EGYPT: 2006 SPECIAL 301 REVIEW

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SUBJECT: EGYPT: 2006 SPECIAL 301 REVIEW

REF: STATE 14937

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Summary and Recommendation
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1. (SBU) Over the past year, the Government of Egypt
has made progress in strengthening its intellectual
property rights (IPR) regime. It issued the final set
of implementing regulations for its 2002 IPR law,
established new offices to license copyrighted
materials, and cleared up a backlog of trademark
applications. Problems, however, remain, especially
with enforcement and protection of copyright and
pharmaceutical test data. Overall, these problems are
significant enough to warrant retaining Egypt on the
Priority Watch List for 2006. End summary and
recommendation.

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Overall Assessment of IPR Climate
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2. (SBU) While Egypt enacted a comprehensive IPR law in
2002, as well as other laws and regulations that create
a legal basis for effective IPR protection, these laws
have not been fully implemented, supporting regulations
are flawed, and enforcement remains generally weak.
There has been notable progress on the IPR front over
the past year -- especially in areas where the USG has
provided technical assistance -- but problems remain.
Details of both the progress made and the deficiencies
that remain are provided below.

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Optical Media Piracy
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3. (SBU) Optical media piracy affects most categories
of intellectual property rights, including motion
pictures, sound recordings, and computer software. In
March 2005, implementing regulations were issued for
Book Three (copyrights and related issues) of Egypt's
IPR law, which affect all these media. Unfortunately,
these regulations are flawed in certain fundamental
ways. For example, rather than clearly transferring
enforcement responsibility for software and database
infringement to the Ministry of Communication and
Information Technology (MCIT),the regulations maintain
an enforcement role for the Ministry of Culture in that
area while also creating one for MCIT. As a result,
the regulations have caused confusion for the
ministries and rights-holders alike. Until the
Ministry of Justice resolves this issue, the ambiguity
is likely to impede serious software piracy enforcement
efforts.


4. (SBU) Major U.S. software and computer companies
operating in Egypt report a piracy rate in business
software under 20 percent for large companies in Egypt.
The most serious problem is now software piracy by
medium and small enterprises, and by computer
retailers, who load pirated software onto their
products. Counterfeiting of software in Egypt is not
currently a problem, according to industry sources.
Virtually all the counterfeit business software used in
Egypt is produced abroad, according to the Business
Software Alliance.

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False Licensing
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5. (SBU) False licensing remains a problem and
undermines copyright protection in Egypt. Pirates are
often able to receive authorization to distribute
software, music, and films from the Ministry of Culture
based on forged documents purporting to give them this
right. The GOE does not have the ability to
authenticate these documents, but revokes its
authorizations when the products are proven to be
pirated. In April 2005, MCIT created an "IPR Office"
under the new Information Technology Industry
Development Agency (ITIDA) to provide authorized
licenses for, and to register newly developed software
and databases. These databases will be used to support
enforcement efforts should the confusion over which
ministry has enforcement authority for software be
resolved (see paragraph 3).

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Printed Material Piracy
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6. (SBU) Book piracy continues to be a problem in
Egypt. In 2005, the Supreme Council of Culture created
a specialized Office for the Protection of Author's
Rights to process licenses for reprinting scientific or
scholastic books according to specific criteria. To
date, no reprint requests have been filed, suggesting
that piracy in this area will not abate simply because
there are now clear procedures in place for obtaining
permission to reprint books. This new office has no
investigative or enforcement responsibilities, as those
duties remain in the purview of the anti-piracy unit of
the police.

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IPR Enforcement
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7. (SBU) IPR enforcement is executed jointly by the
police force under the Ministry of Interior and
inspectors from the Ministry of Trade and Industry, in
coordination with other relevant ministries and
authorities. Even though the number of trained
inspectors increased in 2005, their number and the
physical resources available to them are still
insufficient for conducting effective raids on software
pirates. If this resource problem were addressed,
effective enforcement of copyright protection might
significantly improve. The Ministry of Trade and
Industry recently established a procedure for seizing
counterfeit goods at the port of entry. Its
effectiveness is still being determined.


8. (SBU) The Ministry of Culture has enforcement
responsibilities for pirated motion pictures, sound
recordings, and possibly software (see paragraph 3).
Over the past year, the number of trained inspectors
doubled, and the ministry investigated 527 cases,
compared to the 328 investigated in 2004. Ministry
officials, however, recognize the need for greater
enforcement, but maintain that their efforts are
hindered by the lack of advanced equipment and
effective coordination with other government entities.
Entertainment companies concur, complaining of
escalating piracy and weak enforcement. They have
tried self-help measures, purchasing and presenting
pirated goods to the police to encourage them to take
action. Although the counterfeiters are sometimes
arrested, often they are back in operation within days.


9. (SBU) A "General Department for Customs Relations
and Clearance" has recently been established in the
Ministry of Trade and Industry to receive border
measures complaints in collaboration with the Egyptian
Customs Authority. Although it is a new department, it
has already acted on a number of complaints. The USAID-
funded Assistance for Trade Reform and Intellectual
Property Rights Assistance projects have been providing
training to this new unit.


10. (SBU) The General Department for IPR Protection in
the Ministry of Trade and Industry receives and
investigates trademark and industrial designs
infringement complaints. The unit investigates
infringement complaints only for marks and designs that
are registered in Egypt. It takes samples of allegedly
infringing goods, decides on their authenticity, and
turns over cases of suspected infringement to the
General Prosecutor's office.


11. (SBU) Egypt has not signed the WIPO Copyright
Treaty (WCT) or the WIPO Performance and Phonograms
Treaty (WPPT). As a major producer of Arabic
entertainment, Egypt could benefit from these treaties.
However, the GOE has not shown interest in joining
either treaty.

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TRIPS Compliance
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12. (SBU) As a signatory of the WTO Trade Related
Aspects of International Property Rights (TRIPS)
agreement, Egypt is required to provide protection to
foreign IPR-holders operating in Egypt. Overall,
infringement of trademark, and industrial designs has
decreased in 2005 in comparison to 2004, yet problems
persist.


13. (SBU) A USAID-funded project working on IPR issues
assisted the Commercial Registration office (which
includes both trademark and industrial designs
departments) to modernize its operations, improve its
management through specialized training, and increase
the efficiency and effectiveness of its staff.


14. (SBU) The trademark office has shown significant
improvement this past year. It successfully processed
almost 38,000 backlog trademark cases, created a
database that includes all registered, renewed or still
processed cases, and reduced the registration period
from 63 to 9 months (which is below the international
standard).


15. (SBU) The industrial designs office has also showed
significant improvement this year. The office,
however, has yet to implement a planned computerized
database of national and international bibliographic
and industrial designs that would allow inspectors to
quickly identify infringements. The current manual
search method is onerous and time-consuming.

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Patent Protection
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16. (SBU) A modern, computerized Egyptian Patent Office
operating under the authority of the Ministry of Higher
Education and Ministry of State for Scientific Research
is now capable of processing and ensuring the
protection of patent applications. Processing times
have been reduced from an average of five years to
between 18 and 25 months. This office has
significantly improved the quality and transparency of
the trademark and industrial design registration
system. Egypt has agreed to join the WIPO Budapest
Treaty on the International Recognition of the Deposit
of Microorganisms for the Purposes of Patent Procedure
by 2007.



17. (SBU) Egypt continues to take advantage of
numerous technical assistance training opportunities
offered by the United States Patent and Trademark
Office on topics such as computerized patent and
trademark application searching, patent, trademark, and
design application examination, and the processing of
applications under the Patent Cooperation Treaty (PCT).
The PCT, which came into force in September 2003,
allows local and international applicants to protect
their inventions in many countries by filing a single
application and designating the countries where the
invention will be protected. Since Arabic has recently
become a PCT language, Egypt's membership in the PCT
permits Egyptian applicants to file their application
in the Arabic language with the Egyptian Patent Office
and to have an international search and examination
report sent to all designated patent offices. This
helps both Egyptian and foreign applicants capture
their local markets and also easily designate their
applications to apply in the two largest world markets,
the U.S. and Europe. Egypt can now serve as a
receiving office for neighboring countries for Arabic-
language applications.

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Protection for Plant Varieties
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18. (SBU) In October 2004 the Ministry of Agriculture
established a new plant variety registration office.
However, the relevant provisions of the IPR law
concerning new plant varieties are not being
implemented because the Egyptian National Gene Bank,
which certifies the novelty of new varieties, has not
been established. Without this office, creators of new
plant varieties are reluctant to file applications for
certification. Another issue of concern is the lengthy
application process. In order to prove the
Distinguished Unity and Stability of plant variations
and novelty, plant seeds have to be planted for two
consecutive seasons to guarantee its originality (e.g.,
consistent size, shape, appearance). The GOE is
undertaking reforms necessary to join the International
Union for the Protection of New Varieties of Plants.

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Market Access for Intellectual Property
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19. (SBU) Market access for some forms of intellectual
property is still problematic in Egypt. Foreign motion
pictures are subject to duties and import taxes (32
percent on each copy of the movie, 12 percent on
posters and 2 percent on the movie reel),as well as a
10 percent sales tax and a 20 percent box office tax
(compared to a five percent box office tax for local
films). Foreign motion pictures are subject to a
screen quota and distributors are allowed to import
only five prints of any foreign film, although
occasionally seven copies may be allowed. The
issuance of approvals and certificates to license films
and entertainment software can be lengthy and
cumbersome. Tariffs on some information technology
products were reduced in 2004 following the signing of
the WTO Information Technology Agreement mandating the
removal of tariffs on information technology (IT)
products but full implementation of the agreement is
still underway.

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Pharmaceutical IPR Protection
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20. (SBU) IPR protection and pricing remain areas of
concern in the pharmaceutical sector. The Ministry of
Health and Population negotiates with companies to set
and adjust pharmaceutical prices using a cost-plus
formula. The Ministry has been slow to adjust
pharmaceutical prices to compensate for significant
depreciation of the Egyptian pound since 2000. In
September 2004, the government lowered customs duties
on most imported pharmaceutical inputs from 10 percent
to 2 percent. The government claims this step
compensates pharmaceutical companies operating in Egypt
for some of their losses from the devaluation. In
November 2004, restrictions on exporting
pharmaceuticals were removed to encourage
pharmaceutical investment and exports. Pharmaceutical
companies rely, however, on the domestic market for a
significant part of their operations, and the creation
of a transparent, systematic, and fair process for
pricing is therefore crucial.


21. (SBU) GOE marketing approval for generic copies of
protected pharmaceutical products remains a serious
issue. In 2004, GOE approval for generic copies of
four protected pharmaceutical products was a main
reason for Egypt's elevation to the Priority Watch
List. In-depth discussions held under the auspices of
the Trade and Investment Framework Agreement reveal
serious differences between the USG's and the GOE's
interpretation of TRIPS obligations, especially
regarding the provisions on data exclusivity and unfair
commercial use. That said, for most of 2005 the GOE
did not act on marketing approvals for generic copies.
In December, however, the outgoing Minister of Health
and Population authorized a local generic copy of an
innovator drug for which a U.S. company claimed IPR
protection. Prior to the approval, the company took
every available step to enforce its intellectual
property rights, including filing a patent application
with Egyptian officials, obtaining a five-year
exclusive marketing right certificate (which was
subsequently overturned in court on a technicality),
and then filing an appeal, which was pending when the
local generic copy was approved. The Ambassador
protested this approval with the new Minister of Health
and Population.

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Government Software
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22. (SBU) Since 2004, the GOE has been taking steps to
promote the use of only legitimate business software by
government departments and state schools. To encourage
use of licensed software, Microsoft -- a major supplier
of software in Egypt for the government and private
sector -- launched a program in 2004 to sell licenses
on credit. Industry representatives express
satisfaction with the level of legitimate software use
in the government.

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IPR Technical Assistance
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23. (SBU) A USAID-funded Intellectual Property Rights
Assistance project (IPRA) is working with several
Egyptian Ministries to strengthen IPR enforcement and
increase public awareness. Program reports indicate an
increase in police and Ministry of Culture involvement
in IPR protection in 2005 over the previous year. The
USAID program is working with the Ministry of Justice
on IPR enforcement issues, and in particular is working
with judges to increase legal awareness and capacity
building for infringement cases. The program works
with law schools in five Egyptian universities to
increase awareness and training on IPR issues. As
noted in paragraph 14, the program worked with the
Government of Egypt to set up a specialized IPR unit
and modernize the trademark office providing technical
assistance to in-house inspectors. The pace of
approval of trademark applications has risen
dramatically according to IPRA project implementers --
from approximately 12 to over 100 approvals a day.


24. (SBU) Some of the courses and programs that the
USAID-funded program organized in Egypt and abroad
include:

-- Training for government officials and journalists on
IPR principles and practice;

-- Training at Egyptian universities and the American
University in Cairo on IPR;

-- Training for judges on IPR issues;

-- Training for government employees at the Patent
Office on the PCT and on drafting patent claims;

-- Training for trademark employees;

-- Training for Internet security issues;

-- Workshops and media events to raise IPR awareness in
the government, private sector, and the general public.

IPRA also:

-- Is preparing for an online patent application and
tracking process, due to be fully operational by mid
2006;

-- Is helping the Ministry of Culture implement the new
law for the Protection of Author's Rights;

-- Is providing reference guides to the GOE's
industrial designs and trademark departments;

-- Successfully negotiated with WIPO to supply free
software and uncharged maintenance for life to Egypt's
Commercial Registration Administration.

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Recommendation
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25. (SBU) As noted above, there have been positive
developments in IPR protection in Egypt, especially
related to improving the operations of government
offices charged with registering the property of rights-
holders. Problems still persist, however, especially
in the critical areas of enforcement and protection of
copyright and pharmaceutical test data. The marketing
approval for a generic local copy of U.S.
pharmaceutical product was a significant setback, as it
appeared, until that point, that the GOE had finally
understood the importance of the issue and was
refraining from issuing further approvals. The
presence of a new business-oriented Minister of Health
and Population may have a positive impact on IPR
protection of pharmaceuticals. At present, however, we
have to conclude that the positive developments this
past year are not sufficient to outweigh the
significant continuing problems. Therefore, post
recommends that Egypt be retained on the Priority Watch
List for 2006.

RICCIARDONE