VZCZCXYZ0083
OO RUEHWEB

DE RUEHRH #0284/01 0501309
ZNR UUUUU ZZH
O 191309Z FEB 08
FM AMEMBASSY RIYADH
TO SECSTATE WASHDC IMMEDIATE 7770

UNCLAS RIYADH 000284 
 
SIPDIS 
 
SIPDIS 
 
USTR FOR JENNIFER GROVES AND JASON BUNTIN 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR SA
SUBJECT: SAUDI ARABIA SPECIAL 301 REVIEW: POST INPUT 
 
REF: SECSTATE 9475 
 
------- 
Summary 
------- 
 
¶1.  Despite continuing deficiencies, Saudi Arabia improved 
its protection of intellectual property rights (IPR) in the 
preceding year.  The Violations Review Committee increased 
its productivity and transparency considerably under new 
leadership, the SAG offered a counter-proposal to USTR's 
Exclusive Marketing Rights Proposal for protecting the IPR 
rights of certain orphan pharmaceutical products and has 
begun to license software for its PCs.  The SAG also 
continues to eagerly participate in and request training from 
the USG to improve its capacity to protect and enforce IPR. 
Officials from USTR, USPTO and the Copyright Office visited 
Riyadh for four days in February 2008 and met with Saudi 
officials from various agencies involved in IPR.  These Saudi 
officials seized the opportunity to explain their role in 
protecting and enforcing IPR in the Kingdom, and to provide 
detailed, specific input regarding self-funded training 
programs they believe the USG can offer to enhance their 
ability to protect and enforce IPR.  The Saudi IPR Committee 
also agreed to establish an IPR Coordination Group in 
February 2008.  An IPR Coordination Group, as proposed in 
Saudi Arabia's 2007 Special 301 Initiative Action Plan, 
should include representatives of the USG and the SAG, as 
well as private industry rights holders, and meet regularly 
to discuss IPR protection and enforcement. 
 
¶2.  Meanwhile, industry losses due to IPR infringement remain 
significant even as industry has grown increasingly impatient 
with Saudi Arabia's lack of progress on transparency and 
enforcement issues.  Specifically, Saudi Arabia has yet to 
develop a system to ensure that rights holders are informed 
of legal actions taken on their behalf, to apply deterrent 
penalties to IPR violators, and to proactively investigate 
and shut down retail sites which engage in the sale of 
infringing goods.  Rights holders agree that problems with 
communication and enforcement center on the Ministry of 
Culture and Information.  Other parts of the Saudi government 
have better records of understanding and enforcing IPR 
standards and complying with IPR commitments. 
 
¶3.  Post recommends that Saudi Arabia remain on the Watch 
List, but not be elevated to the Priority Watch List.  Saudi 
Arabia progressed in implementing its IPR obligations during 
the preceding year and continues to seek opportunities to 
cooperate with the USG to work to overcome its deficiencies. 
 
 
--------------------- 
COPYRIGHT ENFORCEMENT 
--------------------- 
 
¶4.  Despite recent improvements, prosecution and punishment 
of copyright violators remains the most deficient area in the 
SAG's intellectual property rights (IPR) regime.  Primary 
responsibility for ensuring copyright protection lies with 
the Ministry of Culture and Information (MOCI), whose 
responsibilities include the investigation of fraudulent 
activity, as well as the initial judicial review of all 
copyright violation cases.  Rights holders criticize the 
MOCI's continued failure to ensure the transparent judicial 
review of IPR cases, to apply deterrent penalties to IPR 
violators, and to proactively investigate and shut down 
retail sites which engage in the sale of infringing goods. 
Severe resource constraints hamper the MOCI's ability to make 
headway on these issues.  For example, the MOCI's 
investigative staff in Riyadh is comprised of 3 inspectors 
(down from 5).  However, the MOCI reports to post that it has 
requested additional budgetary resources from the Ministry of 
Finance to increase its investigative capacity. 
 
¶5.  Initial judicial review of all copyright violation cases 
is conducted by the MOCI's Violations Review Committee (VRC), 
a semi-judicial authority that has the ability to issue fines 
of up to 100,000 Saudi Riyals or refer more serious cases to 
the Board of Grievances.  Though it continues to be staffed 
by members who hold other full-time jobs at the Ministry, the 
VRC's productivity increased dramatically upon the 
appointment of a new Chairman in September 2007.  While 
industry sources told post the VRC issued 13 rulings in 2006, 
earlier this month the VRC reported that it had issued 275 
rulings under its new leadership.  According to industry 
sources the new Chairman is also generally willing to consult 
with rights holders. 
 
¶6.  Despite these marked improvements at the VRC, problems 
communicating information about cases between the VRC and 
rights holders persist.  These communication issues could be 
effectively addressed by the "electronic gateway" by which 
the SAG proposes to publish VRC decisions on the MOCI's web 
site.  MOCI officials told post earlier this month that a 
budget for the electronic gateway had been approved and a 
private company contracted to design it.  The failure to 
issue deterrent penalties also continues to be a problem. 
The VRC did not refer any cases to the Board of Grievances 
this year, and post is unaware of any Saudi court issuing a 
prison sentence for an IPR violation, although Saudi 
legislation now provides for such a penalty. 
 
¶7.  Despite King Abdullah's issuance of a circular directing 
government ministries to legalize their software use 
following the International Intellectual Property Alliance's 
visit to the Kingdom in 2006, industry maintains that the 
push for legalization has enjoyed only modest success.  For 
example, Microsoft estimates that the SAG uses about 500,000 
PCs with Microsoft software, but has licensed only 29,000 of 
those computers.  In 2007 the Ministry of Interior licensed 
Microsoft software for 7,000 of its estimated 50-70,000 PCs, 
and the MOCI (the ministry to which VRC is attached) licensed 
software for 3,000 of its PCs.  While these agreements cover 
a small percentage of the PCs that Microsoft estimates the 
SAG uses, they are significant since Microsoft had not signed 
any license agreements with the SAG prior to 2007.  Further, 
the SAG disputes industry's estimates of its rate of legal 
software use.  It asked all government ministries to 
investigate and report back whether their computers ran only 
licensed software.  SAG officials report that this study 
demonstrated that about 90% of government PCs run only legal 
software.  Industry dismisses this self-certification as 
inadequate and inaccurate.  Microsoft believes that 
legalization problems persist for bureaucratic and budgetary 
reasons, and suggests that the SAG designate funds for all 
ministries to use to legalize rather than addressing the 
issue ministry by ministry or pooling the ministries' 
technology budgets together. 
 
------------------ 
PATENT ENFORCEMENT 
------------------ 
 
¶8.  The SAG offered a counter-proposal to USTR's Exclusive 
Marketing Rights Proposal (EMR Proposal) in February 2008. 
USTR proposed that the SAG grant temporary exclusive 
marketing rights to pharmaceutical products that lost patent 
protection when Saudi Arabia transitioned to a new 
TRIPS-compliant patent law in 2004 through such products' 
patent expiration in the US or the European Union (whichever 
is sooner).  Products that had applications for patents 
pending under the old law (and enjoyed patent protection 
while their applications were pending) were reviewed as new 
cases under the new law.  These products were then denied 
patents because the SAG determined that they were not "novel" 
because they had been publicly patented in other 
jurisdictions more than a year before their cases were 
considered in Saudi Arabia.  While industry was reluctant to 
provide a definitive list of these products for fear of 
inadvertently omitting a product, the SAG required such a 
list to consider the EMR Proposal, thus USTR forwarded a list 
of more than 70 products compiled by industry in October 2007. 
 
¶9.  The SAG analyzed this list of more than 70 products and 
winnowed it down to about 40.  It accomplished this by 
eliminating both products for which patent applications were 
never filed or were dropped or refused because of a failure 
to pay fees or provide requested information, and products 
that were granted patents or were still being considered for 
patents.  The SAG further proposes excluding products for 
which a generic is or becomes available in the US, the 
European Union or the Kingdom, and limiting exclusive 
marketing rights to those products that applied to register 
with the Saudi Ministry of Health (MOH) under the old patent 
law.  This counter-proposal seems only to regard listed 
pharmaceuticals rather than defining a category, and the 
officials presenting the counter-proposal made it clear that 
any agreement would have to approved by the Council of 
Ministers.  USTR is reviewing the counter-proposal and 
consulting with industry, but this response marks progress 
for an issue that has proved intractable for years. 
 
¶10.  To post's knowledge, Lipitor is the only pharmaceutical 
in the category described in Paragraph 8 for which the MOH 
has subsequently licensed manufacture of a generic 
equivalent.  Pfizer, Lipitor's manufacturer, is appealing the 
decision to deny Lipitor a patent, and argues that the MOH's 
issuance of a license to manufacture generic Lipitor violates 
Saudi Arabia's WTO obligations.  Under Saudi Arabia's 
Protocol of Access to the WTO, the Saudi Arabian 
representative stated that if a pharmaceutical patent 
application was pending, the MOH would not register a 
generic, unless there was no possibility that the patent 
would be granted.  In discussions with post SAG officials 
have agreed in principle that a license to produce a generic 
version of a pharmaceutical should not be issued while the 
patent rejection of that precise pharmaceutical is being 
appealed, but the license to manufacture a generic equivalent 
of Lipitor has not been revoked.  Lipitor's status in the 
Kingdom would not seem to be remedied by the SAG's 
counter-proposal because the generic is available in Saudi 
Arabia. 
 
---------------------------------------- 
LEGISLATION AND INTERNATIONAL AGREEMENTS 
---------------------------------------- 
 
¶11.  There is agreement among Saudi officials and rights 
holder groups that current IPR laws provide the necessary 
authority for the SAG to investigate, arrest and penalize IPR 
violators. Post no longer considers Saudi legislation as an 
impediment to IPR enforcement.  However, Saudi Arabia's 2007 
Special 301 Initiative Action Plan recommends that Saudi 
Arabia ratify and implement the WIPO Copyright Treaty and 
WIPO Performances and Phonograms Treaty (the WIPO Treaties). 
SAG officials met with WIPO in Geneva in October 2007 and are 
still in the process of engaging a legal advisor to explain 
the content of the WIPO Treaties and what the SAG's 
responsibilities would be if it were to ratify them. 
 
------------------------ 
TRAINING AND COOPERATION 
------------------------ 
 
¶12.  Improving the SAG's performance on transparency and 
enforcement will require building knowledge and expertise 
across Saudi ministries in officials ranging from customs and 
copyright inspectors to patent examiners and judges.  While 
Saudi nominees have attended a number of week-long US Patent 
and Trademark Office (USPTO) academies in Washington, D.C. in 
the preceding year, SAG officials tell post that most of 
their employees that speak English well have already 
completed USG training.  They are eager for their employees 
that only speak Arabic to benefit from this professional 
development opportunity as well. 
 
¶13.  SAG officials demonstrated this desire during a recent 
four day visit to Riyadh by officials from USTR, USPTO and 
the Copyright Office.  These USG officials met with Saudi 
officials from the MOCI, the Ministry of Commerce and 
Industry, the Customs Authority, the King Abdulaziz City for 
Science and Technology and the Board of Grievances.  Each of 
these institutions seized the opportunity to explain their 
role in protecting and enforcing IPR in the Kingdom, and to 
provide detailed, specific input regarding self-funded 
training programs they believe the USG can offer to enhance 
their ability to protect and enforce IPR.  Delegation members 
are now designing proposals for various Saudi-specific, 
Arabic-language training programs that should pay dividends 
in enhanced IPR enforcement and protection in the Kingdom. 
The Saudi IPR Committee also agreed to establish an IPR 
Coordination Group during this visit.  An IPR Coordination 
Group, as proposed in Saudi Arabia's 2007 Special 301 
Initiative Action Plan, should include representatives of the 
USG and the SAG, as well as private industry rights holders, 
and meet regularly to discuss IPR protection and enforcement. 
 
-------------- 
RECOMMENDATION 
-------------- 
 
¶14.  Post recommends that Saudi Arabia remain on the Watch 
List, but not be elevated to the Priority Watch List.  Saudi 
Arabia progressed in implementing its IPR obligations during 
the preceding year and continues to seek opportunities to 
cooperate with the USG to work to overcome its deficiencies. 
GFOELLER