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UNCLAS SECTION 01 OF 04 WARSAW 001117 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
E.O. 12958:  N/A 
TAGS: ETRD KIPR PL
SUBJECT:  Poland:  2005 Special 301 Submission - Gradual 
          Progress in Fighting Piracy and Improving IPR 
          Protection 
 
REFS:  A) State 23950, B) Warsaw 368, C) 04 Warsaw 4488 
 
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Summary 
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¶1.  (SBU)  Poland's efforts to improve its IPR protection 
continued through the fourth quarter of 2004, with increased 
activities by customs and police authorities to curb IPR 
violations in the optical disc area.  It is clear that 
copyright and trademark protection is significantly better 
than several years ago.  Since May 1, 2004, Poland also has 
doubled its period of pharmaceutical data protection to six 
years to meet EU requirements.  Progress on other 
pharmaceutical IPR issues is less pronounced, with Poland 
still lacking official linkage between Polish patent 
authorities and offices responsible for drug registration 
and market approval.  Although U.S. industry has reported no 
new infringing generics making their way on to the 
reimbursement list since last year's out-of-cycle review, 
one major U.S. research pharmaceutical firm is concerned 
marketing approval may soon be granted to a generic version 
of one of its blockbuster drugs. 
 
¶2.  (U)  In a major new market access development, the U.S. 
generics drug manufacturer Ivax has taken over Polfa Kutno, 
one of Poland's largest generics drug companies.  The 
takeover gives the U.S. firm a major share of the Polish 
generics market for the first time.  In addition, a U.S. 
logistics firm UTI, which specializes in the direct shipment 
of drugs from manufacturers to pharmacies and hospitals, 
started operations in Poland in January 2005.  The firm 
offers services designed to allow drug manufacturers and 
Poland's independent pharmacies to entirely bypass the 
current wholesale distribution system, which is dominated by 
a handful of wholesalers.  The move was warmly welcomed by 
the Polish Association of Pharmacies.  Finally, although we 
still have no confirmation of this (and likely will not 
until March), Health Ministry officials have stated that new 
innovative drugs will be on the public health system's 
revised reimbursement list due out in March 2005.  The move 
would break a de facto moratorium in effect since 1998. 
 
¶3.  (SBU)  Taking into account the progress Poland has made 
in copyrights and trademarks, and distance it still has to 
go to adequately protect pharmaceutical property, the 
Embassy recommends that the country remain on the Watch 
List. 
 
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OD Piracy Efforts 
----------------- 
 
¶4.  (SBU)  As reported in Ref C, Polish authorities have 
targeted Warsaw Stadium and bazaars along the Polish-German 
border for increased OD investigations.  In a major 
development, two illegal CD production facilities supplying 
Warsaw Stadium were identified and closed.  To demonstrate 
their commitment to stamping out piracy, Polish police 
authorities have for the first time invited the Embassy's 
trade officer to accompany them on an upcoming raid on a 
provincial open air market where pirated CD's and other 
goods (primarily liquor and apparel) are trafficked.  Police 
continue to work closely with industry representatives to 
coordinate enforcement efforts. 
 
------------------------- 
Other Anti-piracy Actions 
------------------------- 
 
¶5. (U)  In the last quarter of 2004, police officers from 
Warszawa-Praga Poludnie Division apprehended 35 suspects for 
piracy, and on the basis of secured evidence, initiated 30 
criminal proceedings (although trials have not yet begun). 
Merchandise confiscated in these arrests included: 
 
CD          16,481 
CD-R         3,619 
DVD          5,808 
MP-3           522 
Play-Station   665 
 
The estimated total value of these seizures is about 
$607,000. 
 
¶6. (U)  In addition, during the fourth quarter of 2004, 
Polish courts also started eight criminal proceedings 
involving eight suspects for which the following evidence 
has been seized: 
 
CD          26,650 
CD-R         2,317 
DVD         13,176 
MP-3           201 
Play-Station   533 
 
The estimated total value of these seizures is approximately 
$1.03 million. 
 
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Official Reporting and OD Law Compliance 
---------------------------------------- 
 
¶7.  (U)  The Union of Producers of Audio Video (ZPAV), the 
International Federation of the Phonographic Industry (IFPI) 
representative office in Poland, reports that a number of 
anti-piracy activities have been undertaken after the 
amendments to the Law on Copyright and Neighbouring Rights 
and a Decree of the Ministry of Culture on conducting 
inspections by authorised employees came into effect. 
 
¶8.  (U)  The Legal Department of the Ministry of Culture has 
officially notified various OD plants about new reporting 
obligations stemming from the amended law and a Ministerial 
decree.  These will require factories to submit information 
about the production of optical discs and any movement of 
pressing equipment and accessories. 
 
¶9.  (U)  Inspectors from the Ministry of Culture, authorized 
by the Legal Department of the Ministry, conducted formal 
inspections of five OD plants.  Inspectors prepared reports 
of their activities and documented collected samples. 
Inspection reports together with recommendations for further 
action were forwarded to all inspected entities.  ZPAV 
prepared inspectors of the Ministry of Culture for these 
inspections by providing the Ministry with a database for 
storing information required in Ministerial Decree. ZPAV 
representatives also participated in inspections of selected 
CD plants. 
 
------------------------------ 
Pharmaceuticals IPR Protection 
------------------------------ 
 
¶10.  (SBU)  Pharmaceutical industry complaints over the last 
several years have focused largely on two patent-infringing 
generics that have been given marketing approval several 
years ago and placed on the reimbursement list.  In one 
case, the Polish courts subsequently upheld the rights of 
the U.S. manufacturer and ordered the competing product 
removed from the market (the foreign competitor is appealing 
the verdict).  In the second example, the U.S. company lost 
its case in the lower courts and is appealing the case. 
(Note:  The same U.S. firm appears to have lost a patent 
case in the United States involving the same product against 
a U.S. generics producer in 2003.) 
 
¶11.  (SBU)  These cases have been reported in previous 
Special 301 reviews as a major obstacle for the innovative 
pharmaceutical industry in Poland.  We share these concerns 
with industry, and have reinforced the message that market 
approval and placement on the reimbursement list for 
infringing generics is a serious IPR violation.  However, we 
have no knowledge of any new patent violations over the past 
year, echoing our finding in the 2004 out-of-cycle review. 
Nevertheless, one major U.S. drug-maker is concerned that 
Polish authorities may soon grant marketing approval for a 
copy of one of its signature drugs may soon be given.  The 
particular drug is protected by a process patent in Poland, 
and the U.S. company fears that a local competitor will 
obtain marketing approval for an alternative manufacturing 
process for the active ingredient without doing all of the 
detailed clinical work and certifications required of the 
U.S. manufacturer during its original submission.  The U.S. 
firm confirms, however, that the copy has not yet appeared 
on the market as of late February 2005.  Finally, we note 
that since May 1, 2004, Poland has adopted the six-year EU 
standard for data protection, effectively doubling the 
period of protection. 
 
---------------------------- 
Pharmaceutical Market Access 
---------------------------- 
 
¶12.  (U)  The Polish national health system's official 
reimbursement list, which effectively accounts for an 
estimated 60 percent of the $4.5 billion annual drug market 
in Poland, has not included an innovative drug since 1998. 
This is a major concern for U.S. manufacturers who feel that 
their new products are unfairly denied market access.  (The 
Polish government argues that the Health system's budgetary 
crisis is the only reason for the freeze on newer, more 
costly products.)   We have learned that the Ministry of 
Health recently circulated for public consideration a draft 
reimbursement list, which will close for comment on February 
¶21.  The final official list is expected to be announced in 
early March. 
 
¶13.  (U)  As of the February 9 Legal Affairs Working Group 
(LAWG) meeting of the AmCham in Warsaw (the group that 
represents pharmaceutical companies), U.S. firms indicated 
that they have no information regarding the presence of any 
new patent-infringing products on the proposed reimbursement 
list.  While the comment period is still open, we find 
industry's silence on this issue telling.  The Polish Health 
Ministry maintains that some new innovative drugs will be on 
the list.  If confirmed, the move would represent the end of 
the de facto moratorium on listings for innovative drugs in 
effect since 1998. 
 
¶14.  (U)  Finally, perhaps the biggest new development in 
the area of market access has been the entry into Poland of 
the U.S. Miami-based generic drugs and veterinary products 
manufacturer Ivax.  On October 22, the Board of Governors of 
the Warsaw Stock Exchange approved Ivax's application for a 
listing on the Warsaw Stock Exchange (WSE).  In November, 
the U.S. firm became the first American company listed on 
the Warsaw Stock Exchange, when it acquired a majority of 
the shares of one of Poland's largest generic drugmakers, 
Polfa Kutno.  Ivax has now replaced Polfa-Kutno's listing on 
the exchange.  The takeover--which valued Polfa-Kutno at 
around $160 million--gives the U.S. firm a significant share 
of the Polish generics market and represents the largest 
U.S. direct investment in drug manufacturing to date in the 
Polish market. 
 
¶15.  (U)  On the distribution side, the U.S. firm UTI--a 
logistics firm specializing in, among other things, the 
direct shipment of pharmaceuticals to pharmacies and 
hospitals--recently started operations in Poland.  The U.S. 
firm plans to create a logistics network that will allow 
pharmaceutical firms to bypass Poland's current 
distributions system, which is dominated by a handful of 
wholesalers.  The set up of the operation was welcomed by 
Poland's Association of Pharmacies whose members have been 
under increasing pressure from wholesaler-operated chains. 
 
---------------------------- 
Intel Trademark Infringement 
---------------------------- 
 
¶16.  (U)  In reviewing the Intel 2005 Special 301 
submission, post notes that none of the problems mentioned 
appear to be current.  The complaints seem to concern events 
which took place several years ago and which were resolved- 
-after some trouble and expense--in Intel's favor by 2003. 
As far as we are aware, Intel has not come to the Embassy 
with any complaints since at least mid-2003.  We are 
therefore uninformed about any more recent trademark 
infringement issues that the firm may have in Poland. 
However, if these exist, we would recommend that the firm 
inform us of them. 
 
¶17.  (U)  The main remedy Intel seeks seems to be reform of 
Poland's court system.  The desire to make Poland's legal 
system more honest and efficient in all respects is a goal 
shared by the U.S. Embassy, the American Chamber of Commerce 
in Poland, and the local Polish business community.  The 
World Bank has noted that Polish firms have great problems 
enforcing even routine financial contracts in the court 
system--a process which can take up to four years.  Reform 
of the court system is a long-standing politically complex 
issue.  However, it is difficult to regard this problem as 
fundamentally an IPR or market access issue. 
 
-------------------------- 
Comment and Recommendation 
-------------------------- 
 
¶18.  (U)  Poland continues to make clear measurable progress 
in improving IPR protection of optical discs.  Over the past 
six months, the Culture Ministry has made efforts to inform 
OD producers of their reporting obligations and sensitize 
police authorities on the need for strict enforcement of IPR 
laws.  To our knowledge, Poland is the only EU country with 
an OD law.  For their part, the Polish Police appear to be 
making more serious efforts to break up rings trafficking in 
pirated merchandise and shut down open-air trade, including 
a major case involving FBI cooperation. 
 
¶19.  (U)  In the area of pharmaceuticals, progress has been 
less noteworthy.  While no new patent-infringing drugs have 
appeared on the market, there continues to be a lack of 
formal coordination between the Ministry of Health and the 
Patent Office.  Thus U.S. research pharmaceutical firms 
continue to lack certainty that protection of their 
intellectual property will be upheld in each case.  On the 
positive side, Poland has now lengthened the period of data 
protection to six years.  It appears about to break its six- 
year moratorium on placing innovative drugs on the 
reimbursement list.  It has welcomed the acquisition of a 
major Polish drug firm by the U.S. generics firm Ivax.  The 
Polish Association of Independent Pharmacies is enthusiastic 
about the recent opening of UTI's direct distribution 
channel in Poland.  The presence of U.S. firms on the Polish 
pharmaceutical market is expanding. 
 
¶20.  (U)  Taking into account the progress Poland has made 
and the distance it still has to go to adequately protect 
pharmaceutical property, the Embassy recommends that the 
country remain on the Watch List.