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