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."

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Reform of Industrial Property Law
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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.


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Socialism, Inc.
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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

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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.

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ALBA Signatories Also Required To Implement IR Reforms
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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.

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Industrial Property Changes Only The First Step
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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."

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Comment
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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