VZCZCXRO0944
PP RUEHRG
DE RUEHBR #0254/01 0611957
ZNR UUUUU ZZH
P 021957Z MAR 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 3693
INFO RUEHSO/AMCONSUL SAO PAULO 3634
RUEHRI/AMCONSUL RIO DE JANEIRO 7350
RUEHRG/AMCONSUL RECIFE 9164
RUEHAC/AMEMBASSY ASUNCION 7423
RUEHBU/AMEMBASSY BUENOS AIRES 6127
RUEHMN/AMEMBASSY MONTEVIDEO 7697
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 11 BRASILIA 000254 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EB/TPP/IPE JENNIFER BOGER 
DEPT PASS USTR FOR KATHERINE DUCKWORTH 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: 2009 Special 301 Recommendation 
 
REF:  A) State 8410; B) 08 Brasilia 130; C) 08 Sao Paulo 242 
 
BRASILIA 00000254  001.3 OF 011 
 
 
¶1. (U) Per reftel A, the following is Embassy Brasilia's input for 
the 2009 Special 301 Review of Brazil. 
 
¶2. (SBU) Summary:  Post recommends that Brazil be maintained on the 
Special 301 Watch List.  GoB actions demonstrate a strong, 
inter-agency commitment to anti-piracy policy and consumer 
education.  This commitment has yielded increases in some seizure 
statistics and a decrease in the percent of Brazilians who have 
purchased pirated or counterfeit goods. 
 
¶3.  (SBU) Despite making improvements, Brazil has not addressed all 
areas of effective IPR protection.  Several IP-related draft laws 
remain stalled at various stages of the legislative process. 
Additionally, Post remains concerned about delays in patent and 
trademark processing, the national health vigilance agency's role in 
reviewing pharmaceutical patents and allowing the use of undisclosed 
test data, and widespread copyright infringements at university copy 
shops.  End Summary. 
 
------------------- 
Enforcement Efforts 
------------------- 
 
¶4.  (SBU) The quantity of counterfeit and pirated goods seized in 
2008 is evidence of the GoB's continued focus on enforcement. 
According to GoB reports, partial year results for 2008 show more 
than 6000 total police inquiries into IPR violations (type of 
violation not specified) and R$600 million (approximately US$261 
million) in counterfeit or pirated goods seized as a result of 
border controls.  (Note: the policy statement does not specify what 
fraction of 2008 is included in the data, making it difficult to 
compare this number to 2007 when R$1.5 billion of goods were 
seized).  The same report claims that 410,639 units of counterfeit 
medicine were seized (partial 2008), compared to 322,601 in all of 
¶2007. 
 
¶5.  (SBU) In a November 2008 study commissioned by the U.S. Chamber 
of Commerce and conducted by the Brazilian Institute of Public 
Opinion and Statistics (IBOPE), the most-seized products were: 
electronics (R$79 million), cigarettes (R$77 million), eyeglasses 
(R$73 million), shoes (R$65 million), and computer products (R$58 
million). Overall, according to the study, Receita Federal (the 
Brazilian customs and internal revenue service) destroyed 7,000 tons 
of counterfeit and pirated products in 2008, with a total value of 
R$228 million. 
 
¶6.  (SBU) In a report to the National Council to Combat Piracy 
(CNCP), Receita Federal registered 2008 contraband seizures totaling 
over R$1.43 billion - a very slight decrease from 2007 when a record 
$R1.05 billion of goods were seized.  The number of anti-contraband 
operations also decreased slightly from 2,269 in 2007 to 2,137 in 
¶2008.  However, in the area of Foz de Iguacu, a well-known area for 
trafficking of contraband goods, Receita Federal seizures for 2008 
totaled over US$81 million, a 6 percent increase over 2007. 
According to CNCP, there has been a 70 percent decrease since 2004 
in the total volume of pirated products that crossed the border in 
that area. 
 
¶7.  (SBU) For 2008, Policia Rodoviaria Federal (the Federal Highway 
Patrol) reported a 25 percent increase in confiscations of pirated 
media from the previous year (Note: confiscation of pirated media 
decreased 23 percent from 2006 to 2007, so the 2008 increase brings 
the number back almost equal with the 2006 figure.  End Note.) 
Seizures of illegal computer products fell approximately 30 percent 
(from 122,881 units in 2007 to 85,585 units in 2008).  Confiscations 
of electronics also decreased, by approximately 30 percent, falling 
back to just under 2006 levels.  Confiscations of cigarettes (which 
fell by almost 50 percent) and drinks (which fell by approximately 
40 percent) were well below even 2006 figures.  The drop in 
confiscations could be due to an increase in the use of secondary 
roads by smugglers where Rodoviaria has less presence (ref B). 
 
¶8.  (SBU) The third major enforcement agency, the Brazilian Federal 
Police, reported 8,582 piracy investigations up to September 2008, 
on track to meet or surpass the number of investigations in 2007 
(8,698).  The Federal Police have not provided 2008 seizure 
information to Post.  (Note:  CNCP officials recently told Econoff 
 
BRASILIA 00000254  002.2 OF 011 
 
 
that the organization's annual report containing consolidated 
federal agency enforcement statistics for 2007 and 2008 will not be 
available until April 2009. End Note.) 
 
¶9.  (SBU) Industry organizations are active in providing information 
to law enforcement and reporting the results of enforcement 
activities.  According to the film and music industries' joint 
anti-piracy organization (APCM), 41 million pirated CDs and DVDs 
were seized in Brazil in 2008 (up 14 percent over 2007, with the 
number of seized DVDs doubling).  The Motion Picture Association of 
America (MPA) reported a 400 percent increase in the seizure of hard 
goods in the state of Minas Gerais alone. 
 
¶10.  (SBU) The software industry also reports increases in seizure 
statistics for 2008.  The Business Software Association's (BSA) May 
2008 annual report (the most recent available) states that in 2007, 
718 raids in Brazil resulted in the seizure of 2,253,546 CDs 
containing pirated software (150 percent more than in 2006).  The 
Association of Brazilian Software Businesses (ABES) reports that for 
2008 more than 1.6 million CDs containing pirated software were 
seized in the course of 754 operations (an increase of 5 percent 
over 2007).  In one case, sixteen small shops selling pirated 
software products were fined R$7 billion, 3000 times the value of 
the pirated software seized. 
 
-- Border Crossings 
 
¶11.  (SBU) In Brazil's Tri-Border Area (TBA) (on the border with 
Argentina and Paraguay), Receita Federal seized 2000 vehicles in 
2008(214 in August alone, a 26 percent increase over August 2007). 
The rise in vehicle seizures appears to be related to changing 
transportation patterns by smugglers who increasingly choose 
individual vehicles to transport their goods rather than caravans of 
buses. This change appears to be the result of a 2007 operation 
targeting buses crossing into Brazil in the TBA (538,038 products 
seized on buses from January to August 2007). 
 
¶12.  (SBU) A customs official in Foz de Iguacu (TBA) told Poloff 
that increased inspections will lead to a decrease in the overall 
number of incidents.  However, Poloff's car was not inspected 
crossing the Friendship Bridge between Brazil and Paraguay (a 
well-known entry point for counterfeit and pirated goods), nor did 
Poloff observe any other vehicles being inspected (ref C). Due to 
heightened enforcement efforts in the TBA (including the use of new 
surveillance tools like helicopters), industry contacts tell Post 
that smugglers are turning to other, more vulnerable entry points 
into Brazil. 
 
-- Arrests and Convictions 
 
¶13.  (SBU) Citing difficulties in consolidating various state and 
federal databases, GoB interlocutors have thus far been unable to 
provide comprehensive statistics for arrests and convictions related 
to piracy and counterfeiting.  Information provided to CNCP shows 
that up to September 2008, the Federal Police conducted 8,582 
piracy/counterfeiting inquiries (compared to 8,698 for all of 2007) 
and 119 raids (compared to 191 for all of 2007), which resulted in 
393 arrests (compared to 766 for all of 2007). The 2008 numbers for 
raids and arrests seem unlikely to surpass 2007. Piracy and 
counterfeiting charges were not segmented out from other charges 
such as income tax evasion.  Rodoviaria Federal statistics also 
submitted to CNCP claim that 26,579 people were detained in 2008 
during anti-piracy operations, but the statistics do not specify the 
number of eventual charges or convictions. (Note:  last available 
statistics indicate that GoB reported only 14 convictions for piracy 
related crimes in 2005.  End Note.) 
 
¶14.  (SBU) According to APCM, 195 people were convicted of copyright 
violations in Brazil in 2008.  In a December 2008 ruling, a Sao 
Paulo court of appeals upheld the conviction and sentencing 
(imprisonment of approximately two years) of two Brazilians 
convicted of selling pirated CDs on a public thoroughfare.  The 
court of appeals ruled that the defendants could not claim ignorance 
of anti-piracy laws as a defense since "it is well-known that 
selling pirate CDs is illegal, being the focus of large-scale 
campaigns in the media, reaching all echelons of society." 
 
¶15.  (SBU) In February 2008, a Sao Paulo court of appeals upheld a 
decision whereby a company in charge of administering the shopping 
 
BRASILIA 00000254  003.2 OF 011 
 
 
center "25 de Marco" was held jointly liable when the stores on its 
premises sold counterfeit goods. Under this decision, the 
administering company had a duty to inspect the behavior of its 
vendors and their respective sales on its premises.  The court 
issued a daily fine of approximately US$31,000 for damages in case 
of noncompliance with the court's order. 
 
--Counterfeit Agricultural Products 
 
¶16.  (SBU) In 2008, the Ministry of Agriculture (MAPA), Department 
of Intellectual Property and Agriculture Technology, conducted 
15,411 investigations of suspected pirated seeds, which resulted in 
the suspension of 16.4 thousand tons of seeds and the assessment of 
167 fines (ranging in value from R$2000 to R$1,814,548).  MAPA 
analyzed 171 cases (up from 103 in 2007 and 71 in 2006).  As a 
result of MAPA's enforcement efforts (including an internet tool for 
researching legitimate seeds), legitimate seed use in the major 
agricultural state of Rio Grande do Sul increased dramatically from 
10 percent in 2007 to 46 percent in 2008. 
 
¶17.  (SBU) The Federal Police, in cooperation with the National 
Union of Agricultural Aviation Businesses (SINDAG), seized 340 tons 
of counterfeit agrochemicals and made 430 related arrests in 2008. 
 
-- Counterfeit Medicine 
 
¶18.  (SBU) ANVISA, acting in cooperation with both federal and state 
authorities, reports thirteen cases of counterfeit medications in 
2008 (an increase from 9 reported cases in 2007). GoB regulations 
call for usage of secure drug packaging and a distributors' 
registry, tools which have helped ANVISA to identify counterfeiting 
via irregularities in lot numbering and packaging.  According to the 
Rodoviaria Federal, the number of units of counterfeit medication 
seized increased more than 50 percent from 322,601 in 2007 to 
496,663 in 2008. Penalties for drug counterfeiters are stiff:  10-15 
years without parole or amnesty plus a fine. 
 
-- Raids on Known Markets 
 
¶19.  (SBU) State and federal enforcement authorities continued 
action against known marketplaces of counterfeit goods.  Following 
raids in late 2007, two notorious markets located on Paulista Avenue 
in Sao Paulo, Promocenter and Standcenter, have not reopened. 
However, the selling of pirated and counterfeit goods has shifted to 
other markets in the same area, such as Paulista Center on Rua 
Pamplona. 
 
¶20.  (SBU) One raid in September 2008 seized 300,000 pirated media 
disks at a Sao Paulo shopping center.  Eight people were arrested in 
connection with the raid.  Another notorious market in Sao Paulo, 
Galeria Paje, was the target of a raid which seized 300,000 pirated 
media disks and 27 vehicles used to transport illegal goods.  Police 
arrested eight people as a result of the raid and also seized three 
kilograms of cocaine and nine kilograms of marijuana.  In November 
2008, Brazilian law enforcement cooperated with Uruguayan 
counterparts in the border cities of Montevideo and Santana do 
Livramento.  The seized blank DVD-R disks from both cities totaled 
over 100,000.  (Note:  CNCP told Econoff that updated information on 
raids of notorious marketplaces and other enforcement operations 
will be included in the organization's report due to be released 
approximately April 2009.  End Note.) 
 
--------------- 
Internet Piracy 
--------------- 
 
¶21.  (SBU) According to APCM, Brazil has the fifth most deficient 
broadband internet service in the world (behind Cyprus, Mexico, 
China, and India).  28 percent of internet connections are one 
megabyte per second (mbps) or slower, while most video streaming and 
social networking sites require speeds of at least 3.75 mbps to 
function optimally.  28 million Brazilians access the internet 
outside their own homes, most at internet cafes known as LAN (local 
area network) houses. These LAN houses are increasingly the focus of 
GoB efforts against internet piracy. 
 
¶22.  (SBU) In January 2009, an operation involving 600 police from 
93 districts conducted 335 raids on LAN houses in Sao Paulo, acting 
on intelligence from APCM.  2,339 computers containing more than one 
 
BRASILIA 00000254  004.2 OF 011 
 
 
million illegal files were seized. Draft Law 296/2008 was approved 
in October by the Committee on Science, Technology, Innovation, and 
Communication, and must now be voted on by the full Congress.  The 
law would require LAN houses to maintain a registry of customers and 
must now be voted on by the full Congress. 
 
¶23.  (SBU) In February 2009, MPA representatives told Econoff that a 
lack of bandwidth and excessive licensing fees by the GoB have 
slowed the proliferation of internet pay-based media in Brazil.  To 
air a television episode in Brazil, whether it is television or 
internet based, costs R$3,000 in licensing fees.  Without an 
immediate guarantee of profit, distributers are not interested in 
taking on this risk, and pirates are filling the market gap.  MPA 
has targeted a number of websites providing illegal content through 
their internet service providers.  In one recent case, MPA succeeded 
in shutting down three sites offering free subtitling for pirated 
movies. 
 
¶24.  (SBU) APCM reports that ten times more illegal files were 
removed in the first half of 2008 than during the same period in 
¶2007.  In addition, ABES and BSA report that 15,300 advertisements 
and 360 internet sites (up 48 percent from 2007) selling pirated or 
counterfeit products were removed from the airways.  A pirate 
advertising illegal copies of films online was sentenced to 2 years 
imprisonment (reduced to one year community service) in a decision 
hailed by the MPA for its recognition that "the laws that govern the 
real world also apply to the virtual world."  In February 2008, 
another internet pirate, whose website sold illegal copies of 
Beatles music, was arrested by the cybercrime division of the Sao 
Paulo police and sentenced to 18 months in prison.  The sentence 
reflects 140 repeated copyright infringements. 
 
----------------------------------- 
GoB Education and Training Programs 
----------------------------------- 
 
¶25.  (SBU) While the GoB continues to emphasize enforcement as its 
primary means to combat piracy, it also appears committed to ongoing 
educational campaigns (many aimed at young adults and children) and 
training efforts for government officials.  CNCP continued its 
involvement with the American Chamber of Commerce's elementary 
school program, "Projeto Escola Legal."  The number of schools 
involved in the program quadrupled in 2008, from 15 to 62.  More 
than 12,000 students and 300 teachers from five major cities 
participate in the program.   CNCP also supports the U.S. Chamber's 
ongoing "Citizenship Game" (www.atitudeoriginal.com) that teaches 
youths and university students the importance of intellectual 
property rights in the context of social responsibility and gives 
them the opportunity to present their ideas on how to address IP 
infringement in Brazil.  CNCP continues to promote the SINDIRECEITA 
(Union of Receita Employees) program "Pirate, I'm out.  I only use 
the Original," also focused on college students, and the Federation 
of Industries of Rio De Janiero (FIRJAN) "Authentics" campaign to 
educate high school students.  The Brazilian Office of Consumer 
Protection (PROCON) and interns at the Secretariat of Economic 
Development (SDE) have participated in CNCP-provided training. 
 
¶26.  (SBU) In 2008, ANVISA's internal training division continued 
participation in counterfeit medication seminars conducted by the 
private industry group National Anti-Piracy Forum (FNCP) in 
conjunction with Public Ministries in states throughout Brazil.  An 
ANVISA official told Econoff that ANVISA's 2009 plans include 
expanding training to include judges.  In 2009, ANVISA will attend 
an Asia-Pacific Economic Cooperation (APEC)-sponsored seminar in 
Mexico City on combating counterfeit medications, where one ANVISA 
participant will present on the topic of educational efforts to 
combat the spread of counterfeit medical products. 
 
¶27.  (SBU) In 2008, INPI held 36 courses on IPR at Brazilian 
universities and research institutes (an increase from 28 in 2007). 
 
 
---------------------------------- 
USG and Industry Provided Training 
---------------------------------- 
 
¶28.  (SBU) Federal and state GoB officials have been receptive to 
USG funded and organized training.  In 2008, 21 Brazilian officials 
participated in ten separate IPR training programs covering patents, 
 
BRASILIA 00000254  005.2 OF 011 
 
 
trademarks and enforcement issues at the U.S. Patent and Trademark 
Office's (USPTO) Virginia-based Global Intellectual Property Academy 
(GIPA).  In January 2009, GoB officials from the Ministry of Labor 
and Employment and the Ministry of Foreign Relations (MRE) 
participated in a GIPA course on copyright protection and 
enforcement. CNCP was active in assisting Post with disseminating 
information about invitations for training and facilitating 
communication with nominees.  In February 2009, USPTO hosted six 
Brazilian trademark examiners for a two-week trademark training 
program as USPTO Foreign Examiners-in-Residence. 
 
¶29.  (SBU) In 2008, USPTO and INPI conducted a series of IP public 
awareness seminars ("IP Roadshow") in Porto Alegre, Salvador, and 
Sao Paulo, which were attended by over 300 Brazilian business 
owners, lawyers, government officials, and academics.  USPTO and 
INPI have agreed to a second phase of the IP Roadshow to take place 
in May 2009, with seminars planned in Rio de Janeiro, Curitiba, and 
Manaus.  The relationship between USPTO and INPI was solidified when 
the organizations signed a Memorandum of Understanding in July 2008, 
in an effort to enhance further cooperation on training and IP 
office administration. 
 
¶30.  (SBU) In July 2008, nine Brazilian officials participated in a 
DHS/ICE coordinated IP enforcement training program at the 
International Law Enforcement Academy in Lima, Peru. 
 
¶31.  (SBU) in September 2008, Post's Resident Legal Advisor (RLA), 
in conjunction with the U.S. Department of Justice's Cyber Crime and 
Intellectual Property Section (CCIPS), orchestrated IPR conferences 
in Florianopolis Brasilia.  American judges, lawyers, and customs 
officials joined Brazilian prosecutors, judges, and law enforcement 
officers in presenting an overview of Brazilian IP law, as well as 
examples of investigations and cases ongoing in the Brazilian court 
system.  In February 2009, cybercrime and intellectual property were 
the first topics in what will be a series of trainings aimed at 
combating crime in major Brazilian cities.  The two-day training 
course in each city (Brasilia, Sao Paulo, and Rio de Janeiro) was 
funded by INL, DOJ and USSS and reached more than 800 Brazilian 
prosecutors, judges, and law enforcement officials.  Highlighting 
key international IPR cases, the program focused on using technology 
to enhance the participants' investigations. 
 
¶32.  (SBU) At a January 2008 meeting with EmbOffs, Ministry of 
Agriculture officials expressed an active interest in USG help with 
patent protection and in streamlining the patent process for 
agricultural products.  Post has applied for funding for MAPA 
officials to visit the United States for training and field 
observation related to seed and plant variety protection. 
 
¶33.  (SBU) Brazilian private industry organizations have also 
conducted extensive IPR training programs.  In 2008, APCM along with 
ABES conducted 35 trainings for federal and state police, Receita 
Federal, and Rodoviaria Federal.  APCM also coordinated with the 
Federation of Industries of the State of Sao Paulo (FIESP) to 
provide contraband identification training to Receita Federal 
inspectors at strategic ports such as Vitoria and Foz de Iguacu. In 
addition to offering training, the National Forum Against Piracy and 
Illegality (FNCP) maintains a consultations hotline which customs 
officials, police, and other law enforcement officials can use to 
seek information on improving their counter-piracy actions. 
 
------------- 
State Efforts 
------------- 
 
¶34.  (SBU) The states of Brasilia, Pernambuco, Bahia, Sao Paulo, Rio 
de Janeiro, Rio Grande do Sul, and Minais Gerais all have 
specialized police units for the enforcement of intellectual 
property rights. 
 
¶35.  (SBU) Shortly after assuming office in 2007, the governor of 
Pernambuco, Eduardo Campos, publicly directed his state police force 
to cooperate with Federal Police in enforcing IPR statutes.  In 
September 2007, the city of Blumenau in Santa Catarina state 
launched the "Municipal Council to Combat Piracy" in conjunction 
with the announcement of a State and Municipal Department of 
Education (APCM) coordinated program, "City Free of Piracy."  APCM 
envisions replicating the Blumenau program in other states and 
already has plans to expand this program to the city of Uberlandia 
 
BRASILIA 00000254  006.2 OF 011 
 
 
in Minas Gerais.  CNCP has made "Cities Free of Piracy" a priority 
project for 2009. 
 
¶36.  (SBU) The states of Amazonas, Bahia, Ceara, Mato Grosso, Minas 
Gerais, Pernambuco, Santa Catarina, and Sao Paulo have innovation 
legislation containing specific references to the protection of 
intellectual property as a prerequisite for innovation. 
 
--------------------- 
University Copy-Shops 
--------------------- 
 
¶37.  (SBU) According to the Brazilian Association for Reprographic 
Rights (ABDR), the University of Sao Paulo (USP) has an internal 
policy allowing the copying of entire books that are "not available 
on the market." According to an ABDR representative, what is 
considered "not available in the market" is very broad, but 
specifically includes books not written in Portuguese and not 
available for sale at campus book stores. In a February 2009 
conversation with Emboff, the ABDR representative said that a late 
2005 or early 2006 formal request for reconsideration presented to 
USP4s Dean resulted in a formal reply maintaining the rule. 
 
¶38.  (SBU) ABDR claims that the university justifies its internal 
rule by stating that access to knowledge and education are 
fundamentally protected under the Brazilian constitution.  (Comment: 
 Under Brazilian copyright law, "the one-time reproduction of small 
passages of a work for the copier's private use without the 
intention of making a profit" is allowed, but the Law does not 
define what constitutes a "small passage."  End Comment.)  The ABDR 
representative emphasized to Emboff that USP is setting a bad 
example, which has been mentioned in international fora and is being 
following by other universities in Brazil including the Pontifical 
Catholic University of Sao Paulo and the Getulio Vargas Foundation 
of Sao Paulo. The representative says that despite CNCP action plans 
for the university textbook industry, no action has been taken to 
date. 
 
¶39.  (SBU) ABDR claims that though the number of university students 
in Brazil has increased 50 percent since 2002, sales figures for 
university books have decreased during the same time.  Estimated 
losses for the Brazilian university book industry are around 3 times 
more than its earnings per year. The organization also states that 
students are beginning to illegally share copies of books using 
computer-based peer-to-peer file-sharing. 
 
¶40.  (SBU) In attempts to address the problem, ABDR has (for the 
past three years) run an awareness campaign for the Congress.  To 
address student complaints that purchasing entire books is too 
expensive, ABDR and its member publishing companies have developed a 
web program called "Pasta do Professor" ("The Professor's File"), 
where students can legally purchase portions of books chosen by 
their professors.  The Pontifical Catholic University of Minas 
Gerais will start using the program during the first term of 2009. 
 
¶41.  (SBU) During a February 2009 conversation, a copyright policy 
official at the Ministry of Culture (MoC) told Econoff that the GoB 
supports the right of individuals to access information and 
knowledge, which is often difficult due to the high cost of 
textbooks, despite their tax exempt status, as a result of low 
production runs.  He asserted that more than 40 percent of the books 
needed by students are simply "not available" on the local market. 
 
¶42.  (SBU) According to the MoC official, the MoC is cognizant of 
the need to protect copyrighted material but also wants to meet the 
needs of Brazilian students.  MoC hosted five public forums from 
December 2007 to November 2008 to solicit input for a copyright 
legislation reform.  The MoC official said that a draft of the 
reform should be ready for public consideration by approximately 
March 2009.  Some of the ideas being considered by the MoC to 
provide remuneration to authors are a collective management system 
or a tax on blank media and reproductive machines. 
 
--------------------------------------- 
Patents, Trademarks and Data Protection 
--------------------------------------- 
 
- Patents and Trademarks 
 
 
BRASILIA 00000254  007.2 OF 011 
 
 
¶43.  (SBU) INPI continues to have a substantial backlog in pending 
patent and trademark applications.  However, INPI has taken concrete 
steps to improve processing of patent and trademark applications, 
including an ongoing upgrade of its outdated data processing 
systems.  The GoB budgeted US$100 million for INPI operations in 
2008 and 2009 (compared to US$40 million in 2004). 
 
¶44.  (SBU) The patent backlog is currently estimated at between 
130,000 and 150,000 applications.  According to INPI's President, 
there were 24,659 patent applications up to November 2008, 
surpassing the 24,081 patent applications received in all of 2007. 
Without opposition, patent applications are processed in an average 
of 8 years.  INPI's goal is to reduce the processing time for patent 
applications to 4 years by 2010, pushed back from last year's goal 
to reduce the wait time to 4 years by 2009. Originally planned to 
come online in 2008, INPI's electronic patent application filing 
system is now forecasted to be ready by the end of 2009. 
 
¶45.  (SBU) Since 2006, INPI has increased the number of patent 
examiners approximately 200 percent and increased median salaries 50 
percent in order to retain experienced employees.  According to an 
interview with the president of INPI, there are currently 238 patent 
examiners.  The organization has already begun the process of hiring 
95 new examiners and plans to add another 140 in 2010. With the new 
staff in place, INPI expects to have reviewed all backlogged 
applications by the first quarter of 2011. 
 
¶46.  (SBU) New patent examiners complete a two-year formal 
on-the-job training program that covers patent law and examination 
(including major national and international legislation and 
jurisprudence). 
 
¶47.  (SBU) Since 2007, INPI has been a WIPO-designated International 
Searching Authority (ISA) and International Preliminary Examining 
Authority (IPEA) under the Patent Cooperation Treaty (PCT) for 
international patent applications. 
 
¶48.  (SBU) INPI currently employs 110 trademark examiners and has 
not announced plans to hire more. The trademark backlog is estimated 
at approximately 470,000 applications. In 2007, INPI brought on-line 
a new electronic filing system (e-Marcas) to streamline trademark 
adjudications. Since then there has been a 15 percent increase in 
trademark applications (from 107,595 in 2007 to 124,660 in 2008). 
52 percent of applications use the online system (compared to 44 
percent of 2007 applications).  According to INPI, new trademark 
applications are now being initially processed within 16 to 18 
months. 
 
¶49.  (SBU) In 2006, Brazil announced plans to join the Madrid 
Agreement Concerning the International Registration of Marks 
("Madrid Protocol"), but the executive branch has yet to submit this 
proposal to the Brazilian Congress for approval.  Nonetheless, INPI 
has undertaken new training and reorganization efforts in 
anticipation of Brazil's eventual enactment of the Madrid Protocol. 
For that reason, six INPI trademark examiners participated in a 
September 2008 training at the German patent office. 
 
--Patents for Pharmaceutical Products 
 
¶50.  (SBU) Law 10196 (2001) requires ANVISA's prior consent before 
the issuance of a pharmaceutical patent, raising concerns of a 
possible conflict with Article 27 of the TRIPS agreement.  U.S. 
companies have complained of lengthy delays in getting ANVISA 
approval for their pharmaceutical and medical device patent 
applications. On June 23, 2008, ANVISA issued a resolution 
standardizing, to some extent, the procedures and timeline for 
review of pharmaceutical patent applications.  Nonetheless, ANVISA's 
role in reviewing pharmaceutical patent applications remains 
non-transparent and has contributed to an increasing backlog in the 
issuance of patents. ANVISA claims that its reviews take no more 
than 120 days with only a three percent rejection rate. 
 
¶51.  (SBU) Medical device manufacturers continue to voice concerns 
over a 2006 ANVISA regulation requiring disclosure of data prior to 
approval of medical devices that they believe to be overly 
burdensome and threatens to infringe on the companies' proprietary 
financial information. 
 
--Polymorphs and Second-Use Drugs 
 
BRASILIA 00000254  008.2 OF 011 
 
 
 
¶52.  (SBU) In April 2008, INPI issued preliminary internal 
guidelines on the patenting of polymorphs and second-use inventions 
for public comment.  The decision to issue such guidelines, which 
suggested that patents in the area might be allowed by INPI, was not 
supported by the Ministry of Foreign Affairs or other ministries and 
created a public schism on the issue.  According to press reports, 
the Ministry of Development, Industry, and Commerce's Secretary of 
Industrial Technology noted that although INPI has the power to 
define technical and legal guidelines for the examination of 
patents, the final word on the subject lies with the 
Interministerial Group on Intellectual Property (GIPI).  An official 
of the Foreign Ministry commented that there is no obligation to 
grant polymorph patents in the WTO TRIPS Agreement.  A Ministry of 
Health representative noted that if such patents were permitted, 
there would be a risk that active substances of various drugs, which 
today are in the public domain, would be unavailable, preventing the 
production of generics. 
 
¶53.  (SBU) On December 1, 2008, GIPI held a meeting on the issue of 
patenting polymorphs and second-use inventions.  The government 
committee unanimously adopted the decision that granting patents in 
this field does not meet the national interest.  The only dissenting 
opinion was voiced by INPI, which is not a member of GIPI.  INPI 
noted that Brazil's patent law does not suggest any restrictions on 
pharmaceutical products, so long as they meet patentability 
criteria. 
 
¶54.  (SBU) In January 2009, USPTO held a digital video conference 
with INPI to discuss U.S. practice in patenting polymorphs.  USPTO 
is providing further follow-up information on U.S. practice.  At 
this time, there is no pending legislation to revise Brazil's patent 
law implementing GIPI's decision.  (Comment: IPR attach anticipates 
that GIPI's decision may instead be enforced during ANVISA's review 
of pharmaceutical patent applications.  End comment.) 
 
-- Major Roadblocks to Biotech Product Approvals Removed 
 
¶55.  (SBU) In March 2007, law 11460 changed the requirement for 
approval of commercial licensing of genetically modified organisms 
(GMOs) and GMO derivatives by Brazil's 27 member National Technical 
Commission of Biosafety (CTNBio) Board from a two-thirds majority to 
an absolute majority.  This removed an impediment to commercial 
licensing of GMOs and GMO derivatives, since the board is heavily 
influenced by environmentalists and anti-biotech groups. 
Subsequently, in June 2008, the National Biosafety Council (CNBS) 
decided that it will only review administrative appeals that are of 
national interest, involving social or economic issues, as per the 
Brazilian Biotech Law. CNBS considers all approvals of biotech 
events by CTNBio as conclusive and will not evaluate technical 
decisions on biotech events that are approved by CTNBio. This is an 
important decision that, along with the change in majority voting, 
eliminates a major barrier for approval of biotech events in Brazil. 
Since then, at least three commercial biotech applications (GMO 
corn) have been approved. 
 
-- Data Protection 
 
¶56.  (SBU) Brazil's Industrial Property Law (9279/1996; Art. 195, 
XIV) provides for civil and criminal penalties for "anyone 
who...divulges, exploits, or utilizes, without authorization, 
results of tests or other undisclosed data whose preparation 
involves considerable effort and that were submitted to government 
agencies as a condition for obtaining approval to commercialize 
products."  However, this provision also provides an exception 
whereby disclosure by government agency is permitted "when necessary 
to protect the public."  Law 10603/2002 mandates the protection of 
test data for veterinary pharmaceuticals and agrochemicals for 2-5 
years (depending on whether it is a new or known chemical entity). 
This law does not cover pharmaceuticals for human use. According to 
Article 7 of this law, if the product is not commercialized within 
two years of the date of sanitary registration, third parties may 
request use of the data for registration purposes. 
 
¶57.  (SBU) In several cases, ANVISA has granted marketing approval 
to generic drug manufacturers based on undisclosed test results and 
other confidential data submitted in connection with approval of the 
original drug, raising concerns of consistency with TRIPS Article 
39.3.  ANVISA has taken the position that reliance on the previously 
 
BRASILIA 00000254  009.2 OF 011 
 
 
granted marketing approval is not a violation of Brazil's unfair 
competition laws. 
 
¶58.  (SBU) Lack of data protection and transparency at ANVISA played 
a critical role in the copying and marketing of a generic drug based 
on a U.S. company's invention. In July 2007, the U.S. company 
applied for marketing approval for a drug, but was never issued a 
decision.  Instead, in February 2008, ANVISA granted approval to a 
Brazilian firm to market the same drug, though that firm had not 
conducted any clinical test trials. According to ANVISA officials, 
ANVISA has the right to waive requirements for submitting clinical 
test data on a case-by-case basis. 
 
¶59.  (SBU) The Brazilian patent in this case was issued in 2005 but 
nullified by INPI in 2006 for lack of inventiveness.  A February 
2008 administrative appeal to stay the marketing of the generic 
received no response, despite a Brazilian law that says 
administrative appeals must be tried within 30 days of receipt by 
the Permanent Commission for the Analysis of Appeals (COREC). 
According to the U.S. company, the only remaining remedy is to 
challenge INPI for restoration of its patent on the drug in 
question. If granted patent rights, the company could seek possible 
infringement action against the Brazilian firm. 
 
-- Compulsory Licensing 
 
¶60.  (SBU) Invoking TRIPS provisions, on May 4, 2007, Brazil issued 
a compulsory license for Merck Sharp & Dohme's anti-retroviral drug 
efavirenz (brand name: Stocrin), used in treating HIV/AIDS, after a 
breakdown in negotiations with the company.  The Brazilian 
government cited a need for cost savings in its universal HIV 
treatment program as justification for the compulsory license.  A 
GoB official stated to Emboffs at a January 2008 meeting that the 
drug's patent was one of over 400 pipeline patents, and, thus, was 
already in the public domain when the patent was issued.  Post is 
not aware at this time of any other imminent compulsory licensing 
actions by the GoB. 
 
----------- 
Legislation 
----------- 
 
¶61.  (SBU) While the GOB has not joined the WIPO Copyright Treaty 
(WCT) or the WIPO Performers and Phonograms Treaty (WPPT), industry 
groups and GOB agencies continue to seek to strengthen existing 
intellectual property legislation. 
 
¶62.  (SBU) In May 2008, several members of the Brazilian Congress 
formed a commission (CEPIRATA) to examine 25 pending draft laws 
related to the protection of intellectual property.  At a June forum 
attended by Econoff, CEPIRATA representatives said they were 
committed to pushing "umbrella" legislation and that they would 
focus their attention on draft law 333 introduced in 1999. That law 
would stiffen the criminal penalties for piracy, but remains stalled 
in the Congress. The draft law was shelved in 2006.  In November 
2008, a resolution was submitted requesting its urgent 
reconsideration.  Post is not aware of any further action since 
then. 
 
¶63.  (SBU) Private sector attendees of the forum agreed that the GoB 
should concentrate on permitting sampling of suspected counterfeit 
goods (rather than requiring testing of every item), permitting 
quick destruction of goods once counterfeiting is confirmed (even 
when criminal investigation is not yet concluded), reversing the 
burden of proof in cases involving customs evasion, and increasing 
criminal sentences. 
 
¶64.  (SBU) Trademark counterfeiting is currently punishable with 
imprisonment of three months to one year, or a fine. A 2007 draft 
law that would have increased penalties for trademark violations was 
rejected in March 2008, but its provisions were appended to a 2003 
draft law that is still being considered by the congressional 
committee on the Constitution, Justice, and Citizenship.  The 2003 
bill would establish IPR violations as public actions, make it 
illegal to publicize a sale or rental of a copyright-infringing 
work, and establish criminal copyright fines of R$10,000 to 
R$50,000.  The 1999 draft bill mentioned in paragraph 58 above would 
increase prison terms for trademark violations from one to four 
years, and another 2007 draft law would allow for imprisonment from 
 
BRASILIA 00000254  010.2 OF 011 
 
 
two to six years. 
 
¶65.  (SBU) Law 11898/2009, commonly known as the "Sacoleiros Law," 
passed in January 2009 and establishes a 42 percent flat tax for 
items imported by the informal commercial importers known as 
sacoleiros.  The bill allows importation of DVDs and CDs, mp3 
players, and other goods that are among the most commonly pirated 
products.   Industry observers fear that the law, though not 
specifically related to piracy and counterfeiting, will ease the 
entry of illegal products into Brazil.  The Executive President of 
the Brazilian Institute for the Defense of Competitiveness has 
predicted that the law will triple piracy rates in Brazil, but no 
statistics are available to support that conjecture. 
 
¶66.  (SBU) Representatives from MPA told Econoff that the 
organization's suggested amendments to the Sacoleiros Law (most 
importantly to make blank media ineligible for the law's flat tax 
regime) were rejected by the GoB.  MPA is concerned that by 
formalizing the sacoleiros' imports, the GoB may de facto legitimize 
IP violators. 
 
- Optical Disk Regulations 
 
¶67.  (SBU) Brazil does not have any regulations on optical media 
manufacturing for the purpose of controlling domestic production or 
any laws or regulations requiring the use of source identification 
(SID) codes in the mastering or replication of optical media. 
There are approximately a dozen optical disc plants in Brazil, which 
appear to be operating legitimately and are not a significant source 
of pirated media.   In a February 2009 meeting, a representative of 
MPA told Econoff that 500 million CD-Rs and DVD-Rs were imported 
into Brazil in 2008, but that only 30 million were used for legal 
purposes.  Most of the blank media is imported from Taiwan and Hong 
Kong. 
 
------------------- 
Consumer Perception 
------------------- 
 
¶68.  (SBU) A September 2008 study of consumer perceptions 
commissioned by the U.S. Chamber of Commerce concludes that changing 
consumer habits combined with decreased supply of pirated and 
counterfeit goods (due to increased enforcement) have contributed to 
a decrease in overall piracy rates in Brazil.  In the categories of 
tennis shoes, clothing, and toys, there was a 38 percent combined 
reduction in spending on counterfeit products.  Looking at a broader 
array of ten product categories, spending on counterfeit products 
decreased 5 percent, with a dramatic reduction of 35 percent in Rio 
de Janeiro set off by a 46 percent increase in Belo Horizonte. 
 
¶69. (SBU) Respondents (chosen from different age groups and 
education levels) were asked about their general attitudes toward 
and intentional consumption of pirated products.  34 percent of 
respondents said they never purchase pirated goods (up from 24 
percent in 2007), while 11 percent said they always do so (down from 
15 percent in 2007).  77 percent agreed that purchasing counterfeit 
or pirated products damages the collection of taxes and diminishes 
the government's ability to invest in health, education, housing, 
etc.  Despite that knowledge, 65 percent of respondents said they 
would purchase pirated products if the impact of doing so was only a 
decrease in tax revenue.  72 percent would not purchase pirated 
goods if they knew that piracy financed organized crime; 90 percent 
would not purchase pirated goods if they knew that doing so would 
harm themselves or their families. 
 
¶70.  (SBU) In August 2008, Rio de Janeiro4s Commerce Federation 
(Fecomercio - RJ) and Ipsos Public Affairs released a report 
entitled "The Consumption of Pirated Products in Brazil."  According 
to the report, there was a 5 percent increase in the percentage of 
Brazilians that bought such products (47 percent in 2008, 42 percent 
in 2007).  There was a minor decrease in the population4s 
willingness to buy pirated CDs - from 86 to 83 percent - and a 
considerable increase in the willingness to buy pirated DVDs - from 
53 to 69 percent.  The population's willingness to buy counterfeit 
watches, toys, glasses and apparel decreased from 2007 to 2008. 
 
------------ 
Future Plans 
------------ 
 
BRASILIA 00000254  011.2 OF 011 
 
 
 
¶71.  (SBU) According to CNCP officials, the organization spent much 
of 2007 in "planning mode." CNCP used the planning time to 
prioritize several projects from its 99-point action plan to combat 
piracy.  In December 2008, CNCP's president announced the following 
six priorities for 2009. 
 
-Increase enforcement against pirated products at notorious markets 
and search for alternative commerce opportunities for vendors. 
 
-Develop an interactive CNCP website, including educational 
material. 
 
-Fight piracy by offering incentives for municipal enforcement 
authorities to create cities "free of piracy." 
 
-Raise consciousness among vendors and merchants of the damage done 
by piracy. 
 
-Create partnerships with internet providers to prevent the 
distribution of pirated products. 
 
-Work with states to create new police units specialized in 
combating piracy and strengthen already existing units. 
 
¶72.  (SBU) Comment:  GoB efforts to improve the adequacy and 
effectiveness of intellectual property protection are multi-faceted 
and include a number of agencies and organizations.  While some in 
GOB have resisted in-depth discussion on IPR issues, Mission has 
made progress in reframing the issue as important to innovation and 
competitiveness.  Mission's working relationship with CNCP has 
evolved over recent years and today is excellent.  Relationships 
with ANVISA, INPI, and the Intellectual Property Division of MRE 
have also improved dramatically and currently reflect a previously 
unknown degree of cooperation on IPR efforts.  There are clearly 
many challenges and opportunities for improvement of the legislative 
framework and overall IP protection in Brazil.  However, the GoB is 
increasingly active in this area, and Post is encouraged by the 
progressively more cooperative and receptive nature of working 
relationships with various GoB agencies.  End Comment. 
 
Sobel