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C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000169 
 
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E.O. 12958: DECL: 2020/02/11 
TAGS: ECON ECIN EIND EINT EINV ETRD KIPR VE
SUBJECT: DRAFT INTELLECTUAL PROPERTY LEGISLATION HAS AN UNCERTAIN 
FUTURE 
 
REF: 09 CARACAS 902; 09 CARACAS 770 
 
CLASSIFIED BY: DUDDY, AMBASSADOR, DOS, AMB; REASON: 1.4(B), (D) 
 
¶1.       (C) SUMMARY: On January 25, a legal consultant for the 
Venezuelan Chamber of Medicine (CAVEME) told EconOffs that an 
intellectual property reform drafted by Commerce Minister Eduardo 
Saman had "no chance" of being passed.  Saman's draft law has 
raised concerns in the IPR legal community because it would 
substitute intellectual property rights for "concessions" granted 
by the Venezuelan government (GBRV) that could only be exploited 
locally for a one year period.  Meanwhile, CAVEME has quietly 
proposed its own intellectual property legislation "written in 
Chavista language" to GBRV officials in order to undermine Saman's 
project.  CAVEME representatives said that international 
pharmaceutical companies expect to have another profitable year in 
Venezuela, a market worth over USD 6 billion, provided that the 
GBRV does not institute new price controls.  END SUMMARY. 
 
 
 
¶2.       (C) On January 25, CAVEME's legal consultant Fernando 
Allende (protect throughout) told EconOffs that a draft 
intellectual property law published on the Trademark and Patent 
Office (SAPI) website had "no chance" of being passed.  The draft 
law, supposedly written by Commerce Minister Eduardo Saman, has 
generated concern in the IPR legal community because it would 
substitute intellectual property rights for  "concessions" granted 
by the GBRV (Ref A,B).  These concessions could only be exploited 
locally for a one year period and the GBRV could annul them at any 
time.  In addition, the concessions could not be licensed, sold, or 
transferred.  Since the Commerce Ministry drafted the legislation 
-and not the National Assembly or Executive-the proposal does not 
have official status and would be unconstitutional if approved, 
according to Allende. 
 
 
 
PRESIDENT CHAVEZ PULLS SAMAN BACK IN ADVANCE OF NATIONAL ASSEMBLY 
ELECTIONS 
 
 
 
¶3.       (C) Allende said that neither the National Assembly nor 
President Chavez would move forward with Saman's draft because it 
would break Venezuela's Paris Convention obligations, discredit the 
GBRV internationally, and jeopardize Venezuela's campaign to join 
Mercosur: "There is a consensus that this project is a barbarity," 
Allende said.  He noted that Commerce Minister Eduardo Saman-who 
also heads the Consumer Protection Agency (INDEPABIS)-is a former 
pharmacist and avowed Marxist who has never believed in 
intellectual property or markets.  Allende remarked that Chavez 
often uses Saman to scare opponents with his extreme proposals-like 
the draft intellectual property reform-but Chavez is likely to pull 
Saman back before the National Assembly elections in September 
2010, "like a dog on a leash." 
 
 
 
PHARMACEUTICAL COMPANIES ARE A "NECESSARY EVIL" 
 
 
 
¶4.       (C) Meanwhile, CAVEME representatives have been working 
behind the scenes to weaken Saman's draft by developing an 
alternative proposal "written in Chavista language."  CAVEME has 
drafted a proposal with the help of Doctor Hildegard Rondon de 
Sanso, the well-connected mother-in-law of PDVSA President Rafael 
Ramirez, that "destroys Saman's draft."  Allende explained that 
CAVEME has been careful to avoid open confrontation with the GBRV 
over patents because Venezuela is a large pharmaceutical market and 
patented products represent a fraction of total sales: the total 
value of pharmaceutical sales in Venezuela is over USD 6 billion 
per year, while a small number of patented pharmaceutical products 
in the Venezuelan market have an estimated annual value of just USD 
100 million.  Stefano Zampa, CAVEME's Executive President, said 
that the GBRV considers pharmaceutical companies a "necessary evil" 
 
CARACAS 00000169  002 OF 002 
 
 
because the government does not have the pharma-chemical industry 
capable of meeting demand and quality standards.  He added that 
international pharmaceutical companies expect to have another good 
year in Venezuela-as long as the government does not introduce new 
price controls. 
 
 
 
LEGAL CONFUSION SURROUNDS INTELLECTUAL PROPERTY RIGHTS REGIME 
 
 
 
¶5.       (SBU) Uncertainty has surrounded Venezuela's Intellectual 
property rights regime since the GBRV withdrew from the Andean 
Community in April 2006.  Following Venezuela's withdrawal, it was 
unclear whether the Andean Community's Decision 486 or Venezuela's 
1955 Industrial Property Law would regulate intellectual property 
rights.  In September 2008, SAPI published an official notice 
upholding the 1955 law, which prohibits patents for pharmaceutical 
products and reduces owner rights-in violation of several articles 
of the Paris Convention and the TRIPS WTO agreement, according to 
Allende.  CAVEME has twice asked the Supreme Court (TSJ) to clarify 
the legal issues surrounding the intellectual property rights 
regime: in the first case, to decide whether Andean Decision 486 or 
the 1955 Intellectual Property law regulated intellectual property 
rights; in the second, to reconcile the contradictions between the 
1955 law and Venezuela's international obligations under the Paris 
Convention and the WTO.  The Supreme Court has not issued a ruling 
in either case.  Meanwhile, Venezuela has not granted a 
pharmaceutical patent since 2002, according to a report by the 
Pharmaceutical Research and Manufactures of America. 
 
 
 
¶6.       (C) COMMENT: Legal experts who have compared the GBRV's 
proposed legal reforms to equivalent Cuban laws note that Saman's 
draft is far more ideologically extreme than its Cuban counterpart. 
From that perspective, the death of Saman's intellectual property 
reform is potentially good news for patent holders in Venezuela, 
who would likely welcome its failure with great relief.  For the 
moment, it appears that the GBRV has not found a way to eliminate 
patents and restructure its intellectual property rights regime 
without violating its international obligations and jeopardizing 
its entry into Mercosur.  END COMMENT. 
DUDDY