Special 301 - Recommendation to Continue

UNCLAS SECTION 01 OF 02 ANKARA 000971

SIPDIS

DEPT FOR EB/TPP/MTA/IPE - SWILSON/JURBAN AND EUR/SE
DEPT PASS USTR FOR JCHOE-GROVES
DEPT PASS LIBRARY OF CONGRESS FOR STEPP
DEPT PASS USPTO FOR JURBAN AND EWU
USDOC FOR ITA/MAC/DDEFALCO AND JBOGER

E.O. 12958: N/A
TAGS: ETRD KIPR TU
SUBJECT: Special 301 - Recommendation to Continue
Turkey's Priority Watch List Status (SBU)

Ref: (A) State 23950 (B) Ankara 394 (C) Ankara 839

(D) Ankara 941 (E) Ankara 939

Summary
--------------


1. (SBU) The GOT has taken a number of steps in the
last year to improve intellectual property protection,
especially for copyright owners. However, Turkey has
not implemented fully TRIPS-consistent data exclusivity
protection, and piracy and counterfeiting rates remain
high. Embassy recommends maintaining Turkey on the
Priority Watch List in the 2005 Special 301 Review, and
continuing to engage the GOT with a view to enhancing
intellectual property protection. End Summary.

Pharmaceuticals
--------------


2. (U) Citing concerns on data exclusivity and patent
linkage, the Pharmaceuticals Research and Manufacturers
Association (PhRMA) claimed IP-related losses of USD 887
million - 20 percent of sales in Turkey, up sharply from
USD 600 million last year, and from much lower estimates
in previous years. Describing serious non-IP problems
with respect to Turkish price controls and reimbursement
system reforms, PhRMA recommended elevating Turkey to
Priority Foreign Country status.


3. (U) Embassy notes that data exclusivity comprises
only USD 146 million of PhRMA's estimated damages. It
is not clear what patent-related damages are represented
by the remaining USD 741 million claimed by PhRMA. We
have requested further clarification from PhRMA of the
causes of these additional lost sales.


4. (U) The GOT introduced limited data exclusivity
protection in a regulation issued by the Health Ministry
in January 2005. Retroactive application is limited to
original products licensed in a Customs Union country
after January 1, 2001 for which no generic manufacturers
have applied for licenses in Turkey. The term of
exclusivity is limited to the duration of the drug
patent. The six-year term of protection starts on the
date of licensing in an EU Customs Union country,
implying a shorter term of protection because of the
length of the marketing approval process in Turkey (ref
B).


5. (SBU) On the issue of patent linkage, the Health
Ministry recently told us that a coordination mechanism
has been established between the Turkish Patent
Institute (TPI) and the Ministry to prevent generic
applications from being filed for drugs with a valid
patent (ref C). However, TPI sources subsequently
advised that the Health Ministry has asked for a list of
patented medicines, but that beyond this, no formal
coordination mechanism exists. To our knowledge, the
Health Ministry has not approved a patent-infringing
copy of Zyprexa, though at least one application has
been in its "final" stages for some time.


6. (SBU) While the data exclusivity regulation is
inadequate, it does represent a significant step
forward, given that the GOT had previously resisted
implementation before the end of 2007. GOT officials
have indicated that the regulation is not set in stone
(ref C) and indeed the GOT is still engaged in a
dialogue with the EC in the context of the Trade Barrier
Review. However, we believe the Turks will continue to
resist broadening the scope of retroactivity because the
GOT believes it cannot legally do so in cases where
there is already a generic application pending. Turkey
is also likely to insist on terminating data exclusivity
protection upon patent expiration so long as EU members
are permitted by relevant directives to do this. It is
post's understanding that EC Directive 2004/27 delinking
patent and data exclusivity terms will not be mandatory
for EU members until late 2005.


7. (SBU) Embassy will continue to raise the issue of
fairness for research-based companies in the Turkish
pricing system and in reimbursement reform. Given the
fiscal constraints imposed by Turkey's reform program
and the overarching U.S. priority of reinforcing
Turkey's recovery from financial crisis, we need to
ensure that our message on pricing and reimbursement is
framed in terms of fair treatment for innovators rather
than opposition to the GOT's efforts to seek cost-
savings.
Copyright, Trademarks and Other IP Issues
--------------


8. (U) Both the International Intellectual Property
Alliance (IIPA) and the International AntiCounterfeiting
Coalition (IACC) recommend that Turkey remain on the
Watch List. They point to continued high levels of
piracy and counterfeiting, and call on the GOT to
improve enforcement. IIPA estimates industry losses in
Turkey at USD 187 million.


9. (U) Turkey has taken a number of significant positive
steps in copyright enforcement in the last year. These
include:

-- Legislation banning street sales of all copyright
products, leading to effective sweeps in major Turkish
markets;

-- The first deterrent sentences we are aware of imposed
on pirates, including large fines and imprisonment;

-- A Finance Ministry circular on investigating and
prosecuting convicted pirates for tax evasion;

-- A Culture and Tourism Ministry computerized system to
license vendors and other commercial users of copyright
products nationwide;

Further information on these measures is provided ref D.


10. (U) Overall, Embassy believes that the GOT is making
a good faith effort to improve enforcement of copyright
and will continue to do so. However, we have not seen
the same focus on curbing trademark counterfeiting.


11. (U) In 2004, Turkey published its first Plant
Variety Protection (PVP) Law. However, at least one
subsidiary of a U.S. seed company has been unable to
obtain protection for its commercial seed under this new
law.

Comment/Recommendation
--------------


12. (SBU) The new data exclusivity regulations, stepped
up copyright enforcement and deterrent sentences
represent more progress than we have seen in several
years on intellectual property protection. At the same
time, serious deficiencies continue in the
pharmaceuticals, copyright and trademark areas. Raising
Turkey to the Priority Watch List in 2004 may have
played a role in prodding the GOT to making some of the
improvements we have seen. Although there is a case for
returning Turkey to the Watch List in 2005, Embassy
suggests that, on balance, maintaining Priority Watch
List status is preferable because it should generate
pressure on the GOT to do more. Embassy will continue
to seek appropriate opportunities to deliver our message
on intellectual property, including in the Trade and
Investment Framework Agreement (TIFA) meetings due to be
hosted by the GOT. In this regard, we recommend that
USTR correspond with its Turkish counterpart, the
Foreign Trade Undersecretariat, to reiterate our
interest in scheduling a TIFA meeting in the near
future.
Edelman