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

UNCLAS  LJUBLJANA 000127 
 
SIPDIS 
 
 
DEPT. FOR EB/IPE 
STATE PASS TO USTR LERRION 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD SI
SUBJECT: SLOVENIA:  2005 SPECIAL 301 REVIEW - 
RECOMMENDATION AGAINST INCLUSION ON WATCH LIST AT THIS TIME. 
 
REF: SECSTATE 23950 
 
 ¶1.  SUMMARY.  In light of significant progress Slovenia has 
made over the past year, Post recommends that Slovenia not be 
included on the Special 301 Watch List or Priority Watch list 
for 2005.  Post has consulted with PhRMA members in Ljubljana 
and relevant government authorities on the PhRMA 
recommendation submitted for USTR's consideration.  The 
advances in Slovenian policy related to the protection of 
intellectual property are a result of its obligations as a 
new member of the European Union.  We expect this trend to 
continue until Slovenia is in full compliance with all EU 
norms and directives.  PhRMA's complaint on slow court 
procedures is well founded.  Slovenia is grappling with a 
very serious problem of court backlogs, but this problem is 
system-wide and is being addressed on a number of fronts by 
the Government of Slovenia (GOS).  Additionally, a number of 
alternative dispute resolution mechanisms have been 
introduced in order to alleviate some pressure on the court 
system.  Recent changes in Slovenia's public health program 
designed to bring costs under control and to balance the 
health-care budget have resulted in some disadvantages for 
the producers of "innovative" drugs.  However, the process by 
which the program is being implemented appears to be 
transparent and designed in order to permit the public health 
system to maintain and even expand the types of drugs 
available, including innovative drugs, to Slovene citizens in 
the long-run.  END SUMMARY. 
 
 
Intellectual Property 
--------------------- 
 
¶2.  Slovenian legislation provides for different legal 
measures within the framework of civil, criminal and 
administrative law, which may be used by holders of 
intellectual property rights.  The Industrial Property Act 
(IPA), the Act on Litigation Procedure (ALP) and the Act on 
Enforcement of Judgments in Civil Matters and Insurance 
(AEJCMI) are generally used in civil litigation and for cases 
involving infringement of industrial property rights. 
 
¶3.  COURT PROCEDURES: In discussions with representatives 
from the Slovenian Intellectual Property Office (SIPO), Post 
raised the points provided by PhRMA with the SIPO Director, 
Biserka Strel, and the Head of the Legal Department, Mojca 
Pecar.  Both acknowledged deficiencies in Slovenia's legal 
system and described the measures currently undertaken to 
address them.  They denied that current legislation favored 
domestic (pharmaceutical or other) industry.  The GOS is 
working to speed court proceedings across the system.  The 
Ministry of Justice has created the Hercules Project, which 
involves experienced judges from the high and Supreme courts 
working in the courts of first instance to speed cases along 
and minimize the need for the appeals process.  In 2005, a 
pilot project with shortened proceedings was launched. 
Results of the Hercules project have been encouraging: 
increased numbers of cases have been solved, and average time 
of proceedings has been reduced.  The EU Directive on 
Enforcement will also impose changes on the Slovene system by 
requiring the GOS to build TRIPS plus into its legislation. 
While the GOS has until April 2006 to accomplish this, it is 
committed to have the regulations in place by the end of 2005. 
 
¶4.  COMPENSATION:   To PhRMA's complaint that "current 
damages for intellectual property rights violations are not 
adequate to compensate for the injury the right holder has 
suffered," SIPO responded that compensation for the damages 
the right holder has suffered including the loss of profit is 
set by the judge, taking into account all the circumstances 
of the case.  As a general rule, a party which did not 
succeed in the litigation has to cover the costs of the 
winning party.  The judge may  also decide to split the 
costs.  These decisions are also subject to appeal.  (Note. 
Because PhRMA's paper did not include concrete examples to 
back up these and other complaints, Post was unable to press 
the point further.  We are pursuing PhRMA locally for 
specific examples we may use in the future. End Note), 
 
¶5.  OTHER TRIPS INCONSISTENCIES:  The PhRMA submission 
complains that appeals periods are extremely short - as short 
as eight days, and that they may not be extended.  According 
to SIPO, the general time period for lodging an appeal is 15 
days.  However, in certain proceedings, for example under 
AEJCMI procedures, the law prescribes a shorter time limit of 
eight days from the receipt of the decision.  SIPO says this 
is due to the nature of the preliminary and provisional 
measures which require extremely fast response in order to 
stop the infringement or to prevent a threatening 
infringement.  The time limit for opposition or appeal of 
this decision is not extendible.  However, a general rule on 
 
 
restitution in integrum exists.  If a party was not able to 
meet the time limit for a justified reason, the court may 
grant a reinstatement of rights and accept the legal act as 
though it were filed on time, although it was filed after the 
expiration of the time limit.  These rules apply equally to 
domestic and foreign parties to a suit. 
 
¶6.  FREE CHOICE OF EXPERTS: Dr. Strel explained that if 
expert testimony is deemed necessary, the court may designate 
one or more experts, generally after consultation with both 
parties.  The court generally designates a "court expert" - 
someone already deemed by the court to have qualifications 
necessary to comment authoritatively on the subject of the 
case - and will pay the expenses of this expert.  It is also 
possible for the court to designate a person or institution 
which is not considered a "court expert," but an expert in 
the subject nonetheless, including a foreign person or 
institution.  Additionally, experts my be proposed by the 
parties, but the costs associated with the proposed expert 
must be covered by the proposing party. 
 
¶7.  PROVISIONAL RELIEF/BURDEN OF PROOF.  In response to 
PhRMA's claim that there is no provision for provisional 
relief against threatened infringements, SIPO responded that 
Article 123 of the IPA instructs the court to adopt 
provisional measures when "such infringement is highly 
probably, and that he (i.e. owner of right) is likely to 
suffer an irreparable damage."  SIPO believes current 
legislation adequately protects and offers relief against 
actual and threatened infringements.  Strel also cited Art. 
122 (l), which clearly states that the burden of proof shall 
be borne by the defendant or alleged infringer. 
 
¶8.  PIPELINE PROTECTION:  Pipeline protection is not a TRIPS 
obligation.  Slovenia introduced patent protection on January 
1, 1993.  Prior to this, there was no protection either in 
Slovenia or the former Socialist Republic of Yugoslavia of 
which Slovenia was a part until June 25, 1991.  At the other 
end of the spectrum, Slovenia introduced the possibility of 
supplementary protection certificates in 1993.  Since May 1, 
2004, when Slovenia joined the EU, supplementary protection 
certificates have been granted in accordance with European 
regulations. Patent holders have the possibility to claim 
prolonged protection for a product after the expiration of 
patent protection. 
 
¶9.  ONGOING IMPROVEMENTS IN LEGISLATION:  SIPO told us it 
plans to propose amendments to Slovene legislation during 
2005 on intellectual property regarding the implementation of 
EU Directive 2004/48/EC on enforcement of intellectual 
property rights.  The Directive will expand the means and 
measures which may be used by a rightholder against 
infringers and therefore strengthen the enforcement of 
intellectual property rights. SIPO does not anticipate any 
exceptions or reservations to this proposal. 
 
¶10.  MARKET ACCESS BARRIERS:  Stanislav Primozic of the 
Agency for Medicinal Products and Medical Devices, which is 
part of the Ministry of Health, described the pricing and 
reimbursement policy applied by the Ministry of Health in its 
efforts to control health-care expenses.  Slovenia employs a 
system based on wholesale prices for generic drugs in 
Germany, France, and Italy, taking into account Slovenia's 
lower GDP.  He acknowledged that it is perhaps not the best 
possible model, but it is a legitimate model not unlike those 
used in Portugal, Greece and Ireland. Primozic said that in 
terms of cost control, drugs are always the first target for 
a health care system because it is one area where clearly 
quantifiable savings can be gained.  He suspected, now that 
the drug reimbursement system had been overhauled, the GOS 
would be focusing on other cost-saving measures within the 
system. 
 
¶11.  Primozic explained Slovenia's approach as an effort to 
find a balance between the use of innovative and generic 
drugs, and he acknowledged that in the transition period 
generics did experience a boost.  This may have been 
advantageous timing, too, for generics just coming to market. 
Overall, he could think of only a few "drastic" cases where 
this occurred and that the complaint could not be 
generalized.  Primozic said this was not a measure aimed 
specifically at foreign drug producers.  Domestic generic 
producers, too, were feeling increased competition with the 
introduction of cheaper generics from India. 
 
¶12.  PRICING:  PhRMA complains that Slovenia is misusing the 
Anatomical Therapeutic Chemical (ATC) and Defined Daily Dose 
(DDD) systems.  Primozic responded that his agency uses the 
ATC/DDD as indicators, not exclusive determinants, of price. 
While the system could be improved, he said that it was 
nonetheless transparent.  There is no law or legal procedure 
 
 
prohibiting physicians from prescribing any drug approved for 
use in Slovenia.  However, the system will only reimburse up 
to the value of the lowest priced drug on the Interchangeable 
Drug List (IDL).  This system would not affect any new, 
innovative drugs brought to market before the patent 
protection period ran out and generics became competitive. 
 
¶13.  Primozic said that the changes to the health care system 
have already realized a savings of 3%.  It has brought down 
the annual increase in expenditures from an average of 15% 
over the last few years into single digits.  He views the 
current period as a time of adjustment, but the ultimate goal 
is to be able to increase spending, particularly on 
innovative drugs, by 4-5% in four or five years.  As a 
pharmacist himself, he is acutely aware of the need to 
encourage development of new drugs and to be able to offer 
Slovenes the latest treatments available. 
 
¶14.  COMMENT:  PhRMA's reasons for wanting Slovenia on the 
Special 301 Watch List are similar to those made during the 
2004 process. This exercise did, however, offer post an 
important opportunity to engage the GOS on progress it has 
made over the last year, and to reinforce our interest in its 
continued progress in this area.  In general, it appears that 
the GOS is meeting its obligations under TRIPS and the 22 
other treaties on intellectual property and patents to which 
it is party.  With membership in the EU, there is added 
pressure to conform to European norms, and it is Post's 
opinion that Slovenia will do so in good faith, if it has not 
already achieved this goal.  The overarching problem in 
Slovenia is an overburdened court system, which is also the 
target of many calls for reform from all sectors of society. 
The COM had also made judicial reform a theme in his calls on 
the new government, senior representatives of the judicial 
system, and in public discussions.  In addition to the IP 
complaints, PhRMA has introduced the problem of market access 
and drug cost reimbursement policies in the Slovene Health 
system. There is agreement on all sides that the new 
reimbursement mechanism employed by the Slovene health system 
has disadvantaged some innovative drug producers in some 
categories in the short run.  This development should be 
viewed in the context of the overall need for the GOS to 
balance its budget, bring down inflation, and prepare its 
economy for entry into the EURO zone.  The measures were not 
undertaken with a goal of favoring domestic producers of 
generic drugs, and according to the GOS, Slovenia's system is 
similar to the majority of EU members' systems. 
ROBERTSON 
 
 
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