VENZUELA TO CHANGE INDUSTRIAL PROPERTY LAW TO

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000902 SIPDIS HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR RJARPE NSC FOR RKING USDOC FOR 4332 MAC/ITA/WH/JLAO E.O. 12958: DECL: 07/16/2019 TAGS: ECIN ECON EFIN EIND EMIN ENIV ETRD ETTC KIDE KIPR, KTIA, VE SUBJECT: VENZUELA TO CHANGE INDUSTRIAL PROPERTY LAW TO PROMOTE "SOCIALIST COMMERCE" REF: A. CARACAS 770 ¶B. CARACAS 1427 Classified By: Economic Counselor Darnall Steuart for reasons 1.4 (b) and (d). ¶1. (SBU) Summary. The government of the Bolivarian Republic of Venezuela (GBRV) is reportedly well along with plans to reform its principal industrial property law. According to press reports of remarks by Commerce Minister Eduardo Saman at a July 9 conference, however, this might only be the first phase in a concerted GBRV effort to reform its laws on competition and foreign capital in order to develop a system of "socialist commerce." -------------- Reform of Industrial Property Law -------------- ¶2. (C) As reported reftels, after pulling out of the Andean Community (and thus the application of Decision 486, the Community,s Common Intellectual Property Regime) on April 22, 2006, the GBRV declared in September 2008 that it had resurrected the 1955 Industrial Property Law which expressly prohibited the issuance of patents for pharmaceuticals and other products. Commerce Minister Eduardo Saman is now believed to be pressing for reform of the 1955 Law (ref A). According to the website for the Autonomous Service for Intellectual Property (SAPI),the proposed reforms will annul existing pharmaceutical patents in order to lower drug prices and stimulate domestic production of generic equivalents. ¶3. (C) In an interview recently published on SAPI,s website, Saman described patents as a mechanism to "monopolize" the pharmaceutical market and impede the distribution of benefits that improve the quality of life of Venezuelans. Saman appears to have the full support of President Chavez, who has called pharmaceutical patents a "trap" and said that Venezuelans "don,t have to be subject to capitalist laws." ¶4. (C) On July 8, Baker & McKenzie attorney Dianne Phoebus (protect throughout) told EconOffs that draft modifications of the 1955 law are "mature." Phoebus said that while no existing patents have been annulled to date, SAPI has started to deny patent applications. She pointed to the recent denial of an application for a GlaxoSmithKline Hepatitis B vaccine as an example, saying that the application had been filed in 2006 under the Decision 486 regime but denied under the 1955 law. Phoebus added that there are also indications that SAPI is seeking to kill other applications through the application of technicalities in the 1955 law. ¶5. (C) Phoebus explained that the proposed industrial property reform reportedly gives the GBRV legal authority to grant obligatory licenses to override patents and manufacture generic versions of drugs. Phoebus said that this provision is legally consistent with the WTO,s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) provided that it is only applied during national emergencies, such as the outbreak of an infectious disease epidemic. Phoebus believes, however, that the reform also contains provisions to oblige international companies to transfer technical information when signing agreements or contracts with the GBRV, an additional provision that is particularly worrisome for international pharmaceutical companies. -------------- Socialism, Inc. -------------- ¶6. (C) With respect to trademarks, Phoebus said that the reactivation of the 1955 law required companies to file trademarks under both national and international classification systems. SAPI also mandates that companies pay for an official search of the national database of previously registered trademarks prior to filing a trademark application. Phoebus said that such searches were not required under the 1955 law and added bluntly that this is an CARACAS 00000902 002 OF 002 attempt by the National Registry to raise money. As a final step, trademark applications must be published in one of two government-endorsed newspapers. Phoebus concludedthat the requirements are mostly a burdensome an costly irritant for companies registering tradearks in the country. In recent public remarks Sman has indicated that trademarks would also be cnsidered in the industrial property reform. -------------- -------------- ALBA Signatories Also Required To Implement IR Reforms -------------- -------------- ¶7. (SBU) Saman has said that LBA signatories wll also be required to change heir laws in accordance with the GBRV,s patent rforms. In an article published July 2 on SAPI,swebsite, Saman said that a new IPR doctrine "is pat of the liberalization of our people in the faceof so-called globalization, which is luckily in risis." Saman added that Venezuela is coordinatng a working group with ALBA members to change te organization,s doctrine on industrial propertyrights. -------------- - Industrial Property Changes Only The First Step -------------- -- ¶8. (SBU) The patent and trademark reforms are part of a broader plan to institute a new system of "socialist commerce," according to press reports of remarks by Commerce Minister Saman at a July 9 conference. The plan reportedly includes five "lines of action": 1) develop industrial production; 2) institute social control of the means of distribution; 3) establish the role of the State in setting prices; 4) substitute "consumerism" with the satisfaction of social needs; and 5) promote the "geopolitics of exchange," based on the necessity to export to ALBA and other markets "of the south." A package of legislative changes to accompany this plan is widely believed to be in the offing. ¶9. (SBU) Saman said that the purpose of the "socialist commerce" model is to replace importation with domestic production. Saman told the group of 80 business and industry representatives in attendance, "Don,t get scared when there is talk of Marxism. You have to lose your fear(it,s the only model that does not exclude." To achieve this goal, the GBRV will only accept external investment if promotes technology transfer, Saman said. The GBRV will also institute anti-dumping measures to protect "strategic sectors," specifically mentioning "footwear, confectionary goods, paper, iron, steel, and plastic." -------------- Comment -------------- ¶10. (C) Commerce Minister Saman,s public comments indicate that he is a committed Marxist who intends to move Venezuela further towards a new "socialist commerce" system. Indications are that he enjoys the full support of President Chavez. While the details of the "socialist commerce" system are unclear, any changes to Venezuela,s industrial property regime or to any other laws are likely to increase GRBV control of economic activity in the country. End comment. CAULFIELD