TURKEY 2009 SPECIAL 301 REVIEW

UNCLAS SECTION 01 OF 06 ANKARA 000326 SENSITIVE SIPDIS DEPT FOR EUR/SE DMARSH AND EEB/TPP/IPE FOR TMCGOWAN AND JURBAN DEPT PLEASE PASS USTR FOR JCHOE-GROVES AND MMOWREY E.O. 12958: N/A TAGS: ETRD KIPR USTR ECON TU SUBJECT: TURKEY 2009 SPECIAL 301 REVIEW REF: A. STATE 8410 ¶B. 08 ANKARA 1471 ¶C. 08 ANKARA 1605 ¶D. 08 ANKARA 2175 ¶E. 08 ANKARA 2128 ¶F. 08 ANKARA 2191 ¶G. ANKARA 48 ¶H. ANKARA 117 ANKARA 00000326 001.2 OF 006 ¶1. (SBU) This report is sensitive but unclassified. Please protect accordingly. ¶2. (SBU) Summary. The last year has been a mixed story for IPR protection in Turkey, with several positive developments but two high-profile setbacks - a regression in the protection of confidential pharmaceutical test data and a legislative fiasco involving the criminal provisions of the trademark law that ended in the downgrading of 9000 trademark violation cases due to GOT inaction. Following Turkey's move in 2008 from the Priority Watch List to the Watch List, these developments are especially disappointing. Despite these setbacks, however, Turkey has made progress on many fronts, including three of the six action items agreed to in the 2007-2008 IPR Action Plan. The Ministries of Culture and Justice, as well as the Customs Undersecretariat and Turkish National Police, have recognized the seriousness of Turkey's IPR problems and are taking some steps to address the lack of public awareness and the lack of training in both law enforcement and the judiciary. The Ministry of Health, however, remains a serious obstacle to progress on IPR issues. MOH violated outright the protection of confidential pharmaceutical test data for a U.S. company's product and circulated a draft regulation that would further reduce data protections for fixed combination products. We recommend that Turkey remain on the Special 301 Watch List this year, and that the report focus attention on the need to address pharmaceutical sector concerns and to continue harmonizing Turkey's regulations and practices with its EU and international commitments. End Summary. -------------- The Good: Incremental Progress on Many Fronts -------------- ¶3. (SBU) The consensus in recent years has been that Turkey's IPR legislation, while flawed in some ways, is generally sound and that the real problems are in public awareness, enforcement, and judicial action. We hoped that the GOT would seriously tackle all these fronts in 2008, but instead much of its attention was absorbed by the filing of a closure case against the ruling party in March and the onset of the global economic crisis in the third quarter. This led to lack of policy coordination on many fronts. Nonetheless, there were several noteworthy positive developments in IPR over the last year, including: (* indicates an item from the 2007-2008 IPR Action Plan) -- In February 2008, the GOT passed a new Copyright Law, harmonizing copyright law with the new Turkish Criminal Code. There are some problems with the law (see para 10) but it ensured that copyright violations would continue to be treated as criminal offenses. (*) -- On April 24 (World IPR Day),in conjunction with the Business Software Alliance (BSA),the Ministry of Culture (MOC) launched an IPR public awareness campaign known as the "3 Monkeys." This included a large billboard provided by the MOC in Istanbul's Taksim Square - the campaign is estimated to have reached 7.5 million people. (*) -- In May, the Ministry of Justice (MOJ) increased the number of specialized IPR courts by two, bringing the total to 23. -- On May 12-13, the MOC and MOJ held a conference in Izmir on the criminal provisions of the Copyright Law. Approximately 100 officials attended, including law enforcement as well as 60 prosecutors and judges dealing with IPR issues. (*) -- On May 29-30, forty Turkish Customs officials participated in a two-day Embassy-sponsored, INL-funded, USPTO training in Istanbul focused on detecting trademark and copyright infringement, with participation from the private sector. ANKARA 00000326 002.2 OF 006 Further follow-up trainings in other cities are planned for March 2009. (*) -- On May 30, the Turkish Patent Institute (TPI),MOJ, and European Patent Institute held a seminar on patent litigation for 30 judges and prosecutors. -- On June 1, the MOC implemented a certificate system for all participants in the copyright production chain, including an electronic track-and-trace component and an automatic auditing mechanism that should ease the process of investigating suspect sellers. (Ref B) -- In June, Turkey formally opened the IPR accession chapter with the European Union. This in and of itself indicates that Turkey had sufficiently improved its IPR environment to meet the chapter-opening benchmarks, but it also opens the door for further harmonization with the EU as Turkey negotiates to close the chapter. -- On July 15, the Prime Ministry issued a circular to all government agencies reminding them that public agencies must use only licensed software and requiring that they establish a mechanism to track and audit software licenses. (Ref B)(*) -- On August 28, Turkey formally acceded to the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, with no reservations. The treaties entered into force on November 28, 2008. (Ref C)(*) -- In October, the GOT held the first meeting of the Undersecretary-level IPR Coordination Council to ensure that GOT policies across ministries are not working at cross-purposes. This idea was pushed by the EU as part of the opening of the accession chapter. -- In November, MOC, MOJ, and Istanbul Bilgi University held a two-week training session in Antalya on all aspects of IPR, focusing especially on judges and prosecutors who had not yet participated in long-term or specialized IPR training. 40 officials participated. (Ref D) -- In November, MOJ also issued a regulation requiring all prosecutor's offices to designate a specialized IPR prosecutor, and for offices with more than 500 cases per annum to establish a special IPR bureau. (Ref D) -- On November 22, the GOT held the first meeting of a "Juridical Consultation Group for IPR" to issue recommendations on improving the coordination of judicial decisions on IPR, including involvement by judges and prosecutors of the Supreme Court. (Ref D) -- In January and February 2009, the Turkish National Police held two three-day training sessions on all aspects of IPR for police and prosecutors charged with IPR enforcement. These were the fifth and sixth meetings in a longer-term training program. (*) -- Throughout the year, the MOJ worked on establishing the National Judiciary Network Project (UYAP),which aims to link various agencies and electronify records to speed the access of judges and prosecutors to case-relevant information. The technical infrastructure is now in place, although several IPR-related agencies are still awaiting legislative action to permit their connection to the network.(Refs B and D) -- The MOC sponsored a short-film contest on IPR among graduate-level film students in which 170 students participated. Television stations will be required to show the winning film, "Don't Kill the Original," as part of a public awareness effort. The Ministry plans to make this into an annual program. The MOC has also reached out to prominent television studios to ask them to include IPR themes in their programs. (*) ¶4. (SBU) The above list is by no means exhaustive, but does indicate that the Ministries of Culture and Justice, as well as the Customs Undersecretariat and Turkish National Police, have recognized the seriousness of Turkey's IPR problems and are taking some steps to address the lack of public awareness and the lack of training in both law enforcement and the judiciary. Much work remains to be done, but Turkey's incremental progress in a number of areas should be recognized. ANKARA 00000326 003.2 OF 006 -------------- -------------- The Bad: Legislative Incompetence/Inaction, and Enforcement Problems Continue -------------- -------------- ¶5. (SBU) The low point of the past year was the GOT's lack of timely response to a Constitutional Court decision annulling the criminal provisions of the Trademark Law. (Refs D, E, F, G and H) On July 6, the Court ruled that the criminal penalties in the Trademark law were unconstitutional because the law was issued by decree rather than passed by Parliament. The Court gave the GOT six months, until January 5, 2009 to pass a new law through Parliament to maintain these criminal penalties in force, and the government was well aware of the deadline (Refs D and E). Due to what can at best be described as GOT incompetence, the deadline passed with no new law, resulting in the invalidation of approximately 9000 pending criminal trademark cases. Following this debacle, the GOT sped a new law through Parliament in near-record time, drafting it on the January 6 and promulgating it on January 29, but the damage had already been done. In an effort to prevent IPR criminals from getting away completely, the MOJ has decided to prosecute the same 9000 cases under unfair competition provisions of the commercial code, but this reduces the maximum penalty, and it is unclear if convictions under this provision will be upheld on appeal. Many attorneys representing rights holders also are concerned that the fake goods confiscated in these 9000 cases will be returned to the counterfeiters, which would flood literally millions of fake products into the marketplace. The only encouraging part of the whole episode is that the Constitutional Court's decision was not based on any objection to IPR. Had the GOT acted in time, it would have been a side note to the year. ¶6. (SBU) At the same time that Parliament was busy not dealing with this specific trademark issue, it was also unable to make much progress on the new patent law or the full trademarks law, both of which have been languishing for several years now (Ref E). Indeed, until the new patent law passes there is some confusion as to whether criminal penalties still apply to patent violations - the new Turkish Criminal Code made all criminal penalties in other laws null and void as of January 1, 2009, unless they had been harmonized with the Code. Copyright and trademark penalties have now been harmonized (the latter by accident),but until the patent law passes there are theoretically no criminal protections (civil penalties still apply). ¶7. (SBU) Both the patent and trademark laws also contain some troubling language, which the private sector and post are working to fix. For example, a requirement in the trademark law that a copy of the original product must be submitted in every trademark case could cause substantial costs to the victimized rights holder when dealing with items worth thousands of dollars. The Turkish Patent Institute has taken private sector concerns seriously, however, and in late February 2009 even allowed for private sector interests to see the draft law and provide comment, which is almost unheard of within the Turkish legislative system and an encouraging sign. There are frequent rumors regarding several amendments to both the patent law and trademark law that would make them applicable only to goods produced in Turkey, but the technical agencies involved (TPI, Foreign Trade, etc.) have so far been diligent in ensuring that these amendments are not included in the legislation. ¶8. (SBU) There was some marginal improvement in the enforcement environment in 2008, but serious problems remain. Anecdotally, rights holders have told us they are pleased with the enforcement activities of the specialized IPR units within the Turkish National Police and with the responsiveness of MOC, MOJ and the Customs Undersecretariat. One software representative noted that 90% of their requests for warrants are granted by the specialized IPR courts as long as there is sufficient evidence of infringement, representing a huge shift in judicial attitudes. However, outside of these specialized units (i.e. outside of the large cities),rights holders find themselves in a constant battle to convince police to take action and to persuade judicial authorities to take the crimes seriously. This is compounded by the fact that such authorities are often themselves involved in IPR-infringing activities. Rights holders (and the police themselves) also note that even the specialized ANKARA 00000326 004.2 OF 006 units are underfunded and lack appropriate equipment. ¶9. (SBU) Enforcement statistics show an overall increase in seizures of counterfeit products, although they have fallen in some categories where the products are either becoming outdated (music and video cassettes) or moving online (music CDs). The following chart highlights statistics from the Security General Directorate - also reflected in the submission of the International Intellectual Property Alliance (IIPA). -------------- Seizure Statistics 2007 2008 -------------- -------------- -------------- Operations 3741 2847 Persons Arrested 4132 3226 Non-Banderoled Products -------------- CD/VCD 2.1 million 1.4 million DVD 490,000 1.3 million Books 235,000 575,000 Video Cassettes 400 250 Music Cassettes 28,000 8,100 Banderoled Products -------------- CD/VCD 12,000 6,000 DVD 1 700 Books 10,000 22,000 Music Cassettes 55,000 15,000 CD/VCD/DVD Inlays 8.2 million 24.2 million ¶10. (SBU) As noted in the IIPA submission, there has been considerable confusion over whether or not Police and Inspection Committee officials possess ex officio power to conduct raids. The language in the previous Copyright Law was deleted from the February 2008 version, not because the power was removed but because it is enshrined elsewhere in law and the amendment drafters felt it was redundant. Post agrees with IIPA that a formal circular confirming ex officio power could help to reduce this confusion and encourage police to initiate raids without a complaint from a victim. ¶11. (SBU) Internet piracy is a growing problem in Turkey, especially as more Turks gain broadband access to the Internet. The GOT has been active in providing support to fight Internet piracy, and both the copyright law and the recent trademark amendment contain specific, strong language to fight abuse of IPR on the Internet. Rights holders report that GOT authorities also respond quickly to requests to block access to various piracy sites. As broadband access is expanding rapidly, the GOT is in a constant race to keep up with the widening scope of the problem, but has shown a good effort to date. ¶12. (SBU) Certain Customs regulations continue to pose problems for rights holders. Trademark owners are still required to file in paper to every Customs site on a monthly basis in order to receive protection for their goods, an exhausting and expensive process. A new Customs law is under consideration that would replace this system with a centralized electronic, yearly filing requirement (Refs B and H) and passage is expected this year. Customs is also only allowed to hold suspected counterfeit goods for 10 calendar days absent a formal complaint from the rights owner. Because of time differences, these days are rapidly used up when trying to coordinate with a rights holder in the U.S., especially if the victim must travel to a remote portion of Turkey to identify the goods. ¶13. (SBU) There has been little to no improvement on speeding up judicial cases, although this may change once the UYAP system is fully implemented and judges and prosecutors have direct access to copyright, trademark, and patent files. Almost all IPR cases are appealed and the average time to process an appeal is still well over two years. Even when convictions are achieved and upheld, sentences also lack deterrent effect and frequently end in suspended sentences or nominal fines. -------------- -------------- ANKARA 00000326 005.2 OF 006 The Ugly: Pharmaceutical Protections Moving Backward -------------- -------------- ¶14. (SBU) The most troubling developments in the last year occurred at the Ministry of Health (MOH),which violated outright the protection of confidential pharmaceutical test data for a U.S. company's product and which circulated a draft regulation that would further reduce data protections for fixed combination products. ¶15. (SBU) In January 2009, in violation of the data exclusivity rights of a U.S. pharmaceutical company, the MOH issued marketing approval for a copycat generic product. This action occurred just days after the approving official, Dr. Mahmut Tokac, told Assistant USTR Christopher Wilson in a formal U.S.-Turkey bilateral trade meeting that Turkey's obligations on data protection for fixed combination products were "unclear" and that the EU had not yet provided instruction on the matter (Ref H). Rather than place the approval application on hold pending that clarification (which had in any event already been provided by the EU in a series of letters dating back four years),MOH went ahead and approved the product. Despite the intervention of the U.S. company, the U.S. Embassy, and the European Commission Delegation to Turkey, the MOH has refused to withdraw its approval and the product was approved for pharmaceutical reimbursement by the Social Security Administration just a few weeks later and is now on the market (and is being marketed for just 30 kurus less than the US company's product - the equivalent of about 18 U.S. cents). A second U.S. product from a different company now faces the same problem. This constitutes a serious violation not only of Turkey's WTO TRIPS and its European Customs Union obligations, but also of internal Turkish law and of the national treatment principle (foreign companies' approval and reimbursement applications routinely take years). Post continues to work with relevant Turkish agencies to rectify this situation, but for the time being, the attitude of MOH remains a significant black mark against Turkey. ¶16. (SBU) At the same meeting with AUSTR Wilson, MOH officials denied that they had proposed amending the regulations on pharmaceutical data protections, even though the industry had been formally requested to provide input in December (in some ways a positive sign, as they were at least consulted first). The amendment would have, among other things, specifically changed the recipient of data protection from its current form of "product" to "molecule." This would have had the effect of removing fixed combination products from the group of protected products. The amendment would also have eliminated the requirement for testing if a combination product's individual ingredients had previously been approved - leaving aside the troubling IPR aspect of this rule, it poses serious public health risks. Although this amendment has not moved forward, it may have been intended to provide cover for the MOH's later actions violating data exclusivity. ¶17. (SBU) In other issues of concern to the pharmaceutical sector, there has still been no progress on the patent linkage proposal (i.e., a formal system in which MOH checks to see if a patent has been issued before issuing a marketing approval). GOT officials privately recognize that the idea has some merit, but argue that Turkey has no obligation to implement the system under its existing obligations. Data exclusivity also remains tied to the remaining term of the product patent and dates from the first approval in the European Customs Union. Turkey will eventually need to harmonize its data exclusivity rules entirely with the EU (meaning an 11 year period of protection),but has indicated that it plans to tie this harmonization to the date it becomes a full member of the EU. This could push back implementation by over a decade. -------------- Where Do We Go From Here? -------------- ¶18. (SBU) Post recommends that Turkey remain on the Special 301 Watch List. We recognize that considerable problems remain in Turkey's IPR regime and that the failure to amend the trademark law in a timely manner and MOH's actions against data exclusivity provide some justification for raising Turkey back to the Priority Watch List. In our judgment, however, penalizing Turkey this year is likely to ANKARA 00000326 006.2 OF 006 dishearten those in the MOJ, MOC and Customs Undersecretariat who are making good faith efforts to improve Turkey's IPR protections, and is highly unlikely to change problematic attitudes at the MOH. As one attorney recently noted to us, "Fixing Turkey's IPR problems requires a change in the society's mentality, and that will not happen overnight." The past year's training programs and public awareness campaigns lay the essential groundwork for future progress. ¶19. (SBU) Just because progress is slow, however, does not mean it should stop. We believe that in the coming year Turkey should: -- Ensure that vital pieces of IPR legislation, such as the new patent and trademark laws and the new Customs law are finally passed and implemented. The laws should be crafted to bring Turkey more in line with EU and international norms instead of diverging from them, so frivolous or harmful amendments should be avoided; -- Issue a circular reaffirming the ex officio powers of law enforcement to act against IPR violations; -- Continue to provide enhanced training programs for judges, prosecutors and law enforcement and expand the reach of these programs beyond the specialized courts and units dealing with IPR; -- Transfer control of the banderole system for copyrighted products to the private sector (Note: MOC officials have informed us that they plan to give the power to issue banderoles to the collecting societies in the coming year, under MOC supervision. End note.); -- Ensure that pharmaceutical fixed combination products receive confidential test data protection in line with Turkey's laws and EU commitments; and, -- Consider including private sector representatives on the IPR Coordination Board. We believe that all of these goals could be achieved within the coming year and that taken together they would contribute to a significant continued improvement in Turkey's IPR regime. Visit Ankara's Classified Web Site at http://www.intelink.sgov.gov/wiki/Portal:Turk ey Jeffrey