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Viewing cable 07SANTIAGO304, CHILE: POST RECOMMENDS CHILE REMAIN ON PRIORITY

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Reference ID Created Released Classification Origin
07SANTIAGO304 2007-02-21 19:34 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Santiago
VZCZCXYZ0002
PP RUEHWEB

DE RUEHSG #0304/01 0521934
ZNR UUUUU ZZH
P 211934Z FEB 07
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 1048
INFO RUEHAC/AMEMBASSY ASUNCION PRIORITY 2838
RUEHBR/AMEMBASSY BRASILIA PRIORITY 3504
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 0122
RUEHCV/AMEMBASSY CARACAS PRIORITY 1284
RUEHLP/AMEMBASSY LA PAZ FEB 5043
RUEHPE/AMEMBASSY LIMA PRIORITY 4937
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 3541
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
UNCLAS SANTIAGO 000304 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/TPP/IPE - JENNIFER BOGER 
STATE PLEASE PASS TO USTR 
COMMERCE FOR SARA MCDOWELL 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR PREL CI
SUBJECT: CHILE: POST RECOMMENDS CHILE REMAIN ON PRIORITY 
WATCH LIST 
 
REF: A. STATE 7944 
     B. 06 SANTIAGO 1761 
     C. SANTIAGO 174 
     D. SANTIAGO 141 
 
1. (SBU) Summary: Post recommends Chile remain on the Special 
301 Priority Watch List in 2007.  During 2006, Chile was the 
subject of an Out-of-Cycle Review (OCR).  The result of the 
OCR was USTR's announcement on January 8, 2007 placing Chile 
on the Priority Watch List.  In the intervening month, Post 
has not seen enough positive movement on intellectual 
property rights (IPR) issues -- despite some hasty 
enforcement actions and a host of IPR-related bills put 
before the Chilean Congress -- to warrant changing Chile's 
status.  The root of the problem remains the lack of a clear 
national policy on IPR protection.  End Summary. 
 
New Member of Priority Watch List 
--------------------------------- 
 
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 in large part to its failure to fulfill many 
of its FTA commitments on intellectual property rights (IPR). 
 The OCR, announced in April 2006, resulted in an intensified 
dialogue between U.S. and Chilean officials on IPR issues. 
The exchanges included digital video conferences, additional 
Embassy reporting and a visit to Santiago in August 2006 by 
Assistant USTR Everett Eissenstat.  Despite repeated USG 
efforts to understand the progress Chile claimed it had made 
(ref B) to improve IPR protection, the GOC was unable to lay 
out in a comprehensible manner its framework to protect IPR. 
The GOC's handling of key technical issues such as protection 
for clinical data and patents remain unclear.  There was also 
evidence that film, music and software piracy is growing 
worse in Chile.  On January 8, 2007, USTR announced the 
results of the OCR and placed Chile on the Priority Watch 
List. 
 
Data Protection and Patent Linkage 
---------------------------------- 
 
3. (SBU) In 2006, there was no progress on core issues such 
as data protection and patents related to pharmaceutical 
products.  Despite new legislation and implementing 
regulations from 2005, Chile continued to grant approval for 
generic copies, violating patents for innovative 
pharmaceuticals.  Additionally, the GOC allowed local 
companies seeking market access to use exclusive company data 
from European and North American companies as the scientific 
basis for approving these generic copies.  Local 
representatives of international pharmaceutical companies 
continued to detail violations of exclusive company test data 
in the Chilean drug approval process.  On the issue of 
patents, there was no linkage between granting market access 
and the existence of valid patents.  The GOC played a 
semantic game by arguing that its FDA-equivalent, the 
Instituto de Salud Publica (ISP), only granted "sanitary 
approval" and thus did not violate the FTA's provision 
barring the granting of marketing approval in violation of a 
patent holder's rights.  Internal documentation publicly 
submitted by the GOC as part of a judicial case demonstrated 
that even it could not distinguish between sanitary approval 
and marketing approval, making its semantic shell game appear 
even more disingenuous. 
 
Step Forward Becomes A Step Backward 
------------------------------------ 
 
4. (SBU) In July 2006, the ISP issued an internal regulation, 
which required any company seeking approval for a biotech 
product to submit its own proprietary clinical test data. 
This decision was never trumpeted by the GOC as an advance in 
IPR protection and the Embassy noticed it only through the 
GOC's online public gazette.  When the Embassy contacted 
local representatives of the international pharmaceuticals, 
all engaged in biotech development worldwide, they saw the 
ISP's decision as an important step toward better IPR 
 
protection in Chile. 
 
5. (SBU) What was a step forward became a step backward 
before the end of the year, however, because in December 
2006, Minister of Health Barria overruled the ISP's internal 
regulation with her own decree carrying the force of law. 
Barria decided that even for biotech products it was not/not 
necessary for a company to present its own proprietary 
clinical data when seeking sanitary/marketing approval.  A 
company could present data from any source, including 
proprietary data from another company, as it sought 
sanitary/marketing approval for its product in Chile. 
 
No Policy on IPR 
---------------- 
 
6. (SBU) The core issue at the heart of IPR-related issues in 
Chile is the lack of a clear, enforceable government policy. 
With a strong presidential system in place, individual 
ministries cannot on their own make policy on IPR.  If it is 
to emerge at all, that unambiguous direction must come from 
President Bachelet.  Though the judiciary is independent, it 
also understands there is no clear policy direction on the 
issue.  So, it manages either to drag out court cases so long 
that a decision is OBE for the IPR stakeholders, or to find 
unrelated technical reasons for dismissal.  The efforts of 
the judiciary to avoid setting precedence in IPR cases have 
been noticed in a number of different areas.  In addition to 
familiar cases in Santiago largely involving pharmaceutical 
products, we have also learned of cases involving pirated 
products being dismissed by judges in Chile's free trade zone 
in Iquique.  Judges have dismissed cases either on technical 
grounds or with spurious arguments that the goods were only 
"transiting" Chile, and thus were not its responsibility. 
 
Some Flash in Anti-Piracy Efforts 
--------------------------------- 
 
7. (SBU) In the immediate aftermath of annual talks under the 
FTA (ref C), there was a burst of activity on the anti-piracy 
front.  Illegal copies of music, movies and books were 
seized, which made some headlines.  As opposed to the GOC's 
public stance defending its position on data protection and 
patents, Foreign Minister Foxley promised the Ambassador more 
action to fight piracy, saying Chile's position was 
indefensible and it needed to do more (ref D).  However, 
evidence from industry and anecdotal evidence in Santiago and 
elsewhere suggest that nothing has sustainably changed.  The 
market for legal copies of products contracted, as piracy 
gained ground throughout 2006.  Efforts by Chilean police and 
prosecutors have had little real impact as fines are minimal, 
with most IPR violators not even paying them and criminal 
penalties suspended.  With little to nothing to show for the 
effort, police rarely investigate the manufacturing and 
distribution of pirated materials. 
 
8. (SBU) There are also several bills before Congress, which 
attempt to address Chile's remaining legal FTA-related 
obligations on trademarks and patents.  It is impossible to 
predict when the legislation will pass and more importantly, 
when and how seriously it will be implemented.  There is also 
a bill before Congress to join the Patent Cooperation Treaty, 
another FTA obligation and one Chile was to have fulfilled by 
January 2007.  The Minister of Economy has introduced plans 
to reform the Department of Industrial Property (Chile's 
equivalent of the U.S. Patent and Trademark Office), but it 
remains unclear what the final outcome will be and how patent 
office reform could improve IPR protection. 
 
Recommendation:  Maintain Chile on the Priority Watch List 
--------------------------------------------- ------------- 
 
9. (SBU) Chile's policy decisions and actions continue to 
fall far short of its rhetoric and trade agreement 
commitments on IPR.  Worse still, the few legislative and 
regulatory moves that the GOC has initiated may not be 
improvements at all; they may just be a legalistic effort to 
check the required boxes.  While the GOC continues to provide 
 
assurances that it understands USG concerns on patents and 
copyrights and is moving to address them, the reality on the 
ground is quite different.  Post believed it had no choice at 
the conclusion of the OCR but to recommend Chile be placed on 
the Priority Watch List.  Reality in Chile has differed from 
rhetoric long enough.  It was high time to say the emperor 
had no clothes.  This has not changed. 
KELLY