Brazil 2006 Special 301 Notification

UNCLAS SECTION 01 OF 04 BRASILIA 000844

SIPDIS

SENSITIVE
SIPDIS

STATE PASS TO USTR FOR MSULLIVAN/KLEZNY
NSC FOR SUE CRONIN
DEPT OF TREASURY FOR FPARODI
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/USFCS/OIO/SHUPKA
USDOJ FOR CHRIS MERRIAM

E.O. 12958: N/A
TAGS: ETRD KIPR BR
SUBJECT: Brazil 2006 Special 301 Notification

REF: A) State 14937


1. (SBU) On April 27, Econ Counselor delivered USG talking points
to Otavio Brandelli, the chief of the Ministry of External
Relations's IPR office. Speaking informall, Brandelli termed the
USG's decision to maintain Brazil on the 2006 Priority Watch List as
both "unpleasant" and "lamentable." Observing that up to now the
United States and the GOB have enjoyed excellent cooperation on IPR
issues, he wondered whether this relationship could continue in
light of the USG's decision.


2. (SBU) In response to our points on pharmaceutical patents,
Brandelli specifically noted that 1) drug test data were "totally
protected by Brazilian law," and 2) the new examiners the national
patent office (INPI) was in the process of hiring would eliminate
the patent backlog. He added that the time-frame for protecting
patents under review was automatically extended in the case of
delay, and that pipeline protection was not obligatory under TRIPs.



3. (U) Late in the afternoon of April 28, subsequent to USTR's
announcement of the Special 301 decisions, the Ministry of External
Relations issued the following press release.

BEGIN TEXT OF INFORMAL TRANSLATION OF PRESS RELEASE

Intellectual Property: Continuation of Brazil on the U.S. Priority
Watch List

The Brazilian government received with displeasure the U.S.
government's April 28 announcement of its decision to maintain
Brazil on the Special 301 trade legislation Priority Watch List.
Brazil has been included in the Priority Watch List since 2002. In
the view of the Brazil government, this situation does not reflect
the reality regarding protection of intellectual property in the
country. Four months ago, on January 13, 2006, the U.S. government
terminated the administrative review that threatened to withdraw
Brazil's tariff benefits under GSP. This was done in recognition of
the noteworthy efforts that had been taken by the Brazilian
government and society in combating copyright piracy and other
crimes against intellectual property through the creation in the
Ministry of Justice of the National Anti-Piracy Council and the
adoption of enforcement, educational, and economic measures.

The decision to maintain Brazil on the Special 301 Priority Watch
List is not consistent with the standards of intellectual property
protection enshrined in Brazilian law, which is completely
compatible with the international commitments undertaken by Brazil
in multilateral fora, such as the World Intellectual Property
Organization (WIPO) and the WTO, and in particular the WTO TRIPs
agreement.

The Brazilian government thus deplores the U.S. decision to maintain
Brazil on the Priority Watch List, as this is inconsistent with the
positive bilateral dialogue, on both the political and technical
level, between the two countries on the issue of intellectual
property. During the course of this dialogue, the Brazilian
government at all times demonstrated an unequivocal constructive
spirit.

Additional Information

Position of Brazil on the Special 301 Priority Watch List for the
Past 10 Years

Year Priority Foreign Country PWL List Watch List
1996 X

1997 X

1998 Brazil not on any list
1999 X

2000 X

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2001 X

2002 X

2003 X

2004 X

2005 X

2006 X


In the ambit of Special 301, based upon information furnished by the
U.S. private sector (the pharmaceutical, software, motion picture,
publishing, and recording industries, among others),the U.S.
organization responsible for trade - USTR - publishes annually three
lists of countries which, in the U.S. government's view, allegedly
fail to offer adequate and effective protection of intellectual
property: priority foreign countries, the Priority Watch List, and
the Watch List.


2. The maintenance of Brazil on the Priority Watch List is
incompatible with the high standards of Brazilian intellectual
property legislation. Brazil has not only declined to take full
advantage of the transition periods in the TRIPs agreement
contemplated for developing countries (the year 2000 in general and
2005 for pharmaceutical patents),but, in some cases, has
established in national legislation requirements stricter than those
agreed to in the WTO. The Brazilian law implementing TRIPs were all
enacted before 2000: the industrial property law in 1996 (Law #
9,279/96),vegetable/cultivation varieties in 1997 (Law # 9,456/97),
copyright in 1998 (Law # 9,610/98) and software also in 1998 (Law #
9,609/98). Specifically, with respect to pharmaceutical patents,
the time-frame for allowing them could have been the year 2005, but
instead, however, they were legalized in the Industrial Property Law
(IPL) of 1996.


3. In substantive terms, the Brazilian IPL granted so-called
"pipeline" patent protection -- not contemplated in the TRIPs
agreement - for the time remaining on patents in areas previously
excluded from patentability (pharmaceuticals, chemicals, and
foodstuffs) that before, by law in Brazil, fell into the public
domain. Regarding copyrights, its worthwhile mentioning the
following provisions of TRIPs-plus character adopted in the
Brazilian juridical framework: (a) the protection period for
property rights (articles 41and 44, Law # 9,610/98) is 70 years when
in TRIPs the period is 50 years (article 12); (b) while under TRIPs
the right to authorize licenses must be allowed, at the minimum, for
computer programs and cinematographic works (article 11, Law #
9,610/98),Brazilian law provides for licensing rights for all
property protected by copyright, including phonographic works
(article 29),(c) Law # 9,610/98 confers on phonogram producers
exclusive rights to authorize, or prohibit, not only the direct or
indirect reproduction of phonograms, but also the distribution
through sale or rental; the divulgation to the public through public
performances; and through any other methods, existing or which come
to be invented. For its part, TRIPs, only provides for "the
producers of phonograms to enjoy the right to authorize or license
the direct or indirect reproduction of their phonograms.


4. In 2004, after the conclusion of the Chamber of Deputies
Congressional Investigative Commission (CPI) on Piracy, the
President of the Republic decreed the creation of a National
Anti-Piracy Council (CNCP). The CNCP represents an unprecedented
qualitative leap in the coordination between public and private
organs in Brazil. Diverse piracy and counterfeiting enforcement
operations took place under the coordination of the CNCP during the
course of 2004 and 2005. According to Receita Federal [the
Brazilian IRS-equivalent] data, in 2005 there was an increase of
32.8 percent in the amount of merchandise apprehended compared to
2004, constituting a record total of R$601 million - R$149 million
more than in the year 2004. The apprehension of illegal media by

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the Federal Highway Police in the first 4 months of 2006 (2.2
million) practically equals the apprehensions for both the years
2005 (2 million) and 2004 (450,000) put together. The Federal
Police detained 1,200 smugglers in 2005, 30 times more than in 2004
(39). Among the various public education efforts, the Government
launched the "Pirata to for a; so uso original" campaign (a
partnership between the CNCP and the SINDIRECEITA),in addition to
education programs aimed at schools, colleges, and universities. In
the various States of the Brazilian federation, diverse regional
initiatives were also implemented.


5. Its worthwhile highlighting at this juncture that the recurring
U.S. allegations about losses in the Brazilian market due to the
violation of intellectual property rights are relative. During the
past 10 years, the repatriation of foreign exchange from Brazil to
the United States originating from intellectual property rights grew
from US$161.31 million in 1994 to US$1.04 billion in 2004, an
increase of 550%.


6. The decision announced by USTR on 1/13/06 to terminate the
investigation under Section 502 of U.S. trade law regarding the
allegation of inadequate protection of copyright in Brazil and to
maintain in full the preferences accorded the country under GSP, in
and of itself recognizes the advances made by Brazil on the issue of
enforcement. One would have expected, however, that the U.S.
government decision would have been consistent with that on GSP,
with Brazil being withdrawn from the list in the 2005 Special 301
review.


7. Other elements, moreover, reinforce the perception that the
inclusion of Brazil on the Special 301 list is inopportune and
inadequate:

PROCESSING OF PATENT REQUESTS: The exponential increase in requests
for patents worldwide, tied with the fact that Brazil had included
"pipeline" patents and areas previously excluded from patentability
in the 1996 LPI, has led to the relative delay in the patent
process, although INPI has begun to remedy this by hiring 440 new
employees. Those posts have been created by the Federal Government
and the selection process is ongoing; 60 new workers are currently
being trained. In addition to this, Article 40 of the LPI
contemplates extension of a patent's term in cases where than has
been a prolonged delay in examining that patent. Up to now,
however, there has been no verified delay in the examination of
patents which would lead to the application of the cited article.

PRIOR REVIEW BY ANVISA: Law # 10,196/01, Article 229-C established
that patent letters can only be granted for pharmaceutical processes
and products after a prior review by ANVISA [Brazil's FDA
equivalent]. ANVISA intervention in the examination of
pharmaceutical patents constitutes a complex Executive Branch act;
one cannot do without the "expertise" of that agency in the area of
drug medications as until the 1996 LPI pharmaceuticals were not
patentable in Brazil.

COMMERCIAL REGISTRATION/TEST DATA/CONFIDENTIALITY: Article 39.3 of
the WTO TRIPs agreement establishes the duty to protect confidential
information contained in commercial registration requests presented
to sanitary authorities - given that the development of such
involves considerable effort. Protection is accorded against any
disloyal commercial use. However, the same article mentions that
where necessary to protect the public such information may be
released. The TRIPs agreement deals with the question of protecting
confidential information under the rubric of disloyal competition

SIPDIS
and not as a property rights matter. Based upon the obligations
imposed by the TRIPs agreement, the Brazilian Industrial Property
Law (Law # 9,279/96) establishes a specific penal category for these
types of disloyal competition offenses (Article 195, section XIV,
paragraph 2). ANVISA fully respects these legal standards as it
takes care to guard the confidentiality of information presented by
companies in registration requests, watching out for any
anti-competitive practices.

VOLUNTARY LICENSING OF ANTI-RETROVIRAL MEDICATIONS (ARVs): Given

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the necessity to make the DST/AIDS program sustainable [Brazil's
national anti-AIDS program], with universal, free access to
treatment in conformity with Law 9313/96, in 2005 the Ministry of
Health initiated the process of negotiating voluntary licenses of
ARVs with three U.S. laboratories. The negotiations with one
laboratory were concluded satisfactorily on 10/11/2005 via an
understanding between the parties. The negotiating process
continues with two other laboratories. While international
agreements and Brazilian industrial property legislation establish
and make available the instrument of compulsory licensing, Brazil -
contrary to the perceptions of U.S. public opinion - never took the
step of "breaking patents and instead put priority on understandings
based on non-compulsory actions.

TRANSGENIC SOY: In the past, the "American Soybean Association
(ASA" presented to the Special 301 Committee a petition to "identify
Brazil for denying adequate and effective protection of patent
protection laws applicable to the use of genetically modified
herbicide-resistant soybean seed developed by Monsanto Company
(RoundUp Ready soybeans) by Brazilian farmers." Notwithstanding the
allegations of that group, the Brazilian judicial system did not
fail to guarantee to holders of the patent for "RoundUp" technology
the right of indemnization for the unauthorized use of this
technology.


8. Complementary information regarding the efforts undertaken by
the Brazilian government in combating the violation of intellectual
property rights, especially with respect to copyright, can be found
in the National Anti-Piracy Council's Activity Reports available on
the internet page:
http://www.mj.gov.br/combatepirataria/relator io.asp

END TEXT OF INFORMAL TRANSLATION OF PRESS RELEASE.

Chicola