VZCZCXRO0602
PP RUEHRG
DE RUEHBR #0294/01 0471902
ZNR UUUUU ZZH
P 161902Z FEB 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 8147
INFO RUEHSO/AMCONSUL SAO PAULO 9247
RUEHRI/AMCONSUL RIO DE JANEIRO 3891
RUEHRG/AMCONSUL RECIFE 6260
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 05 BRASILIA 000294 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EB/TPP/IPE JENNIFER BOGER 
DEPT PASS USTR FOR SUE CRONIN AND JENNIFER CHOE GROVES 
DEPT PASS USPTO 
USDOC FOR ITA/MAC/OIPR CASSIE PETERS 
USDOC FOR ITA/MAC/WH/OLAC/MCAMPOS 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON BR
SUBJECT:  BRAZIL: Special 301 Recommendation 
 
REF:  A) State 7944; B) Brasilia 249; C) 05 Brasilia 2813; 
D)Sao Paulo 71; E) 06 Brasilia 2606; F) 06 Brasilia 367; G) 05 
Brasilia 573; H) Sao Paulo 1206 
 
¶1. (U) Per reftel A, the following is Embassy Brasilia's input for 
the Special 301 Review of Brazil. 
 
¶2. (SBU) Summary:  In 2006, Brazil continued to make significant 
progress in improving protection of copyrights and intellectual 
property.  The potential for compulsory licensing - a key area of 
concern in Post's 2006 Special 301 submission (reftel F) - has 
ceased to be a major concern at this time.  All of the U.S. 
pharmaceutical companies that were previously faced with this threat 
have either reached an accord with the GOB, or in the case of the 
one remaining firm that hasn't (Merck), believe their situation is 
relatively secure. End Summary. 
 
¶3.  (SBU) The December 2006 "Report on Activities" released by the 
GOB National Council to Combat Piracy (CNCP) indicates that the 
overall nine-month results of GOB interdiction efforts as of 
September 30, 2006 surpassed those for the entire year of 2005. 
Indeed, the GOB has significantly increased both its internal and 
border enforcement efforts over the last year.  The report set forth 
the government's overall approach to combating IPR piracy, i.e. 
enforcement, public education, and economic efforts.  The report 
also highlighted public outreach activities such as the "Pirate: I'm 
Out!" initiative and the planned March 2007 "Brazil Against Piracy" 
caravan across the country.  The GOB and private industry have 
continued educational outreach efforts, but many Brazilian consumers 
exhibit a price-oriented approach to purchases, and attach no 
particular stigma to pirated items. 
 
¶4.  (SBU) Notwithstanding efforts by the GOB to streamline patent 
adjudication, Brazil continues to have a daunting patent backlog 
(exact numbers will be difficult to obtain until Brazil's patent 
agency, INPI, consolidates its data operations) and the 
pharmaceutical industry has voiced concerns over the confidentiality 
of undisclosed test and other data submitted to the Brazilian FDA 
equivalent, ANVISA, as part of the patent approval process. 
However, pharmaceutical companies have not been able to identify a 
case in which data confidentiality has, in fact, been breached. 
 
¶5.  (SBU) Post recognizes that the GOB still has much ground to 
cover.  Still, it has made significant progress and gives every 
indication that it will continue to improve its IPR protection 
efforts.  Therefore, Post recommends that Brazil's Special 301 
Status be upgraded from Priority Watch List to Watch List. This 
stance is consistent with International Intellectual Property 
Alliance's (IIPA) recommendation that Brazil be accorded Watch List 
Status and the views of the Motion Picture Association (MPA) and 
companies like Nintendo.  While PhRMA has called for Brazil to 
remain on the Priority Watch List, other players within the industry 
(like Gilead) have indicated that they favor an upgrade to Watch 
List.  From our perspective, moving Brazil to the Watch List will 
bolster our engagement with Brazil on IPR, allowing us to better 
push the U.S. public/private sector agenda of training, legislative 
advances and heightened law enforcement.  End Summary. 
 
--------------------------------------------- --- 
Enforcement, Educational and Economic Strategies 
--------------------------------------------- --- 
 
¶6. (U) Often, much of the problem with piracy interdiction in Brazil 
is not the existing legislation, but the enforcement and proper 
application - or lack thereof - of the statutes.  Through its 
enforcement efforts over the past year, the GOB has exhibited 
increasing political will to deal with piracy, partly in recognition 
of the damage contraband activities have done to the Brazilian 
economy through the loss of government tax revenues.  Tax evasion is 
now frequently a concurrent charge during piracy and contraband 
arrests. 
 
¶7.  (U) The December "Report on Activities" released by the GOB 
Ministry of Justice (MOJ) National Council to Combat Piracy (CNCP) - 
a public-private undertaking that includes representatives of 
various trade associations - indicates a substantial increase in GOB 
piracy enforcement efforts.  Although most of the data included for 
2006 only covers the first three quarters of the year, the overall 
results equal or surpass calendar year 2005.  The GOB report 
outlined its three-pronged approach to combating IPR crime: 
enforcement, public education, and economic efforts.  While efforts 
in prior years focused heavily on public education, the GOB 
currently appears to be pursuing the enforcement approach more 
 
BRASILIA 00000294  002 OF 005 
 
 
vigorously than the other two. 
 
¶8. (U) The CNCP report segments out efforts by enforcement agencies 
and provides an overall view of total seizures of pirated goods. 
Among the highlights, the GOB reports a 54 percent increase in the 
total value of goods confiscated during the first nine months of 
2006 (approximately USD 283.1 million) versus the same period in 
2005 (approximately USD 183 million).  The CNCP report shows 
seizures over the first nine months of 2006, outstripping all of 
2005 by over USD 3.1 million.  However, CNCP could not provide 
consolidated information on arrests and convictions for piracy and 
contraband activities.  (See reftel B for statistics and detailed 
information on GOB enforcement, educational, and economic strategies 
to combat piracy, including individual state enforcement actions.) 
 
¶9.  (SBU) Even with improved enforcement activity, the GOB faces 
significant challenges.  Representatives of several intellectual 
property trade associations expressed satisfaction with improved GOB 
anti-piracy efforts, but told Sao Paulo EconOff that despite 
successful raids and seizures in downtown shopping malls, they have 
noticed that the raided stores are full of the same products the 
next day.  They also believe that while the GOB has made significant 
efforts to restrain inflow of pirated smuggled products through 
Brazil's border with Paraguay and through several ports, there are 
still insufficient enforcement agents to police Brazil's lengthy 
coast, which smugglers use to bring in pirated and counterfeit 
products. 
 
--------------------------------------------- ------- 
Efforts against the Production, Import and Export of Counterfeit 
Goods 
--------------------------------------------- ------- 
 
¶10.  (U) Detailed information on raids on notorious marketplaces and 
the results of both federal and state efforts against the 
production, import and export of counterfeit goods is included in 
reftel B. 
 
----------- 
Legislation 
----------- 
 
--Federal Legislation 
 
¶11.  (U) While the GOB has yet to take steps to adopt the WIPO 
Copyright Treaty (WCT) or the WIPO Performers and Phonograms Treaty 
(WPPT), industry groups and GOB agencies have been seeking to 
strengthen existing anti-piracy legislation.  The 2006 legislative 
session ended without action on three proposed amendments to federal 
anti-piracy legislation covering software, industrial property and 
intangible property.  This legislation, endorsed by the 
International Intellectual Property Alliance (IIPA), would have 
stiffened criminal penalties for piracy, which already prescribe 
penalties ranging from two to four years, but allow for alternate 
forms of sentencing such as community service.  A GOB interlocutor 
recently told EmbOffs that these amendments are effectively off the 
table.  Instead, he said alternative draft legislation, developed by 
CNCP's Legislation Working Group, with input from a 2005 private 
sector forum, has been submitted for consideration by Brazil's slow 
moving legislative process. (Comment:  GOB anti-piracy legislation 
is generally TRIPS compliant. End Comment.) 
 
¶12.  (U) This alternative legislation proposes a number of changes 
to the country's penal code and industrial property law.  Most 
suggested changes are practical in nature, such as providing a 
rights-holder with additional time for initiating legal proceedings; 
providing law enforcement agencies with the authority to seize 
maritime and aviation craft, in addition to buses, used to transport 
pirated goods; clarification of procedures for seizing and 
destroying goods, as well as enabling law enforcement agencies the 
ability to retain only samples for use in litigation; introducing 
differentiation in penalties between individual offenders (such as 
street vendors) and those involved in a larger operation; holding 
owners of media responsible for advertisements that promote buying, 
renting, exporting or importing goods produced in violation of IPR 
laws; incorporating penalties for software copyright violation into 
the penal code; and stiffening penalties if pirated goods are 
imported (reftel C). 
 
--State Legislation 
 
¶13.  (U) The Federal District and the states of Sao Paulo, Mato 
Grosso, and Rio de Janeiro took steps in 2006 to strengthen 
 
BRASILIA 00000294  003 OF 005 
 
 
anti-piracy legislation.  In Sao Paulo, an enterprise can now be 
banned from conducting business for five years for selling pirated 
goods.  The prohibition extends to any branch or other attempt to 
open a similar business in another name.  Mato Grosso is reportedly 
considering similar legislation.  In the Federal District, vendors 
of pirated goods can be fined up to approximately USD 25,000. In Rio 
de Janeiro, sellers of pirated goods can lose their business 
licenses. 
 
¶14.  (U) However, there are states with far weaker anti-piracy 
legislation.  For example, in Rio Grande do Sul (reftel D), sale of 
pirated items is subject to a relatively minor fine and state code 
allows counterfeiters to retain their illicit goods after paying the 
fine. 
 
--A View from Local Trade Organizations 
 
¶15.  (SBU) Brazil-based representatives of several major 
intellectual property rights associations told Sao Paulo EconOff 
that they feel there is a need for stronger legislation with higher 
penalties.  These association representatives pointed out that 
although current penalties for vendors of pirated goods range from 
two to four years in prison, violators are rarely incarcerated 
because they are either first time offenders or are poor. 
 
--------------------------------------- 
Patents, Trademarks and Data Protection 
--------------------------------------- 
 
¶16.  (SBU) U.S. companies continue to complain of lengthy delays and 
burdensome documentation requirements for the approval of drug 
patents.  The Ministry of Health's regulatory agency, ANVISA, must 
approve product registrations for imported pharmaceuticals and 
medical devices before they can be considered by Brazil's patent 
agency, the National Institute of Industrial Property (INPI). 
ANVISA approval currently takes three to six months for new versions 
of existing products and can take over six months for products new 
to the market.  Some international medical device companies have 
expressed concern that legislation passed in October 2006 (reftel 
E), requiring them to submit economic information as part of the 
medical device registration process, could require disclosure of 
proprietary production cost data.  ANVISA has made it clear to 
EmbOffs that it does not plan to request confidential data of this 
nature. 
 
¶17.  (SBU) The potential for compulsory licensing - a key area of 
concern in Post's 2006 Special 301 submission (reftel F) - has 
ceased to be a major concern at this time.  All of the U.S. 
pharmaceutical companies that were previously faced with this threat 
have either reached an accord with the GOB, or in the case of the 
one remaining firm that hasn't (Merck), believe their situation is 
relatively secure.  A representative of one of the pharmaceutical 
companies that settled with the GOB, Gilead, said the company 
recommends Brazil be upgraded to Watch List status.  In contrast, a 
Merck representative told us that his firm prefers retaining Brazil 
on the Priority Watch list. 
 
¶18.  (U) Although INPI has taken steps to increase its processing 
capacity - such as hiring new employees, employing new technology 
and expanding its facilities - patent and trademark delays are still 
a considerable problem.  The PhRMA 2007 Special 301 submission notes 
that the number of patent examiners has increased from 105 to 350, 
going from 30 to 90 in the pharmaceutical field alone.  INPI has 
also incorporated new technology into its approval process. 
Nevertheless, INPI estimates the number of pending patents has 
increased to 140,000 (versus 130,000 last year as noted in reftel 
F), although INPI is not sure that this figure is accurate - it 
could be lower or higher - given uncertainties created by the 
upgrading of its internal data center. 
 
¶19.  (U) In December, INPI announced its plans to join the Madrid 
Agreement Concerning the International Registration of Mark ("Madrid 
Protocol").  Rightsholders who seek trademark protection in Brazil 
would then be able to take advantage of this streamlined 
international trademark registration system, making Brazil the first 
country in South America where this system is available.  Trademark 
approvals in Brazil have risen from 17,329 in 2003 to 111,996 in 
¶2006.  With the introduction of an electronic trademark application 
system (E-Marcas) in 2006, INPI plans to process trademark 
registrations in less than one year by the end of 2007. 
 
¶20.  (U) A U.S. Patent and Trademark Office (USPTO) IPR Attache was 
assigned to ConGen Sao Paulo in October 2006 and continues to 
 
BRASILIA 00000294  004 OF 005 
 
 
interface with INPI.  Under the US-Brazil Commercial Dialogue, USPTO 
and INPI meet bi-monthly and plan to continue their ongoing dialogue 
on technical cooperation on patent and trademark examination 
practices and operations.  Most recently, USPTO IPR Attache met with 
INPI's Coordinator for International Cooperation to discuss upcoming 
training opportunities.  INPI has expressed particular interest in 
integrated circuits as Brazil has adopted a provisional legislative 
measure which will allow for IPR protection of them. 
 
¶21.  (U) Although the Brazilian Law on Industrial Property currently 
prohibits disclosure and use of undisclosed test data, 
pharmaceutical industry representatives continue to voice concern 
over the potential for release of confidential data submitted to 
ANVISA as part of the drug patent approval process.  A 
representative of Brazil's multinational pharmaceutical industry 
association, Interfarma (which also includes representatives of U.S. 
companies), told Sao Paulo EconOff that the association's efforts to 
get Congress to pass a law specifically addressing data protection 
have been unsuccessful and he has concerns about protection of 
undisclosed data from competitors during the patent pending process. 
 However, Interfarma has not brought to our attention any cases in 
which data confidentiality has, in fact, been breached. 
 
--Roadblock to Biotech Product Approvals 
 
¶22.  (U) Despite the March 2005 approval of Brazil's Biosafety Law, 
which regulates biotechnology crops and stem cell research (reftel 
G), approval of biotech products is a slow process.  Currently, two 
thirds of the 27 member National Technical Commission of Biosafety 
(CTNBio) board must approve introduction of new biotech products in 
Brazil.  Environmentalists and anti-biotech groups have a strong 
influence on key members of the board, who are essentially 
boycotting commercial approvals of new biotech products, including 
requests for imports of biotech products (such as U.S. genetically 
modified corn), effectively vetoing new product approvals.  The GOB 
is attempting to unblock the approval process with new legislation 
reducing the number of CTNBio board members required for approval to 
a simple majority.  The provisional measure is now in the Senate for 
consideration and, if approved, will be forwarded to President 
Lula's office for signature. 
 
---------------------------------- 
USG and Industry Provided Training 
---------------------------------- 
 
¶23.  (U) The past year has seen a growth in momentum of USG and 
industry-provided training in Brazil.  During CY 2006, the USG 
partnered with the Brazilian Association for the Defense of 
Intellectual Property (ADEPI) to conduct a series of INL-funded 
copyright piracy seminars for Brazilian federal and state law 
enforcement officials in Brasilia, Porto Alegre, Belo Horizonte and 
Recife.  Additional 2006 seminars built upon these efforts and 
included as sponsors the U.S. Chamber of Commerce, Sao Paulo State 
Federation of Industries, CNCP, Minas Gerais State Federation of 
Industries and private industry representatives.  Held in major 
cities and ports around the country, these seminars targeted various 
audiences including port customs officials, judges, prosecutors, 
state law enforcement officials, college students and teachers. 
Information on upcoming USG and industry training programs is 
included in reftel B. 
 
¶24.  (U) The CNCP report also notes GOB partnerships with a wide 
range of Brazilian industry associations to provide anti-piracy 
training to public officials.  In 2006, in-country training 
collaborators included the Brazilian Association of Software 
Companies (ABES), the Entertainment Software Association (ESA), 
Association for the Protection of Phonographic Intellectual Rights, 
ADEPI, Sao Paulo State Federation of Industries, and the Rio de 
Janeiro Delegation for Repression of Crimes against Intangible 
Property.  Last October, the President of CNCP received the Motion 
Picture Association of America's first anti-piracy award for his 
contributions to the reduction of piracy and for raising public and 
government awareness of the problem. 
 
---------------------- 
Anti-Piracy Committees 
---------------------- 
 
¶25.  (U) Sao Paulo, Brazil's most populous state, began the year 
with the creation of the Inter-Agency Committee to Combat Piracy. 
This group, which coordinates its efforts with the CNCP, is composed 
of the Governor, his Chief of Staff, the Attorney General, six State 
Secretaries (Justice; Finance; Public Security; Labor; Culture; and 
 
SIPDIS 
 
BRASILIA 00000294  005 OF 005 
 
 
Science, Technology, and Economic Development), and members of their 
staffs.  Sao Paulo joins the states of Rio de Janeiro and Rio Grande 
do Sul, which already have established state anti-piracy committees, 
and the state of Minas Gerais, which formed a similar committee in 
2006 (reftel H). 
 
------------------- 
Consumer Perception 
------------------- 
 
¶26.  (U) A U.S. Chamber of Commerce/Brazil-U.S. Business Council 
commissioned poll released in December 2006, found that price is the 
determining factor in the Brazilian consumer's purchasing decisions. 
The survey also found that the purchase of pirated goods increased 
in the 25-39 year old age group and with those over 50.  The report 
acknowledges increased GOB efforts to combat piracy, but the results 
do not show a major movement in consumer behavior away from 
purchasing pirated goods. 
 
¶27.  (U) The poll also noted a 17 percent growth overall in 
commercial piracy in the cities of Rio de Janeiro, Belo Horizonte 
and Recife, including a 45 percent increase in pirated items in the 
clothing, tennis and toy sectors.  By contrast, in Sao Paulo city, 
the country's largest and a key focal point of increased GOB 
anti-piracy efforts, the survey found a 14 percent reduction in the 
sale of pirated goods. 
 
¶28.  (SBU) Comment:  While there is much yet to be accomplished, 
particularly in the area of public consciousness and patent 
processing, the GOB and key states have clearly made significant 
progress in their fight against piracy in 2006.  In cooperation with 
the GOB, private industry is playing a larger role in anti-piracy 
efforts.  Through its actions, INPI has recognized the patent and 
trademark backlog problem and is taking steps to remediate it as 
well as the agency's statistical reporting system.  All this 
warrants, in our view, upgrading Brazil from Priority Watch List to 
Watch List.  End Comment. 
 
Sobel