Israel may remain on the list of patent infringing countries in 2007, according to a U.S. Department of Commerce report, unless it finally amends its pharmaceuticals law.

Less than one month before publication of the U.S. Priority Watch List, the U.S. Department of Commerce has publicized its 2007 report on the limitations of commercial activity in the U.S. and other countries.

If Israel fails to amend its legislation on the protection of proprietary data in the production of pharmaceuticals, and fails to extend the term of validity of patent protection of such information, it will again find itself on the Priority Watch List of patent-infringing countries.

According to the chapter on Israel, the U.S. government and American companies remain concerned about Israeli legislation on the protection of ethical pharmaceuticals (name brand drugs available only with a prescription).

As a result, U.S. companies have limited research, development and clinical experimental activity in Israel, transferring such activity instead to countries where proprietary information is better protected.

The report notes that the issue had been dealt with in the special "301 report" publicized annually at the end of April, which ranks patent-infringing countries. The commerce report mentions that Israel has appeared on the Priority Watch List for the past two years for this reason. As the report determines that there has been no improvement, it can be assumed that Israel will remain on the list this year, too. The report specifies that Israel's Pharmacists Law does not provide sufficient OECD-level protection of ethical companies' production data against generic drug companies.

The U.S. government is also troubled by intellectual property legislation in Israel regarding personal criminal culpability for unlicensed use of software. According to the report, if the bill submitted by the government in 2005 is passed in the Knesset, end users will not be held culpable for the unlicensed use of software, weakening protection of business software.

The legislation also enables import of patent protected products, and the U.S. government is concerned that intellectual property rights on such products will be weakened.

Another issue being closely monitored by the U.S. government is the protection of copyrighted music in public airings. According to the report, Israeli legislation does not include such protection, as promised by the Israeli government. Tomer Feffer, Secretary General of Pharma Israel (which represents ethical pharmaceutical companies worldwide) notes that the low level of protection available in Israel overshadows its commercial ties with European countries. He said EU and Swiss demands are similar to those presented by the U.S.