High Tech Products and Intellectual Property

Erinn Woodcock

Rick Nortz

Paula Ramko

Lance Gomes

Agenda

• Argentina’s Hardware Industry

• Argentina Software Industry

• Intellectual Property Issues– Argentina– Brazil– Mexico

• Conclusion

Hardware (36%)

Software (16%)

Consumables (7%)

Services (41%)

Overall IT Market1999

Source: U.S. & Foreign Commercial Service

Total IT Market :– Grew at 11% in 1999

– Total Market $3.84 Billion in 1999

– Expected growth of 10% through 2000

Argentina Hardware Market

1999 Hardware Market – $1.6 Billion Market

User Segments:– Multi-users: $294 million in purchases– Single-users: $1 billion in purchases

Hardware MarketTrends

• 3.6 Million PCs in the Market

• 800,000 PCs sold in 1999– Total market penetration about 10 %

• Volume increase 10% in PC sales demonstrates growth of market– Residential market and small and medium-sized

businesses responsible for the growth

Hardware MarketTrends

• Government Initiatives – Science and Technology Secretariat and the Banco

Nacion will work together to:• Reduce overall costs of ownership

• Provide financing

• 8% growth projected for the sector

• Goal of 1 million homes with PCs and Internet connection

Argentine Hardware MarketExports

• Basically nonexistent

• “Export” imported products– These are customized solutions to specific

clients’ subsidiaries located in bordering countries

• Export sales of $4.8 million in 1999

• Total Hardware Import market– $1.45 billion in 1999

• US accounts for 67 % of computer import market

• 1999: $1 billion in sales of US Hardware products

• 1999-2000: Argentina increased hardware imports by 8%

Argentine Hardware MarketImports

China (7%)

Country of OriginHardware

USA (67%)

Brazil (10%)

Others (6%)

Mexico (10%)

Source: U.S. & Foreign Commercial Service

Hardware MarketImport vs. Export

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1997 1998 1999 2000

ImportDomesticExports

Source: U.S. & Foreign Commercial Service

Hardware MarketMexico and Brazil

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1998 1999 2000

Source: U.S. & Foreign Commercial Service

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1998 1999 2000

Argentina Software Market

1999 Software Market – $459 Million Market– Expected Growth 10% per year

User Segments:– Banks, Large Firms, Government Agencies– Medium and Small Companies(PyME)– Residential (SOHO)

Large Firms (35%)

Banks (19%)

Sm & Med Sized Companies(28%)

SOHO (13%)

Government (5%)

End User MarketHardware and Software

Source: U.S. & Foreign Commercial Service

Software MarketTrends

• 3 Market Segments– Software for manufacturing– Vertical software market– PC software

• End-User Changes– Mostly large or small-medium corporations

Software MarketTrends

• Growth of PyME Market– Creates alliances between major US software

vendors and banks, vendors and resellers– Customized solutions

• Decrease in Piracy– 1997 70%– 1998 Software piracy law passed

Argentine Software MarketExports

• No Software Export Market • Local Production

– 1998: $30 Million– 1999: $35 Million– 7.2% share of local market

• Intersoft– Most important local software company– Will be expanding into Brazil, Paraguay,

Venezuela

• Total software import market– $459 million in 1999

• US accounts for 77% of software import market

• 1999: $350 million in sales of US software

• 1999-2000: Argentina increased software imports by 10%

Argentine Software MarketImports

USA (77%)

Germany (12%)

Others (5%)

Spain (6%)

Country of OriginSoftware

Source: U.S. & Foreign Commercial Service

Software MarketImport vs. Export

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ImportDomesticExports

Source: U.S. & Foreign Commercial Service

Software MarketMexico and Brazil

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Source: U.S. & Foreign Commercial Service

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Intellectual Property Guidelines

WTO (World Trade Organization)

• Sets guidelines for international trade rules

TRIPS (Trade-related Aspects of Intellectual Property Rights)

• Established in 2000

• Covers treatment of copyrights, patents, trademarks, layout of integrated circuits

• A company or individual in a WTO country can patent a product/process to prevent others using, selling or importing without the owner’s consent

Intellectual Property Law

• 1933 Law on Intellectual Property - Provides copyright protection- Nov. 1998 revision: copying software is illegal

• 1981 Law on Technology Transfer- Governs agreements providing for the transfer, assignment or licensing of technology or trademarks.

• 1981 Law on Trademarks and Designations - Ownership of a trademark begins at registration.

• 1998 IPR Protection for Software

- Explicitly included software in protected area

- Reduced software piracy by 8%• Software Legal

- Private sector group representing local software interests- Will initiate legal action against companies using pirated software.- Claims 15,000 companies are using pirated software.- Launched 170 piracy lawsuits since 1998, has won only one case.

Intellectual Property Law

Intellectual PropertyArgentina

• Level of software piracy- 1998: 62%- 1999: 55%-60%

• U.S.’estimated retail losses from software piracy:- 1998: $124M- 1999: $250M

• 2000 - Black market for computer programs is est. $1.5B/year.

• The government paid the software industry over $5M for using 22,525 versions of pirated software.

Intellectual Property LawBrazil

• April 1996 - Law protecting layout of designs of integrated circuits

• May 1997 - Industrial property law covering patents and trademarks

• February 1998 - Software law protecting computer programs as “literary works” with 50 year protection

• Draft of Bill in 2000 - Broaden criminal penalties and streamline judicial process

• Level of software piracy- 1998: 61%- 1999: 58%

• U.S.’estimated retail losses from software piracy- 1998: 367M- 1999: $392M

• Has one of the largest piracy rates in the hemisphere

• Local industry groups

•Business Software Alliance

•Brazilian Software Companies Association

Intellectual PropertyBrazil

• NAFTA (North American Free Trade Agreement)- Mexico must provide effective border enforcement

•December 1996 Copyright Law:

- Substantially increased protection for computer programs

- Criminal penalties were increased

•March 1998 “Reglamentos”

-Most significant change to Mexican copyright law

- Tripled the number of inspectors

Intellectual Property LawMexico

• May 1999 Penal Code Update - Substantially increased penalty for IPR violations

• November 1999 Law of Industrial Property (reformed)

- More jurisdiction in copyright law

- Original law brought Mexico’s patent and trademark legislation in line with NAFTA

Intellectual Property LawMexico

• Level of software piracy- 1998: 60% - 1999: 56%

• U.S.’estimated retail losses from software piracy- 1998: $147M- 1999: $134M

• Mexico piracy is below the 80% average in Latin America

•Violations have been reclassified as a felony

Intellectual Property Mexico

Conclusion

• Hardware and Software in Argentina– Dependent on the US for Hardware and Software

– Target Markets Changing

– New Initiatives/Alliances

• Intellectual Property– Software Piracy was Rampant in the mid 90’s

– New Software Piracy Laws in many Latin American Countries

– Piracy is decreasing

– Enforcement remains an issue

Sources:

• US Department of State, FY2000; Country Commercial Guide - Argentina and Mexico

• The Economist Intelligence Unit - from Country Commerce; Argentina: June 22, 2000 and June 30, 1999; Mexico: September 30, 2000,

• SourceMex, May 12, 1999; www.ladb.unm.edu

• US Trade Representative 2000 national Trade Estimate Report on Foreign Trade. (Brazil)

• US & Foreign Commercial Services (Industry Sector Analysis: Hardware and Software for Argentina)

Thank You

Questions?