Special 301 - Recommendation to Downgrade

UNCLAS SECTION 01 OF 04 ANKARA 000854 SIPDIS DEPT FOR EB/TPP/MTA/IPE - CLACROSSE/JURBAN AND EUR/SE DEPT PASS USTR FOR JCHOE-GROVES DEPT PASS USPTO FOR JURBAN USDOC FOR ITA/MAC/CRUSNAK E.O. 12958: N/A TAGS: ETRD KIPR TU USTR SUBJECT: Special 301 - Recommendation to Downgrade Turkey to Watch List Status (SBU) Ref: (A) State 14937 (B) 05 Ankara 6378 (C) 05 Ankara 7097 (D) 05 Ankara 6899 (E) 05 Ankara 971 (F) 06 Istanbul 124 (G) 06 Ankara 479 (H) 05 Ankara 7308 (I) 05 Ankara 7296 Summary -------------- ¶1. (SBU) Over the past year, the GOT has continued to improve intellectual property protection, especially for copyright owners. Turkish courts began rendering increasingly deterrent sentences for copyright infringers in a more expedited manner. An expanded data exclusivity regulation provides protection for new pharmaceutical molecules, although it is still short of TRIPS and EU requirements and leaves the fate of 35 products in question. The most productive way to ensure that Turkey continues to move toward full implementation of international IPR standards would be to include Turkey on the Watch List in the 2006 Special 301 Review and continue to engage the GOT to improve intellectual property protection. Such steps would recognize the successful actions taken over the past year and set a clear agenda for further work in the period ahead. End Summary. Pharmaceuticals -------------- ¶2. (U) Inadequate protection of the confidential test data of pharmaceutical companies has been Turkey's most egregious IPR shortcoming. In response to intense EU and USG pressure, however, the GOT broadened data protection in a regulation issued by the Health Ministry in June 2005. Data exclusivity is provided to all products granted marketing approval in Turkey after January 1, 2005. The six-year term of protection starts on the date of licensing in a European Customs Union (ECU) country. The GOT argues that it cannot differentiate itself from other ECU countries with respect to data exclusivity. EU representatives in Turkey concede that, while the ECU system is complex and this issue is not entirely clear in its regulations, this is probably the case. They add that under ECU statutes, an ECU country cannot block access to a product that has been approved or produced in other ECU countries. Using the leverage of the EU accession process, the EU continues to engage the GOT at the highest level, including letters from Commissioner Mandelson to FM Gul and meetings with State Minister Babacan, to push the GOT to implement fully EU-compliant regulations on this issue. ¶3. (SBU) Prior to the January 1, 2005 start of enhanced data protection, generic manufacturers in Turkey filed a number of "midnight" applications for approval of products not yet registered in the Turkish market. Pharmaceuticals Research and Manufacturers Association (PhRMA) companies in Turkey remain concerned about the data protection available to up to 35 molecules for which such generic applications were filed (ref B). MOH officials argue that under Turkish law they must process these applications, but that this in no way guarantees that they will subsequently gain approval (ref C). Local representatives of PhRMA companies tell us that under Turkish law these files do not qualify for approval because they may rely on research-based companies' full data submissions that were not filed in Turkey prior to January 1, 2005. MOH officials also tell us that the 210 day processing deadline for applications does not apply to files submitted prior to January 1, 2005, and therefore they have made it a priority to process the applications submitted after this date and will get to the "midnight filings" as time becomes available. While the MOH has not been willing to definitively state whether or not these 35 products enjoy data exclusivity, officials have indicated to us that they may be solving the problem by waiting for what would have been the end of the data exclusivity period before making a decision. ¶4. (SBU) On the issue of patent linkage, the Health Ministry recently told us that the Turkish Patent Institute (TPI) holds responsibility for patent linkage reviews. Under Turkish law, there is no linkage requirement between a patent search and licensing approval. There does exist, however, a requirement to determine whether or not a patent exists prior to granting marketing approval, the final step before a product becomes available to the Turkish market. ¶5. (U) Citing concerns on data exclusivity and patent linkage, PhRMA claimed IP-related losses of USD 1.36 billion - 21.8 percent of sales in Turkey in 2005, up from USD 887 million last year. Describing serious non- IP problems with respect to Turkish price controls and reimbursement system reforms, PhRMA again recommended elevating Turkey to Priority Foreign Country status. Embassy notes that data exclusivity comprises only USD 205 million of PhRMA's estimated damages. We also note that, following the MOH's expansion of data protection in June 2005, the pharmaceutical companies operating here have expressed a willingness to let implementation take its course for now rather than pushing for our continued high-level engagement. It is not clear what if any patent-related damages are represented by the remaining USD 1.16 billion claimed by PhRMA. Copyright, Trademarks and Other IP Issues -------------- ¶6. (U) While the International AntiCounterfeiting Coalition (IACC) did not recommend that Turkey remain in any Special 301 category in 2005, the International Intellectual Property Alliance (IIPA) recommended that Turkey remain a Priority Watch List Country. While doing so, however, IIPA's submission describes a number of improvements made by the GOT to fight piracy and strengthen enforcement in 2005. IIPA estimates 2005 industry losses in Turkey at over USD 160 million, down from 2004 estimated loss of USD 190 million. ¶7. (U) Turkey has indeed taken a number of significant positive steps in copyright enforcement in the last year. These include the following: -- 3.5 million pirated goods were confiscated in 2005 during raids and other ex officio actions (those not requiring a court order) by the Turkish National Police (TNP). -- In July 2005, the Turkish Court of Cassation (the highest appeal court) upheld a previous Ankara IPR Court ruling cited in our 2005 submission (ref E) against three individuals who were sentenced to 2.5 years in prison and a YTL 60,000 (approx USD 44,000) fine. This ruling now provides a precedent for future cases and should lead to expedited decisions during the appeals process. -- In January 2006, the Istanbul IPR Court sentenced a pirated optical disk producer to 2 years, 13 months and 15 days imprisonment for illegally copying and distributing copyrighted material, an additional 2.5 years imprisonment for violating a copyright without the right owner's consent, the confiscation of 4,700 pirated DVDs, and the sale of the production equipment worth YTL 160,447 (approx USD 120,000). This was the first time in which the production equipment was seized and sold in Turkey and responds directly to IIPA's recommendation that criminal liability include seizure and forfeiture of all equipment and goods found in such facilities. -- The Culture and Tourism Ministry (MOTC) and the Ministry of Education (MOE) created an IPR-related curriculum as part of primary and secondary school civics programs. -- The MOE began a public-education campaign targeting universities and places of business providing photocopy services in their vicinity stating that the reproduction of copyrighted material is illegal. -- Due to private sector and inter-agency GOT pressure, a proposed amendment that would remove criminal penalties for infringing goods produced outside of Turkey (ref D) has been set aside and is not expected to be passed by the Parliament. ¶8. (U) In 2004, Turkey published its first Plant Variety Protection (PVP) Law. At least one subsidiary of a U.S. seed company, however, reported difficulty obtaining protection for its commercial seed under this new law. In the last six months, however, we have had no further contact from the company regarding this issue. Unlicensed Software Use -------------- ¶9. (SBU) In the 1990s, the GOT implemented an internal memorandum banning the use of unlicensed software. According to NGOs in Turkey that monitor this usage, the memorandum's requirements are sufficient for the protection of software rights holders. Official statistics, however, are not available concerning the percentage of government offices in compliance, and no formal mechanism of enforcement exists. ¶10. (SBU) The private business and home use of unlicensed software remains a problem. In a January 2006 visit to Turkey, however, Microsoft's Bill Gates congratulated the GOT on its effort to reduce software piracy and launched a new program, "My First Computer," which aims to provide low cost computers (approx USD 300) to 80 percent of Turkish households (ref F). Gates described Turkey as a "dynamic emerging market" and alluded to the possibility of further IT investment in the country. According to Turkey's chapter of the Business Software Alliance, approximately 66 percent of the software in Turkey is pirated. (Note: While this seems high, compared to other more developed developing countries, Turkey's home computer use is low, estimated at only 16 percent of households or an estimated 10 million people using 750,000 computers. End note.) International Treaties -------------- ¶11. (SBU) Turkey has not yet ratified the 1996 WIPO Copyright Treaty (WCT) or the WIPO Performances and Phonograms Treaty (WPPT). MOCT officials recently told us, however, that the matters were at the Parliament and they hoped, but were not certain, that they would be considered and approved during the 2006 Parliamentary session. They added that in practice Turkey already complies with these treaties. Training -------------- ¶12. (SBU) As a result of the October 2005 start of Turkey's EU accession talks, the GOT has begun a harmonization effort to align its IPR regulations with those of the EU. In an effort to strengthen Turkey's copyright protection and to enhance enforcement, GOT IPR judges, prosecutors, police and customs officials have participated in a number of training programs and twining projects in which officials from another EU country work closely with relevant officials on specific IPR issues. Most recently 8 additional judges and several additional prosecutors were selected to serve in the IPR courts and receive training. The MOCT also held a seminar for 75 TNP officers on detection of pirated goods, investigation and enforcement. 2005 also marked the addition of a former IPR court judge to the Court of Cassation, thus providing much-needed expertise to that court of appeal. This should hopefully expedite future appeals in 2006. ¶13. (U) While the GOT's EU accession process will provide many training opportunities, we continue to support USG training courses for Turkey's IPR judges, prosecutors, police and customs officials. One useful avenue of training would be a course linking IPR crimes with organized crime and terrorist organizations. Many GOT officials believe that proceeds from pirated products fund the PKK terrorist organization, although no connection has been found. It would be useful for Turkey's prosecutors and investigators to receive training on how to detect and link such activities with these organizations and prosecute the offenders. Comment/Recommendation -------------- ¶14. (SBU) The June 2005 expanded data exclusivity regulations, stepped up copyright enforcement and deterrent sentences represent significant progress on intellectual property protection. Due to Turkey's EU harmonization process, the USG and the EU are working together to emphasize the importance of these issues and provide training and technical support. In addition, these issues were emphasized during the January Trade and Investment Framework (TIFA) Council meeting by USTR representatives. We supported putting Turkey on the Priority Watch List in 2004 and 2005 in order to apply the pressure needed for the GOT to implement much-needed reform. Serious steps have been taken and should be recognized. Keeping Turkey there in 2006 could slow down this progress if there is a political backlash against outside pressure, especially if this pressure is seen as not taking into account Turkey's progress. With the increase in raids and contraband seizures, a more expedited judicial process that is issuing more punitive penalties for IPR infringers, and the assurance of data exclusivity for all but 35 remaining pharmaceutical molecules, we believe that downgrading Turkey to the Watch List in 2006 would encourage the GOT to reinforce and continue its IPR enforcement efforts while still maintaining pressure to continue its efforts. Wilson