SAUDI ARABIA SPECIAL 301 REVIEW: POST INPUT

UNCLAS RIYADH 000386

SIPDIS

STATE FOR NEA/ARP(HARRIS) AND EEB/TPP/IPE
STATE PASS USTR FOR JENNIVER GROVES AND JASON BUNTIN

E.O. 12958: N/A
TAGS: ECON ETRD EINV KIPR SA
SUBJECT: SAUDI ARABIA SPECIAL 301 REVIEW: POST INPUT

REF: A. SECSTATE 8410

B. RIYADH 30

C. RIYADH 40

D. RIYADH 83

E. 2008 RIYADH 1271

F. 2008 RIYADH 1435

G. 2008 RIYADH 1630

H. 2008 RIYADH 1663

I. 2008 RIYADH 1682

J. 2008 RIYADH 1870

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Summary
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1. Despite continuing deficiencies, Saudi Arabia improved
its protection of intellectual property rights (IPR) in the
preceding year. The Violations Review Committee has become
more productive and transparent under new leadership. The
SAG offered a counter-proposal to USTR's Exclusive Marketing
Rights Proposal for protecting the IPR rights of certain
orphan pharmaceutical products and reported 100% compliance
in using licensed software for its PCs. The SAG also
continues to eagerly participate in and request training from
the USG to improve its capacity to protect and enforce IPR,
and has scheduled a conference on IPR protection and
enforcement to take place in Riyadh in April 2009, to include
speakers from the USPTO and similar agencies from the
European Union. In February 2008, the Saudi IPR Committee
agreed to establish an IPR Coordination Group. Although no
group has nominally been established yet, the SAG met
regularly with USG representatives and private industry
rights holders, sometimes simultaneously, to discuss IPR
protection and enforcement.


2. However, industry losses due to IPR infringement remain
significant, and industry groups express frustration about
IPR enforcement. The Violations Review Committee (VRC) at the
Ministry of Culture and Information (MoCI) has begun to
provide a publicly accessible website with all information
for ongoing IPR cases. The MoCI has also raided warehouses
and shops which produce counterfeit material, and police and
customs officials have confiscated hundreds of thousands of
counterfeit goods from pharmaceuticals to optical media. The
MoCI proactively investigated and shut down retail sites
which sell infringing goods and cafes which profit from
pirated cable signals and internet connections. However, at
the time of this report, the SAG has failed to enact severe
deterrent penalties in the form of high fines or imprisonment
for IPR violators.


3. Post recommends that Saudi Arabia remain on the Watch
List pending an out-of-cycle review to monitor progress on
near-term goals. Saudi Arabia made substantial efforts in
implementing its IPR obligations during the preceding year
and continues to seek opportunities to cooperate with the USG
to work to overcome its deficiencies.

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Copyright enforcement
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4. Despite recent improvements, prosecution and punishment
of copyright violators remains the most deficient area in the
SAG's intellectual property rights (IPR) regime. Primary
responsibility for ensuring copyright protection lies with
the Ministry of Culture and Information (MOCI),whose
responsibilities include the investigation of fraudulent
activity, as well as the initial judicial review of all
copyright violation cases. Rights holders criticize the
MOCI's continued failure to apply effective deterrent
penalties to IPR violators. However, in response to
complaints about the lack of transparency in IPR cases the
MoCI created and is making case information available on a
publicly accessible website.


5. The MOCI has also proactively investigated and shut down
retail sites which sell infringing goods and cafes which use
pirated internet and cable signals. Severe resource
constraints hamper the MOCI's ability to make rapid progress
on these issues, but significant headway has been made. For
example, stories of the raids on warehouses, vendors, and
cafes have been published in the local media as part of a
"name-and-shame" campaign. Additionally, vendors that are
closed are locked and covered in signs stating clearly
"Closed by the Ministry of Culture and Information for
Intellectual Property Infringement." In 2008, 12,340 stores
were inspected up 40% from 2007, 5930 raids were conducted,
and 2,869,622 units of counterfeit material were confiscated
ad destroyed, according to MOCI sources. In January 2009,

the Ministry of Culture raided a warehouse and discovered
800,000 pirated PlayStation games.


6. Initial judicial review of all copyright violation cases
is conducted by the MOCI's Violations Review Committee (VRC),
a semi-judicial authority that has the ability to issue fines
of up to 100,000 Saudi Riyals or refer more serious cases to
the Board of Grievances. Though it continues to be staffed
by members who hold other full-time jobs at the Ministry, the
VRC's productivity increased dramatically upon the
appointment of a new Chairman in September 2007. While
industry sources told post the VRC issued 13 rulings in 2006,
the VRC reported that it had issued 275 rulings under its new
leadership. In 2008 the VRC received 485 complaints, of
these 263 violations were referred to the Committee, 225 were
processed, and 50 are still ongoing. According to industry
sources, the new Chairman is also generally willing to
consult with rights holders. In order to expedite cases, the
MOCI also committed to establish regional VRC's in Dhahran
and Jeddah. The Jeddah VRC was launched in January 2009.
Additionally, in 2008 the MOCI hired 80 new employees as
inspectors and purchased 15 new vehicles to be used in the
inspections.


7. Despite these marked improvements at the VRC, the failure
to issue effective deterrent penalties remains a problem. The
maximum fine issued by the VRC for and IPR violation was
100,000 Saudi Riyals (approximately $26,666.00 USD). Post is
unaware of any Saudi court issuing a prison sentence for an
IPR violation, although Saudi legislation now provides for
such a penalty.


8. Following King Abdullah's issuance of a royal order
directing government ministries to legalize their software
use following the International Intellectual Property
Alliance's visits to the Kingdom in 2006 and 2008, the SAG
now claims that it has 100% compliance in using licensed
software in government ministries. However, industry
maintains that the push for legalization has enjoyed only
modest success. The SAG disputes industry's estimates of its
rate of legal software use. It asked all government
ministries to investigate and report back whether their
computers ran only licensed software. SAG officials report
that this study demonstrated over 90% of government PCs run
only legal software. Industry dismisses this
self-certification as inadequate and inaccurate. Microsoft
believes that legalization problems persist for bureaucratic
and budgetary reasons, and suggests that the SAG designate
funds for all ministries to use to legalize rather than
addressing the issue ministry by ministry or pooling the
ministries' technology budgets together.


9. The MOCI in 2008 began populating the "E-gate", a publicly
accessible website with information on cases before the
Violations Review Committee, both pending and closed. In
2008 140 cases were completely posted to the website, and in
2009 the postings are expected to exceed 400 cases.

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Patent enforcement
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10. The SAG offered a counter-proposal to USTR's Exclusive
Marketing Rights Proposal (EMR Proposal) in February 2008.
USTR proposed that the SAG grant temporary exclusive
marketing rights to pharmaceutical products that lost patent
protection when Saudi Arabia transitioned to a new
TRIPS-compliant patent law in 2004 through such products'
patent expiration in the US or the European Union (whichever
is sooner). Products that had applications for patents
pending under the old law (and enjoyed patent protection
while their applications were pending) were reviewed as new
cases under the new law. These products were then denied
patents because the SAG determined that they were not "novel"
because they had been publicly patented in other
jurisdictions more than a year before their cases were
considered in Saudi Arabia. While industry was reluctant to
provide a definitive list of these products for fear of
inadvertently omitting a product, the SAG required such a
list to consider the EMR Proposal, thus USTR forwarded a list
of more than 70 products compiled by industry in October 2007.


11. The SAG analyzed this list of more than 70 products and
winnowed it down to about 40. It accomplished this by
eliminating both products for which patent applications were
never filed or were dropped or refused because of a failure
to pay fees or provide requested information, and products
that were granted patents or were still being considered for
patents. The SAG further proposes excluding products for
which a generic is or becomes available in the US, the
European Union or the Kingdom, and limiting exclusive
marketing rights to those products that applied to register
with the Saudi Ministry of Health (MOH) under the old patent
law. This counter-proposal seems only to regard listed
pharmaceuticals rather than defining a category, and the
officials presenting the counter-proposal made it clear that
any agreement would have to approved by the Council of
Ministers. USTR reviewed the counter-proposal and submitted
a response on April 2, 2008, which has not yet received a
response.


12. To post's knowledge, Lipitor is the only pharmaceutical
in the category described in Paragraph 8 for which the MOH
has subsequently licensed manufacture of a generic
equivalent. Pfizer, Lipitor's manufacturer, is appealing the
decision to deny Lipitor a patent, and argues that the MOH's
issuance of a license to manufacture generic Lipitor violates
Saudi Arabia's WTO obligations. Under Saudi Arabia's
Protocol of Access to the WTO, the Saudi Arabian
representative stated that if a pharmaceutical patent
application was pending, the MOH would not register a
generic, unless there was no possibility that the patent
would be granted. In discussions with post SAG officials
have agreed in principle that a license to produce a generic
version of a pharmaceutical should not be issued while the
patent rejection of that precise pharmaceutical is being
appealed, but the license to manufacture a generic equivalent
of Lipitor has not been revoked. Lipitor's status in the
Kingdom would not seem to be remedied by the SAG's
counter-proposal because the generic is available in Saudi
Arabia.

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Legislation and international agreements
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13. There is agreement among Saudi officials and rights
holder groups that current IPR laws provide the necessary
authority for the SAG to investigate arrest and penalize IPR
violators. Post no longer considers Saudi legislation an
impediment to IPR enforcement. However, Saudi Arabia's 2007
Special 301 Initiative Action Plan recommended that Saudi
Arabia ratify and implement the World Intellectual Property
Organization (WIPO) Copyright Treaty and WIPO Performances
and Phonograms Treaty (the WIPO Treaties). SAG officials met
with WIPO in Geneva in October 2007 and are still looking for
a legal advisor to explain the content of the WIPO Treaties
and what the SAG's responsibilities would be if it were to
ratify them.


14. In March 2008 Saudi Customs issued a circular requiring
all foreign importers, as of February 1, 2009, to certify the
origin of their goods with a stamped, non-removable
"certificate of origin" on the package of the item and the
shipping container of the items. This certification is
intended to protect the integrity of items with regional
designations as well as certify their legitimacy and prevent
the importation of fraudulent goods. Saudi Customs no longer
accepts imported products lacking this certification.

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Training and cooperation
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15. Improving the SAG's performance on transparency and
enforcement will require building knowledge and expertise
across Saudi ministries in officials ranging from customs and
copyright inspectors to patent examiners and judges. While
Saudi nominees have attended a number of week-long US Patent
and Trademark Office (USPTO) academies in Washington, D.C. in
the preceding year, SAG officials tell post that most of
their employees that speak English well have already
completed USG training. They are eager for their employees
that only speak Arabic to benefit from this professional
development opportunity as well.


16. SAG officials demonstrated this desire during a Spring
2008 visit to Riyadh by officials from USTR, USPTO and the
Copyright Office. These USG officials met with Saudi
officials from the MOCI, the Ministry of Commerce and
Industry, the Customs Authority, the King Abdulaziz City for
Science and Technology and the Board of Grievances. Each of
these institutions seized the opportunity to explain their
role in protecting and enforcing IPR in the Kingdom, and to
provide detailed, specific input regarding self-funded
training programs they believe the USG can offer to enhance
their ability to protect and enforce IPR. Delegation members
are now designing proposals for various Saudi-specific,
Arabic-language training programs that should pay dividends
in enhanced IPR enforcement and protection in the Kingdom.
The Saudi IPR Committee also agreed to establish an IPR
Coordination Group during this visit. An IPR Coordination
Group, as proposed in Saudi Arabia's 2007 Special 301
Initiative Action Plan, should include representatives of the
USG and the SAG, as well as private industry rights holders,
and meet regularly to discuss IPR protection and enforcement.
Although no group has nominally been established yet, the
SAG met regularly with USG representatives and private
industry rights holders, sometimes simultaneously, to discuss
IPR protection and enforcement.

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Public awareness as a priority
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17. The SAG is making substantial strides in promoting
public awareness of IPR violations as a crime, and consumer
protection. For example, in June 2007 the Ministry of
Commerce and Industry in conjunction with the WIPO and the
Islamic Development Bank (IDB)hosted a regional seminar on
Intellectual Property and Technology Transfer. In March,
2008, the Saudi Publishers Association launched the first
Saudi Intellectual Property Rights Conference. In October,
2008, the SAG hosted, along with the Arab League, the First
Arab Consumer Protection Forum in Jeddah, attended by over
1000 participants.


18. The Ministry of Culture and Information also publishes
stories of raids in the local press as a part of a
name-and-shame campaign, and to further publicize that those
businesses selling pirated goods will be targeted by the MoCI
and the Ministry of the Interior. During a January 2009
warehouse raid, the Deputy Minister of Culture and
Information invited local TV stations and press to observe
and document the raid. The MOCI has also published a booklet
guide to Copyrights Law and Enforcement procedures and are in
the process of translating the guide into English and French.

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Recommendation
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19. Post recommends that Saudi Arabia remain on the Watch
List pending an out-of-cycle review to monitor progress on
near-term goals. Saudi Arabia made substantial efforts in
implementing its IPR obligations during the preceding year
and continues to seek opportunities to cooperate with the USG
to work to overcome its deficiencies.
FRAKER