YEAR 2006 SPECIAL 301 REVIEW: POST RECOMMENDATION

UNCLAS BOGOTA 001948

SIPDIS

SIPDIS

COMMERCE PLEASE PASS USPTO FOR JOELLEN URBAN, STATE PLEASE
PASS USTR FOR JENNIFER CHOE-GROVES

E.O. 12958: N/A
TAGS: KIPR ETRD ECON CO
SUBJECT: YEAR 2006 SPECIAL 301 REVIEW: POST RECOMMENDATION
FOR COLOMBIA

REF: STATE 14937


1. Summary. Post recommends that Colombia remain on USTR's
Special 301 Watch List for 2006. While data protection for
pharmaceuticals and agrochemicals remained in effect,
Colombia continued to face high levels of copyright piracy in

2005. Colombia has the legal tools necessary to combat
piracy but a lack of sufficiently strong enforcement actions
and a weak judicial system for prosecuting IPR violations
limits deterrent effects on piracy. End Summary.

Data Protection for Pharmaceuticals, Agrochemicals Remains in
Place But Counterfeit Pharmaceuticals Are a Problem
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2. Colombia,s four-year-old decree 2085 (issued in August,
2002) that protects product and patent process data for
pharmaceuticals remains in effect after withstanding a
variety of challenges at the Congressional, judicial, and
Andean Community level. It remains the only Andean country
with such protection. Colombia,s data protection norm for
the agrochemical sector pursuant to the obligation under
TRIPS 39.3 (Decree 502/503) provides five years of protection
to agrochemicals. The Andean Tribunal recently ruled that
the GOC had overstepped its authority in issuing 2085.
Colombia, Peru and Ecuador are attempting to modify Andean
regulations to allow 2085, and the data protection agreed to
by Peru in the USATPA negotiation to stand.


3. As reported last year, counterfeit pharmaceutical
products continue to be a problem in Colombia. The regular
market contains generic products of assured quality, but
recent surveys such as the CRECER project reveal that in
rural areas, there are more counterfeit pharmaceutical
products than original ones. The CRECER project found that
only ten percent of the counterfeit products contain the
correct active ingredient and dosage, while 60 percent do not
contain any active ingredient and 30 percent contain the
wrong active ingredient or the wrong dosage. The local
pharmaceutical industry loses more than USD 35 million
annually because of contraband, counterfeiting, and
adulteration of drugs according to the National Association
of Pharmaceutical Industries (NAPI). NAPI estimates that 8
percent of the national market is illegal.

Copyright - Making Significant Progress Proves Difficult
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4. The rate of business software piracy remained steady at
55 percent of the market, the same level reported for 2004 by
the Business Software Alliance (BSA),the industry watchdog
group. BSA estimated that overall dollar losses fell from
USD 46 million to USD 44.8 million. In a 2005 study
conducted with the International Data Corporation, BSA
contended that if Colombia reduced the piracy rate by ten
percent, USD 581 million would be added to the economy, 1,900
jobs created, local industry sales increased by USD 450
million, and an additional USD 38 million added in additional
tax revenues. BSA,s business software anti-piracy campaign
continues to receive backing from Colombian government
agencies and the private sector although DAS (Security
Department of the Ministry of Justice) removed its support in
2004 stating that its focus would be restricted to national
security issues. IIPA reported that despite Colombia,s
lower software rate compared to regional neighbors, business
software piracy remains a problem among small to medium-sized
organizations, particularly outside Bogota. Evidence of
paramilitary group involvement in counterfeiting operations
and distribution of illegal software added to the scope of
the problem according to IIPA.


5. Colombia continues to obtain improvements in reducing
cable signal piracy in response to the attentiveness to
licensing and inspections by the CNTV (National Television
Commission) and MPA legal actions. According to MPA,
remaining television piracy is mostly limited to rural areas
or quasi-legal community associations where enforcement
actions have limited effectiveness. CNTV licensing and
inspections also contributed to the significant reduction in
television piracy. Cable signal piracy continued to decline
through buyouts of pirated systems by legal operators and
MPA,s active use of the legal system. In 2004, CNTV
launched an aggressive anti-piracy campaign and signed its
first cooperation agreement with FOX Sports to combat piracy
in the television market.


6. Piracy in the recording industry remains a major concern
in Colombia. The number of illegal copies in the Colombian
music market was steady at 71 percent and monetary losses
decreased from USD 51.6 million in 2004 to USD 47.7 million
in 2005. According to IIPA, heightened levels of optical
disk piracy (CD-R and DVD-R) in Colombia pose increasing
dangers to legitimate sales and distribution. The industry
estimated that over 60 million blank CD-R,s came to Colombia
in 2005, most arrived from Asia through Panama and were
priced at 3 cents per unit. This number of legally imported
disks probably outstripped demand for legitimate purposes
with the remainder diverted to piracy operations. As
reported last year, the market crisis created by piracy
caused Warner Music to close its Colombian operation in 2004.
The Motion Picture Association (MPA) did not have estimates
of industry losses in 2005 at the time of this report but in
2004, IIPA estimated the U.S. motion picture industry lost
approximately USD 40 million in 2004 and had a piracy rate of
75 percent. For 2005, MPA reported that enforcement activity
has improved and the GOC has provided funding to the Film
Development Fund (Fondo para el Desarrollo Cinematografico)
for anti-piracy activities.

Enforcement and Judicial Action Continue As Principle Problems
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7. While enforcement actions exist, prosecution is weak and
judicial action, often by judges unfamiliar with IPR, can
take years. IIPA reported that while there were 1,885 police
raids of pirating operations in the recording industry in
2005, most were directed at street level markets with only 32
raids aimed at copying or storage facilities where the effect
would be maximized. While these raids seized an estimated 7
million pirated CD-Rs and 794 CD burners, the number was
proportionally small compared to a 2004 estimate of 17
million illegal copies sold in Colombian street markets and
stalls. In addition, most of the seizures took place in
Cucuta and Bucaramanga rather than in the larger commercial
centers of Bogota and Medellin where there is a heavier flow
of pirated products.


8. Enforcement actions against book piracy improved in 2005
when the Ministry of Education began a campaign against
illegal book copying. According to IIPA, the police seized
more than 161,000 copies of pirated books and 8,300 books on
CD. The Colombian national police reported that 60 percent
of the 900,000 books pirated annually are produced in
Medellin. As in other areas of copyright piracy, these
efforts have had only a marginal effect on the USD 6 million
in annual industry losses due to book piracy.


9. Enforcement efforts notwithstanding, the judicial system
does a poor job of prosecuting and punishing those arrested
in Colombia for piracy. Few of those caught for piracy are
prosecuted and those found guilty often do not receive prison
terms. In 2005, 42 pirates received sentences, none
involving incarceration, according to IIPA. The recording
industry asserts that Colombian courts take an average of 45
months to process most cases resulting in a high number of
suspended or dismissed cases. (Comment: This situation
should improve as Colombia transitions to the accusatorial
system for hearing cases.)


10. Colombia would improve its IPR judicial process if the
government provided adequate training for civil and penal
judges who rule on IPR violations. Although the Prosecutor
General,s Office created a Specialized Unit for IPR that has
had significant recent successes, more training of judges and
investigators is needed, especially as Colombia implements
the accusatorial system that will require greater competence
in the technical presentation of cases. The IPR unit began
functioning in November 1999 and has 60 cases under
investigation on different issues including usurped
trademarks, counterfeit pharmaceuticals, pirated books, CD's,
and movies, violations to industrial secrecy, and cases
against pirate television programming broadcasters.


11. Post has supported the need to improve the investigative
abilities of Colombian investigators and prosecutors and
enhance awareness of U.S. IPR policy and law. To improve
skills in conducting IPR investigations, the U.S. Department
of Justice (DOJ) Judicial Reform Sector Reform Program in
Bogota developed a three-day IPR Seminar. The seminar
focused on the IPR law, piracy and terrorism, software
piracy, identification of counterfeit music and DVD products,
trademark violations, and hypothetical case studies. The DOJ
Computer Crime and Intellectual Property Section (CCIPS) from
Washington, DC participated in the course development and
assisted in delivering the first seminar held in Bogota in
April 2005. Other seminars were held in Cali, Barranquilla,
and Medellin. Over 109 Colombian law enforcement officials
and prosecutors have attended these seminars. The economic
section also sent the head of the Industrial Property Office
of the GOC Superintendence for Industry and Commerce to the
U.S. Patent and Trademark Office,s International Visitor
Program in February 2005 in Washington DC.

Improvements Made to Penalties but Deterrence Still Weak
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12. Colombia enhanced criminal penalties for breaches of
copyright law during the past year. In January 2005, Law No.
890 increased the incarceration time for copyright
infringement from a range of 4 years to 8 years. The new law
also modifies parole guidelines so that judges can only
approve parole if the inmate has completed two-thirds of the
prison term with demonstrated good behavior and full payment
of all fines. Another new law (No. 906) effective as of
January 2005 requires incarceration for piracy cases when the
value of the seized merchandise exceeds 150 times a
designated salary rate (approximately $20,000).

Bureaucratic Improvements Still Needed
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13. Colombia lacks a unified IPR registration system. The
grant, registration, and administration of IPR are carried
out by four different government entities. The
Superintendence of Industry and Commerce (SIC) acts as the
Colombian patent and trademark office. While it has IPR
policy control, the agency suffers from inadequate financing
and personnel, a high turnover rate, and a large backlog of
trademark and patent applications leading to a large number
of appeals. SIC has only 16 patent examiners for the whole
country. The staff has a high turnover rate, resulting in a
large backlog of trademark and patent applications. This has
led to a large number of appeals. The patent office at SIC
believes that the number of new patent and trademark
applications (currently 1,600 patent and 15,000 trademark
requests per year) will double in the next two or three
years, without considering the increase in applications that
the signing of a free trade agreement with the U.S. would
likely produce. The Colombian Agricultural Institute (ICA)
is in charge of the issuance of plant variety
protection-related and agro-chemical patents. The Ministry
of Social Protection is in charge of licensing pharmaceutical
products, while the Ministry of Justice is in charge of
issuing literary copyrights. Each of these entities also
suffers from significant financial and technical resource
constraints. Moreover, the lack of uniformity and
consistency in IPR registration and oversight procedures
limits the transparency and predictability of the IPR
enforcement regime.

Post Recommendation - Keep Watch List Status
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14. Post recommends that Colombia remain on USTR's Special
301 Watch List due to continuing high levels of piracy and
problems with enforcement and obtaining successful judicial
prosecutions for piracy. We recognize the progress Colombia
has made on legal protections for pharmaceuticals and
agrochemicals. Colombian legislation provides penalties for
IP infringement; Colombia has signed seven international
agreements regarding piracy and copyright infringement, and
losses to U.S. companies have generally stabilized during the
last five years. However, Colombia can do more to enhance
the deterrent effect of established legal remedies and
improve its enforcement actions. Once in force, the recently
concluded intellectual property chapter of the US-Andean
Trade Promotion Agreement should go a long ways toward
improving the IP situation in Colombia.
WOOD