SPECIAL 301 DEMARCHE GETS QUICK GOI ATTENTION

C O N F I D E N T I A L SECTION 01 OF 04 TEL AVIV 002070

SIPDIS

USTR FOR NOVELLI AND SAUMS
USDOC FOR 4520/CLOUSTAUNAU AND NWEIGLER

E.O. 12958: DECL: 04/05/2014
TAGS: KIPR ETRD IS ECONOMY AND FINANCE LABOR AND COMMERCE ISRAEL RELATIONS
SUBJECT: SPECIAL 301 DEMARCHE GETS QUICK GOI ATTENTION

REF: STATE 71498

Classified By: CDA Richard LeBaron for Reasons 1.4 (B) and (D)


1. (C) Summary: Aaron Abramovitch, Director General of
Israel's Ministry of Justice, told Econ/C April 5 that the
GOI was "surprised and confused" by the USG statement that it
planned to raise Israel to Special 301 Priority Watch List
status unless action is taken on data protection and
copyright protection for U.S. rights holders in sound
recordings (reftel). Abramovitch said a "Directors General
Committee" would meet soon after the Passover holidays to
decide whether to accept experts' committee recommendations
on data protection. If the recommendations are accepted, the
GOI will share them with the USG in mid- or late-April. The
GOI has taken no official position, he said, on whether U.S.
sound recordings are covered by our bilateral copyright
agreement. Indeed, royalties continue to be paid.
Abramovitch said the GOI wants to engage in consultations
with USTR copyright experts as soon as possible in order to
help resolve the issue. Abramovitch passed us a letter from
Ministers Olmert (Industry and Trade) and Lapid (Justice)
responding to letters from the Ambassador and Under Secretary
Larson on IPR issues (text in paragraph 7). Olmert and Lapid
have also arranged a meeting with Charge April 14 to discuss
these issues prior to the April 16 deadline noted reftel.
End Summary.


2. (C) Abramovitch said the GOI was surprised by reftel
demarche, in which the USG said it intended to raise Israel
to Priority Watch List unless actions were taken on data
protection and copyrights for U.S. music rights holders.
Israel, he said, has taken great strides on IPR enforcement.
The USG stance is "confusing," he said, in that the level of
IPR protection in Israel is much higher than in countries
typically considered for Priority Watch List. He hoped that
the U.S. would look at Israel's total performance, not just
at one or two issues of concern.

--------------
Data Protection
--------------


3. (C) Abramovitch noted that the GOI had been looking
carefully at its data protection regime for the last year,
and was now in a position to recommend changes. An experts'
committee had submitted a report to the Directors General of
the Ministries of Justice, Industry and Trade, Finance and
Health. The Directors General Committee planned to meet soon
after the Passover holidays. If the Directors General accept
the recommendations, they will be forwarded to Ministers.
Finally, Knesset approval for any changes in law will be
required. Abramovitch said he could not share the draft
recommendations with us now, but would be able to do so once
they were approved at the DG level. He said the
recommendations would "answer your concerns," but cautioned
that we should not expect that the recommendations would be
exactly what the international pharmaceutical industry has
asked for, because of the need to craft rules "that will
work" and that the Knesset will support.

-------------- --
National Treatment for U.S. Phonogram Producers
-------------- --


4. (C) Abramovitch said he recognized that the GOI
submission to USTR on the sound recording issue had not been
received very favorably. The GOI had been forced into a
corner, he said, by the USG insistence that the GOI make a
clear statement about the protection of phonograms under the
1950 bilateral agreement. In response, the GOI sought a
legal opinion from an outside source. The GOI has not
endorsed that opinion (which states that music recordings may
not be covered by the agreement). On the other hand, the GOI
cannot ignore the opinion and state in writing (as the USG
has asked) that the bilateral agreement covers phonograms.
The GOI desires instead, he said, to engage in consultations
with the USG about the copyright issue and the scope of the
bilateral agreement. It is important to note, he continued,
that royalties continue to be paid to US music producers, and
the GOI has no plans to argue that royalties should not be
paid.

-------------- --------------
Letter from Olmert and Lapid; Meeting with Charge Planned
-------------- --------------


5. (SBU) Abramovitch said Minister of Industry and Trade
Olmert and Minister of Justice Lapid had not yet had a chance
to carefully review reftel demarche, although both had been
apprised on its contents. Olmert and Lapid, he said, wished
to meet with Charge as soon as possible after Passover (and
before the April 16 deadline mentioned in the demarche) to
discuss the upcoming Special 301 Review. A meeting has
tentatively been set for April 14.

6. (SBU) Abramovitch passed Econ/C a letter from Ministers
Olmert and Lapid to the Ambassador in response to 1) a letter
the Ambassador had written to the ministers March 11 on the
music recordings issue noted above and 2) a letter from Under
Secretary Larson detailing USG concerns about IPR issues. The

SIPDIS
texts of that letter and an accompanying letter to USTR on
the music recordings issue follow in paragraphs 7 and 8
below.


7. (SBU) Letter from Minister of Industry and Trade Olmert
and Minister of Justice Lapid to Ambassador Kurtzer.

Begin text:

"April 4, 2004

His Excellency Mr. Daniel C. Kurtzer
Ambassador
Embassy of the United States of America

Dear Ambassador Kurtzer:

Thank you for your letters of March 11th and March 29th,

2004. It appears that there have been misunderstandings
regarding some intellectual property issues, and we would
like to take this opportunity to clarify those issues.

As you know, over the past few years the Government of Israel
(GOI) has exerted enormous efforts to enhance its
intellectual property regime. The GOI remains committed to
fulfilling its international obligations regarding
intellectual property rights, building on its past proven
successes in effective enforcement and in the promotion of
investment and trade.

We note first that during the past year Israel has continued
vigorously to combat IP related violations in all its forms,
dedicating substantial and increasing resources to strong and
cooperative efforts by Israeli police and customs officers,
prosecutors, judges, legislators and diplomats. Israel's
significant progress during the past year is detailed in the
extensive report submitted by the GOI to the U.S. Trade
Representative (USTR).

Israel's intellectual property regime is a modern and
effective one, more so than the systems of many countries
that do not appear in any category of the "watch list". We
need not belabor the point that being placed on a U.S. "watch
list" may have strong ramifications, economic or otherwise,
for a country that is so listed. Therefore we urge the U.S.
to view Israel's system in its entirety, and not merely in
the context of one or two outstanding issues.

In that context, we would like to address the two issues you
raised - phonogram producers and data exclusivity - and, we
hope, to allay your concerns regarding those issues.

Regarding phonograms, the GOI's newly published draft
copyright bill is, needless to say, intended to be consistent
with all relevant international obligations. That issue and
others are elaborated in a letter sent by Adv. Howard
Poliner, of the GOI's Ministry of Justice, dated March 26,
2004, to Mr. Edmund Saums of the Office of the USTR, a copy
of which is attached hereto.

We believe that the protection of phonograms is an important
and complex issue that requires a thorough and good faith
examination. The GOI has stated that it will form an opinion
on the scope of the U.S.-Israel bilateral agreement and has
been examining that issue. No final opinion can be
established without copyright experts from both sides
engaging in detailed discussions. We again invite U.S. legal
experts to assist us in opening a professional and candid
dialog to arrive at a proper interpretation of our bilateral
agreement among all concerned parties.

We would also like to add that in practice, to the best of
our knowledge, the Israeli Federation of the Phonographic
Industry has been transferring royalties for public
performances to U.S. phonogram producers, and continues to do
so.

With respect to the question of data exclusivity, it is the
view of the GOI that its legal system and practices ensure
the required level of protection that is called for pursuant
to Article 39.3 of the TRIPS Agreement.

Nevertheless, as has already been reported to the USTR, the
GOI formed an inter-ministerial committee whose task was to
review Israel's policy regarding the protection of data
exclusivity. The committee included senior representatives
from the Ministries of Finance, Health, Justice, and the
Ministry of industry, Trade and Labor. The committee studied
all aspects of that issue, including its implications on
access to medicine, public health, budget and expenditures,
industry and employment, investments and international legal
commitments.

As part of its work, the committee held extensive
consultations with industry representatives (both generic and
innovative),Israeli health maintenance organizations, and
other relevant bodies. The committee concluded its work at
the end of March and has already submitted its report and
recommendations to the Director Generals of the relevant
ministries. The said report includes a proposal for altering
the current policy in this matter. Following a meeting
between the Director Generals, scheduled to take place
following the Passover vacation, a final decision will be
made by the relevant Ministers.

We hope that the foregoing explanation has been helpful, and
we would like to suggest a joint meeting in which those
issues and others will be discussed and further clarified.
Additional meetings have already been scheduled between
Israeli and USTR officials.

Sincerely,

Ehud Olmert
Vice Prime Minister and
Minister of Industry, Trade,
Labor and Communications

Joseph (Tommy) Lapid
Minister of Justice
Deputy Prime Minister"

End text.

Begin text of letter from Ministry of Justice to USTR:

"March 26, 2004
State of Israel
Ministry of Justice
Howard Zvi Poliner, Advocate
Director Intellectual Property Law Dept.
Legislation and Legal Counsel

Mr. Edmund Saums
Office of the United States Trade Representative
Washington, D.C.

Dear Mr. Saums,

Based on preliminary informal reactions to the Government of
Israel's (hereinafter GOI) recent submission to your office
in the framework of the Special 301 Review Process, we are
under the impression that there are several factual
misunderstandings that require clarification. In particular,
it appears that USTR believes: (1) that the GOI has changed
its position on the interpretation of the scope of the
Bilateral Copyright Agreement; and, (2) that the recently
published proposal for a copyright bill is designed to negate
the Bilateral Copyright Agreement. Those assumptions are not
accurate.

With regard to the scope of the Bilateral Copyright
Agreement, the GOI does not now, nor has it in the past, held
a formal position on this matter, nor has it stated
otherwise. On the contrary, the GOI has stated that it would
form an opinion on the scope of the Bilateral Agreement. In
order to reach an opinion regarding the scope of the
Bilateral Agreement, it was deemed necessary to seek the
assistance of outside counsel. To that end the law firm of
Morrison and Forester was recently asked to prepare a
preliminary opinion on the question of whether US phonogram
producers, as such, are covered under the terms of the
Bilateral Agreement (as distinguished from copyrights in the
lyrics and composition embodied in those phonograms which
clearly are within the scope of several international
copyright agreements). Morrison's preliminary opinion states
that phonograms, as such, are not subject matter covered
under the terms of the Bilateral Agreement. The Morrison
opinion is only a preliminary opinion and no decision has yet
been taken with regard to its conclusions. Any possible
interpretations of the scope of the Bilateral Agreement are
open for discussion.

With regard to the perception that the proposal for a
copyright bill would effectively result in the abrogation of
the Bilateral Agreement, this too is not accurate. Section 8
of the proposal is designed to empower the Minister of
Justice to implement international commitments which Israel
has made, or will make in the future, in the field of
copyright. Indeed, nothing in the proposal calls into
question the validity of existing bilateral or multilateral
agreements. In other words, section 8 is intended to
maintain the status quo with regard to existing bilateral
agreements, whatever such status quo may be, and section 8
does not affect the interpretation of such bilateral
agreements.

With regard to the optional proposal set forth in section
7(b) of the proposal for a copyright bill to not recognize
"simultaneous publication" with respect to public performance
and broadcast of phonograms, this too would not impact on the
interpretation of the Bilateral Agreement and is effectively
a separate issue. Indeed, if the Bilateral Agreement is
deemed to cover phonograms as such, then the optional
proposal set forth in section 7(b),even if adopted, would
not supersede the terms of the Bilateral Agreement. Further,
it should be noted that the proposal set forth in section
7(b),to limit the applicability of the "simultaneous
publication" is consistent with the 1996 WIPO Performances
and Phonograms Treaty and the Rome Convention's concept of
the rule of reciprocity. Indeed, with respect to public
performance rights in phonograms, reciprocity, and not
national treatment, is the more common practice throughout
the world and in particular in common law tradition countries
such as Canada and Australia.

Accordingly, and in order to reach a better common
understanding of the scope of copyright relations between our
countries, we believe that it would be useful for copyright
experts from both sides to engage in direct discussions
either in person or by teleconference.

Sincerely,
Howard Poliner, Adv.









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