CROATIA 2007 SPECIAL 301 RECOMMENDATION

UNCLAS ZAGREB 000183

SIPDIS

SIPDIS

SENSITIVE

STATE FOR EUR/SCE, EB/TPP/IPE

E.O. 12958: N/A
TAGS: ECON KIPR HR INTELLECTUAL PROPERTY
SUBJECT: CROATIA 2007 SPECIAL 301 RECOMMENDATION

REF: A) STATE 7944, B) ZAGREB 100, C) ZAGREB 164, D) ZAGREB 175, E)

06 STATE 184074


1. (SBU) Summary and Recommendation: In light of the recent
establishment of a mechanism of patent linkage and improving
enforcement of IPR generally, Post recommends that Croatia be
removed from the Special 301 Watch List this year. Special 301 was
a useful tool for effecting improvements in Croatia's IP regime. It
is now time to acknowledge that improvement and remove Croatia from
the Watch List. End Summary.

Pharmaceutical Patent Protection In Place
--------------

2. (SBU) With the recent establishment of a system of coordination
between its Drug Agency and the State Office for Intellectual
Property, the GOC has taken the remaining step necessary to close
the gap in its IP regime for pharmaceuticals (see Ref D). Together
with its 2004 data protection legislation, patent linkage means that
a repetition of past infringements of pharmaceutical patents is
unlikely. Post is not aware of any recent case of pharmaceuticals
being unlawfully placed on the market, which is borne out by the
fact that PHARMA did not prepare a submission on Croatia for this
301 cycle.

Enforcement Improving
--------------

3. (SBU) Croatia's patent authority, the State Office for
Intellectual Property is activist and professional. The GOC is
encouraging economic reform policies to develop Croatia's "knowledge
economy" and seems to be fully cognizant of the fact that a strong
IP regime is one of the foundations of such an effort.
Consequently, we have seen an across the board improvement in IP
protection over the last year. More people were arrested and
charged for IP-related crimes in 2006 than in any previous year and
more people sentenced by the judicial system, including imprisonment
(see Ref C). At the same time, a system of surcharges on recordable
media was introduced to offset losses incurred by illegal copying of
audio-visual IP (see Ref B).

How 301 Was Ultimately Successful in Croatia
--------------

4. (SBU) Croatia has made a lot of progress on IPR in recent years,
which is visible in its enforcement statistics. In the case of
Special 301, the Embassy was able to use this as a lever to
establish needed communication between the Drug Agency and the State
Office for Intellectual Property. Although reaction to Croatia's
annual 301 listing was usually quite dismissive at the official
level, with our interlocutors noting "that at least Croatia is in
good company, given all the other countries included on the list",
the desire to get Croatia off the list ultimately overcame
resistance. The effective message for the GOC was that although an
individual listing may not be highly significant, the larger message
sent to potential investors can be damaging. The simple fact that
Croatia was included among a list of serious IP violators had the
potential to reinforce an impression that this is a country where
investments are not protected by the law. We told the GOC that the
cost of closing the gap in the protection of pharmaceutical patents
was essentially nothing, but the cost of doing nothing was
potentially high. This message ultimately got through and was
successful.

Time to Remove Croatia from 301 Watch List
--------------

5. (SBU) Croatia's IP regime is not perfect; this is still a young
democracy with significant deficiencies in its legal system.
However, the GOC has taken the right steps on IPR. Most industry
groups here concur with this view and consider Croatia an IPR bright
spot in this region. Now is the time to acknowledge this progress
and remove Croatia from the Special 301 Watch List.
BRADTKE