VZCZCXRO3434
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHTM
DE RUEHCV #0366/01 0521438
ZNR UUUUU ZZH
R 211438Z FEB 07
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 7899
INFO RUEHZI/WHA IM POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE

UNCLAS SECTION 01 OF 02 CARACAS 000366 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/IPE CLACROSSE, DEPT PLS PASS TO USTR 
JCHOE-GROVES, DOC JBOGER, DOC PLS PASS TO USPTO JURBAN AND 
LOC STEPP 
 
E.O. 12958: N/A 
TAGS: KIPR VE
SUBJECT: 2007 SPECIAL 301 RECOMMENDATION:  KEEP VENEZUELA 
ON PRIORITY WATCH LIST 
 
REF: A. STATE 7944 
 
     ¶B. 06 CARACAS 486 
     ¶C. 05 CARACAS 596 
 
¶1.  Summary: (SBU)  The BRV's protection and enforcement of 
IPR continues to deteriorate.  The market for legitimate 
music CDs is eclipsed by piracy, with piracy rates for CDs, 
DVDs, and business software hovering around 80 percent. 
SAPI, the agency that oversees IPR enforcement and issues 
patents, has not issued a single patent since 2004. 
Venezuela's customs and tax agency, SENIAT, has achieved some 
success in its anti-piracy campaigns and seizure of 
contraband, but overall enforcement of IPR legislation 
remains ineffective.  The implementation of proposed legal 
changes would further weaken IPR protection.  Based on the 
BRV's antipathy to IPR, weak enforcement and possible legal 
changes to further strip away IPR protection, Post recommends 
that Venezuela remain on the Special 301 Priority Watch List 
for 2007.  End Summary. 
 
--------------------------- 
The Pharmaceutical Industry 
--------------------------- 
¶2.  (SBU) The international pharmaceutical industry continues 
to see a weakening of IPR protection in Venezuela.  Despite 
Venezuela having the highest per-capita pharmaceutical 
consumption in Latin America, and being the third largest 
market in the region, SAPI, the Autonomous Intellectual 
Property Service (the country's primary IPR authority), has 
not issued a patent to an imported pharmaceutical product 
since 2003, and has not issued a patent in any sector since 
¶2004.  SAPI has continued to receive an average of over 500 
patent application submissions per year.  Since 2002, the BRV 
has failed to protect pharmaceutical testing and other 
confidential data for product submissions that have not yet 
 
SIPDIS 
received patent protection.  The BRV does not provide linkage 
between patent and sanitary registration.  Counterfeiters can 
receive sanitary registration approval in the absence of a 
patent -- equivalent to marketing approval for a counterfeit 
product. 
 
¶3.  (SBU) The legal framework in Venezuela for pharmaceutical 
protection is ambiguous after the BRV withdrew from the CAN 
(Andean Community) in April 2006.  Venezuelan law had 
incorporated over 650 legal decisions from the Andean 
Community into domestic law, including Decision 486, a 
pronouncement on protection of intellectual property rights. 
The most recent domestic intellectual property legislation in 
Venezuela dates from 1955 and does not provide for patent 
protection.  Venezuelan courts have, de facto, continued to 
apply Decision 486, though they have offered no assurances 
that they will continue to do so. 
 
--------------------------- 
Recorded Media and Software 
--------------------------- 
¶4.  (SBU) The market for legitimate CDs and DVDs continues to 
decline.  According to a Post IPR source, there are 
approximately 1.8 million music CDs sold annually in 
Venezuela and 80 million virgin discs imported.  This would 
indicate that Venezuela is not solely a distribution source, 
but a mass production center for counterfeit products. 
Industry estimates the piracy rate for music CDs at 85 
percent, a two percent increase from 2005.  The National Film 
Law, passed in August 2005, requires mandatory registration 
of all films, which could lead to unauthorized releases of 
confidential information and contribute to piracy. 
 
SIPDIS 
 
¶5.  (SBU) The piracy rate for business software in 2006 is 84 
percent, according to International Intellectual Property 
Alliance statistics -- a 6 percent increase from 2005.  U.S. 
software companies have repeatedly come under attack from the 
BRV as exemplars of what President Chavez referred to as the 
"neo-liberal" trap of IPR.  In 2004, the BRV passed 
legislation that mandates the use of open source software 
throughout the public sector.  While not necessarily a 
violation of IPR in and of itself, the software industry has 
concerns about a lack of transparency in its implementation 
and favoritism shown to certain vendors. 
 
--------------- 
IPR Enforcement 
--------------- 
¶6.  (SBU) IPR enforcement in Venezuela continues to be weak. 
Enforcement problems derive for the most part from a lengthy 
legal process, unprepared judges, as well as lack of 
 
CARACAS 00000366  002 OF 002 
 
 
resources for investigation and prosecution.  A single 
special prosecutor is responsible for IPR issues. 
Consequently, investigations are severely backlogged.  Under 
current Venezuelan law, most IPR enforcement actions can only 
take place as a result of a complaint by the rights holder. 
In addition, the complainant is responsible for the cost of 
storage of allegedly illicit goods during the investigation 
and trial.  A loophole in the law only permits actions 
against copyright violators operating at a fixed location, 
effectively barring prosecution of street vendors. 
 
¶7.  (SBU) SENIAT remains the one bright spot in a dismal 
landscape of respect for IPR with noteworthy efforts to fight 
piracy in conjunction with its "zero tax evasion" mission. 
SENIAT proposed an Anti-Piracy Law in 2006.  We do not expect 
this proposal to be signed into law.  In February 2007, 
SENIAT reportedly destroyed 450,000 pirated CDs and 280,000 
pirated DVDs.  SENIAT superintendent Jose Gregorio Vielma 
Mora has called on the BRV to provide the legislative 
framework to protect author's rights, adding that enforcement 
efforts to stamp out counterfeiting requires enhanced 
cooperation of SENIAT, local police, and the national guard. 
Coordinated efforts, to date, have been minimal. 
 
---------------------------- 
Legal Changes on the Horizon 
---------------------------- 
¶8.  (SBU) Proposed legal changes, if implemented, would 
result in further weakening of the IPR regime in Venezuela. 
The National Assembly has delegated to President Chavez, for 
a period of 18 months, the power to issue decrees carrying 
the force of law.  Both the pharmaceutical and recording 
industries expressed their concern to us over potential abuse 
of this power to push through legislation that would further 
weaken the IPR regime.  In particular, there is concern that 
Chavez may sign into law a controversial copyright bill 
dating from 2004, which apparently was no longer on the 
legislative agenda.  The bill would violate a reported 31 of 
Venezuela's bilateral and multilateral IPR treaty obligations 
including the Bern Convention and TRIPs.  It would reduce the 
protection period for copyrights from 60 to 50 years and 
would allow the BRV to expropriate artistic rights for the 
public sector.  Venezuela has not yet ratified the WIPO 
Copyright Treaty or the WIPO Performances and Phonograms 
Treaty. 
 
------- 
Comment 
------- 
¶9.  (SBU) Venezuela continues to be an unfriendly environment 
for intellectual property rights.  Pirated and counterfeit 
products abound, and piracy rates are climbing.  Despite 
SENIAT's efforts, overall enforcement remains weak.  The BRV 
has dedicated few resources to investigating and prosecuting 
IPR crimes.  The legal regime for IPR protection is in a 
state of uncertainty after Venezuela's withdrawal from the 
CAN.  IPR protection will likely deteriorate in the upcoming 
year as Chavez may push through controversial copyright 
legislation that would further undermine IPR protection and 
violate Venezuela's treaty obligations.  Post recommends 
keeping Venezuela on the Special 301 Priority Watch List for 
¶2007. 
 
BROWNFIELD