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DE RUEHCV #0902/01 1971733
ZNY CCCCC ZZH
P 161733Z JUL 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 3390
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUEIAYF/ATO LATIN AMERICA
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

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