VZCZCXYZ0001
PP RUEHWEB
DE RUEHSG #0167/01 0521513
ZNR UUUUU ZZH
P 211513Z FEB 08
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 2809
INFO RUEHAC/AMEMBASSY ASUNCION PRIORITY 3332
RUEHBO/AMEMBASSY BOGOTA PRIORITY 1951
RUEHBR/AMEMBASSY BRASILIA PRIORITY 0184
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 0804
RUEHCV/AMEMBASSY CARACAS PRIORITY 1670
RUEHLP/AMEMBASSY LA PAZ FEB 5689
RUEHPE/AMEMBASSY LIMA PRIORITY 5457
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 3922
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
UNCLAS SANTIAGO 000167
SIPDIS
SENSITIVE
SIPDIS
STATE FOR WHA/BSC AND EB/TPP/IPE - JENNIFER BOGER
STATE PLEASE PASS TO USTR - KDUCKWORTH AND CWILSON
COMMERCE FOR KRISTEN MANN
E.O. 12958: N/A
TAGS: KIPR ETRD PREL PGOV CI
SUBJECT: CHILE: POST RECOMMENDS CHILE REMAIN ON PRIORITY
WATCH LIST
REF: STATE 9475
1. (SBU) Summary: Post recommends Chile remain on the Special
301 Priority Watch List (PWL) in 2008. In January 2007,
Chile was placed on the PWL following an Out-of-Cycle Review
(OCR) and it remained there for all of 2007. The GOC does
not like being on the PWL, and the stick has provided
motivation inside the government to begin work to improve its
framework for the protection of intellectual property rights.
That being said, all that work remained in the draft stage
during 2007. The most significant step was the introduction
of draft legislation in May 2007 on trademarks and
copyrights. This bill remains in Congress, with passage
likely in 2008. Little has been done on other issues such as
joining the Patent Cooperation Treaty (part of Chile's Free
Trade Agreement obligations to the U.S.) and improving
protection of pharmaceutical patents and proprietary clinical
data. Finally and most tellingly, there remains no clear
national policy on intellectual property rights. End Summary.
Priority Watch List Background
------------------------------
2. (SBU) In 2006, the third year of the U.S.-Chile Free Trade
Agreement (FTA), Chile was the subject of an Out-of-Cycle
Review (OCR) due to its failure to fulfill many FTA
commitments on the protection of intellectual property rights
(IPR). The OCR, announced in April 2006, resulted in an
intensified and generally positive dialogue between U.S. and
Chilean officials. During the course of that dialogue, the
GOC was unable to explain its institutional framework to
protect IPR, essentially laying bare the lack of protection.
On January 8, 2007, the Office of the U.S. Trade
Representative (USTR) announced the results of the OCR and
placed Chile on the Priority Watch List (PWL) for the first
time. Placing Chile on the PWL led to an immediate and
sustained public debate on IPR, which almost exclusively
favored more robust IPR protection. Before the regular
annual Special 301 review and announcement in April 2007,
there were no significant changes, and Chile remained on the
PWL for all of 2007.
3. (SBU) One of the four declared pillars of President
Bachelet's administration (she began a four-year term in
March 2006) is innovation. She appointed a presidential
council, headed by a former finance minister, to identify
potential value-added sectors for the GOC to promote. Thanks
to Bachelet's emphasis on the subject, there is a great deal
of talk inside the GOC and in the public domain about the
importance of innovation. That being said, to date that talk
has remained largely just rhetoric and there has not been
much concrete action to back up the words. At an elementary
level, Chileans understand that improved IPR protection is a
key part of fostering innovation and creating value-added
sectors in the economy. But, the GOC is struggling to find
practical ways to turn its talk into deeds.
Data Protection and Patent Linkage
----------------------------------
4. (SBU) Since the FTA went into force in January 2004, there
has been no institutional progress on core issues such as
data protection and patents related to pharmaceutical
products. Despite new legislation and implementing
regulations dating back to 2005, Chile has continued to grant
approval for generic copies, which violate patents for
innovative pharmaceuticals. Additionally, the GOC has
exhibited a pattern of allowing local companies to use
exclusive company data from innovative Asian, European and
North American companies as the scientific basis for granting
sanitary (and thus market) approval for these generic copies.
International pharmaceutical companies continue to detail
violations of exclusive company test data in the Chilean drug
approval process.
5. (SBU) On the issue of patents, there is no linkage between
granting market access and the existence of valid patents.
The GOC has consistently maintained that it provides linkage
through the judicial system and that the dispute over linkage
is a difference of interpretation as to the specific
obligations in the U.S.-Chile FTA. A French pharmaceutical
company enjoyed one minor and partial legal victory in 2007
in a case against a Chilean firm over a patent violation.
The case was lengthy, the fine was minimal (USD 6,000) and
the offending drug was not pulled from the market. It's hard
to see how the courts provide linkage in Chile.
Dancing Sideways on Clinical Data
---------------------------------
6. (SBU) In July 2006, the Instituto de Salud Publica (ISP)
-- the rough equivalent of the FDA -- issued an internal
regulation, which required any company seeking approval for a
biotech product to submit its own proprietary clinical test
data. This was viewed by innovative pharmaceutical companies
as a clear step forward in better protecting their clinical
data and, hopefully, eventually their valid patents as well.
By December 2006, in what has been privately described to us
as part of an internal turf battle at the ministry, Minister
of Health Barria overruled and removed the ISP regulation.
Though there has been informal talk of Minister Barria
re-issuing these rules under her own authority, over a year
later nothing has happened.
7. (SBU) As a further twist, new data protection rules were
briefly published on the Ministry of Health's website in
January 2008, only to be removed within days for "further
drafting." The official GOC explanation is that the rules
were published for public comment. The unofficial
explanation is that they were removed due to pressure from
Chilean pharmaceutical firms which saw the rules as
disadvantageous. What was briefly exposed to public view was
largely in line with the ISP's initial regulation from July
2006 and represented some improvement over existing norms.
If something along these same lines were to be issued as a
Ministry of Health decree, it could represent an advance in
providing protection to proprietary clinical data. However,
it appears that once again everything is on hold.
Piracy and Legislation on Copyrights and Trademarks
--------------------------------------------- ------
8. (SBU) In the aftermath of being placed on the PWL, there
was a burst of activity on the public anti-piracy front.
Illegal copies of music, movies and books were seized, which
made some headlines. There has been a campaign to remove
illegal copies from Santiago, but this has largely meant
moving vendors rather than prosecuting them. Overall,
industry and anecdotal evidence suggests nothing has
substantively changed. If anything, the pirates'
understanding of the market is more sophisticated and
developed than ever. On Santiago's streets, prices for
pirated software, music and films have dropped, implying
greater supply. Additionally, the pirated market has become
more sophisticated and segmented, with vendors increasingly
catering to specific tastes and clientele rather than selling
a little bit of everything.
9. (SBU) There was a substantive anti-piracy reform package
introduced by Bachelet with great fanfare in May 2007. The
reform package was far from perfect but represented an
advance in developing a more practical IPR protection
framework. Additionally, the bill was supported by eight
different Chilean ministries. While not reason alone to
cheer, this development showed the degree to which interest
in and concern about IPR have spread inside the GOC. Three
years ago, the Ministry of Foreign Affairs was a lone voice
inside the GOC as it transmitted U.S. and European concerns
about IPR violations to other ministries.
10. (SBU) In the course of 2007, as the bill worked its way
through Congress, the GOC was receptive to a positive and
sustained dialogue with the U.S. on suggested changes to the
legislation. This dialogue included formal meetings, such as
the FTA's annual Free Trade Commission talks in November,
informal exchanges via phone and e-mail and most
substantively through a series of three digital video
conferences (DVCs). These DVCs brought together technical
experts and allowed the U.S. to make clear its concerns with
parts of the draft legislation. Chile's Congress will likely
pass the law in the first half of 2008 but to what degree the
final version will reflect U.S. concerns is unclear.
Whatever legislation is passed will, of course, be followed
by the equally important phases of implementing regulations
and then enforcement. We are still far from being able to
pass judgment on outcome of this reform package.
Core Problem: No Policy on IPR
-------------------------------
11. (SBU) As noted in previous years, the core issue at the
heart of IPR-related issues in Chile is the lack of a clear
government policy. Chile has a strong presidential system,
and individual ministries cannot on their own make policy on
IPR. Unambiguous direction must come from the top and that
means President Bachelet. Though the judiciary is
independent, it also part of the same system and sees there
is no clear policy direction. As such, judges drag out court
cases to the point of irrelevancy, make minor decisions as in
the one legal victory in 2007 for an innovative
pharmaceutical company, or find unrelated technical reasons
for dismissal. While the public debate favors greater IPR
protection, and ministries are increasingly educated and
engaged on the issue, the system as a whole is waiting on
leadership from the top. So far, that has not come.
Recommendation: Maintain Chile on the Priority Watch List
--------------------------------------------- -------------
12. (SBU) Though 2007 was more positive for IPR in terms of
dialogue and tone than previous years, Chile continues to
fall far short of its rhetorical and practical commitments to
its trade agreements. Placing Chile on the PWL in January
2007 was the right thing to do based on the facts. It proved
also a smart move in terms of generating a public debate on
IPR. As noted, that debate has favored improved protection
and furthered understanding of the link between fostering
innovation and IPR protection. The stick of being on the PWL
continues to motivate the GOC to take actions to remove
itself from this list. Removing Chile from the PWL in 2008
would a mistake on every front. We have the potential over
the coming few years to move substantively and sustainably in
the right direction on IPR in Chile. To do that, we will
need to keep up the pressure.
URBAN