MORE BRV POLICY CONTRADICTIONS: IPR "REFORM" AND

UNCLAS SECTION 01 OF 03 CARACAS 000710

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EB/IPE
DEPT PLEASE PASS TO LIBRARY OF CONGRESS, COPYRIGHT OFFICE
USTR FOR JENNIFER CHOE GROVES
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E.O. 12958: N/A
TAGS: ECON ETRD KIPR OTRA VE
SUBJECT: MORE BRV POLICY CONTRADICTIONS: IPR "REFORM" AND
MERCOSUR

REF: CARACAS 366


1. (SBU) Summary: Venezuela's withdrawal from the Andean
Community (CAN) in April 2006 has created legal uncertainty
as to both the present and future legal framework of IPR.
Venezuela must now deal with an awkward reality of three
concurrent IPR regimes - vestiges of the CAN, outdated
domestic legislation, and nascent Mercosur obligations. The
BRV is expected to introduce controversial legislation under
the Enabling Law that would further weaken IPR protections in
Venezuela. The BRV's push for "southern" regional trade
integration through Mercosur is incompatible with radical IPR
"reform." In an example of the contradictions that have come
to typify BRV politics, Chavez' legal advisors who are
drafting radical IPR reform are also arguing for Venezuela to
harmonize IPR protections with Mercosur members. Septel will
address the broader political and economic dimensions of
Venezuela's Mercosur integration. End Summary.

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IPR Protection in the BRV: What Law Applies?
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2. (SBU) Prior to Venezuela's withdrawal from the CAN, IPR
protection was governed by CAN Commission Decision 486,
signed in September 2000 by the Andean Commission. Decision
486 is one of over 650 Andean Community Decisions
incorporated into Venezuela's domestic law. Decision 486
implements a common intellectual property regime for patents
and trademarks in member states, while Decision 351 covers
copyrights. These decisions obligate member states to
provide most favored nation status to one another and
national treatment.


3. (SBU) Venezuela's withdrawal from the CAN has created a
legal vacuum for the IPR regime. Affected industries, in
particular the pharmaceutical industry, called on Venezuela's
courts to enunciate the applicable law regarding IPR after
withdrawal from the CAN, which the judiciary has so far
failed to do (Reftel). If Decision 486 were not the
applicable law in Venezuela, the only alternative source of
patent protection would be the outdated 1955 Law on
Industrial Property. That said, there is an argument that
the BRV would still be bound by Decision 486: according to
Article 135 of the Cartagena Accord establishing the CAN,
"advantages received and granted subsequent to a member
state's renunciation of the treaty remain in effect for a
period of five years from the denunciation." The article
does not specify whether it applies to goods and services or
all the preferential provisions accorded under the Accord.
Since IPR harmonization is referenced in Article 55 of the
Cartagena Accord, the clear language of the provision would
imply that Venezuela should continue to apply Decision 486
for a five year period with respect to other member states.
Consequently, there appear to be three co-existent IPR
regimes in Venezuela. Outdated domestic legislation - the
Industrial Property Law of 1955 and Copyright Law of 1993,
Decision 486 of the CAN for an additional five years, and
Mercosur norms (see para 6).

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Domestic Reform
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4. (SBU) Post contacts in the pharmaceutical and recording
industries told Econoff in February 2007 that radical IPR
legislation with respect to copyright protection and patents
is on the BRV's agenda this year. They expect that Chavez
will introduce such legislation in the form of a decree-law
pursuant to the Enabling Law, which grants him diktat powers
for the next 16 months. The legislation was first discussed
in 2005 but never placed on the National Assembly's
legislative agenda. According to industry sources, the bill
would essentially eviscerate IPR protection.


5. (SBU) Dr. Hildegard Rondon de Sanso is reportedly
spearheading the BRV's IPR reform. (Note: Rondon, 73, is a
former Venezuelan Supreme Court justice and Energy Minister
Ramirez' mother-in-law. She is also rumored to be the
primary drafter of constitutional reform, though she is not
an official member of the President's Committee on

CARACAS 00000710 002 OF 003


Constitutional Reform. End Note.) Post has obtained a copy
of a presentation she gave in late 2006 discussing IPR reform
in Venezuela and obligations under the CAN and Mercosur. She
previews what the BRV may contemplate on the horizon with
respect to IPR reform. Rondon argues that three guiding
points of IPR reform in Venezuela should be 1) industrial
property norms have been established by patent producing
developed countries and unfairly favor such countries; 2)
Venezuela is a consumer of technology and not a producer; and
3) WTO IPR norms are being challenged by developing
countries.


6. (SBU) The proposed copyright legislation would severely
hamper domestic and foreign rights holders' ability to
exploit their works in Venezuela. According to our industry
contacts, the measure would violate 31 of Venezuela's
bilateral and multilateral obligations, including TRIPS, if
passed in its current form. The bill would reduce the period
of protection from 60 to 50 years and give the BRV broad
powers to expropriate artistic works for purposes of the
"collective benefit." Proposed patent reform would further
weaken provisions for test data protection and codify
Venezuela's failure to protect second-use patents, such as
Viagra, originally used to treat hypertension (Reftel).

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Mercosur and IPR
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7. (SBU) Venezuela acceded to the Treaty of Asuncion and
Mercosur membership in July 2006, joining Argentina, Brazil,
Uruguay and Paraguay as the fifth "full member" in the
trading block. Venezuela is to extend full trade benefits to
other member states by 2012. Mercosur's goal is to establish
a common market and common external tariff. Generally, trade
blocks strengthen IPR protections. The premise of IPR
protections in Mercosur stems from the principle of
territoriality, providing that each member state should
define the scope of its intellectual property regime using
multilateral obligations such as TRIPS as a baseline.
Mercosur envisions several measures to coordinate IPR
protection because discordant IPR regimes can pose a
substantial barrier to trade and circulation of goods and
services. Two Mercosur protocols call for harmonization on
industrial designs and trademarks. (Note: The protocol on
industrial designs is not yet in force and Argentina and
Brazil have yet to deposit the protocol on trademarks. End
Note.) The Mercosur protocols aim to set minimal standards
of common protection to ensure that the common market
functions smoothly. Specific areas of IPR protection that
Mercosur seeks to harmonize are patentability, licensing
requirements, duration of patent and trademark rights, and
parallel imports/exports.


8. (SBU) According to Article 27 of the 1995 Protocol of
Harmonization of Norms on Intellectual Property in Mercosur
for Trademarks, National Origin, and Denomination of Origin,
countries that accede to the Treaty of Asuncion agree to be
bound by the provisions of the Protocol. According to
Rondon, Mercosur also envisions creation of a supranational
patent office responsible for issuing community-level
patents. During a March 28 conference on Mercosur in
Caracas, Hernando Diaz, a partner in the U.S. law firm Squire
Sanders, offered IPR protections as an example of an area in
which the BRV's domestic legal reform would have to be more
restrained out of respect for Mercosur integration.

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Comment
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9. (SBU) Venezuela's IPR regime is currently an awkward mix
and match from antiquated domestic legislation, CAN decisions
and fledgling Mercosur obligations. A mitigating factor in
analyzing potential damage that BRV IPR legislation could
wreak on Mercosur is that the trade bloc's other four members
historically have shown little interest in stringent IPR
protections. However, the fact that a key BRV legal advisor
is drafting radical domestic IPR reform on the one hand, and
lecturing on Mercosur IPR harmonization on the other,
underscores the contradictions in BRV policy, which have

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become more and more typical.

BROWNFIELD