IP ENFORCEMENT FUNDING PROPOSAL FOR NICARAGUA

UNCLAS MANAGUA 001043

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR INL/C/CP - JAMES VIGIL, EB/TPP/MTA/IPC - EVAN
FELSING, EB/TPP/IPE - ANNA MARIA ADAMO

E.O. 12958: N/A
TAGS: KIPR KCRM ABUD AFIN SNAR ECON ETRD
SUBJECT: IP ENFORCEMENT FUNDING PROPOSAL FOR NICARAGUA

REF: A. SECSTATE 34733

B. SECSTATE 28249

C. MANAGUA 645

D. MANAGUA 411


1. (SBU) Summary: Working with a broad range of Nicaraguan
partners, Post has developed a proposal for the intellectual
property (IP) enforcement funding outlined in REFTEL A.
While the Government of Nicaragua (GON) has recently taken
several encouraging actions related to strengthening IP
protections and the National Assembly (NA) passed a series of
IP reforms required for entry into force of the Central
America Free Trade Agreement (CAFTA),enforcement remains a
stumbling block. The Nicaraguan National Police (NNP)
Economic Crimes Unit (ECU) specifically requested assistance
for training NNP investigators in IP enforcement. Private
sector leaders of the intellectual property rights (IPR)
coalition and GON interlocutors agreed that the fact that the
ECU only has four investigators - who are responsible for all
types of economic crimes - greatly inhibits IP enforcement.
Also, the Nicaraguan Copyright and Patent Protection Society
(NICAUTOR) has been an outstanding partner in Post's efforts
to pass IP reforms and change the culture of piracy in
Nicaragua. Post seeks funding to create an anti-piracy
center (APC) that will train 120 officials in IP enforcement
by utilizing NICAUTOR facilitators. There is also a public
outreach element. This program will increase law enforcement
effectiveness and provide capacity building to a key private
sector partner. The cost of the APC is USD 55,100. See Paras
18 - 24 for proposal details. End Summary.

The Cost of IP Piracy in Nicaragua to US Business
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2. (SBU) While Post did not recommend Nicaragua for Special
301 listing thanks to progress on IP issues, significant
problems remain for US businesses. The US entertainment
industry faces an uphill struggle in Nicaragua in the face of
rampant piracy. Many outlets openly sell unlicenced goods,
knowing that the GON lacks the resources to investigate and
prosecute. In the last year, 13,000 cassettes, 19,000 CDs
(music and movie),and several pieces of equipment for making
illegal copies of music and movies were seized and destroyed
by the NNP. The fact that these raids were carried out
against only nine establishments and vendors in an open air
market show the extent of the problem. Almost all of these
outlets are now operating again.


3. (SBU) Nicaraguan Customs (Aduana) figures show that
538,125 tons of blank CDs were imported legally into
Nicaragua in 2005. Since there are only a few small outlets
for purchasing or renting legal music, movies, and software,
it is clear that a large percentage of those imported blank
CDs are for the purpose of illegal copying. While there are
a few legitimate video rental outlet operating in the
capital, Blockbuster found that it could not profitably
operate in Nicaragua.


4. (SBU) One of the largest cable television companies in
Nicaragua was recently presented with a "cease and desist"
letter from the Motion Picture Association of America for
broadcasting US-owned movies and television programs without
license, although the cable company denies responsibility
because the programming runs on a separately organized cable
channel (that it broadcasts and with which ownership is
overlapping). In the run up to the vote on IP reforms in
February, a coalition of cable companies was the most vocal
opponent to the new legislation since several may have not
been paying for the right to broadcast American-owned
content. Although computer use is growing rapidly, there are
few outlets where properly licensed software is available.
Recent media reports and anecdotal evidence also indicate
that knockoff pharmaceuticals are readily available in open
air markets.

Close Cooperation on IP Issues and Proposal Development
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5. (U) Post has developed a close partnership with many
sectors in a campaign against IP piracy in Nicaragua. REFTEL
C describes how this coalition helped pass IP reforms needed
for CAFTA entry into force, and fostered an ongoing public
information drive utilizing famous Nicaraguan musicians aimed
at changing the culture of piracy. To draft the IP
enforcement proposal described in this cable, econoff
collaborated with IP prosecutors, Ministry of Trade (MIFIC)
IP experts, ECU investigators, NICAUTOR and several
representatives of the entertainment industry.


6. (U) The primary thrust of the proposal is based on a
request from NNP ECU investigators who identified their lack
of resources and a corresponding lack of understanding of the
IP issue amongst their fellow police officers (as well as
other officials) as the biggest hindrances to effective
enforcement. Given NICAUTOR's energetic cooperation with
Post on other IP issues, and its own need for capacity
building, utilizing this association for IP enforcement
training was quickly agreed to by IP coalition members.

The Capacity of the GON and Civil Society to Combat Piracy
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7. (SBU) As mentioned above, the ECU conducted several
successful raids over the last year. Given their lack of
resources, almost all of those enforcement actions were taken
with the active participation of civil society. NICAUTOR,
with funding from a national music producer and a local
company that represents Vista Entertainment, took on the task
of conducting initial investigations and identifying
enforcement targets to the ECU. The private sector has even
purchased gasoline so police could drive to the offending
businesses.


8. (SBU) Since its creation in 2003 by 17 of Nicaragua's most
important contemporary writers and artists, NICAUTOR has
worked closely with national and foreign authors and
businesses. To date, NICAUTOR-supported seizures include
80,000 CDs, 30 CPUs containing at least seven CD/DVD burners
each, and other miscellaneous articles required for the
manufacture of illegal material. NICAUTOR also coordinates
closely with IP prosecutors.


9. (SBU) This year, the GON created an office dedicated to
prosecuting IP crimes within the Office of the Public
Prosecutor for Managua. There are currently two IP
prosecutors (both of whom have received US-funded training).
The two prosecutors have been proactive in seeking
partnerships with civil society and the USG. They were
actively involved in creating the APC proposal.


10. (SBU) The GON IPR Office also facilitated the
non-judicial resolution of at least 12 cases involving IP
infringements on music, software, photographs, videos and
other works. Many of these cases also involved working with
NICAUTOR.

NICAUTOR's Strong Record as a USG Partner Against IP Piracy
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11. (SBU) NICAUTOR's close cooperation in achieving USG IP
goals this year has been remarkable. As part of this year's
campaign for passage of IP reforms, NICAUTOR agreed that the
Embassy Managua-conceived plan could be conducted under its
auspices to maintain focus on the benefits to Nicaraguan
businesses and culture. NICAUTOR launched the campaign with
a well attended press conference. It then followed up by
organizing direct lobbying by well-known Nicaraguan musicians
(from across the political spectrum) to national legislators
and editorial boards. With a small USG grant and many free
services from the private sector, NICAUTOR also produced a CD
containing music and pro-IPR messages from Nicaraguan
cultural icons, which was distributed to legislators, media,
and others who could influence the terms of the debate.


12. (SBU) With the same USG grant and private sector support,
NICAUTOR also produced four anti-piracy spots for continuing
broadcast in every movie theater in Nicaragua, several TV
stations, the Internet, and (in audio version) on several
radio stations.

Links To Other US Foreign Policy Objectives
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13. (SBU) CAFTA implementation and trade capacity building
are identified in Post's Mission Program (MPP) Plan as the
most important economic goals for Nicaragua. IP piracy in
Nicaragua - the second poorest country in the hemisphere -
directly hinders international investment. Once an
international leader in music in the arts, Nicaragua's local
artistic community is also inhibited by piracy, which damages
the ability to produce and export artistic products. The APC
will foster an improved business climate for creators of and
investors in intellectual property.


14. (SBU) Another major MPP goal is improving the rule of law
in Nicaragua. Post has identified lawlessness as a major
roadblock on Nicaragua's path to full democracy and a modern,
vibrant economy. Evidence shows that many economic crimes
are directly linked to the corrupt political class. As
Nicaragua faces critical national elections in November 2006,
the USG must seek creative solutions to systemic corruption.
This proposal builds capacity inside and outside of the
government to take on that challenge.

Regional Partnering
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15. (SBU) While regional partnering is not an explicit
component of this proposal, with additional funding it could
easily be adapted to accommodate other Central American
countries. A second facilitator could travel to other
countries or the process could be duplicated. This would
provide Spanish-language training for regional IP officials,
which is generally not available from the USPTO acadamy.
Sending regional representatives to the APC would also be a
less expensive option.

High Impact/Low Cost
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16. (SBU) Although IP piracy in Nicaragua in absolute terms
is not as costly to US businesses as is the case in more
populous and wealthier countries, the close cooperation Post
enjoys with anti-piracy partners and the nature of the
problem here, give the USG an opportunity to have a profound
and rapid impact for relatively little cost. Police,
prosecutors, MIFIC, NICAUTOR and legal businesses are anxious
to tackle this problem. Even Aduana and DGI, which have
traditionally been primarily concerned that pirates pay their
taxes rather than with how they earn their money, are
involved in this project.


17. (SBU) Under our multi-faceted plan, a budget of USG
55,100 will allow the training of 120 police, DGI, Aduana,
and other officials, create a reference and training capacity
within NICAUTOR for future use, and provide funding for 52
outreach events to tackle the culture of piracy in Nicaragua.
This plan will also strengthen NICAUTOR so it can continue
its anti-piracy efforts.

Proposal Details
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18. (SBU) Post proposes to fund an Anti-Piracy Center (APC)
in partnership with NICAUTOR. Using a "train the trainers"
approach, a full-time APC facilitator/coordinator and a
short-term assistant facilitator (to work only during four
3-day training academies) will receive US Patent and
Trademark Office (USPTO) enforcement training of the type
that is regularly conducted in the United States for foreign
IP officials. Post will also approach the U.S. Justice
Department (DOJ) and Department of Homeland Security/
Immigration and Customs Enforcement (DHS/ICE) for training
assistance. The NICAUTOR APC facilitators will then train
Nicaraguan officials on IP enforcement.


19. (SBU) The APC will conduct four IP enforcement training
academies (one every three months) for NNP investigators from
all over Nicaragua, DGI and Aduana officials, and
prosecutors. From time to time, journalists and private
sector partners may also be invited to participate. There
will be 30 participants per academy for a total of 120 over a
year. As mentioned above, there are currently four ECU
investigators and two dedicated prosecutors. The academies
will educate participants on the seriousness of the problem,
Nicaraguan IP law, investigative techniques unique to IP
cases, evidence preservation, making charging decisions,
drafting indictments, and preparing cases for trial.


20. (SBU) For the three months leading up to the first
academy, the APC facilitators will receive their training and
prepare investigation and prosecution handbooks for
specialized personnel. They will also create audiovisual and
other training materials. A private sector video production
company has agreed to provide its services at reduced cost.
All materials used to present the enforcement academies, as
well as other accumulated anti-piracy materials, will be made
available as an IPR library within the APC.


21. (SBU) In addition to conducting the conferences, the APC
facilitator will also be required to lead an anti-piracy
public information campaign. At least once a week, he or she
will conduct outreach to educational institutions, business
chambers, media and/or artistic organizations. The person
hired as a facilitator will be paid a Nicaragua-scale
professional wage in hopes of attracting a dynamic individual
who can, in turn, be developed as an IPR leader for the
future. An attorney or person with entertainment business
credentials would be a strong candidate. USG lectures from
USPTO, DOJ, ICE, and IPR association (pharmaceutical, motion
picture, music, software, etc.) will be encouraged to
participate as lecturers as well.


22. (SBU) This proposal will also build organizational
capacity for NICAUTOR, which is a not for profit
organization. Despite its successes, NICAUTOR has neither an
office nor a staff. It's sole employee is Engel Ortega, a
well known Nicaraguan song writer. Several international
copyright protection societies are partnered with NICAUTOR
but are reluctant to provide direct funding until it can show
success in forging royalty contracts with the Nicaraguan
private sector. Post believes that this proposal will give
NICATOUR the organizational strength needed for it to become
self-sufficient in a short time.

Cost Breakdown (USD, For One Year)
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23. A. Renting and maintaining an office: $7,000

B. Facilitator/coordinator: $20,000

C. Assistant facilitator: $1,600 ($400 per academy)

D. Administrative assistant: $2,800

E. Rental of facilities for four training academies
(including lunch for participants): $8,000

F. Academy attendee materials: $500

G. Support for public outreach (including travel): $1,000

H. Accountant (two visits per month): $1,200

I. Auditor: $5,000

J. Training/Audiovisual Materials: $2,000

K. Training of facilitators: $6,000


Total: $55,100

Measuring Results and Verifying the Appropriate Use of
Official Funds
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24. (SBU) A committee consisting of three officers from POL
(INL),ECON (IPR),and USAID (TCB-IPR) will oversee this
program. NICAUTOR will be required to submit monthly reports
on its activities. This proposal covers the cost of
contracting accounting services. Also, $5,000 will be used
to contract an independent auditor to verify the appropriate
use of official funds and other contract requirements. Post
will also monitor the number of siezures, arrests, and
convictions to measure the direct impact of this program.

Points of Contact
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25. Post looks forward to receiving feedback on this
proposal. Points of Contact are Dana Deree
(DereeDD@state.gov) until May 31, and Nicole Chulick
(ChulickNA@state.gov) thereafter.
TRIVELLI