ARGENTINA'S 2006 SPECIAL 301 REVIEW

UNCLAS BUENOS AIRES 000406

SIPDIS

SIPDIS

DEPT FOR EB/IPE CLACROSSE AND ANNA MARIA ADAMO
DEPT PLS PASS TO USTR JCHOE-GROVES
DOC FOR JBOGER, PLEASE PASS TO USPTO JURBAN AND LOC STEPP

E.O. 12958: N/A
TAGS: KIPR ETRD ECON AR
SUBJECT: ARGENTINA'S 2006 SPECIAL 301 REVIEW

REF: A. STATE 014937


B. 05 BUENOS AIRES 01566

C. 05 BUENOS AIRES 01047

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Summary
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1. Argentine entities responsible for upholding IPR failed
to translate the momentum from a strong 2004 into tangible
successes in 2005. U.S. pharmaceutical companies are still
waiting for commercially valuable patents; CD and DVD piracy
rates appear to be rising, despite Argentina's economic
recovery; and a piece of draft legislation that would have
bolstered the protection of trademarked goods died in
committee during the year. The Embassy therefore recommends
that Argentina remain on the Special 301 Priority Watch List
until it can begin to point to concrete results across the
IPR gamut and, more specifically, until it ensures effective
protection of confidential and proprietary data developed by
pharmaceutical companies. End Summary.

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Patents
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2. Argentina's patent and trademark agency, The National
Institute of Industrial Property (INPI),made significant
progress toward streamlining Argentina's patent system over
the past several years. That system appeared close to
breakdown until 2002, with patent applications coming in much
more quickly than they could be processed. From 1995 until
2002, for example, the INPI received 47,573 patent
applications but was able to resolve only 28,190 of those in
the queue, for a deficit of over 19,000 applications in those
eight years alone. That situation has now turned around,
with the INPI receiving 14,106 patent applications during
2003-2005 and resolving 18,334 during the same period.
Additionally, the rate at which the number of applications
resolved exceeds the number of applications received is
increasing.


3. INPI's improved efficiency stems from a number of reforms
that began to be introduced in 2003. The INPI, via a series
of resolutions, implemented fast-track procedures to reduce
what had grown to be a large patent application backlog of
over 30,000 cases. Specifically, all persons or companies
having more than one patent application pending were given
the opportunity to rank-order their applications, allowing
them to jump the application of a potentially more-valuable
product ahead of a less-promising application that had been
submitted at an earlier date. U.S. and other research-based
pharmaceutical companies are also now authorized to present
studies used in other patent-granting countries to support
patent requests in Argentina, significantly easing the INPI's
investigation requirements.


4. The GOA also increased the INPI's budget by 11 percent in
2004, and kept those gains during 2005. The extra money
allowed the hiring of 27 new patent examiners, 10 of them in
the key pharmaceutical area. That initiative doubled the
total number of pharmaceutical examiners to 20. The INPI has
instituted a system of in-house training that an INPI
executive told Econoff has increased the examiners'
efficiency by up to 30 percent. One result has been a
reduction in the time it takes a patent application to
receive a preliminary examination from fifteen months to
eleven months. In another positive development, the INPI
sent two of its pharmaceutical inspectors to the U.S. Patent
and Trademark Office's (USPTO) academy for training in 2005.
That training, arranged by the Embassy and jointly funded by
the USPTO and research-based pharmaceutical companies, was a
first for Argentine patent inspectors. The Embassy also
arranged for an Argentine appeals court judge specializing in
IPR cases to attend USPTO training, another first.


5. The gains mentioned above, while undeniably positive,
proceed from a very low baseline. The right to patent
pharmaceutical products in Argentina was recognized only in
1996, and the first pharmaceutical patents were issued
following the expiration of the TRIPS transition period in
October 2000. Even those patents were for approximately 80
products of marginal commercial value. A small number of
other pharmaceutical patents of greater value were granted in
subsequent years, but only after long and arduous processes.
Many of the patent applications the INPI counted as
"resolved" during 2005 were simply discarded after the
applicant failed to respond to an INPI instruction to
formally reaffirm the application.


6. The lack of patents for many products, coupled with
Argentina's devaluation in 2002, which resulted in sharp
price increases for imported products, increased incentives
for local pharmaceutical companies to produce unlicensed
copies of products that had been patented or for which
patents were pending. The combination of these factors has
had a negative effect on the Argentina-derived business of
U.S.-based pharmaceutical companies. According to CAEMe, the
Argentine association that represents U.S. and other
research-based pharmaceutical companies, local pharmaceutical
firms now have over 50 percent of the Argentine market and
have reached almost 50 percent of the export market.


7. Argentina amended its patent law (Law 24,481) in December
2003 to implement an agreement between the USG and the GOA
that had been signed in May 2002. That agreement came after
approximately three years of consultations under the WTO's
dispute settlement mechanism. In a related development, the
U.S. agreed to give consideration to an Argentine request to
add specific products to the U.S. Generalized System of
Preferences (GSP) that allows for duty-free entry into the
U.S. The remaining unresolved pharmaceutical patent issue
relates to the effective legal protection of confidential and
proprietary data developed by pharmaceutical companies to
demonstrate the efficacy and safety of new medicines. U.S.
and other research-based pharmaceutical companies believe
this to be a critical issue and Argentina and the U.S. have
agreed to leave this issue within the WTO dispute settlement
mechanism for future action. (Note: The absence of data
protection has lead research-based pharmaceutical companies
to complain that Argentine health regulatory authorities
(ANMAT) rely inappropriately on data supplied by
research-based companies to approve unauthorized copies of
innovative medicines. According to CAEMe, ANMAT interprets
the public disclosure of partial data as an indicator that
the data should be regarded as in the public domain.)


8. U.S. pharmaceutical companies also remain concerned about
the legal implications of two specific clauses in the 2003
agreement. Specifically, the amendment mandates an expert
opinion that can challenge the validity of a patent, and
requires consideration of the economic impact of an
injunction on both parties before the seizure of goods
alleged to violate the patent law. Since the agreement was
signed, research-based pharmaceutical companies have feared
that those clauses could preclude the granting of preliminary
injunctive relief and limit the success they have achieved in
protecting their products through the use of preliminary
injunctions.


9. 2005 was the first year during which those fears were
realized. A U.S.-based pharmaceutical company discovered
several competitors trying to sell copies of its most
profitable drug, and sought injunctions to prevent those
sales. In one case, the issuance of an injunction was
delayed for months, and in another the application for an
injunction was rejected by a judge swayed by a local expert
hired by the defense, who claimed that the copycat drug did
not violate the U.S. pharmaceutical company's patent. In
another instance, a different U.S.-based pharmaceutical
company went to court to remove five copies of one of its
joint-venture drugs from the Argentine market. In a
promising ruling, the judge issued injunctions ordering the
copies off the market (Reftel B). More than six months after
the decision, however, those injunctions have yet to be
enforced.


10. A frequent complaint of U.S. pharmaceutical companies is
that there remains in Argentina no regulatory linkage between
the INPI and the ANMAT. While such linkage is not required
by TRIPS, its absence in Argentina allows ANMAT to grant
local pharmaceutical producers authorization to manufacture
and sell products that have already been patented or for
which a patent has been requested. The Embassy and
multinational pharmaceutical companies have urged the GOA to
establish a linkage between ANMAT and INPI that would prevent
ANMAT from continuing to authorize local pharmaceuticals to
produce products for which an INPI patent has been granted or
is pending. There were hints during 2005 of the beginnings
of a cooperative relationship between INPI and ANMAT (Reftel
C),but the Embassy has no evidence that such cooperation has
developed. As things stand, U.S. and other research-based
pharmaceutical companies must incur the legal costs of
obtaining injunctions to stop the production and sale of
products produced by local pharmaceutical companies for which
the research-based companies have INPI patents.


11. Law 25,649 adopted in 2002 requires medical doctors to
use a drug's generic name in all prescriptions. It is
believed that this law diverts sales from innovative
medicines to TRIPS-infringing copy products. U.S. and other
research-based pharmaceutical companies say that true
generics do not exist in Argentina because copy products are
not required to demonstrate their bioequivalence or
bioavailability with original products, meaning local
producers can sell drug copies that lack quality and safety
assurances. According to Law 25,649, doctors may also
include a trademarked version of a drug in their
prescriptions, but pharmacists may still offer a substitute.
According to Law 25,649, reasons must be indicated on a
prescription if a medical doctor does not want the
prescription substituted by a pharmacist. Another area of
concern is that Argentina has yet to become a contracting
state to the World Intellectual Property Organization's
(WIPO) Patent Cooperation Treaty.

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Copyrights
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12. Optical Media Piracy: The incidence of CD and DVD piracy
in Argentina does not appear to have declined in 2005.
Problems in this area include the widespread and open sale of
pirated copies of albums and videos and an apparently
increasing number of businesses that offer home delivery of
pirated artistic content. Argentina's laws provide generally
good nominal protection. However, the lack of any real bite
(pirates have not faced jail time),coupled with the extra
incentive provided by Argentina's devaluation in 2002, which
spiked prices for imported media, has spurred piracy. A
local attorney working copyright issues told Econoff that his
clients estimate that losses to U.S. companies due to optical
media piracy in Argentina exceeded USD 150 million in 2004.
The same attorney said that while the Argentine legal system
does not function at a first-world level, it is "not bad for
the region." The legal system will generally respond when
needed to effect the seizure of counterfeit media, the
attorney said, but the existence of a personal relationship
with relevant authorities is helpful. Still, his client (a
IP content trade association) worked with police to effect
over 200 raids and seize over 100,000 pirated discs during

2005.


13. Use/Procurement of Government Software: The GOA has yet
to fully comply with its 1999 agreement with the local
software industry to legalize unlicensed software used in
offices of the national government, and many GOA offices
continue to use pirated software. Ministry of Interior
Director of Information Management Eduardo Thill told a local
news outlet in January 2005 that 90 percent of GOA agencies
employing licensed software are using it illegally. There is
a GOA move toward open source software, according to Thill,
but there has been no legislation to date to bind the GOA to
open source software solutions. That situation held true
throughout 2005, although a representative of Thill's office
told the Embassy February 2006 that the percentage of GOA
agencies using licensed software illegally had fallen to
between 80 and 85 percent.


14. Amendments to Existing Legislation: A promising piece of
legislation to modernize Argentina's quarter-century old
trademark law (Law 22,362) died in committee in 2005. That
draft law, introduced in August 2004, contained several
measures that would have strengthened Argentina's
anti-trademark piracy regime. Specifically, the draft law
would have: involved Argentina's tax agency (AFIP) in
trademark piracy (counterfeit merchandise) investigations;
expanded the authority of Argentina's Financial
Investigations Unit (UIF) to include trademark piracy among
the crimes that entity is able to investigate; and increased
penalties for those convicted of trademark piracy
(eliminating community service as a possible sentence). The
Embassy was told by a local attorney who helped to draft the
legislation that it will be re-introduced in April 2006. The
same attorney blames the failure of the bill on the lethargy
of local Argentine business chambers, which he said did not
actively support the effort.

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Trademarks
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15. Argentina's trademark law (Law 22,362) fulfills
international standards, but legislation subsequent to its
enactment has rendered it relatively ineffective, with
penalties limited to probation and fines that are not high
enough to act as a significant deterrent (see paragraph 14).
The process of renewing trademarks is an area where INPI's
increasing efficiency has become evident. Whereas an
applicant for renewal had to wait five months only a few
years ago, the process is now completed in less than two
months. Raids by local police on flea markets where
counterfeit merchandise is openly sold have not been frequent
or widespread enough to lessen the availability of pirated
goods. Representatives of industries frequently targeted by
counterfeiters claim that over forty large, well-established
markets exist in Buenos Aires alone that are almost
completely dedicated to the sale of counterfeit goods (in
addition to innumerable smaller points of sale throughout the
country).

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Plant Variety
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16. Argentine farmers have the right to replant -- although
not to sell -- seed generated from a harvest originating from
registered seeds without paying royalties. However,
Argentine farmers continue to sell "brown bag" seed (as
opposed to bags of seed showing brand names) as brand-name
product. This is a widespread problem with soybean seed, and
it underlies Monsanto's recent court actions in Europe, which
have resulted in ships carrying Argentine soy being stopped
and the cargo seized. Monsanto's actions are aimed at
collecting royalties that Argentine farmers are not paying
via legal challenges in countries in which Monsanto has
patent protection for the Roundup Ready soybean technology.
Farm associations and industry representatives generally
agree that Argentina must elaborate and enact a new seed law
that better protects intellectual property, but negotiations
toward that end have broken down as of this writing. The
sale of "brown-bag" seed from Argentina to neighboring
countries has also led to the significant production of
unregistered biotech soybeans in Brazil and Paraguay.
Argentina is a party to the 1978 Act of the International
Union for the Protection of New Varieties of Plants (UPOV),
but has not signed the 1991 UPOV convention.

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Training
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17. Reluctance by the various enforcement entities to
cooperate with each other is a problem that has long
contributed to ineffective anti-piracy action in Argentina.
The Embassy would therefore encourage any IPR training that
emphasizes a team approach and brings together
representatives from the full range of GOA institutions
involved in anti-piracy efforts. The trust and familiarity
that would result from such officials being brought together,
even if only for a short training session, would help to
foster inter-agency teamwork of the sort necessary to
effectively combat piracy.

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Comment and Recommendation
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18. The Embassy's Special 301 report for 2005 said: "Most of
the persons interviewed for this report believe that 2005
will be the year when it becomes clear whether the legal and
administrative improvements of the recent past will finally
manifest themselves in tangible successes." There was
evidence of improvement during 2005, but very few of the
hoped-for tangible successes. INPI appears to be functioning
more efficiently, but that procedural improvement has not
translated into the issuance of patents with significant
commercial value for U.S. pharmaceutical companies. Piracy
has not diminished, despite a significant recovery from an
economic crisis that was a real spur to piracy. Neither has
Argentina's legislature taken the steps necessary to clamp
down on piracy. As also noted herein, the Argentine legal
system remains an uncertain ally in the fight to protect
intellectual property. The Embassy therefore recommends that
Argentina remain on the Special 301 Priority Watch List for

2006. End Comment.


19. To see more Buenos Aires reporting, visit our classified
website at: http//www.state.sgov.gov/p/wh/buenosaires
GUTIERREZ