CROATIA IPR UPDATE

UNCLAS SECTION 01 OF 02 ZAGREB 000152

SENSITIVE
SIPDIS

STATE FOR EB/TPP/IPE URBAN, EUR/SCE

E.O. 12958: N/A
TAGS: ECON ETRD KIPR HR
SUBJECT: CROATIA IPR UPDATE

SENSITIVE BUT UNCLASSIFIED


1. (SBU) Summary: Croatia is currently not on
the Special 301 Watch List. Post has researched
the area of concern identified by industry in its
Special 301 submission (see paragraph 4).
Croatia's legal framework continues to develop and
is now completely harmonized with the EU.
However, effective law enforcement, including
addressing of IPR issues in the courts, is uneven
and often does not provide companies adequate IPR
protection. Post has recently engaged in advocacy
for a U.S. pharmaceutical company facing patent
violations by a generic producer. Post's efforts
have achieved a positive result, but Croatia still
faces problems of patent protection in its
licensing procedures for new drugs. End Summary.

Legal framework Now Harmonized with EU
--------------


2. (SBU) With the recent passage of several
pieces of technical legislation, the legal
framework for the protection of IPR in Croatia is
fully harmonized with the Acquis Communitaire.
IPR infringements have been criminalized in
Croatia since 1994. Until recently, the Ministry
of Interior maintained a special IPR investigative
police unit. This unit was recently absorbed into
the department of white collar crime and has
ceased to exist on its own. Several U.S.
companies in the country have complained about
this move, saying they no longer have any specific
counterparts in the police with whom to discuss
IPR cases.


3. Seizures and the number of criminal cases
brought for IP crimes have risen steadily in
recent years, however problems remain. Geography
poses Croatia's greatest challenge in protecting
IPR, as its long coast and land borders with
Bosnia and Serbia make it a major transit route
for counterfeit goods. Also, despite regular
police seizures of pirated and counterfeit goods,
Croatia's court system has not developed as far in
its ability to tackle this problem, frequently
releasing violators with little more than a verbal
warning and forfeiture of goods seized. Post has
an excellent relationship with the government IPR
office and they have expressed their openness to
suggestions or assistance that the USG can offer
in relation to IPR issues.


Twinning project to intensify IPR enforcement
--------------


3. (SBU) Croatia recently received approval for
the PHARE 2006 twinning project "Strengthening the
Enforcement of Intellectual Property Rights"
launched in February 2009. The project is
designed to train relevant persons in the Ministry
of Justice, Ministry of Interior, Customs
Authority and the State Inspectorate in effective
law enforcement techniques. The project is
intended to strengthen administrative capacity in
line with legislation harmonized with the EU.
While Croatia is not an important producer of
pirated and counterfeit goods, the authorities
involved will increase levels of information
sharing that should lead to increased actions
against entrance of and distribution of
counterfeit goods in Croatia.

Interpretation of .hr domain legislation
--------------


4. (SBU) Post has researched a concern received
this year from the business community - Verizon's
"Special 301" submission, which mentions a problem
with Croatia's internet domain regulations. After
discussions with CARnet, Croatia's official .hr
domain source, post believes Verizon has
misinterpreted Croatia's regulations. A CARnet
representative explained that while a company
registered in Croatia may apply for only one
domain, the domain name itself is not restricted.
Verizon's example of an infringer registered as
"verizon.hr" precluding the company from

ZAGREB 00000152 002 OF 002


registering as "verizontelecom.hr" is not correct.
A company registered in Croatia may use any word
and symbol they wish in their domain name and may
use only a symbol or add a word to differ from an
already registered .hr domain.

Qualified success on a recent IPR issue
--------------


5. The issue of patent linkage between medical
licensing agencies and patent enforcement entities
continues to be a problem in Croatia. (Note: An
MOU signed between the state IPR office and the
medical licensing agency in 2007 on information
sharing led to Croatia's removal from the Special
301 Watchlist.) Despite this MOU, local
representatives of Merck pharmaceuticals
approached the embassy last fall to report that
Krka Pharmaceuticals, a Slovenian pharmaceutical
company, had registered a generic form of MSD's
patented Singulair asthma medicine with the
Medical Licensing Agency. Although the patent
registered to Merck expires on October 11, 2011,
Krka was able to register the generic copy of the
drug in Croatia under the name Monkasta and has
submitted a request to the Croatian Health
Insurance Fund (HZZO) for the drug to be included
on the HZZO reimbursement list. The Croatian
Patent Act allows this procedure per Article 112,
which does not allow for standard patent
protection for patents registered before 1993, but
only allows holders of such patents to initiate
court proceedings in order to claim damages.
Hence, Merck cannot prevent the marketing of
Singulair's copies in Croatia regardless of the
existing patent, but can only seek compensation in
court. This loophole is not unique to Croatia,
and we understand that most EU countries have
similar legislation. However, most EU countries'
judicial systems are more efficient in ruling in a
timely and effective manner on behalf of the
damaged party.


6. After numerous discussions between Merck,
Embassy econ and FCS officers, the state IPR
office, the medical licensing agency, and the
Ministry of Health, the HZZO recently put off
decision on the approval of the Krka drug for
their reimbursement list until at least July.
Merck is please with this situation for the moment
and told us the embassy's assistance had helped
save them $3 million in sales.


7. Comment. We were disappointed to see the
issue of patent linkage arise again after the
signing of the MOU between the state IPR office
and the medical licensing agency. The licensing
agency clearly does not feel it has an obligation
to consult with the patent office and has told us
they are not authorized to make decisions taking
patent rights into consideration. Despite this
problem, Croatia's legal framework is strong.
What lags behind is enforcement, both in police
and customs capacity, and knowledge of IPR within
the court system. Any bilateral assistance
efforts in the future should focus on these areas.




BRADTKE