VZCZCXYZ0001
PP RUEHWEB

DE RUEHRH #0386/01 0631146
ZNR UUUUU ZZH
P 041146Z MAR 09
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC PRIORITY 0318
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS RIYADH 000386 
 
SIPDIS 
 
STATE FOR NEA/ARP(HARRIS) AND EEB/TPP/IPE 
STATE PASS USTR FOR JENNIVER GROVES AND JASON BUNTIN 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV KIPR SA
SUBJECT: SAUDI ARABIA SPECIAL 301 REVIEW:  POST INPUT 
 
REF: A. SECSTATE 8410 
     ¶B. RIYADH 30 
     ¶C. RIYADH 40 
     ¶D. RIYADH 83 
     ¶E. 2008 RIYADH 1271 
     ¶F. 2008 RIYADH 1435 
     ¶G. 2008 RIYADH 1630 
     ¶H. 2008 RIYADH 1663 
     ¶I. 2008 RIYADH 1682 
     ¶J. 2008 RIYADH 1870 
 
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Summary 
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¶1.  Despite continuing deficiencies, Saudi Arabia improved 
its protection of intellectual property rights (IPR) in the 
preceding year.  The Violations Review Committee has become 
more productive and transparent 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 reported 100% compliance 
in using licensed 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, 
and has scheduled a conference on IPR protection and 
enforcement to take place in Riyadh in April 2009, to include 
speakers from the USPTO and similar agencies from the 
European Union.  In February 2008, the Saudi IPR Committee 
agreed to establish an IPR Coordination Group. Although no 
group has nominally been established yet, the SAG met 
regularly with USG representatives and private industry 
rights holders, sometimes simultaneously, to discuss IPR 
protection and enforcement. 
 
¶2.  However, industry losses due to IPR infringement remain 
significant, and industry groups express frustration about 
IPR enforcement. The Violations Review Committee (VRC) at the 
Ministry of Culture and Information (MoCI) has begun to 
provide a publicly accessible website with all information 
for ongoing IPR cases.  The MoCI has also raided warehouses 
and shops which produce counterfeit material, and police and 
customs officials have confiscated hundreds of thousands of 
counterfeit goods from pharmaceuticals to optical media.  The 
MoCI proactively investigated and shut down retail sites 
which sell infringing goods and cafes which profit from 
pirated cable signals and internet connections. However, at 
the time of this report, the SAG has failed to enact severe 
deterrent penalties in the form of high fines or imprisonment 
for IPR violators. 
 
¶3.  Post recommends that Saudi Arabia remain on the Watch 
List pending an out-of-cycle review to monitor progress on 
near-term goals.  Saudi Arabia made substantial efforts 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 apply effective deterrent 
penalties to IPR violators. However, in response to 
complaints about the lack of transparency in IPR cases the 
MoCI created and is making case information available on a 
publicly accessible website. 
 
¶5. The MOCI has also proactively investigated and shut down 
retail sites which sell infringing goods and cafes which use 
pirated internet and cable signals.  Severe resource 
constraints hamper the MOCI's ability to make rapid progress 
on these issues, but significant headway has been made. For 
example, stories of the raids on warehouses, vendors, and 
cafes have been published in the local media as part of a 
"name-and-shame" campaign. Additionally, vendors that are 
closed are locked and covered in signs stating clearly 
"Closed by the Ministry of Culture and Information for 
Intellectual Property Infringement."  In 2008, 12,340 stores 
were inspected up 40% from 2007, 5930 raids were conducted, 
and 2,869,622 units of counterfeit material were confiscated 
ad destroyed, according to MOCI sources.  In January 2009, 
 
the Ministry of Culture raided a warehouse and discovered 
800,000 pirated PlayStation games. 
 
¶6.  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, 
the VRC reported that it had issued 275 rulings under its new 
leadership.  In 2008 the VRC received 485 complaints, of 
these 263 violations were referred to the Committee, 225 were 
processed, and 50 are still ongoing.  According to industry 
sources, the new Chairman is also generally willing to 
consult with rights holders.  In order to expedite cases, the 
MOCI also committed to establish regional VRC's in Dhahran 
and Jeddah.  The Jeddah VRC was launched in January 2009. 
Additionally, in 2008 the MOCI hired 80 new employees as 
inspectors and purchased 15 new vehicles to be used in the 
inspections. 
 
¶7.  Despite these marked improvements at the VRC, the failure 
to issue effective deterrent penalties remains a problem. The 
maximum fine issued by the VRC for and IPR violation was 
100,000 Saudi Riyals (approximately $26,666.00 USD).  Post is 
unaware of any Saudi court issuing a prison sentence for an 
IPR violation, although Saudi legislation now provides for 
such a penalty. 
 
¶8.  Following King Abdullah's issuance of a royal order 
directing government ministries to legalize their software 
use following the International Intellectual Property 
Alliance's visits to the Kingdom in 2006 and 2008, the SAG 
now claims that it has 100% compliance in using licensed 
software in government ministries. However, industry 
maintains that the push for legalization has enjoyed only 
modest success.  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 over 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. 
 
¶9. The MOCI in 2008 began populating the "E-gate", a publicly 
accessible website with information on cases before the 
Violations Review Committee, both pending and closed.  In 
2008 140 cases were completely posted to the website, and in 
2009 the postings are expected to exceed 400 cases. 
 
------------------ 
Patent enforcement 
------------------ 
 
¶10.  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. 
 
¶11.  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 reviewed the counter-proposal and submitted 
a response on April 2, 2008, which has not yet received a 
response. 
 
¶12.  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 
---------------------------------------- 
 
¶13.  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 an 
impediment to IPR enforcement.  However, Saudi Arabia's 2007 
Special 301 Initiative Action Plan recommended that Saudi 
Arabia ratify and implement the World Intellectual Property 
Organization (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 looking for 
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. 
 
¶14.  In March 2008 Saudi Customs issued a circular requiring 
all foreign importers, as of February 1, 2009, to certify the 
origin of their goods with a stamped, non-removable 
"certificate of origin" on the package of the item and the 
shipping container of the items.  This certification is 
intended to protect the integrity of items with regional 
designations as well as certify their legitimacy and prevent 
the importation of fraudulent goods.  Saudi Customs no longer 
accepts imported products lacking this certification. 
 
------------------------ 
Training and cooperation 
------------------------ 
 
¶15.  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. 
 
¶16.  SAG officials demonstrated this desire during a Spring 
2008 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. 
 Although no group has nominally been established yet, the 
SAG met regularly with USG representatives and private 
industry rights holders, sometimes simultaneously, to discuss 
IPR protection and enforcement. 
 
------------------------------ 
Public awareness as a priority 
------------------------------ 
 
¶17.  The SAG is making substantial strides in promoting 
public awareness of IPR violations as a crime, and consumer 
protection.  For example, in June 2007 the Ministry of 
Commerce and Industry in conjunction with the WIPO and the 
Islamic Development Bank (IDB)hosted a regional seminar on 
Intellectual Property and Technology Transfer.  In March, 
2008, the Saudi Publishers Association launched the first 
Saudi Intellectual Property Rights Conference.  In October, 
2008, the SAG hosted, along with the Arab League, the First 
Arab Consumer Protection Forum in Jeddah, attended by over 
1000 participants. 
 
¶18.  The Ministry of Culture and Information also publishes 
stories of raids in the local press as a part of a 
name-and-shame campaign, and to further publicize that those 
businesses selling pirated goods will be targeted by the MoCI 
and the Ministry of the Interior.  During a January 2009 
warehouse raid, the Deputy Minister of Culture and 
Information invited local TV stations and press to observe 
and document the raid.  The MOCI has also published a booklet 
guide to Copyrights Law and Enforcement procedures and are in 
the process of translating the guide into English and French. 
 
-------------- 
Recommendation 
-------------- 
 
¶19.  Post recommends that Saudi Arabia remain on the Watch 
List pending an out-of-cycle review to monitor progress on 
near-term goals.  Saudi Arabia made substantial efforts 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. 
FRAKER