003 Brasilia 2943 L) 2003 Sao Paulo 1186

SENSITIVE BUT UNCLASSIFIED, PROTECT ACCORDINGLY.


1. (SBU) Summary: Post recommends that Brazil remain on the
Priority Watch List for the 2004 Special 301 Review. Despite
several positive developments, including tougher penalties for
copyright infractions and increased (but isolated) police
action against copyright theft, the Lula administration has not
yet developed a comprehensive national strategy for addressing
the country's poor IPR enforcement, nor has it reduced the
backlog of patent and trademark applications. Several signs
suggest that substantial progress is in the offing, but to date
there has been little concrete improvement in Brazil's
enforcement record. Widespread recognition of the harm caused
by IPR abuse to Brazilian artists, tax revenues, and
technological progress/industrial development has increased,
due in part to successful public awareness campaigns launched
by both the private and public sectors. The federal government
has incorporated intellectual property regime improvements in
its 2004-2007 Pluriannual Plan, and the formation of a
Commission of Parliamentary Inquiry (CPI) and a permanent
Caucus (Frente Parlamentar) on the issue of piracy and tax
evasion in Brazil's Congress has generated much positive
momentum. Leaving unaltered Brazil's Special 301 status while
recognizing the progress it has made would send the clear
signal that its continued poor IPR enforcement is a significant
bilateral concern, but not damage the efforts of those within
Brazil who seek tangible improvement. End summary.

Copyright Piracy - Positive Strides But Piracy Still Rampant


2. (SBU) Several of the industry Special 301 submissions
welcome the increased interest in piracy and tax evasion
generated in the Brazilian Congress in 2003. The Chamber of
Deputies' Piracy CPI and the spin-off permanent Caucus may well
represent the best hope for national-level action to improve
copyright enforcement. As IIPA's submission suggests, the
CPI's final report due in June will include several private
sector generated action proposals for the federal government
that should substantially remedy the lack of concrete
coordinated action against piracy. While the issue gains
prominence, the crime continues unabated. Special piracy task
forces or police units in some Brazilian states and
municipalities have produced enforcement successes and worked
cooperatively with the CPI to make some high-profile arrests
(refs E, G, H, I, K). These encouraging but isolated foci of
activity are not coordinated and exist despite the
Administration's failure to formulate a national strategy.


3. (SBU) The administration's Inter-ministerial Committee to
Fight Piracy (IMC) met 11 times during its first year under the
leadership of former federal police official Clovis Monteiro da
Silva, but was bogged down in the bureaucracy of transition to
the new Lula administration for much of the first half of 2003.
Residing in the Ministry of Justice, the IMC continues to
disappoint most with its lack of vision in addressing the fight
against piracy. One member of the committee told econoff
recently that the IMC has lots of great ideas but no authority
or resources to implement them. Monteiro notes that the IMC
still suffers from insufficient funds to accomplish its
mission, and some ambitious 2003 plans, such as a Mercosul IPR
conference, had to be postponed.


4. (SBU) Ref B notes Brazil-based industry representatives'
assessment of the IMC as largely ineffective, but several of
the committee's actions in 2003 deserve mention. Monteiro is
most proud of the IPR introductory training course now required
at the federal police academy and hopes to duplicate the
success of this program in all police training curricula (civil
and military). The public awareness campaign initiated in 2003
with radio, billboards and isolated television spots in a few
cities will be expanded nationwide to include anti-piracy movie
trailers. Monteiro insists that the educating role of the IMC
is significantly undervalued, and that in the long-term, this
effort will reduce piracy. He admits that the IMC would gain
from improved self-promotion and publicity to inform the
interested public of its activities and accomplishments.
According to Monteiro, the Committee's role of coordinating
action within the Federal government, including with the police
and customs officials where true enforcement takes place, is
difficult to appreciate, but he believes that the growing
recognition of the scope of Brazil's piracy problem is due to
the quiet, consistent work of the Committee. There wouldn't be
a CPI on piracy if the IMC did not exist, he told econoff.


5. (SBU) The IMC and the Federal Police are developing a
database of piracy actions that will be accessible by federal,
state civil and military police. This effort entails modifying
an existing crime database to include crimes related to piracy.
The IMC has not yet finalized its 2004 action plan, which is to
be included in the National Public Security Plan, but held its
first meeting of the year on February 19. Monteiro plans to
focus on widening the public awareness campaign and
strengthening ties within Mercosul and with WIPO. The IMC will
also be studying changes to the legislation that created the
Committee to strengthen its powers and expand its jurisdiction.
Contrasted with the CPI's warm and cooperative relationship
with the private sector, the IMC appears to regard the industry
associations with a certain suspicion, particularly concerning
industry statistics on damages caused by piracy -- which the
IMC maintains are not credible. The IMC is working on
developing its own statistics and studying the economic impacts
of the creation and theft of intellectual property. With the
start of the CPI, the private sector's involvement with the IMC
has waned, but the IMC invited private associations to
participate in several 2003 meetings, according to Monteiro.


6. (SBU) In July 2003 President Lula signed a law amending
the Brazilian criminal code with respect to copyright
violations (ref L). The law increases the minimum penalty
from one to two years' imprisonment, levies a fine and
allows for improved seizure and destructions procedures for
contraband. The law does not include increased sanctions
for software infringement. The free software movement is
building support within the GoB and throughout Brazil. GoB
procurement regulations prohibit use of unlicensed software,
according to Itamaraty officials, but no special decrees or
directives exist to further encourage compliance with
international standards of copyright protection.

Patents - Talk but Little Action


7. (SBU) As ref C illustrates, Brazil's difficulties in
granting patents and trademarks continues to worsen, as INPI
lacks much needed resources and the involvement of the Ministry
of Health's Sanitary Vigilance Agency (ANVISA) in
pharmaceutical patents become more pronounced. INPI's Patent
Director estimates the current patent backlog at 50,000.
PhRMA's estimate of 450,000 pending trademark applications
strikes us as reasonable. The administration's industrial
policy goals, focusing on improving the technological base of
Brazilian industry with special emphasis on software and
pharmaceutical industries, put INPI in the spotlight. The 2004-
07 Pluriannual Plan fixes the objective of reducing processing
time for patents from seven to four years and for trademarks
from four to one year.


8. (SBU) There appears to be recognition within the
administration that the INPI/ANVISA linkage with regard to
patent approval for pharmaceutical products or processes has
taken on negative dimensions, but no remedies have been
proposed (refs C and F). INPI's staffing woes should be
ameliorated somewhat this year with the addition of 108
positions now available to qualified civil servants, and
officials from the Ministry of Development Industry and Foreign
Trade (MDIC) expect a permanent President of INPI to be named
shortly.

TRIPS Compliance and Related Issues


9. (SBU) Presidential Decree 4370/03 amends existing patent
legislation regarding compulsory licensing in situations of
national emergency or public interest. The GoB quickly
instituted the measure after the August 30 WTO Access to
Medicines Agreement while in the midst of price negotiations
with several pharmaceutical companies regarding medicines for
its world-renowned HIV/AIDS treatment program. The measure has
not been invoked, and its TRIPS compliance is uncertain (ref
J). Legislation pertaining to designs for integrated circuits
(Bill 1787/96) remains pending in Congress; Itamaraty officials
have repeatedly requested priority action on the bill, to no
avail.

10. (SBU) Previous Brazilian legislation dealing with
aspects of genetic "patrimony" or heritage related to
biodiversity conservation, integrity of genetic patrimony
and traditional knowledge was superceded by the issuance of
Provisional Measure 2.186 of August 23, 2001, which together
with Decree 3.945 of 2001 and subsequent regulations,
subject access and transfer of genetic patrimony to the
approval of the Genetic Heritage Management Council (GHMC) -
- a body composed of several ministries, academics, and
others which is directed by the Ministry of Environment --
and to the sharing of benefits in contractual terms and
legally established conditions. New draft legislation on
genetic patrimony, which would replace the Provisional
Measure and subsequent regulations, is reportedly under
consideration in the Brazilian Executive Branch, and could
be introduced in the Brazilian Congress later this year.

Biotechnology


11. (SBU) In January 2004, Monsanto announced that it had
reached an agreement with farmers from the Brazilian state of
Rio Grande do Sul to receive remuneration for the use of
Roundup Ready technology found in the company's soybean variety
grown widely throughout the state. The GoB's position on
biotechnology remains undecided, as the biotechnology bill is
still under debate in Congress (ref D).


12. (SBU) Itamaraty confirms that the GOB has no plans to
ratify the 1996 WIPO Copyright treaty or the WIPO Performances
and Phonograms Treaty.

Recommendation


13. (SBU) Despite positive strides in some sectors, post
believes that the continued lack of tangible improvements in
IPR protection and enforcement as a whole in the last year
manifestly precludes lowering Brazil's Special 301 status.
However, we recognize a positive momentum that should bear
fruit this year, with projects in the pipeline such as the
CPI's final report and INPI's increased staffing. We concur
with industry submissions that suggest that retaining Brazil
as a Priority Watch List country will appropriately convey
the importance of the issue in our bilateral relationship,
and believe that this position would not unduly discourage
the forces of positive change within Brazil. To ensure that
we can use the announcement to promote further progress we
request that, should Brazil's status be maintained, USTR's
announcement clearly recognize the positive developments
regarding IPR that did occur and the USG's desire to work
collaboratively to produce tangible results in the coming
year.

HRINAK