IPR ROUNDTABLE 2: IMPROVED PROSECUTION OF IPR CASES

UNCLAS SECTION 01 OF 04 MANILA 004395

SIPDIS

SENSITIVE

STATE FOR EAP/EP, EB/TPP/IPE, EB/IFD, EB/TPP/BTA/ANA
STATE PASS USTR FOR BWEISEL AND DKATZ
STATE PASS USAID FOR CDOWNEY
USDOC FOR 4430/ITA/MAC/DBISBEE
USDOC PASS USPTO FOR PFOWLER, KHAUDA

E.O. 12958: N/A
TAGS: ECON ETRD KIPR PGOV PREL BEXP RP
SUBJECT: IPR ROUNDTABLE 2: IMPROVED PROSECUTION OF IPR CASES
NEEDED


SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION

REF: MANILA 02813


1. (U) Summary: On September 13, Embassy conducted its second
IPR roundtable to review IPR issues with US company reps and GRP
officials. Roundtable participants praised the government for
recent initiatives, notably its crackdown on pirated optical
media goods, but stressed the need to prosecute IPR violators and
create an effective deterrent effect. The Director General of
the Intellectual Property Office (IPO) presented current GRP
initiatives to coordinate better IPR enforcement and to support
the creation of specialized courts and prosecutors for IPR cases.
Private sector representatives applauded the creation of IP
courts, but emphasized the need for effective training of court
personnel and streamlining procedures to avoid duplicating the
bottlenecks now encountered in the commercial courts where IP
cases are now tried. Feedback during a follow-up private sector
meeting revealed mixed opinions about the recent progress and
future prospects for greater IPR enforcement. End Summary.


2. (U) As a follow-up to the June 7 IPR roundtable with
representatives of U.S. IP rights holders (reftel),Embassy
conducted an expanded "Roundtable 2" on September 13, with over
60 private sector representatives and eight key GRP IPR
officials, including IPO Director General Adrian Cristobal. The
Charg, Cristobal, and representatives from three industry groups
delivered remarks, followed by an open forum discussion between
participants and GRP IPR officials on current priorities for
improving IPR protection, paying particular attention to the
creation of specialized courts and prosecutors for IPR cases.
The roundtable concluded with a separate session for U.S.
business representatives and Embassy officers.


3. (U) In his opening remarks, the Charg acknowledged recent
GRP progress such as the passage and implementation of the
Optical Media Act in 2004 and stepped up enforcement actions this
year, but he highlighted several areas where further progress is
needed. Most importantly, the GRP must create a more credible
deterrent to piracy by improving the prosecution of IPR
violators, he said. In addition, he noted the needs for
legislation to implement WIPO treaties and for better education
and training for IPR enforcers. While stressing the U.S.
interest in IPR issues, the Charg underscored the importance of
f
IPR protection to encourage investment and economic growth in the
Philippines.

--------------
RECENT PROGRESS
--------------


4. (SBU) Several company representatives praised the Optical
Media Board (OMB) members and its chairman, Eduardo Manzano, for
their efforts to step up enforcement actions on optical disc
piracy. A representative of the International Federation of
Phonographic Industries (IFPI) noted a dramatic improvement
during the past year in the number of raids OMB conducted, a more
rigorous program of plant inspections, and greater transparency
in the seizure of pirated goods. Other representatives of the
optical media industry, including representatives of film and
software industry groups and individual companies, echoed this
assessment.


5. (U) Cristobal described government initiatives to improve
coordination of IPR enforcement and raise public awareness of the
importance of IPR for domestic industry and economic development.
He described how the IPO has strengthened its role in leading
interagency coordination on IPR protection. IPO is also
tabulating information about IPR enforcement actions and
prosecutions for posting on the IPO website (www.ipophil.gov.ph).
(Note: The Philippine Department of Justice (DOJ) recently
ordered a nationwide inventory of IPR cases currently in process
as part of this effort, but the data collection is proceeding
slowly. End Note.) The IPO is also improving awareness of IPR
within the GRP and advocating IPR protection with other executive
agencies, according to Cristobal.


6. (U) Cristobal added that the IPO is working to increase its
role in offering alternative mechanisms to adjudicate cases and
impose penalties on IPR violators. Several company
representatives expressed interest in using these mechanisms if
they could be guaranteed that the procedures would progress
quickly and that fines and penalties imposed will be enforced.
Cable TV industry representatives took issue with the claim that
these administrative procedures by regulators are a viable
alternative to filing cases in court, saying that rights holders
often face the same types of delays and inequities with these
mechanisms as they do with traditional courts. They noted that
the National Telecommunications Commission (NTC) has failed to
take action on a complaint filed against a rogue cable operator
over one year ago, even though the attorneys for that operator
have simply failed to appear at scheduled hearings. They also
pointed out the difficulty they face from a lack of effective
interagency coordination on these procedures. According to
participants, regulators, such as NTC for cable TV or the Bureau
of Food and Drugs (BFAD) for pharmaceuticals, often deflect or
deny jurisdictional authority over alleged IPR violations, but
IPO insists it cannot intervene in licensing issues controlled by
another agency. Cristobal said he is working to clarify the
division of responsibility between the various agencies. For
example, an IPO agreement with the NTC may allow the IPO to
adjudicate 20 cases that have languished under NTC's
jurisdiction.

--------------
WEAK JUDICIARY INHIBITS PROSECUTION
--------------


7. (SBU) Several participants underscored the extreme
difficulties they have encountered in prosecuting cases and the
ease with which IPR violators exploit judicial weaknesses to
dismiss or delay cases filed against them. One participant
summed up the feelings of the group: "The judiciary is the crux
of the problem." The IFPI representative cited several specific
cases where search warrants were quashed for questionable reasons
or cases were delayed for years with no trial. He noted that
years of attempted prosecutions have failed to yield one single
conviction, except when the defendant pleaded guilty to lesser
charges. Pharmaceutical and cable industry representatives also
reported little success in prosecuting cases in the courts.
Roundtable participants emphasized the importance of the
improvements in enforcement actions, but urged GRP officials to
move beyond the mentality that enforcement actions are
sufficient. The time has come, they said, to follow through more
effectively with prosecutions. It is also vital, they said, to
focus not only on low-level infringers, such as street vendors,
but to move up the chain to the "people behind the
establishments" and the kingpins. Participants urged improved
coordination between Philippine authorities and their
counterparts in neighboring countries; they claimed that much of
the money backing pirate operations here comes from abroad.


8. (SBU) Cristobal, noting that in the Philippine system an
aggrieved party must pursue prosecution in private cases such as
IPR violations, replied that enforcement agencies have sometimes
been frustrated when rights holders refused to pursue prosecution
of arrested IPR violators. Participants countered this claim by
saying they often choose not to pursue prosecution because --
based on past experience -- they have no faith in the ability of
the DOJ successfully to prosecute a case or the ability of the
Philippine courts successfully to conduct an IPR trial. One
participant retorted, "I choose not to pursue prosecution because
I know it will never go to court. There is no point in throwing
good money away." Another responded to Cristobal, "If you had
ever pursued a case through the DOJ and the courts, you would
know what a disincentive it is." Participants pointed out that
their reluctance to pursue prosecution is rational behavior given
the costs of litigation and the minimal likelihood of successful
prosecution. Cristobal also urged rights holders to share more
proactively information about infringers with GRP authorities.
Rights holders responded that they most often do not share
information because doing so normally compromises any enforcement
actions they may be contemplating. They said they have little to
no trust in the operational security of GRP enforcement agencies.


9. (U) Industry representatives also raised concerns over the
failure of customs and immigration officials to stem the import
of pirated goods and pursue charges against foreign IPR violators
arrested in the Philippines. Participants noted that most
pirated goods are imported and foreigners involved are normally
processed on immigration charges, and later released or deported.
Participants claimed that deportation sets these infringers free,
so many of these same individuals return illegally to the
Philippines and resume IPR violation under new identities.
Cristobal explained that the IPO is trying to work with the
customs and immigration services as well as the Philippine
Economic Zone Authority (PEZA) to address these issues.

--------------
PHARMACEUTICAL PATENTS UNDER THREAT
--------------


10. (U) The Pharmaceutical and Healthcare Association of the
Philippines (PHAP) expressed concern over proposed legislation
and administrative decisions that may reduce IPR protection of
the pharmaceutical sector. One proposal to expand the GRP's
parallel importation scheme for medicines in competition with
exclusive distributors will likely increase the proliferation of
counterfeit medicine. Two bills recently proposed to shorten
pharmaceutical patents from 20 to 10 years also concern the
industry. PHAP questioned the legality of Department of Health
Administrative Order No. 85, which allows the import of branded
products without the consent of brand owners. PHAP emphasized
the importance of IPR protection to ensure incentives for further
drug development and underscored the industry's willingness to
support affordable access to medicine.

-------------- -
SUPPORT FOR SPECIALIZED COURTS AND PROSECUTORS
-------------- -


11. (SBU) Participants expressed support for recent moves to
establish specialized courts and prosecutors for IPR cases; one
called it a "massive step forward." Following discussion of this
issue at the last roundtable (reftel),private sector groups and
the Joint Foreign Chambers of Commerce joined the IPO in lobbying
successfully for the creation of dedicated IPR courts. Cristobal
expects IP courts to be operational by the end of 2005. IPO will
help to provide training for judges and court personnel and it
will consult with the Supreme Court to plan the phased transfer
of more than one thousand outstanding IPR cases to these courts.
Cristobal underscored the opportunity provided by these courts to
restore some confidence in the prosecution IPR cases. IFPI,
offered to provide support for the training of IP court personnel
and others also said they would look at ways of assisting IPO on
capacity building for court personnel and DOJ prosecutors.
Cristobal thanked them for their offers and welcomed involvement
with law enforcement agencies, but appeared reluctant to accept
direct private sector involvement in setting up the IP courts.
(Note: Embassy, through USAID, is evaluating how we could help
package these offers of assistance into a form that would
maximize their impact and allay GRP conflict of interest concerns
over too direct involvement by IP rights holders in setting
internal policy. End Note.)


12. (U) Some participants suggested that the IP courts should
create special rules of procedure to avoid duplicating the
problems in regular courts. Specifically, participants called
for continuous hearings for cases and the elimination of
interlocutory appeals; steps were needed to reduce the use of
delaying tactics that now discourage prosecution. Attorney
Joshua Lapuz, representing the Supreme Court Office of Public
Information, said that special rules may be possible and he
advised interested parties to make these recommendations to the
Supreme Court (which administers the court system in the RP).
Lapuz noted that no additional legislation would be required to
streamline the new IP courts. Cristobal initially expressed
reluctance to pressure the courts on procedural issues and
emphasized that these issues should be left to the courts to
decide.


13. (SBU) Cristobal later privately asked if the USG and
possibly other countries would weigh in with the Supreme Court to
encourage streamlined procedures for new IP courts. Emboff
promised to sound out USG colleagues on this point and review our
experience here with judicial reforms, but noted that it would
probably be easier to initiate streamlining measures prior to
setting up the courts. These measures might include "technical
changes" such as the elimination of interlocutory appeals (which
permit endless objections by plaintiffs to even trivial matters
in order to bring the pace of prosecution to a virtual halt).
Cristobal expressed interest but made no commitment.

--------------
Wrap-up
--------------


14. (SBU) In a concluding session involving Embassy officers and
private sector representatives, participants gave mixed reviews
to the GRP's efforts on IPR. Some expressed the view that, if
the GRP continues on its current trajectory, the USG should
seriously consider removing the RP from the Special 301 Priority
Watch List. Others said that such a move is premature, claiming
that the GRP still needs to prove its long-term commitment to
continued improvement of IPR protection. Participants also
discussed several ways to increase public awareness of IPR issues
and mobilize greater public support for IPO initiatives. Many of
the represented firms are interested in collaborating with IPO to
plan public information campaigns. The US-ASEAN Business Council
in its planned October visit as well as other business groups may
also urge President Arroyo to express her strong support for
greater IPR protection in order to add momentum to IPO efforts in
upcoming meetings and further empower IPO, OMB, and others.

--------------
COMMENT
--------------


15. (SBU) As expected, the roundtable discussion focused on
problems with the judicial system in which prosecution of IPR
cases remains problematic. There was a consensus among
participants that the new IP courts offer an opportunity to
expedite the prosecution of IPR cases, but effective training and
other support will be critical to make these courts effective.
Stakeholders may lobby for special court procedures to avoid
duplicating the delays seen in regular courts. It is unclear
whether the Supreme Court will be receptive to this suggestion.
Most company representatives seemed resigned to the fact that
prosecutions will continue to be the major obstacle to improved
IPR protection in the RP and remained skeptical about prospects
for further progress with prosecutions.


16. (SBU) Embassy received positive feedback from participants
regarding the usefulness of the discussion. Cristobal
complained, with good humor, that we had put him on the "hot
seat," but also said it was useful for him to see the breadth of
interests represented at the table. The discussion focused
mostly on the big IPR interests: entertainment, software, books,
and medicines. Some representative from other industries, such
as the apparel and IT industries, told econoffs that they felt
"overwhelmed" by the magnitude of the concerns they had heard in
comparison to their own issues. However, they confirmed that IPR
infringement is rapidly growing in their industries and must be
addressed. Embassy plans to facilitate discussions between GRP
officials and representatives of these other groups in a series
of smaller roundtables focused on some of the industries that are
often pushed aside in the IPR debate. Showing that IPR is more
than music, movies and "Microsoft" is crucial to the creation of
an enduring respect for and valuing of IPR in the Philippines.

JOHNSON