SLOVENIA: 2005 SPECIAL 301 REVIEW -

UNCLAS LJUBLJANA 000127

SIPDIS


DEPT. FOR EB/IPE
STATE PASS TO USTR LERRION

E.O. 12958: N/A
TAGS: KIPR ECON ETRD SI
SUBJECT: SLOVENIA: 2005 SPECIAL 301 REVIEW -
RECOMMENDATION AGAINST INCLUSION ON WATCH LIST AT THIS TIME.

REF: SECSTATE 23950


1. SUMMARY. In light of significant progress Slovenia has
made over the past year, Post recommends that Slovenia not be
included on the Special 301 Watch List or Priority Watch list
for 2005. Post has consulted with PhRMA members in Ljubljana
and relevant government authorities on the PhRMA
recommendation submitted for USTR's consideration. The
advances in Slovenian policy related to the protection of
intellectual property are a result of its obligations as a
new member of the European Union. We expect this trend to
continue until Slovenia is in full compliance with all EU
norms and directives. PhRMA's complaint on slow court
procedures is well founded. Slovenia is grappling with a
very serious problem of court backlogs, but this problem is
system-wide and is being addressed on a number of fronts by
the Government of Slovenia (GOS). Additionally, a number of
alternative dispute resolution mechanisms have been
introduced in order to alleviate some pressure on the court
system. Recent changes in Slovenia's public health program
designed to bring costs under control and to balance the
health-care budget have resulted in some disadvantages for
the producers of "innovative" drugs. However, the process by
which the program is being implemented appears to be
transparent and designed in order to permit the public health
system to maintain and even expand the types of drugs
available, including innovative drugs, to Slovene citizens in
the long-run. END SUMMARY.


Intellectual Property
--------------


2. Slovenian legislation provides for different legal
measures within the framework of civil, criminal and
administrative law, which may be used by holders of
intellectual property rights. The Industrial Property Act
(IPA),the Act on Litigation Procedure (ALP) and the Act on
Enforcement of Judgments in Civil Matters and Insurance
(AEJCMI) are generally used in civil litigation and for cases
involving infringement of industrial property rights.


3. COURT PROCEDURES: In discussions with representatives
from the Slovenian Intellectual Property Office (SIPO),Post
raised the points provided by PhRMA with the SIPO Director,
Biserka Strel, and the Head of the Legal Department, Mojca
Pecar. Both acknowledged deficiencies in Slovenia's legal
system and described the measures currently undertaken to
address them. They denied that current legislation favored
domestic (pharmaceutical or other) industry. The GOS is
working to speed court proceedings across the system. The
Ministry of Justice has created the Hercules Project, which
involves experienced judges from the high and Supreme courts
working in the courts of first instance to speed cases along
and minimize the need for the appeals process. In 2005, a
pilot project with shortened proceedings was launched.
Results of the Hercules project have been encouraging:
increased numbers of cases have been solved, and average time
of proceedings has been reduced. The EU Directive on
Enforcement will also impose changes on the Slovene system by
requiring the GOS to build TRIPS plus into its legislation.
While the GOS has until April 2006 to accomplish this, it is
committed to have the regulations in place by the end of 2005.


4. COMPENSATION: To PhRMA's complaint that "current
damages for intellectual property rights violations are not
adequate to compensate for the injury the right holder has
suffered," SIPO responded that compensation for the damages
the right holder has suffered including the loss of profit is
set by the judge, taking into account all the circumstances
of the case. As a general rule, a party which did not
succeed in the litigation has to cover the costs of the
winning party. The judge may also decide to split the
costs. These decisions are also subject to appeal. (Note.
Because PhRMA's paper did not include concrete examples to
back up these and other complaints, Post was unable to press
the point further. We are pursuing PhRMA locally for
specific examples we may use in the future. End Note),


5. OTHER TRIPS INCONSISTENCIES: The PhRMA submission
complains that appeals periods are extremely short - as short
as eight days, and that they may not be extended. According
to SIPO, the general time period for lodging an appeal is 15
days. However, in certain proceedings, for example under
AEJCMI procedures, the law prescribes a shorter time limit of
eight days from the receipt of the decision. SIPO says this
is due to the nature of the preliminary and provisional
measures which require extremely fast response in order to
stop the infringement or to prevent a threatening
infringement. The time limit for opposition or appeal of
this decision is not extendible. However, a general rule on


restitution in integrum exists. If a party was not able to
meet the time limit for a justified reason, the court may
grant a reinstatement of rights and accept the legal act as
though it were filed on time, although it was filed after the
expiration of the time limit. These rules apply equally to
domestic and foreign parties to a suit.


6. FREE CHOICE OF EXPERTS: Dr. Strel explained that if
expert testimony is deemed necessary, the court may designate
one or more experts, generally after consultation with both
parties. The court generally designates a "court expert" -
someone already deemed by the court to have qualifications
necessary to comment authoritatively on the subject of the
case - and will pay the expenses of this expert. It is also
possible for the court to designate a person or institution
which is not considered a "court expert," but an expert in
the subject nonetheless, including a foreign person or
institution. Additionally, experts my be proposed by the
parties, but the costs associated with the proposed expert
must be covered by the proposing party.


7. PROVISIONAL RELIEF/BURDEN OF PROOF. In response to
PhRMA's claim that there is no provision for provisional
relief against threatened infringements, SIPO responded that
Article 123 of the IPA instructs the court to adopt
provisional measures when "such infringement is highly
probably, and that he (i.e. owner of right) is likely to
suffer an irreparable damage." SIPO believes current
legislation adequately protects and offers relief against
actual and threatened infringements. Strel also cited Art.
122 (l),which clearly states that the burden of proof shall
be borne by the defendant or alleged infringer.


8. PIPELINE PROTECTION: Pipeline protection is not a TRIPS
obligation. Slovenia introduced patent protection on January
1, 1993. Prior to this, there was no protection either in
Slovenia or the former Socialist Republic of Yugoslavia of
which Slovenia was a part until June 25, 1991. At the other
end of the spectrum, Slovenia introduced the possibility of
supplementary protection certificates in 1993. Since May 1,
2004, when Slovenia joined the EU, supplementary protection
certificates have been granted in accordance with European
regulations. Patent holders have the possibility to claim
prolonged protection for a product after the expiration of
patent protection.


9. ONGOING IMPROVEMENTS IN LEGISLATION: SIPO told us it
plans to propose amendments to Slovene legislation during
2005 on intellectual property regarding the implementation of
EU Directive 2004/48/EC on enforcement of intellectual
property rights. The Directive will expand the means and
measures which may be used by a rightholder against
infringers and therefore strengthen the enforcement of
intellectual property rights. SIPO does not anticipate any
exceptions or reservations to this proposal.


10. MARKET ACCESS BARRIERS: Stanislav Primozic of the
Agency for Medicinal Products and Medical Devices, which is
part of the Ministry of Health, described the pricing and
reimbursement policy applied by the Ministry of Health in its
efforts to control health-care expenses. Slovenia employs a
system based on wholesale prices for generic drugs in
Germany, France, and Italy, taking into account Slovenia's
lower GDP. He acknowledged that it is perhaps not the best
possible model, but it is a legitimate model not unlike those
used in Portugal, Greece and Ireland. Primozic said that in
terms of cost control, drugs are always the first target for
a health care system because it is one area where clearly
quantifiable savings can be gained. He suspected, now that
the drug reimbursement system had been overhauled, the GOS
would be focusing on other cost-saving measures within the
system.


11. Primozic explained Slovenia's approach as an effort to
find a balance between the use of innovative and generic
drugs, and he acknowledged that in the transition period
generics did experience a boost. This may have been
advantageous timing, too, for generics just coming to market.
Overall, he could think of only a few "drastic" cases where
this occurred and that the complaint could not be
generalized. Primozic said this was not a measure aimed
specifically at foreign drug producers. Domestic generic
producers, too, were feeling increased competition with the
introduction of cheaper generics from India.


12. PRICING: PhRMA complains that Slovenia is misusing the
Anatomical Therapeutic Chemical (ATC) and Defined Daily Dose
(DDD) systems. Primozic responded that his agency uses the
ATC/DDD as indicators, not exclusive determinants, of price.
While the system could be improved, he said that it was
nonetheless transparent. There is no law or legal procedure


prohibiting physicians from prescribing any drug approved for
use in Slovenia. However, the system will only reimburse up
to the value of the lowest priced drug on the Interchangeable
Drug List (IDL). This system would not affect any new,
innovative drugs brought to market before the patent
protection period ran out and generics became competitive.


13. Primozic said that the changes to the health care system
have already realized a savings of 3%. It has brought down
the annual increase in expenditures from an average of 15%
over the last few years into single digits. He views the
current period as a time of adjustment, but the ultimate goal
is to be able to increase spending, particularly on
innovative drugs, by 4-5% in four or five years. As a
pharmacist himself, he is acutely aware of the need to
encourage development of new drugs and to be able to offer
Slovenes the latest treatments available.


14. COMMENT: PhRMA's reasons for wanting Slovenia on the
Special 301 Watch List are similar to those made during the
2004 process. This exercise did, however, offer post an
important opportunity to engage the GOS on progress it has
made over the last year, and to reinforce our interest in its
continued progress in this area. In general, it appears that
the GOS is meeting its obligations under TRIPS and the 22
other treaties on intellectual property and patents to which
it is party. With membership in the EU, there is added
pressure to conform to European norms, and it is Post's
opinion that Slovenia will do so in good faith, if it has not
already achieved this goal. The overarching problem in
Slovenia is an overburdened court system, which is also the
target of many calls for reform from all sectors of society.
The COM had also made judicial reform a theme in his calls on
the new government, senior representatives of the judicial
system, and in public discussions. In addition to the IP
complaints, PhRMA has introduced the problem of market access
and drug cost reimbursement policies in the Slovene Health
system. There is agreement on all sides that the new
reimbursement mechanism employed by the Slovene health system
has disadvantaged some innovative drug producers in some
categories in the short run. This development should be
viewed in the context of the overall need for the GOS to
balance its budget, bring down inflation, and prepare its
economy for entry into the EURO zone. The measures were not
undertaken with a goal of favoring domestic producers of
generic drugs, and according to the GOS, Slovenia's system is
similar to the majority of EU members' systems.
ROBERTSON


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2005LJUBLJ00127 - Classification: UNCLASSIFIED



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