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 -------------- -------------- ¶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 -------------- -------------- ¶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 -------------- -------------- ¶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 -------------- -------------- ¶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 -------------- ¶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 -------------- ¶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