VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0406/01 0482043
ZNR UUUUU ZZH
R 172043Z FEB 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 3529
INFO RUEHAC/AMEMBASSY ASUNCION 5344
RUEHBR/AMEMBASSY BRASILIA 5128
RUEHLP/AMEMBASSY LA PAZ FEB MONTEVIDEO 5320
RUEHSG/AMEMBASSY SANTIAGO 4944
RUEHRI/AMCONSUL RIO DE JANEIRO 1875
RUEHSO/AMCONSUL SAO PAULO 2769

UNCLAS BUENOS AIRES 000406 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EB/IPE CLACROSSE AND ANNA MARIA ADAMO 
DEPT PLS PASS TO USTR JCHOE-GROVES 
DOC FOR JBOGER, PLEASE PASS TO USPTO JURBAN AND LOC STEPP 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON AR
SUBJECT: ARGENTINA'S 2006 SPECIAL 301 REVIEW 
 
REF: A. STATE 014937 
 
     ¶B. 05 BUENOS AIRES 01566 
     ¶C. 05 BUENOS AIRES 01047 
 
------- 
Summary 
------- 
 
¶1.  Argentine entities responsible for upholding IPR failed 
to translate the momentum from a strong 2004 into tangible 
successes in 2005.  U.S. pharmaceutical companies are still 
waiting for commercially valuable patents; CD and DVD piracy 
rates appear to be rising, despite Argentina's economic 
recovery; and a piece of draft legislation that would have 
bolstered the protection of trademarked goods died in 
committee during the year.  The Embassy therefore recommends 
that Argentina remain on the Special 301 Priority Watch List 
until it can begin to point to concrete results across the 
IPR gamut and, more specifically, until it ensures effective 
protection of confidential and proprietary data developed by 
pharmaceutical companies.  End Summary. 
 
------- 
Patents 
------- 
 
¶2.  Argentina's patent and trademark agency, The National 
Institute of Industrial Property (INPI), made significant 
progress toward streamlining Argentina's patent system over 
the past several years.  That system appeared close to 
breakdown until 2002, with patent applications coming in much 
more quickly than they could be processed.  From 1995 until 
2002, for example, the INPI received 47,573 patent 
applications but was able to resolve only 28,190 of those in 
the queue, for a deficit of over 19,000 applications in those 
eight years alone.  That situation has now turned around, 
with the INPI receiving 14,106 patent applications during 
2003-2005 and resolving 18,334 during the same period. 
Additionally, the rate at which the number of applications 
resolved exceeds the number of applications received is 
increasing. 
 
¶3.  INPI's improved efficiency stems from a number of reforms 
that began to be introduced in 2003.  The INPI, via a series 
of resolutions, implemented fast-track procedures to reduce 
what had grown to be a large patent application backlog of 
over 30,000 cases.  Specifically, all persons or companies 
having more than one patent application pending were given 
the opportunity to rank-order their applications, allowing 
them to jump the application of a potentially more-valuable 
product ahead of a less-promising application that had been 
submitted at an earlier date.  U.S. and other research-based 
pharmaceutical companies are also now authorized to present 
studies used in other patent-granting countries to support 
patent requests in Argentina, significantly easing the INPI's 
investigation requirements. 
 
¶4.  The GOA also increased the INPI's budget by 11 percent in 
2004, and kept those gains during 2005.  The extra money 
allowed the hiring of 27 new patent examiners, 10 of them in 
the key pharmaceutical area.  That initiative doubled the 
total number of pharmaceutical examiners to 20.  The INPI has 
instituted a system of in-house training that an INPI 
executive told Econoff has increased the examiners' 
efficiency by up to 30 percent.  One result has been a 
reduction in the time it takes a patent application to 
receive a preliminary examination from fifteen months to 
eleven months.  In another positive development, the INPI 
sent two of its pharmaceutical inspectors to the U.S. Patent 
and Trademark Office's (USPTO) academy for training in 2005. 
That training, arranged by the Embassy and jointly funded by 
the USPTO and research-based pharmaceutical companies, was a 
first for Argentine patent inspectors.  The Embassy also 
arranged for an Argentine appeals court judge specializing in 
IPR cases to attend USPTO training, another first. 
 
¶5. The gains mentioned above, while undeniably positive, 
proceed from a very low baseline.  The right to patent 
pharmaceutical products in Argentina was recognized only in 
1996, and the first pharmaceutical patents were issued 
following the expiration of the TRIPS transition period in 
October 2000.  Even those patents were for approximately 80 
products of marginal commercial value.  A small number of 
other pharmaceutical patents of greater value were granted in 
subsequent years, but only after long and arduous processes. 
Many of the patent applications the INPI counted as 
"resolved" during 2005 were simply discarded after the 
applicant failed to respond to an INPI instruction to 
formally reaffirm the application. 
 
¶6.  The lack of patents for many products, coupled with 
Argentina's devaluation in 2002, which resulted in sharp 
price increases for imported products, increased incentives 
for local pharmaceutical companies to produce unlicensed 
copies of products that had been patented or for which 
patents were pending.  The combination of these factors has 
had a negative effect on the Argentina-derived business of 
U.S.-based pharmaceutical companies.  According to CAEMe, the 
Argentine association that represents U.S. and other 
research-based pharmaceutical companies, local pharmaceutical 
firms now have over 50 percent of the Argentine market and 
have reached almost 50 percent of the export market. 
 
¶7.  Argentina amended its patent law (Law 24,481) in December 
2003 to implement an agreement between the USG and the GOA 
that had been signed in May 2002.  That agreement came after 
approximately three years of consultations under the WTO's 
dispute settlement mechanism.  In a related development, the 
U.S. agreed to give consideration to an Argentine request to 
add specific products to the U.S. Generalized System of 
Preferences (GSP) that allows for duty-free entry into the 
U.S.  The remaining unresolved pharmaceutical patent issue 
relates to the effective legal protection of confidential and 
proprietary data developed by pharmaceutical companies to 
demonstrate the efficacy and safety of new medicines.  U.S. 
and other research-based pharmaceutical companies believe 
this to be a critical issue and Argentina and the U.S. have 
agreed to leave this issue within the WTO dispute settlement 
mechanism for future action.  (Note: The absence of data 
protection has lead research-based pharmaceutical companies 
to complain that Argentine health regulatory authorities 
(ANMAT) rely inappropriately on data supplied by 
research-based companies to approve unauthorized copies of 
innovative medicines.  According to CAEMe, ANMAT interprets 
the public disclosure of partial data as an indicator that 
the data should be regarded as in the public domain.) 
 
¶8.  U.S. pharmaceutical companies also remain concerned about 
the legal implications of two specific clauses in the 2003 
agreement.  Specifically, the amendment mandates an expert 
opinion that can challenge the validity of a patent, and 
requires consideration of the economic impact of an 
injunction on both parties before the seizure of goods 
alleged to violate the patent law.  Since the agreement was 
signed, research-based pharmaceutical companies have feared 
that those clauses could preclude the granting of preliminary 
injunctive relief and limit the success they have achieved in 
protecting their products through the use of preliminary 
injunctions. 
 
¶9.  2005 was the first year during which those fears were 
realized.  A U.S.-based pharmaceutical company discovered 
several competitors trying to sell copies of its most 
profitable drug, and sought injunctions to prevent those 
sales.  In one case, the issuance of an injunction was 
delayed for months, and in another the application for an 
injunction was rejected by a judge swayed by a local expert 
hired by the defense, who claimed that the copycat drug did 
not violate the U.S. pharmaceutical company's patent.  In 
another instance, a different U.S.-based pharmaceutical 
company went to court to remove five copies of one of its 
joint-venture drugs from the Argentine market.  In a 
promising ruling, the judge issued injunctions ordering the 
copies off the market (Reftel B).  More than six months after 
the decision, however, those injunctions have yet to be 
enforced. 
 
¶10.  A frequent complaint of U.S. pharmaceutical companies is 
that there remains in Argentina no regulatory linkage between 
the INPI and the ANMAT.  While such linkage is not required 
by TRIPS, its absence in Argentina allows ANMAT to grant 
local pharmaceutical producers authorization to manufacture 
and sell products that have already been patented or for 
which a patent has been requested.  The Embassy and 
multinational pharmaceutical companies have urged the GOA to 
establish a linkage between ANMAT and INPI that would prevent 
ANMAT from continuing to authorize local pharmaceuticals to 
produce products for which an INPI patent has been granted or 
is pending.  There were hints during 2005 of the beginnings 
of a cooperative relationship between INPI and ANMAT (Reftel 
C), but the Embassy has no evidence that such cooperation has 
developed.  As things stand, U.S. and other research-based 
pharmaceutical companies must incur the legal costs of 
obtaining injunctions to stop the production and sale of 
products produced by local pharmaceutical companies for which 
the research-based companies have INPI patents. 
 
¶11.  Law 25,649 adopted in 2002 requires medical doctors to 
use a drug's generic name in all prescriptions.  It is 
believed that this law diverts sales from innovative 
medicines to TRIPS-infringing copy products.  U.S. and other 
research-based pharmaceutical companies say that true 
generics do not exist in Argentina because copy products are 
not required to demonstrate their bioequivalence or 
bioavailability with original products, meaning local 
producers can sell drug copies that lack quality and safety 
assurances.  According to Law 25,649, doctors may also 
include a trademarked version of a drug in their 
prescriptions, but pharmacists may still offer a substitute. 
According to Law 25,649, reasons must be indicated on a 
prescription if a medical doctor does not want the 
prescription substituted by a pharmacist.  Another area of 
concern is that Argentina has yet to become a contracting 
state to the World Intellectual Property Organization's 
(WIPO) Patent Cooperation Treaty. 
 
---------- 
Copyrights 
---------- 
 
¶12.  Optical Media Piracy: The incidence of CD and DVD piracy 
in Argentina does not appear to have declined in 2005. 
Problems in this area include the widespread and open sale of 
pirated copies of albums and videos and an apparently 
increasing number of businesses that offer home delivery of 
pirated artistic content.  Argentina's laws provide generally 
good nominal protection.  However, the lack of any real bite 
(pirates have not faced jail time), coupled with the extra 
incentive provided by Argentina's devaluation in 2002, which 
spiked prices for imported media, has spurred piracy.  A 
local attorney working copyright issues told Econoff that his 
clients estimate that losses to U.S. companies due to optical 
media piracy in Argentina exceeded USD 150 million in 2004. 
The same attorney said that while the Argentine legal system 
does not function at a first-world level, it is "not bad for 
the region."  The legal system will generally respond when 
needed to effect the seizure of counterfeit media, the 
attorney said, but the existence of a personal relationship 
with relevant authorities is helpful.  Still, his client (a 
IP content trade association) worked with police to effect 
over 200 raids and seize over 100,000 pirated discs during 
¶2005. 
 
¶13.  Use/Procurement of Government Software: The GOA has yet 
to fully comply with its 1999 agreement with the local 
software industry to legalize unlicensed software used in 
offices of the national government, and many GOA offices 
continue to use pirated software.  Ministry of Interior 
Director of Information Management Eduardo Thill told a local 
news outlet in January 2005 that 90 percent of GOA agencies 
employing licensed software are using it illegally.  There is 
a GOA move toward open source software, according to Thill, 
but there has been no legislation to date to bind the GOA to 
open source software solutions.  That situation held true 
throughout 2005, although a representative of Thill's office 
told the Embassy February 2006 that the percentage of GOA 
agencies using licensed software illegally had fallen to 
between 80 and 85 percent. 
 
¶14.  Amendments to Existing Legislation: A promising piece of 
legislation to modernize Argentina's quarter-century old 
trademark law (Law 22,362) died in committee in 2005.  That 
draft law, introduced in August 2004, contained several 
measures that would have strengthened Argentina's 
anti-trademark piracy regime.  Specifically, the draft law 
would have: involved Argentina's tax agency (AFIP) in 
trademark piracy (counterfeit merchandise) investigations; 
expanded the authority of Argentina's Financial 
Investigations Unit (UIF) to include trademark piracy among 
the crimes that entity is able to investigate; and increased 
penalties for those convicted of trademark piracy 
(eliminating community service as a possible sentence).  The 
Embassy was told by a local attorney who helped to draft the 
legislation that it will be re-introduced in April 2006.  The 
same attorney blames the failure of the bill on the lethargy 
of local Argentine business chambers, which he said did not 
actively support the effort. 
 
---------- 
Trademarks 
---------- 
 
¶15.  Argentina's trademark law (Law 22,362) fulfills 
international standards, but legislation subsequent to its 
enactment has rendered it relatively ineffective, with 
penalties limited to probation and fines that are not high 
enough to act as a significant deterrent (see paragraph 14). 
The process of renewing trademarks is an area where INPI's 
increasing efficiency has become evident.  Whereas an 
applicant for renewal had to wait five months only a few 
years ago, the process is now completed in less than two 
months.  Raids by local police on flea markets where 
counterfeit merchandise is openly sold have not been frequent 
or widespread enough to lessen the availability of pirated 
goods.  Representatives of industries frequently targeted by 
counterfeiters claim that over forty large, well-established 
markets exist in Buenos Aires alone that are almost 
completely dedicated to the sale of counterfeit goods (in 
addition to innumerable smaller points of sale throughout the 
country). 
 
------------- 
Plant Variety 
------------- 
 
¶16.  Argentine farmers have the right to replant -- although 
not to sell -- seed generated from a harvest originating from 
registered seeds without paying royalties.  However, 
Argentine farmers continue to sell "brown bag" seed (as 
opposed to bags of seed showing brand names) as brand-name 
product.  This is a widespread problem with soybean seed, and 
it underlies Monsanto's recent court actions in Europe, which 
have resulted in ships carrying Argentine soy being stopped 
and the cargo seized.  Monsanto's actions are aimed at 
collecting royalties that Argentine farmers are not paying 
via legal challenges in countries in which Monsanto has 
patent protection for the Roundup Ready soybean technology. 
Farm associations and industry representatives generally 
agree that Argentina must elaborate and enact a new seed law 
that better protects intellectual property, but negotiations 
toward that end have broken down as of this writing.  The 
sale of "brown-bag" seed from Argentina to neighboring 
countries has also led to the significant production of 
unregistered biotech soybeans in Brazil and Paraguay. 
Argentina is a party to the 1978 Act of the International 
Union for the Protection of New Varieties of Plants (UPOV), 
but has not signed the 1991 UPOV convention. 
 
-------- 
Training 
-------- 
 
¶17.  Reluctance by the various enforcement entities to 
cooperate with each other is a problem that has long 
contributed to ineffective anti-piracy action in Argentina. 
The Embassy would therefore encourage any IPR training that 
emphasizes a team approach and brings together 
representatives from the full range of GOA institutions 
involved in anti-piracy efforts.  The trust and familiarity 
that would result from such officials being brought together, 
even if only for a short training session, would help to 
foster inter-agency teamwork of the sort necessary to 
effectively combat piracy. 
 
-------------------------- 
Comment and Recommendation 
-------------------------- 
¶18.  The Embassy's Special 301 report for 2005 said: "Most of 
the persons interviewed for this report believe that 2005 
will be the year when it becomes clear whether the legal and 
administrative improvements of the recent past will finally 
manifest themselves in tangible successes."  There was 
evidence of improvement during 2005, but very few of the 
hoped-for tangible successes.  INPI appears to be functioning 
more efficiently, but that procedural improvement has not 
translated into the issuance of patents with significant 
commercial value for U.S. pharmaceutical companies.  Piracy 
has not diminished, despite a significant recovery from an 
economic crisis that was a real spur to piracy.  Neither has 
Argentina's legislature taken the steps necessary to clamp 
down on piracy.  As also noted herein, the Argentine legal 
system remains an uncertain ally in the fight to protect 
intellectual property.  The Embassy therefore recommends that 
Argentina remain on the Special 301 Priority Watch List for 
¶2006.  End Comment. 
 
¶19.  To see more Buenos Aires reporting, visit our classified 
website at:  http//www.state.sgov.gov/p/wh/buenosaires 
GUTIERREZ