US embassy cable - 05WELLINGTON154

UNCLAS SECTION 01 OF 03 WELLINGTON 000154 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/IPE-SWILSON AND EAP/ANP-TRAMSEY 
STATE PLEASE PASS TO USTR FOR JCHOE-GROVES AND DKATZ 
STATE PLEASE PASS TO USPTO FOR JURBAN 
STATE PLEASE PASS TO LOC FOR STEPP 
COMMERCE FOR JBOGER AND GPAINE/4530/ITA/MAC/AP/OSAO 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, ECON, PREL, NZ 
SUBJECT: YEAR 2005 SPECIAL 301 REVIEW -- NEW ZEALAND 
 
REF: A. STATE 23950 
 
     B. 04 WELLINGTON 1037 
     C. 04 WELLINGTON 900 
     D. 04 WELLINGTON 516 
 
Sensitive but Unclassified -- for U.S. government channels 
only. 
 
Summary 
------- 
1. (SBU) Although both the pharmaceutical and music-recording 
industries urge that New Zealand be placed on the Special 301 
List, the Embassy recommends that New Zealand not be listed. 
The country's overall record is well above that of countries 
typically on the 301 list.  As in past years, the Embassy 
continues to believe that the pharmaceutical industry's 
restricted access to New Zealand's market stems more from the 
government's anti-competitive drug-purchasing policy than a 
failure to protect intellectual property.  While the music 
industry has legitimate concerns about New Zealand's proposed 
exceptions to copyright protection, the government is 
discussing those exceptions with industry and will likely 
change them. 
 
IPR in general 
-------------- 
2. (SBU) The New Zealand government in general provides 
adequate and effective protection of intellectual property 
rights (IPR).  While no IPR-related legislation was 
introduced in 2004, the government's actions in 2003 showed 
it to be strengthening its IP regime:  banning the parallel 
importation of films, videos and DVDs; making trademark 
infringements a criminal offense; and increasing the 
penalties for copyright infringements.  With few exceptions, 
the government has not rolled back its advances in IP 
protection. 
 
The pharmaceutical issue 
------------------------ 
3. (SBU) The pharmaceutical industry has a number of 
legitimate complaints about its treatment in the New Zealand 
market, and we are continuing to press for an improvement in 
this situation.  However, the barriers to pharmaceuticals are 
primarily caused by the process in which the Pharmaceutical 
Management Agency (PHARMAC), a stand-alone Crown entity, 
decides which medicines will be subsidized by the New Zealand 
government and what their prices will be.  The issue also is 
one of funding, since a larger budget would allow PHARMAC -- 
which has operated for the last 10 years with minimal 
increases in its annual budget -- to put more medicines, and 
perhaps more cutting-edge medicines, on its pharmaceutical 
list. (ref B) 
 
4. (SBU) The Embassy believes this market-access barrier 
should be dealt with as such and not treated as a failure to 
protect intellectual property.  Even the Researched Medicines 
Industry Association of New Zealand concedes that PHARMAC's 
practices do not violate the government's TRIPS commitments. 
The government also has mostly defined the issue as a matter 
of ensuring affordable pharmaceutical prices for all New 
Zealanders.  Listing the country on the Watch List would only 
enable the government to claim to the New Zealand public that 
its policies protect the population against a greedy 
pharmaceutical industry. 
 
5. (U) Curiously, the pharmaceutical industry in its Special 
301 submission did not mention concern over the government's 
proposed revision of the Patents Act.  The draft bill fails 
to meet two of the industry's objectives in New Zealand: (1) 
It does not allow patent protection for diagnostic, 
therapeutic and surgical methods for the treatment of humans, 
as allowed under the TRIPS agreement, and (2) it fails to 
extend the effective patent life of drugs.  The effective 
patent life (the period after marketing approval is obtained 
during which companies are earning a return on their patented 
product) stands at seven years on average in New Zealand. 
Moreover, the revision leaves in place an amendment that 
provides an exception to Patents Act protection, allowing 
generic competitors to begin the process required for 
regulatory approval of a product while a proprietary drug is 
still under patent.  (ref C)  While we may in the future want 
to place New Zealand on the Watch List because of this 
legislation, we believe the precedent of listing a country 
because of its draft legislation would not be a good one for 
the United States and could minimize our negotiating effort 
on the bill.  We continue to press New Zealand government 
officials about the draft bill and recommend that U.S. 
government officials raise this issue with their New Zealand 
government counterparts. 
 
Format- and time-shifting 
------------------------- 
6. (U) The New Zealand government has proposed amendments to 
the Copyright Act 1994 that would allow format-shifting, or 
the duplication of sound recordings to another format for a 
purchaser's private use without the copyright owner's 
permission.  The amendments also would extend to all 
communication works a provision in the Copyright Act that 
permits time-shifting, or the recording of a broadcast or 
cable program for private use solely for the purpose of 
viewing or listening to the recording at a more convenient 
time or for making a complaint.  The amendments were proposed 
and released as a cabinet paper in June 2003, after a review 
of how digital technology had affected the country's 
copyright law (see Paragraph 13).  Legislation incorporating 
the amendments is being drafted and is expected to be 
introduced in Parliament in April. (ref D) 
 
7. (SBU) As the International Intellectual Property Alliance 
noted in its Special 301 submission, these exceptions to 
copyright protection would send the wrong message to 
consumers and undermine efforts to curb unauthorized copying 
of CDs in New Zealand.  They would cost the industry in 
revenue and profits and discourage innovation.  However, 
Associate Minister of Commerce Judith Tizard still is 
discussing the issue with the music industry and has 
expressed a desire for a solution that satisfies all parties, 
although the format-shifting and time-shifting exceptions 
remain for now as proposed in the cabinet paper.  We will 
continue to work with the government and industry on this 
issue.  In the meantime, with discussions ongoing, we believe 
a Special 301 listing over this issue would not be helpful. 
 
Optical media piracy 
-------------------- 
8. (U) While New Zealand does not have any regulations 
specifically addressing optical media manufacturing, the 
Copyright Act 1994 -- including protections and sanctions for 
copyright infringement -- applies to optical media.  We are 
not aware of significant problems with optical media piracy 
in New Zealand. 
 
Procurement/use of government software 
-------------------------------------- 
9. (U) New Zealand has no specific guidelines relating to 
government use or procurement of software, but it does have 
general rules pertaining to protection of intellectual 
property in the public sector. 
 
TRIPS compliance 
---------------- 
10. (U) Following a government review of the Patents Act 1953 
that began in August 2000, the Ministry of Economic 
Development has drafted legislation intended to bring the act 
into closer conformity with international standards.  The 
draft would keep the maximum patent term at 20 years, but 
would tighten the criteria for granting a patent, from a 
patentable invention being new in New Zealand, to being new 
anywhere in the world, involving an inventive step and being 
useful.  The bill is expected to be introduced in Parliament 
by mid-2005. 
 
11. (U) No new IPR-related legislation was introduced or went 
into force in 2004. 
 
12. (U) We are unaware of any new legislation related 
specifically to domestic protection of traditional knowledge 
or expressions of folklore.  However, the proposed changes to 
the Patents Act 1953 include a provision to set up a Maori 
consultative committee that would advise the patents 
commissioner on whether a patent application pertains to an 
invention that is derived from Maori traditional knowledge, 
indigenous plants or animals and whether the commercial 
exploitation of such an invention would be contrary to Maori 
values. 
 
WCT/WPPT 
-------- 
13. (U) The government in June 2003 proposed amendments to 
the Copyright Act 1994 to make it more consistent with the 
World Intellectual Property Organization Copyright Treaty 
(WCT) and Performances and Phonograms Treaty (WPPT).  The 
amendments are intended to ensure that the act reflects 
developments in digital technologies and international 
developments in copyright.  Legislation containing these 
amendments is expected to be introduced in April 2005.  If it 
is passed, the government would decide whether to accede to 
the WCT and WPPT. 
 
Enforcement 
----------- 
14. (U) The New Zealand government is committed to adequately 
and effectively enforcing its IPR-related laws, as reflected 
by the creation of new criminal offenses for trademark 
infringements and the increases in penalties for copyright 
infringements. 
Swindells