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DE RUEHBR #0367/01 0522000
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P 212000Z FEB 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 4600
INFO RUEHSO/AMCONSUL SAO PAULO 6428
RUEHRI/AMCONSUL RIO DE JANEIRO 1579
RUEHRG/AMCONSUL RECIFE 4374
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UNCLAS SECTION 01 OF 03 BRASILIA 000367 
 
SIPDIS 
 
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DEPT PLS PASS TO USTR JCHOE-GROVES 
DOC FOR JBOGER 
DOC PLEASE PASS TO USPTO JURBAN AND LOC STEPP 
 
EFTO NO FORN 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON BR
SUBJECT: BRAZIL'S SPECIAL 301 RECOMMENDATION 
 
REF: (A) STATE 14937, (B) 05 Brasilia 2813 (Notal), (C) 05 Brasilia 
2729, (D) Brasilia 271, (E)  05 Brasilia 1163 
 
¶1. (U) Per ref A, the following is Embassy Brasilia's input for the 
Special 301 Review of Brazil. 
 
¶2. (SBU) Summary. Brazil made significant strides last year in 
improving the protection of copyrights and intellectual property 
related to biotechnology - key areas of concern in previous Special 
301 submissions.  On January 16, 2006 the USG terminated review of 
Brazil's trade benefits under the Generalized System of Preferences 
based on advances made by Brazil on copyright enforcement. 
Meanwhile, passage of Brazil's Biosafety Law eliminated barriers to 
the protection of biotech-related IPR.  If we were to base our 
judgment solely on these considerations, post would recommend that 
Brazil be moved from the Priority Watch List to the Watch List. 
However, Brazil's overall performance in defending intellectual 
property rights remains uneven, particularly in the area of patents. 
 Specifically, at this time negotiations are on-going -- under the 
threat of compulsory licensing -- between Brazil's Ministry of 
Health and two U.S. pharmaceutical companies over pricing of 
anti-retroviral (ARV) AIDS drugs.  Therefore, Post's recommendation 
is that Brazil stay on the Priority Watch List, but be downgraded to 
the Watch List if these negotiations reach a mutually satisfactory 
conclusion prior to the Special 301 announcement.  Should Brazil 
remain on the Priority Watch List, the GOB would likely react, 
claiming that this decision demonstrates USG refusal to acknowledge 
Brazil's improved performance on copyright protection.  However, 
privately, our main GOB interlocutors on IPR would understand the 
reason for our decision.  End Summary. 
 
Copyright -- Cooperation 
------------------------ 
 
¶3. (SBU) On January 13, 2006 the USG announced its decision to close 
a review of Brazil's trade benefits under the Generalized System of 
Preferences.  Brazil's GSP benefits had been threatened by a 
petition filed by the International Intellectual Property Alliance 
in 2000 alleging ineffective copyright protection.  The GSP Review 
decision was based on advances made in copyright enforcement by 
Brazil in 2005, including formation of the public-private sector 
National Council to Combat Piracy and Other IP Crimes (CNCP), 
establishment of (and progress in implementing) a national 
anti-piracy action plan, and a significant increase in law 
enforcement actions, most notably along the border with Paraguay and 
in local marketplaces.  (See ref B for a detailed survey of Brazil's 
actions through October 2005).   The CNCP has been successful in 
encouraging the formation of anti-piracy task forces in a number of 
municipalities and formation of counterpart state-level anti-piracy 
councils in Rio Grande do Sul and most recently in Sao Paulo, thus 
further improving its organizational capabilities for combating 
piracy. 
 
¶4. (SBU) In 2005, Brazilian federal law enforcement agencies seized 
pirated goods valued at around US$84 million, a 130 percent increase 
over 2004.  Efforts were directed mainly at stemming the tide of 
illicit merchandise entering the country, primarily across the 
Brazil-Paraguay border at Foz do Iguacu.  Operation Cataratas in Foz 
yielded seizures valued at around US$60 million over the 12 months 
of last year.  Brazil's customs service reported seizures of 10.3 
million CDs and DVDs in Foz alone, 96 percent of which were virgin 
discs; this is almost three times the amount seized in 2004.  A 
number of other major operations (Muralha, Porto de Santos, Plata, 
Rezende-RJ) were conducted throughout the country. 
 
¶5. (SBU) During the year-end holiday, the GoB expanded its focus by 
launching raids directed at the retail level in a number of cities 
and states.  Operation Sagitarius, which involved over 1500 police 
and customs agents, raided huge, well-known market places in Sao 
Paulo -- i.e., Stand Center, Shopping Marco 25, and Promocenter -- 
apprehending an estimated US$5 million in pirated goods.  Sales in 
these markets were estimated to have dropped by as much as US$250 
million for the month.  Acknowledging that the affect on sales of 
pirated products from such raids is temporary, local customs and 
fiscal officials have pledged continued actions.  In early 2006, the 
momentum has continued.  In one operation alone in the poor 
northeastern state of Piaui in January, over 1.7 million CDs and 
DVDs and 8 tons of other merchandise were seized. 
 
¶6. (SBU) Brazil's judicial system remains a weak link in the fight 
 
BRASILIA 00000367  002 OF 003 
 
 
against piracy.  Last year was the first time that a copyright 
pirate has been sent to jail.  Indeed, in 2005 only 14 people were 
convicted of piracy related crimes.  In 2003, the GOB enacted 
tougher sentences for piracy but the effects may not be apparent 
until 2008 as cases take an average of five years to work through 
the system. The CNCP acknowledges the problem, which in large part 
reflects systemic problems of inefficiency and poor quality in the 
country's judiciary system, and is seeking ways to ameliorate it 
through education and judicial specialization. 
 
¶7. (SBU) Recognizing the GoB's new commitment to fighting piracy, 
but also the need for continued effort, the International 
Intellectual Property Alliance (IIPA) recommended that Brazil be 
moved from the Priority Watch List to the Watch List.  And if Brazil 
comes to a satisfactory negotiated solution with the U.S. 
pharmaceutical makers at risk (see paragraph 13), we would support 
this recommendation.  Indeed, we would go even further and dispense 
with the out-of-cycle review also recommended by IIPA, as this might 
distract Brazil from substantive anti-piracy efforts while shifting 
the focus onto the more political and contentious aspects of our 
bilateral dialog on this issue.  Brazil appears committed to 
fighting piracy due to domestic interests, such as concern over 
organized crime, lost tax revenues and the high level of informality 
it promotes in the economy.   But given the size of the country and 
the level of entrenched piracy, substantial improvement will require 
a forceful and sustained effort over a number of years. 
 
¶8. (SBU) Note, while Nintendo's arguments that Brazil's high tariffs 
and taxes suppress the market for its products are valid, these 
represent bad domestic policy choices by Brazil rather than 
discriminatory behavior -- the tariffs are below Brazil's WTO bound 
rate and the country's costly and complex tax structure is the bane 
of domestic producers and importers alike. 
 
Biotechnology - A Legal Framework At Last 
----------------------------------------- 
 
¶9. (SBU) After years of refusing to acknowledge the significant 
extent of illegal biotech soybean seed use in the country, Brazil 
established a legal framework for the use of biotech agricultural 
products through the Biosafety Law (11,105/2005), signed by 
President Lula on March 24, 2005.  This law, which also includes 
provisions for stem cell research, became effective on March 28, 
2005 after its publication in Brazil's official registry (Diario 
Oficial).  Implementing regulations for the law were issued by 
presidential decree on November 23, 2005.   Law 11,105 has improved 
the quality of public debate on biotechnology in Brazil and provided 
a frame of reference for judicial proceedings.  While outstanding 
issues remain, movement has been in the right direction, driven by 
Brazil's own substantial commercial interest in biotechnology.  None 
of the 2006 Special 301 submissions for Brazil raised concerns in 
the area of biotechnology. 
 
Patents - Uncertainty 
--------------------- 
 
¶10. (SBU) Unfortunately, in the area of patents a level of common 
interest is much less apparent.  In particular, the Ministry of 
Health's threat to issue compulsory licenses for certain ARVs for 
AIDS treatment casts a shadow over our bilateral IPR dialog (ref C). 
 We have been told that negotiations between the Ministry of Health 
and Gilead Sciences, and Merck, Sharp and Dohme are going smoothly, 
but the longer it takes to conclude agreements, the more opportunity 
there is for trouble.  For instance, should the Health Minister 
resign in order to run for elective office (by law, he would have to 
do so by March 31), the negotiations could go back to square one, or 
worse, a new Minister could take the politically expedient route of 
announcing a decision to issue compulsory licenses, without resuming 
negotiations with the companies. 
 
¶11. (SBU) As noted in Pharma's Special 301 submission, Brazil's 
industrial property law (Law 9,279/1996), as amended, also contains 
some problematic provisions.  One prohibits importation as a means 
of satisfying the requirement that a patent be "worked" in Brazil. 
This issue was the subject of a U.S. dispute settlement proceeding 
at the WTO, which was terminated without prejudice in June 2001. 
Another requires prior approval by Brazil's health agency, ANVISA, 
before issuance of a patent.  These issues have been the subject of 
USG-GoB discussions, as have been allegations of disclosure of 
proprietary information, which ANVISA denies. 
 
BRASILIA 00000367  003 OF 003 
 
 
 
¶12. (SBU) Pharma also notes concern over pending legislation (Bill 
22/2003 - unpatentability of AIDS drugs) that would clearly be 
WTO-inconsistent.  However, this measure and other troubling 
patent-related bills have not been enacted into law.  Activists both 
outside and inside the government may find it politically 
advantageous to promote such projects, but high-level government 
officials have not embraced the legislation and the implications of 
Bill 22's passage have not been lost on our Foreign Ministry 
interlocutors. 
 
¶13. (SBU) According to Interfarma, the local association of 
international pharmaceutical companies, the biggest problem for 
their industry is really that patent issuance is just plain slow 
(ref D).   Last year the National Patent and Trademark Institute 
(INPI) was able to slightly reduce patent and trademark application 
backlogs - currently at 130,000 (17,000 for pharmaceuticals) and 
500,000 respectively - but it will take years to eliminate them. 
INPI has had to fight a number of bureaucratic battles for increased 
resources, although it may now be poised for a substantial overhaul. 
 The Institute has secured an increased budget and in early 2006 is 
in the process of hiring an additional 145 examiners.  Separately it 
has received authorization to hire an additional 400 examiners over 
a several year period.  INPI has approached Mission requesting the 
resumption of a dialog with USPTO on technical assistance.  Post 
supports a closer working relationship, including training, between 
USPTO and INPI, as this will provide a vehicle for improving 
Brazil's patent and trademark adjudication as well as an avenue for 
discussing policy issues that affect Brazil's domestic IPR policies 
and its positions in international IPR fora. 
 
Post's Special 301 Recommendation 
--------------------------------- 
 
¶14. (SBU) Brazil Special's 301 status should reflect the positive 
developments it has made in copyright enforcement, but also the need 
for continued improvements, both in combating piracy and in its 
patent regime.  Accordingly, Post recommends that Brazil remain on 
the Priority Watch List, but be downgraded to Watch List if the 
negotiations over ARV pricing/compulsory licensing reach a mutually 
satisfactory conclusion prior to the Special 301 announcement. 
Publicly Brazil will react negatively to the "status quo" option, 
claiming the USG refuses to acknowledge Brazil's improved 
performance on copyright protection.  However, privately, GOB 
interlocutors would understand the reason for our decision. 
 
Training 
-------- 
 
¶15. (SBU) The high profile given over the last year to the 
government's anti-piracy activities has increased interest within 
Brazil's law enforcement and customs agencies in anti-piracy 
training.  Post seeks to send Brazilian officials to training 
opportunities as they arise, such as ILEA IPR Enforcement Academy 
training (February 2006) and USPTO Enforcement Academy offerings. 
This year Post is also offering anti-piracy training in partnership 
with a local copyright defense association; the INL-funded program 
will consist of 5 sessions held throughout the country, with a total 
of 200 participants (ref E).  Post encourages USPTO to consider 
opportunities for training/technical assistance for INPI's cadre of 
new examiners.  Such training would yield immediate benefits in the 
speed and quality of patent and trademark adjudications in Brazil, 
but also serve as an opportunity to present to this group the U.S. 
perspective on policies relating to patents and trademarks which 
could yield significant returns over the longer-term. 
 
LINEHAN