1. High Tech Products and Intellectual Property Erinn Woodcock Rick Nortz Paula Ramko Lance Gomes

2. Agenda Argentina’s Hardware Industry Argentina Software Industry Intellectual Property Issues –Argentina –Brazil –Mexico Conclusion

3. Hardware (36%) Software (16%) Consumables (7%) Services (41%) Overall IT Market 1999 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

4. Argentina Hardware Market 1999 Hardware Market –$1.6 Billion Market User Segments: –Multi-users: $294 million in purchases –Single-users: $1 billion in purchases

5. Hardware Market Trends 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

6. Hardware Market Trends 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

7. Argentine Hardware Market Exports 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

8. 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 Market Imports

9. China (7%) Country of Origin Hardware USA (67%) Brazil (10%) Others (6%) Mexico (10%) Source: U.S. & Foreign Commercial Service

10. Hardware Market Import vs. Export Source: U.S. & Foreign Commercial Service

11. Hardware Market Mexico and Brazil Source: U.S. & Foreign Commercial Service

12. 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)

13. Large Firms (35%) Banks (19%) Sm & Med Sized Companies(28%) SOHO (13%) Government (5%) End User Market Hardware and Software Source: U.S. & Foreign Commercial Service

14. Software Market Trends 3 Market Segments –Software for manufacturing –Vertical software market –PC software End-User Changes –Mostly large or small-medium corporations

15. Software Market Trends 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

16. Argentine Software Market Exports 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

17. 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 Market Imports

18. USA (77%) Germany (12%) Others (5%) Spain (6%) Country of Origin Software Source: U.S. & Foreign Commercial Service

19. Software Market Import vs. Export Source: U.S. & Foreign Commercial Service

20. Software Market Mexico and Brazil Source: U.S. & Foreign Commercial Service

21. 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

22. 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.

23. 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

24. Intellectual Property Argentina 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.

25. Intellectual Property Law Brazil 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

26. 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 Property Brazil

27. 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 Law Mexico

28. 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 Law Mexico

29. 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

30. 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

31. 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)

32. Thank You Questions?