2003 SPECIAL 301 REVIEW FOR SLOVAKIA

UNCLAS BRATISLAVA 000212

SIPDIS


DEPARTMENT FOR EUR/NCE MCKNIGHT AND EB/IPC:WILSON

DEPT PLEASE PASS TO USTR FOR BPECK
USDOC FOR KSCHLEGELMILCH
USPTO FOR JURBAN/DASHLEY-JOHNSON
LOC FOR TEPP

E.O. 12958: N/A
TAGS: KIPR ETRD ECON XG LO IPR
SUBJECT: 2003 SPECIAL 301 REVIEW FOR SLOVAKIA

REF: STATE 43420


1. Summary: Slovakia has enacted nearly all of the
intellectual property legislation required by TRIPS, and the
overall IPR situation has improved from a historical
perspective. However, a lack of IPR protection for
pharmaceuticals caused Slovakia to be placed on the Special
301 Watch List in each of the past three years and there is
little evidence that the situation has improved adequately.
Problems related to general patent protection, especially
data exclusivity, continue to be an issue because it is
unclear which department of the GOS has responsibility.
Piracy of optical and other visual medias remains minimal,
but home "burning" of CD's has likely increased. The
Ministry of Interior (MOI) and the police have an
independent office dedicated to computer-related crime.
Although GOS offices and large companies predominantly use
licensed software, experts say entrepreneurs and small- and
medium-size enterprises continue to use pirated software.
The sale of counterfeit trademarked goods is minimal. Due
to problems in the pharmaceutical area we recommend that
Slovakia remain on the Watch List unless the GOS moves
aggressively to address these issues before the 301
decisions must be made. End summary.

TRIPS IMPLEMENTATION
--------------

2. The Patent Law, the Commercial Code, the Law on
Trademarks, the Law on Inventions, Industrial Design and
Rationalization, the Law on Protection of Appellations of
Origin of Products, and the Copyright Act, all implement
Slovakia's TRIPS obligations. The Civil and Penal Codes
implement obligations with regard to enforcement. TRIPS has
been valid in Slovakia since 1995, but industry sources
report that implementation and enforcement, despite some
improvement, still remain problematic.


3. Slovak law remains problematic because it fails to
harmonize data exclusivity with market authorization, and
this raises potential conflicts with the country's WTO
obligations. Data exclusivity is drastically weakened
because the GOS recognizes the date of first marketing
authorization in any EU country as the start of the six-year
period of protection in Slovakia, but does not accept the
corresponding EU marketing authorization. Since Slovak
marketing authorization often takes two or three years
longer than its EU equivalent, the six-year period of data
exclusivity protection is drastically reduced. In an effort
to placate disgruntled industry members, in 2002 the GOS
passed a law offering a 10-year period of data exclusivity
for "high technology" drugs. However, in 2003 the GOS
returned to a six-year period of protection.


4. Foreign pharmaceutical manufacturers continue to
complain that the GOS allows competitors to sell drugs that
are protected by valid patents. Reportedly, the GOS has
told the patent holders to sue the infringing companies
directly, rather than getting involved itself or denying the
guilty companies legal approval to sell the disputed drugs
in the first place. Industry sources complain that Slovak
legislation is unclear and that GOS officials do not
understand who has responsibility for enforcement of various
laws, or even that patents are held on certain drugs.
Currently, at least one foreign pharmaceutical
manufacturer's infringement case is caught between two GOS
offices that each say the other is responsible for the
issue.


5. In 2002, Slovakia became a member of the EPO, acceding
to all of the appropriate regulations, including the
Convention on the Grant of European Patents and the Protocol
on Centralization of the European Patent System. According
to Lubos Knoth at the Slovak Industrial Property Office
(SIPO),Slovakia now provides European patents with the same
level of protection as they enjoy in other EPO members.
Moreover, licensed Slovak attorneys can now represent their
customers in the EPO.

OPTICAL MEDIA
--------------

6. According to the Slovak Anti-Piracy Union (SAPU),the
problem of video piracy has decreased significantly since

2002. The practice of video rental shops buying one legal
copy of a video and then making several pirated copies, as
well as the presence of pirated videos at flea markets, is
now rare. On the other hand, counterfeited DVD's, primarily
of Ukrainian and Russian origin, have started to become more
common. Efforts by the police, tax authorities and customs

officers to monitor this situation have been commendable.
According to a SAPU official, in 2003 up to 1,000 DVDs were
seized and five or six individuals were arrested and put on
probation for a period of 2 years. Generally, Slovakia is a
transit-and-target country rather than a producing nation,
as it has no visual media pressing plants. However, Sky
Media, a Swiss company reportedly with Russian interests,
plans to open Europe's largest CD-rom and DVD production
facility in Slovakia later this year.


7. Although some progress has occurred in the area of music
media, further improvement is essential. According to
Slavomir Olsovsky from the International Federation of the
Phonographic Industries (IFPI),legislation has been to a
large extent harmonized, but enforcement is still lacking
because of the insufficient skills and experience of police
and customs officers. A flea market in Eastern Slovakia's
largest city, Kosice, was recently the site of a major
police action, during which dozens of music CDs and other
goods were confiscated, and forty people were arrested for
selling illegal merchandise. The number of home
manufactured, or so-called "burned" CD's has likely climbed
significantly due to the increasing penetration of personal
computer copiers. There are no industrial facilities to
press pirated and/or counterfeited CD's in the country.

COMPUTER SOFTWARE
--------------

8. Computer programs are protected as literary works,
according to Section 7(1)a of the Copyright Act. Use of
unlicensed computer programs is a crime, which carries a
sentence of up to five years in prison or a financial
penalty. Since 2001, the Slovak Police Presidium has
operated a special independent office dedicated to computer-
related crime. Generally, Slovakia is a consumer of pirated
software but not a significant producer, and most of the
pirated goods come from Ukraine, Russia and Poland.
Problems persist regarding Slovakia's personal computer
gaming clubs, which continue to violate computer licensing
laws. In 2003, Slovak police conducted raids at 12 Internet
cafes in the city of Nitra, seizing 116 personal computers
that contained illegal software.


9. According to industry experts, software piracy has
noticeably decreased in Slovakia. Microsoft's Bill Gates
said during his visit to the country in January 2004, "We
have registered a decline in software piracy in Slovakia."
Based on the Microsoft's Enterprise Agreement with the GOS
signed in 2002, all copyrights of Microsoft software being
used in the state administration have been purchased by
Slovak authorities for a total of USD 13 million
(representing a 65 percent discount on the regular price).
In 2001, a similar agreement was signed between Microsoft
and the Slovak Chamber of Physicians and in 2004, Slovakia
joined Microsoft's worldwide project "Partners in
education."


10. In October 2003, the Slovak branch of the U.S. based
Business Software Alliance (BSA) launched a nationwide
campaign to fight illegal software. Together with the
police, the BSA sent out 100,000 letters to entrepreneurs
reminding them that the use of unlicensed products was
against the law. Ads on local radio stations relayed the
same message. The International Planning and Research
Corporation assigned Slovakia a piracy rate of 45 percent
for 2002, the second lowest figure in the region, down from
66 percent in 1994. A 2003 study by BSA and the IDC Company
suggested that if Slovakia reduced its software piracy rate
by 10 percentage points, its IT sector could grow to nearly
USD 1 billion annually by 2006, from USD 545 million in

2002.

TRADEMARKS
--------------

11. Trips obligations on trademarks, bringing Slovakia into
conformation with EU legislation, came into effect in 2002.
In addition, Slovakia passed a law on customs measures
regarding the import and export of illegal and counterfeit
goods to comply with TRIPS articles dealing with customs and
border control. However, implementation is weak along the
Ukrainian border, which is considered by experts to be an
easy target for pirates.


12. An amendment to the Act on Trademarks came in effect on
February 1, 2004, granting European "community" trademarks
validity in Slovakia after its accession to the EU on May 1,

2004. Existing community trademarks will automatically be
valid in the enlarged EU. While the holders of existing

national or international trademarks of similar appearance
may not contest this automatic extension of existing
community trademarks, they can protect their rights by
applying for a ban on the use of existing similar community
trademarks in Slovakia if their trademark was previously
registered. In addition, commencing November 1, 2003,
trademark holders can file objections to new applications
for the registration of community trademarks of similar
appearance.


13. According to sources, illegal use of trademarks is not
perceived to be a significant problem in Slovakia. The
Customs Code makes it possible for Slovak Customs to seize
counterfeited goods. (NOTE: Previously, this authority was
granted only to the trademark owner himself). However, both
customs and police are still not sufficiently trained
regarding which trademarks are licensed in Slovakia.

DESIGNS
--------------

14. Protection of industrial designs by the 2002 Act on
Designs, conforms to EU standards. After accession to the
EU, the protection afforded designs in existing member
states will automatically apply in Slovakia, just as Slovak
businesses will be able to take advantage of the same
protection for their designs in the enlarged EU.

DESIGNATION OF ORIGIN
--------------

15. In the area of designation of origin, Slovak
legislation (Act. 466/2003) conforms to Council Regulation
(EC) No. 535/97 on the protection of geographical
indications and designations of origin for agricultural
products and foodstuffs.

ENUMERATION LEGISLATION
--------------

16. Compensation of enumeration is defined by the Copyright
Act, which entered into effect on January 1, 2004. The law
imposes a six percent levy on all recording carriers such as
CD's and video and audiotapes, and a three percent levy on
all recording devices such as computers, video recorders,
DVD players and other reprographic appliances. Slovakia is
the only country in Europe to also imposed a 0.5 percent
levy on all hard discs in computers. The proceeds from
these levies go to industry rights holders, including
foreign entities, although the exact amounts are difficult
to calculate and vary according to bilateral and
multilateral agreements. For example, the Slovak Performing
and Mechanical Rights Society (SOZA) is responsible for
distributing compensation for U.S.-made music recordings to
the American Society of Composers, Authors and Publishers.

INTERNET PIRACY
--------------

17. In 2003, the SAPU, responsible for protection of movie
industry rights, discovered 57 websites offering up to 700
movie titles in the form of burned CDs in 2003. SAPU has
worked with the police in an effort to close down the
websites and prosecute the administrators. Most of the
sites had operated on an order-only base (no titles in
stock). The BSA, responsible for monitoring software-
related crime, reported that for the first time ever, an
individual in Slovakia had received a sentence of one-year
of probation for the crime of selling computer programs
through the Internet.

IPR ENFORCEMENT
--------------

18. According to the SIPO, Slovakia's TRIPS obligations are
implemented through the Civil and Penal Codes. The Slovak
Customs Directorate is responsible for border enforcement,
while the Slovak Police Presidium under the MOI is
responsible for cases occurring within Slovakia. The State
Institute for Criminology has a department that specializes
in determining whether goods are pirated or genuine. Legal
representatives of specialized organizations protecting
intellectual property rights are often invited to assist in
determining the size of damage and applying compensations.
A lack of experience on the side of executing bodies still
persists a major obstacle in IPR enforcement.


19. In 2003, police seized around 6,000 music CD's (in
audio or MP3 format),the overwhelming majority of which
were burned, not industrially produced. This compares to
7,500 CD's in 2002; 7,630 in 2001; 13,859 in 2000, and
26,500 in 1999. Experts partially blame the decline on
police incompetence, but also admit that fewer people are

purchasing pirated CD's as household "burning" becomes more
common. According to SAPU's statistics, in the area of
movies, the police made 114 raids on flea markets during
2003, and seized 467 videocassettes, 316 DVD's and 560 CD's
with movie content.


20. In addition to enforcement, prosecution remains a
problem. Slovakia still has no specialized IPR prosecutors
or police, there are no formal procedures or registrations
required for lawyers seeking to adjudicate IPR cases, and
punishment for IPR crimes remains inadequate. If a pirate
obtains a skilled lawyer, he can often be acquitted.
Further, most pirates who are prosecuted receive light
sentences, such as small fines or probation, although they
can be sentenced for up to five years in prison in case of
breaching copyright rights and up to three years in prison
in case of violating industrial property rights. To date,
no persons convicted of piracy have served prison terms.


21. There are no dedicated courts for the adjudication of
IPR cases in Slovakia. However in 2003, the GOS established
a panel of three judges to adjudicate IPR cases at three
regional courts, in Banska Bystrica, Kosice and Bratislava.
The Ministry of Justice, in cooperation with the SIPO,
conducted intensive training of assigned judges on IPR and
related issues.

WCT AND WPPT COMPLIANCE
--------------

22. Obligations from WIPO's Copyright Treaty (WCT) and
WIPO's Performance and Phonograms Treaty (WPPT) were
implemented into the Slovak Copyright Act in 2000. Slovakia
became party to WCT and WPPT in 2002. Moreover, a new
Copyright Law (618/2003),effective from January 1, 2004,
has also been brought into compliance with Directive
2001/29/EC of the European Parliament and of the Council of
22 May 2001 on the harmonization of certain aspects of
copyright and related rights in the information society.

COMMENT
--------------

23. We do not believe piracy is a major problem in
Slovakia. Authorities have been generally cooperative with
aggressive private sector efforts to combat piracy of
various products protected by IPR legislation. However,
weak data exclusivity protection remains a major concern and
we believe it warrants keeping Slovakia on the Special 301
Watch List. We are encouraged by Slovakia's membership in
various international IPR organizations and hope it will
lead to greater patent protection within the pharmaceutical
industry. If so, we would call for Slovakia to be removed
from the Special 301 List in the future. Post will continue
to lobby hard for actual implementation of laws protecting
patent information, and we urge USG officials to raise the
importance of this issue with the Slovak embassy in
Washington as well.

THAYER


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