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UNCLAS SECTION 01 OF 06 CAIRO 001262 
 
SIPDIS 
 
DEPT FOR NEA/ENA, EB/IPE LACROSSE 
COMMERCE FOR 4520/ITA/ANESA/TALAAT/BOGER 
DOC PLEASE PASS TO USPTO URBAN 
DEPT PLEASE PASS TO USTR FOR CHOE-GROVES, SAUMS 
LIBRARY OF CONGRESS FOR STEPP 
 
SENSITIVE 
 
E.O.  12958: N/A 
TAGS: ECON ETRD KIPR EG USTR
SUBJECT: EGYPT: 2006 SPECIAL 301 REVIEW 
 
REF:  STATE 14937 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT 
ACCORDINGLY. 
 
-------------------------- 
Summary and Recommendation 
-------------------------- 
 
¶1.  (SBU) Over the past year, the Government of Egypt 
has made progress in strengthening its intellectual 
property rights (IPR) regime.  It issued the final set 
of implementing regulations for its 2002 IPR law, 
established new offices to license copyrighted 
materials, and cleared up a backlog of trademark 
applications.  Problems, however, remain, especially 
with enforcement and protection of copyright and 
pharmaceutical test data.  Overall, these problems are 
significant enough to warrant retaining Egypt on the 
Priority Watch List for 2006.  End summary and 
recommendation. 
 
--------------------------------- 
Overall Assessment of IPR Climate 
--------------------------------- 
 
¶2. (SBU) While Egypt enacted a comprehensive IPR law in 
2002, as well as other laws and regulations that create 
a legal basis for effective IPR protection, these laws 
have not been fully implemented, supporting regulations 
are flawed, and enforcement remains generally weak. 
There has been notable progress on the IPR front over 
the past year -- especially in areas where the USG has 
provided technical assistance -- but problems remain. 
Details of both the progress made and the deficiencies 
that remain are provided below. 
 
-------------------- 
Optical Media Piracy 
-------------------- 
 
¶3. (SBU) Optical media piracy affects most categories 
of intellectual property rights, including motion 
pictures, sound recordings, and computer software.  In 
March 2005, implementing regulations were issued for 
Book Three (copyrights and related issues) of Egypt's 
IPR law, which affect all these media.  Unfortunately, 
these regulations are flawed in certain fundamental 
ways.  For example, rather than clearly transferring 
enforcement responsibility for software and database 
infringement to the Ministry of Communication and 
Information Technology (MCIT), the regulations maintain 
an enforcement role for the Ministry of Culture in that 
area while also creating one for MCIT.  As a result, 
the regulations have caused confusion for the 
ministries and rights-holders alike.  Until the 
Ministry of Justice resolves this issue, the ambiguity 
is likely to impede serious software piracy enforcement 
efforts. 
 
¶4.  (SBU) Major U.S. software and computer companies 
operating in Egypt report a piracy rate in business 
software under 20 percent for large companies in Egypt. 
The most serious problem is now software piracy by 
medium and small enterprises, and by computer 
retailers, who load pirated software onto their 
products.  Counterfeiting of software in Egypt is not 
currently a problem, according to industry sources. 
Virtually all the counterfeit business software used in 
Egypt is produced abroad, according to the Business 
Software Alliance. 
 
--------------- 
False Licensing 
--------------- 
 
¶5. (SBU) False licensing remains a problem and 
undermines copyright protection in Egypt.  Pirates are 
often able to receive authorization to distribute 
software, music, and films from the Ministry of Culture 
based on forged documents purporting to give them this 
right.  The GOE does not have the ability to 
authenticate these documents, but revokes  its 
authorizations when the products are proven to be 
pirated.  In April 2005, MCIT created an "IPR Office" 
under the new Information Technology Industry 
Development Agency (ITIDA) to provide authorized 
licenses for, and to register newly developed software 
and databases.  These databases will be used to support 
enforcement efforts should the confusion over which 
ministry has enforcement authority for software  be 
resolved (see paragraph 3). 
 
----------------------- 
Printed Material Piracy 
----------------------- 
 
¶6. (SBU) Book piracy continues to be a problem in 
Egypt.  In 2005, the Supreme Council of Culture created 
a specialized Office for the Protection of Author's 
Rights to process licenses for reprinting scientific or 
scholastic books according to specific criteria.  To 
date, no reprint requests have been filed, suggesting 
that piracy in this area will not abate simply because 
there are now clear procedures in place for obtaining 
permission to reprint books.  This new office has no 
investigative or enforcement responsibilities, as those 
duties remain in the purview of the anti-piracy unit of 
the police. 
 
--------------- 
IPR Enforcement 
--------------- 
 
¶7. (SBU) IPR enforcement is executed jointly by the 
police force under the Ministry of Interior and 
inspectors from the Ministry of Trade and Industry, in 
coordination with other relevant ministries and 
authorities.  Even though the number of trained 
inspectors increased in 2005, their number and the 
physical resources available to them are still 
insufficient for conducting effective raids on software 
pirates.  If this resource problem were addressed, 
effective enforcement of copyright protection might 
significantly improve.  The Ministry of Trade and 
Industry recently established a procedure for seizing 
counterfeit goods at the port of entry.  Its 
effectiveness is still being determined. 
 
¶8.  (SBU) The Ministry of Culture has enforcement 
responsibilities for pirated motion pictures, sound 
recordings, and possibly software (see paragraph 3). 
Over the past year, the number of trained inspectors 
doubled, and the ministry investigated 527 cases, 
compared to the 328 investigated in 2004.  Ministry 
officials, however, recognize the need for greater 
enforcement, but maintain that their efforts are 
hindered by the lack of advanced equipment and 
effective coordination with other government entities. 
Entertainment companies concur, complaining of 
escalating piracy and weak enforcement.  They have 
tried self-help measures, purchasing and presenting 
pirated goods to the police to encourage them to take 
action.  Although the counterfeiters are sometimes 
arrested, often they are back in operation within days. 
 
¶9. (SBU) A "General Department for Customs Relations 
and Clearance" has recently been established in the 
Ministry of Trade and Industry to receive border 
measures complaints in collaboration with the Egyptian 
Customs Authority.  Although it is a new department, it 
has already acted on a number of complaints.  The USAID- 
funded Assistance for Trade Reform and Intellectual 
Property Rights Assistance projects have been providing 
training to this new unit. 
 
¶10. (SBU) The General Department for IPR Protection in 
the Ministry of Trade and Industry receives and 
investigates trademark and industrial designs 
infringement complaints.  The unit investigates 
infringement complaints only for marks and designs that 
are registered in Egypt.  It takes samples of allegedly 
infringing goods, decides on their authenticity, and 
turns over cases of suspected infringement to the 
General Prosecutor's office. 
 
¶11. (SBU) Egypt has not signed the WIPO Copyright 
Treaty (WCT) or the WIPO Performance and Phonograms 
Treaty (WPPT).  As a major producer of Arabic 
entertainment, Egypt could benefit from these treaties. 
However, the GOE has not shown interest in joining 
either treaty. 
 
---------------- 
TRIPS Compliance 
---------------- 
 
¶12. (SBU) As a signatory of the WTO Trade Related 
Aspects of International Property Rights (TRIPS) 
agreement, Egypt is required to provide protection to 
foreign IPR-holders operating in Egypt.  Overall, 
infringement of trademark, and industrial designs has 
decreased in 2005 in comparison to 2004, yet problems 
persist. 
 
¶13. (SBU) A USAID-funded project working on IPR issues 
assisted the Commercial Registration office (which 
includes both trademark and industrial designs 
departments) to modernize its operations, improve its 
management through specialized training, and increase 
the efficiency and effectiveness of its staff. 
 
¶14. (SBU) The trademark office has shown significant 
improvement this past year.  It successfully processed 
almost 38,000 backlog trademark cases, created a 
database that includes all registered, renewed or still 
processed cases, and reduced the registration period 
from 63 to 9 months (which is below the international 
standard). 
 
¶15. (SBU) The industrial designs office has also showed 
significant improvement this year.  The office, 
however, has yet to implement a planned computerized 
database of national and international bibliographic 
and industrial designs that would allow inspectors to 
quickly identify infringements.  The current manual 
search method is onerous and time-consuming. 
 
----------------- 
Patent Protection 
----------------- 
 
¶16. (SBU) A modern, computerized Egyptian Patent Office 
operating under the authority of the Ministry of Higher 
Education and Ministry of State for Scientific Research 
is now capable of processing and ensuring the 
protection of patent applications.  Processing times 
have been reduced from an average of five years to 
between 18 and 25 months.  This office has 
significantly improved the quality and transparency of 
the trademark and industrial design registration 
system.  Egypt has agreed to join the WIPO Budapest 
Treaty on the International Recognition of the Deposit 
of Microorganisms for the Purposes of Patent Procedure 
by 2007. 
 
 
¶17.  (SBU) Egypt continues to take advantage of 
numerous technical assistance training opportunities 
offered by the United States Patent and Trademark 
Office on topics such as computerized patent and 
trademark application searching, patent, trademark, and 
design application examination, and the processing of 
applications under the Patent Cooperation Treaty (PCT). 
The PCT, which came into force in September 2003, 
allows local and international applicants to protect 
their inventions in many countries by filing a single 
application and designating the countries where the 
invention will be protected.  Since Arabic has recently 
become a PCT language, Egypt's membership in the PCT 
permits Egyptian applicants to file their application 
in the Arabic language with the Egyptian Patent Office 
and to have an international search and examination 
report sent to all designated patent offices.  This 
helps both Egyptian and foreign applicants capture 
their local markets and also easily designate their 
applications to apply in the two largest world markets, 
the U.S. and Europe.  Egypt can now serve as a 
receiving office for neighboring countries for Arabic- 
language applications. 
 
------------------------------ 
Protection for Plant Varieties 
------------------------------ 
 
¶18. (SBU) In October 2004 the Ministry of Agriculture 
established a new plant variety registration office. 
However, the relevant provisions of the IPR law 
concerning new plant varieties are not being 
implemented because the Egyptian National Gene Bank, 
which certifies the novelty of new varieties, has not 
been established.  Without this office, creators of new 
plant varieties are reluctant to file applications for 
certification.  Another issue of concern is the lengthy 
application process.  In order to prove the 
Distinguished Unity and Stability of plant variations 
and novelty, plant seeds have to be planted for two 
consecutive seasons to guarantee its originality (e.g., 
consistent size, shape, appearance).  The GOE is 
undertaking reforms necessary to join the International 
Union for the Protection of New Varieties of Plants. 
 
--------------------------------------- 
Market Access for Intellectual Property 
--------------------------------------- 
 
¶19. (SBU) Market access for some forms of intellectual 
property is still problematic in Egypt.  Foreign motion 
pictures are subject to duties and import taxes (32 
percent on each copy of the movie, 12 percent on 
posters and 2 percent on the movie reel), as well as a 
10 percent sales tax and a 20 percent box office tax 
(compared to a five percent box office tax for local 
films).  Foreign motion pictures are subject to a 
screen quota and distributors are allowed to import 
only five prints of any foreign film, although 
occasionally seven copies may be allowed.   The 
issuance of approvals and certificates to license films 
and entertainment software can be lengthy and 
cumbersome.  Tariffs on some information technology 
products were reduced in 2004 following the signing of 
the WTO Information Technology Agreement mandating the 
removal of tariffs on information technology (IT) 
products but full implementation of the agreement is 
still underway. 
 
----------------------------- 
Pharmaceutical IPR Protection 
----------------------------- 
 
¶20. (SBU) IPR protection and pricing remain areas of 
concern in the pharmaceutical sector.  The Ministry of 
Health and Population negotiates with companies to set 
and adjust pharmaceutical prices using a cost-plus 
formula.  The Ministry has been slow to adjust 
pharmaceutical prices to compensate for significant 
depreciation of the Egyptian pound since 2000.  In 
September 2004, the government lowered customs duties 
on most imported pharmaceutical inputs from 10 percent 
to 2 percent.  The government claims this step 
compensates pharmaceutical companies operating in Egypt 
for some of their losses from the devaluation.  In 
November 2004, restrictions on exporting 
pharmaceuticals were removed to encourage 
pharmaceutical investment and exports.  Pharmaceutical 
companies rely, however, on the domestic market for a 
significant part of their operations, and the creation 
of a transparent, systematic, and fair process for 
pricing is therefore crucial. 
 
¶21. (SBU) GOE marketing approval for generic copies of 
protected pharmaceutical products remains a serious 
issue.  In 2004, GOE approval for generic copies of 
four protected pharmaceutical products was a main 
reason for Egypt's elevation to the Priority Watch 
List.  In-depth discussions held under the auspices of 
the Trade and Investment Framework Agreement reveal 
serious differences between the USG's and the GOE's 
interpretation of TRIPS obligations, especially 
regarding the provisions on data exclusivity and unfair 
commercial use.  That said, for most of 2005 the GOE 
did not act on marketing approvals for generic copies. 
In December, however, the outgoing Minister of Health 
and Population authorized a local generic copy of an 
innovator drug for which a U.S. company claimed IPR 
protection.  Prior to the approval, the company took 
every available step to enforce its intellectual 
property rights, including filing a patent application 
with Egyptian officials, obtaining a five-year 
exclusive marketing right certificate (which was 
subsequently overturned in court on a technicality), 
and then filing an appeal, which was pending when the 
local generic copy was approved.  The Ambassador 
protested this approval with the new Minister of Health 
and Population. 
 
------------------- 
Government Software 
------------------- 
¶22. (SBU) Since 2004, the GOE has been taking steps to 
promote the use of only legitimate business software by 
government departments and state schools.  To encourage 
use of licensed software, Microsoft -- a major supplier 
of software in Egypt for the government and private 
sector -- launched a program in 2004 to sell licenses 
on credit.  Industry representatives express 
satisfaction with the level of legitimate software use 
in the government. 
 
------------------------ 
IPR Technical Assistance 
------------------------ 
 
¶23. (SBU) A USAID-funded Intellectual Property Rights 
Assistance project (IPRA) is working with several 
Egyptian Ministries to strengthen IPR enforcement and 
increase public awareness.  Program reports indicate an 
increase in police and Ministry of Culture involvement 
in IPR protection in 2005 over the previous year.  The 
USAID program is working with the Ministry of Justice 
on IPR enforcement issues, and in particular is working 
with judges to increase legal awareness and capacity 
building for infringement cases.  The program works 
with law schools in five Egyptian universities to 
increase awareness and training on IPR issues.  As 
noted in paragraph 14, the program worked with the 
Government of Egypt to set up a specialized IPR unit 
and modernize the trademark office providing technical 
assistance to in-house inspectors.  The pace of 
approval of trademark applications has risen 
dramatically according to IPRA project implementers -- 
from approximately 12 to over 100 approvals a day. 
 
¶24. (SBU) Some of the courses and programs that the 
USAID-funded program organized in Egypt and abroad 
include: 
 
-- Training for government officials and journalists on 
IPR principles and practice; 
 
-- Training at Egyptian universities and the American 
University in Cairo on IPR; 
 
-- Training for judges on IPR issues; 
 
-- Training for government employees at the Patent 
Office on the PCT and on drafting patent claims; 
 
-- Training for trademark employees; 
 
-- Training for Internet security issues; 
 
-- Workshops and media events to raise IPR awareness in 
the government, private sector, and the general public. 
 
IPRA also: 
 
-- Is preparing for an online patent application and 
tracking process, due to be fully operational by mid 
2006; 
 
-- Is helping the Ministry of Culture implement the new 
law for the Protection of Author's Rights; 
 
-- Is providing reference guides to the GOE's 
industrial designs and trademark departments; 
 
-- Successfully negotiated with WIPO to supply free 
software and uncharged maintenance for life to Egypt's 
Commercial Registration Administration. 
 
-------------- 
Recommendation 
-------------- 
 
¶25. (SBU) As noted above, there have been positive 
developments in IPR protection in Egypt, especially 
related to improving the operations of government 
offices charged with registering the property of rights- 
holders.  Problems still persist, however, especially 
in the critical areas of enforcement and protection of 
copyright and pharmaceutical test data.  The marketing 
approval for a generic local copy of U.S. 
pharmaceutical product was a significant setback, as it 
appeared, until that point, that the GOE had finally 
understood the importance of the issue and was 
refraining from issuing further approvals.  The 
presence of a new business-oriented Minister of Health 
and Population may have a positive impact on IPR 
protection of pharmaceuticals.  At present, however, we 
have to conclude that the positive developments this 
past year are not sufficient to outweigh the 
significant continuing problems.  Therefore, post 
recommends that Egypt be retained on the Priority Watch 
List for 2006. 
 
RICCIARDONE