[Ip-health] USTR Criticizes Chile On IPR

[Stephanie Burgos]

This article is from the journal Inside US Trade.  Do not reproduce
without prior authorization from that source.

Inside US Trade
Date: January 19, 2007
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USTR Criticizes Chile On IPR; Notes Failure To Meet FTA Deadlines
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The Office of the U.S. Trade Representative last week placed Chile on
the U.S. "priority watch list" following the completion of an
out-of-cycle Special 301 review, and criticized that country for not
protecting U.S. pharmaceutical patents and copyrights.


The results of that review said piracy rates in Chile, which is a free
trade agreement partner with the U.S., are increasing, and concluded
that Chile's "commitment to the vigorous enforcement and prosecution of
intellectual property theft of copyrighted goods appears to be
diminishing significantly," according to a Jan. 8 statement from USTR.

It also criticized Chile for not implementing certain requirements
related to copyright protections by deadlines included in the FTA. For
example, Chile was required by Jan. 1, 2006, to prevent unauthorized
reproductions of temporary copies of software, digital videos and other
products covered by copyrights, something Chile has failed to do. It was
also required by that date to follow so-called patent term extension
rules that are intended to extend patent terms as compensation to patent
holders when patent terms are shortened due to delays in the marketing
approval process of a drug.

USTR also criticized Chile on the issue of patent linkage. It said Chile
remained unwilling to address complaints from pharmaceutical patent
holders who charge that Chile is authorizing the marketing of
patent-infringing pharmaceuticals, and has failed to provide an
effective mechanism to prevent this. Pharmaceutical groups have also
criticized Chile for not providing effective protection for clinical
test data submitted by patent owners in order to secure marketing
approval for patented drugs.

U.S. and Chilean officials have discussed these issues over a series of
meetings and videoconferences, but a U.S. trade official said Chile has
not given any satisfactory answers that would address U.S. complaints.
The official said the U.S. hoped the elevation to the priority watch
list would lead Chile to address the U.S. complaints, and said
additional steps could be considered in the future.

For now, however, the official said the U.S. wanted to see if placement
on the priority watch list would have an impact. As a result, the
official indicated the U.S. would allow Chile some time to make changes.

The official acknowledged another option would be to bring a dispute
settlement case against Chile under the bilateral FTA, which could lead
to the withdrawal of FTA benefits. But at this point, the official said
USTR was focused on continuing consultations with Chile. For example,
U.S. and Chilean officials will meet in Santiago later this month under
the FTA's free-trade commission, and the copyright and pharmaceutical
patent issues could be discussed at that time.

Placement on the priority watch list does not have any immediate
negative impact on Chilean goods, although U.S. officials have insisted
it is an effective way of pressuring foreign governments to improve
their IPR protections. Chile was previously on the 301 watch list.

The U.S. trade official said Chile is not happy to be on the priority
watch list because it views itself as a country with an attractive
climate for foreign investment with good IPR protections. He said other
countries have taken steps to strengthen IPR protections in response to
placement on the priority watch list. For example, late last year USTR
dropped Indonesia from the priority watch list to the watch list after
noticing improvements in that country's IPR regime.

Some industry sources expressed doubts that elevating Chile to the
priority watch list would have much of an effect in terms of the
pharmaceutical issues, although one industry source said pharmaceutical
groups also would give Chile some time to react to its placement on the
priority watch list.

The Pharmaceutical Research and Manufacturers of America (PhRMA) had
pressed for Chile's placement on the priority watch list because of the
patent linkage and data exclusivity issues. It charged that Chile has
granted sanitary registrations allowing companies to sell drugs that
should be protected by U.S. patents.

Chile allows U.S. companies to attempt to block the marketing of such
drugs if they feel approval has been incorrectly awarded, but PhRMA
charges this process is cumbersome and ineffective.

Specifically, U.S. companies must get a preliminary injunction from a
Chilean court to prevent the Chilean Health Authority (ISP) from issuing
the sanitary registration, which effectively provides marketing approval
in Chile. Industry sources and U.S. trade officials have previously
charged that some drugs that should have been protected by patents were
marketed in Chile even after U.S. companies won preliminary injunctions.

PhRMA has also raised complaints about ineffective data exclusivity
rules in Chile that are supposed to prevent generic drug makers for five
years from being able to use test data used by patent holders to secure
marketing approval for their patented drugs. Chile has data exclusivity,
but allows Chilean authorities to deny it in certain circumstances
(Inside U.S. Trade, May 12).

In a Jan. 17 statement, PhRMA Senior Vice President Geralyn Ritter
praised USTR's decision on Chile. The issues of patent linkage and data
exclusivity "are serious problems that must be addressed and the USTR
has taken an important step to convince Chile to initiate reforms,"
Ritter said.

Copyright groups led by the International Intellectual Property Alliance
(IIPA) had also called for Chile's status to be elevated to the priority
watch list because of poor enforcement, and what they charge is Chile's
slow process of enacting copyright reforms that are required under the
U.S.-Chile FTA.

Chile is required under the FTA to have certain copyright protections
enacted into its laws by the end of this year. For example, the FTA
requires Chilean to have laws protecting tools such as water marks,
digital locks and encryption that are used by digital copyright holders
to protect works from being reproduced. Chile currently has no civil or
criminal penalties against removing such protections, an industry source
said.

Chile's Ministry of Culture is reportedly working on a copyright reform
proposal, but U.S. copyright groups and trade officials have yet to see
an English-language version, an industry source said.