This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 BRASILIA 000698 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR EB/IPC WILSON 
DEPT PLEASE PASS TO USTR KALVAREZ, DOC LASHLEY, USPTO 
URBAN, LOC TEPP 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON BTIO
SUBJECT: BRAZIL: SPECIAL 301 RESPONSE 
 
REF: A) SECSTATE 43420 B) 02 BRASILIA 1869 C) 02 
     BRASILIA 2290 D) 02 BRASILIA 2590 E) 02 
     BRASILIA 2940 F) 02 BRASILIA 4170 G) 02 
     BRASILIA 4470 H) 02 BRASILIA 4473 I) RIO DE 
     JANEIRO 198 J) 02 RIO DE JANEIRO 1030 K) 02 
     SAO PAULO 268 L) 02 SAO PAULO 807 M) 02 SAO 
     PAULO 894 AND PREVIOUS N) 02 SAO PAULO 1709 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1.  Summary.  Post recommends that Brazil remain on the 
Priority Watch List for the 2003 Special 301 Review.  New 
attention to entrenched IPR problems, particularly in the 
copyright area, may be forthcoming under the new Lula 
government.  Driven largely by concern over lost tax 
revenues, impact on formal sector jobs, and harm to Brazilian 
artists, the new administration, which assumed office January 
1, has publicly acknowledged rampant piracy and 
counterfeiting to be a Brazilian problem, and has vowed 
action.  However, it is too early to assess the GOB's new 
level of commitment.  Furthermore, despite some positive 
groundwork laid by the Cardoso administration, the level of 
IPR enforcement within Brazil remained grossly inadequate 
during the last year.  Despite its new leadership and 
staffing, the Inter-Ministerial Committee for Fighting Piracy 
(IMC) has not yet proven its capacity for effecting 
substantial, tangible improvements in copyright enforcement. 
Likewise, the backlog of pharmaceutical patents continues to 
grow due to the two-step patent application process, which 
requires Ministry of Health approval, and insufficient 
resources within Brazil's patent institute.  Maintaining the 
status-quo on Special 301 status for Brazil strikes the 
appropriate balance between recognition of a continued poor 
IPR record, hopes that the new government will tackle the 
issue in earnest, and reinforcement of the USG message that 
IPR remains a priority within our bilateral agenda. 
 
Copyright - The Groundwork 
 
- Inter-Ministerial Committee: An Enigma or Force for Change? 
 
¶2.  As IIPA notes in its submission, much stock was placed in 
the creation of the Inter-Ministerial Committee to Fight 
Piracy (IMC) in March 2001.  There was an expectation that 
the IMC would provide the vehicle through which the GOB could 
finally articulate and act on a national strategy for 
copyright enforcement.  However, far from being a dynamic 
force for change, the IMC was not a functioning entity in 
¶2001.  Even GOB officials have acknowledged the IMC's less 
than stellar 2001 performance, during a November 2002 
Bilateral Consultative Mechanism meeting and more recently in 
meetings with DOC A/S Lash on February 27.  While copyright 
industries are correct in asserting that tangible results 
still remained elusive in 2002, the following changes in the 
IMC should be noted as having positive potential. 
 
¶3. In March 2002, a new coordinator, Clovis da Silva 
Monteiro, was named to head the IMC.  Monteiro was tasked 
solely with running the IMC, in contrast to his predecessor, 
who had retained his drug-fighting responsibilities as a 
senior police official in Rio de Janeiro during his IMC 
tenure.  Monteiro established within the Ministry of Justice 
an IMC office staffed with four assistants, and had managed 
to convene 10 IMC meetings by the end of 2002, many with 
private sector representatives.  In November 2002, the IMC 
produced an action plan for 2003 (USTR received a copy during 
the Bilateral Consultative Mechanism meeting the same month). 
 
¶4. The action plan, a nine-page document, on first read 
appears to suffer from over-generality; actions are only 
described in broad terms.  For example, one action item is to 
examine existing proposals for legislative reform and to 
identify the need to improve other legal texts.  The item 
fails to provide IMC views on specific IPR legislative 
proposals or to identify actions to promote their adoption or 
defeat.  This generality, at least in part, reflects the fact 
that the IMC is a coordinating body ) it does not have the 
authority to direct action by any other government body. 
 
¶5. As explained by Elza Marcelino de Castro, chief of 
Itamaraty's Intellectual Property Division and Itamaraty's 
representative to the IMC, specific actions are not 
identified in the IMC action plan because implementation is 
the responsibility of the individual ministries that comprise 
the group.  She notes, for instance, that after IMC 
discussions and consensus, Itamaraty recently sent a note to 
the Brazilian Congress urging action on long-pending 
legislation on integrated circuitry.  She also claims that an 
action plan with greater specificity exists, but is not 
public.  Likewise, it is difficult to find the imprint of the 
IMC on police enforcement actions.  Monteiro, who hails from 
the Federal Police corps, claims to be intimately involved in 
promoting and coordinating police activity country-wide.  He 
admits, however, that he generally obtains results more from 
drawing on his personal credibility and experience within law 
enforcement than as head of the IMC. 
 
¶6. Monteiro has apparently succeeded in elevating IPR as an 
issue within Mercosul.  Due to his efforts, IPR was included 
for the first time within a Mercosul Presidential Declaration 
during the group's summit in Brasilia in December 2002. 
Itamaraty has confirmed that the issue is on the Mercosul 
agenda for follow-up at the ministerial level.  Brazil's 
actions in this regard are driven by its concern over pirated 
materials being smuggled across its borders, principally from 
Paraguay. 
 
¶7. Another action under IMC discussion is formation of a task 
force to deal with counterfeit products.  In a conference on 
IPR enforcement held in Rio de Janeiro in late November 2002, 
tax losses and potential harm to consumers from counterfeit 
products figured prominently.  A representative of Receita 
Federal, the GOB's IRS, was quoted extensively on the 
substantial tax losses from counterfeit products, principally 
cigarettes and gasoline.  Given the federal government's 
tight budget situation and focus on tax issues, greater GOB 
attention can logically be expected in this area during the 
coming months. 
 
¶8. The Ministry of Justice is reportedly looking into the 
possibility of forming a task force comprised of 
representatives from the country's various police units. 
This would be a welcome complement to the more 
policy-oriented IMC.  Monteiro also claims that the IMC is 
encouraging other municipalities to establish IPR task 
forces, similar to Sao Paulo's, but admits that convincing 
local authorities with tight resources that investments 
should be made in this area is an uphill battle. 
 
¶9. An area of increasing focus by some of the copyright 
industries is Brazil's judicial system, in particular, the 
lack of convictions and of deterrent sentencing.  According 
to Itamaraty's de Castro, while establishment of separate IPR 
courts is not envisioned, the IMC is discussing how to 
cultivate IPR expertise within the judicial system.  She 
notes, however, that executive branch initiatives in this 
area are not always welcomed by the independent judiciary. 
 
¶10. While the IMC's lack of overarching authority will 
continue to undermine its ability to forcefully carry out a 
nation-wide strategy for improving IPR protection within 
Brazil, it still represents the best vehicle at present for 
focusing IPR enforcement issues at the federal level. 
Private sector associations interested in IPR issues are 
seeking increased involvement in the work of the IMC, with 
some requesting a seat on the committee.  Enhanced 
involvement in the IMC by the private sector could lead to 
better focus and more concrete results. 
 
-Optical Media: New Digital Codes Requirement 
 
¶11. The promulgation of Presidential Decree 4533 on December 
19, 2002 provides implementing regulations for Article 113 of 
Brazil's 1998 Copyright Law concerning identification codes 
for copyright products.  The decree requires that music and 
audiovisual works, whether optically read or not, include 
codes identifying the original work, the production company, 
catalogue number, the lot code and number of copies contained 
within the lot, as well as an International Standard 
Recording Code providing information on the respective 
artists and other information provided by the producer.  The 
decree is due to become effective April 22, 2003. Local 
industry is divided on whether or not this requirement will 
prove to be an effective IPR enforcement tool, or merely a 
mechanism for better accounting between production companies 
and artists.  The local software industry association (ABES), 
for instance, opposes the decree.  However, Castro argues 
that the decree will help reduce illegal sales of works that 
are stolen from legitimate production facilities, which she 
claims have been significant. 
 
Patents ) No Recovery Expected Soon 
 
¶12.  Despite GOB officials -- such as the acting head of 
Brazil's National Institute of Industrial Property (INPI), 
Minister Furlan who oversees INPI as the head of the Ministry 
of Development, Industry and Trade (MDIC), Under-Secretary 
Hugueney of Itamaraty's U/S of Integration, Economics and 
Trade, and Senator Mercadante (PT)- recently acknowledging 
the magnitude of the problem, no immediate reduction in the 
pharmaceutical patent backlog is expected.  Firm figures on 
INPI's pending patent applications are hard to come by, but 
PhRMA's estimate of 45,000 pending patent applications, of 
which approximately 18,000 are pharmaceutical patents, 
appears reasonable. 
 
¶13. INPI claims the backlog is due to its lack of resources; 
INPI currently has 80 examiners and only a few computer 
terminals.  INPI has requested approval from the central GOB 
to hire 350 examiners over the next five years and expand its 
number of computers.  However, the government's tight budget 
situation casts doubt on the likelihood of this occurring. 
Even Itamaraty's de Castro admitted to econoff that without a 
dramatic increase in resources for INPI, the patent backlog 
will persist for many years.  INPI is currently training 27 
new examiners, 20 of which will reportedly focus on 
pharmaceutical patents.  The required approval of the 
Ministry of Health's regulatory agency, ANVISA, in addition 
to raising TRIPS compliance concerns, also adds to patent 
processing uncertainty and delays.  However, in a February 27 
meeting with DOC A/S Lash, Hugueney reported that the GOB 
will be initiating a review in March of its policy regarding 
ANVISA's role in the patent approval process. 
 
Biotechnology 
 
¶14. As noted in the American Soybean Association's (ASA) 
Special 301 submission, piracy associated with Roundup Ready 
has been a burgeoning trend.  Past denial by the GOB of the 
existence of illegal plantings of Roundup Ready, which is 
estimated to have reached as high as 70 to 90 percent of the 
soybean crop in the state of Rio Grande do Sul, has hindered 
Monsanto's ability to exercise its patent rights.  The Lula 
administration has recently recognized the widespread use of 
Roundup Ready and is deliberating on what to do about the 
"illegal" GMO plantings within the 2002-2003 crop.  It is 
unclear at this point to what extent if any this 
acknowledgment of the pervasive use of Roundup Ready will 
assist Monsanto in pursuing its patent claims. 
 
TRIPS Compliance: Data Confidentiality 
 
¶15. On December 17, 2002, the Brazilian Congress passed Law 
10,603 intending to bring the data confidentiality portions 
of the industrial property law fully in line with TRIPS.  The 
law provides data protection for 10 years from the date of 
patent registration for products utilizing new chemical 
molecules or new biological organisms or until the first 
release of the information by the patent holder, with a 
minimum guaranteed period of protection of one year.  For 
products not utilizing new molecule or organisms, the period 
of protection is five years or until the first release of 
information by the patent holder with a one-year minimum 
period of protection.  For data generated after patent 
registration, the period of protection will coincide with the 
patent period or one year from when the data was divulged, 
whichever is longer.  USTR is evaluating whether or not the 
legislation is TRIPS compliant. 
 
Treaty Ratification 
 
¶16. Itamaraty has confirmed that the GOB does not currently 
have plans to ratify the 1996 WIPO Copyright Treaty or the 
WIPO Performances and Phonograms Treaty. 
 
Recommendation 
 
¶17. Post believes that the lack of tangible improvements in 
IPR protection and enforcement in the last year manifestly 
precludes lowering Brazil's Special 301 status.  We concur 
with industry submissions that suggest that retaining Brazil 
as a Priority Watch List country will appropriately highlight 
for the new government the importance of the issue in our 
bilateral relationship, without appearing to prejudge its 
policies and actions in this area.  Nonetheless, we request 
that, should Brazil's status be maintained, USTR's 
announcement highlight the USG's recognition of the positive 
intentions expressed by the Lula administration regarding IPR 
and the USG's desire to work collaboratively with it to 
improve its IPR regime in the coming year. 
GOUGHNOUR