PANAMA RESPONSE TO REQUEST FOR SPECIAL 301

UNCLAS PANAMA 000258 SIPDIS SENSITIVE SIPDIS STATE FOR EB/TPP/IPE JENNIFER BOGER USTR FOR JENNIFER CHOE GROVES COMMERCE FOR ITA/MAC/OIPR CASSIE PETERS E.O. 12958: N/A TAGS: ECON ETRD KIPR PGOV PM SUBJECT: PANAMA RESPONSE TO REQUEST FOR SPECIAL 301 VOLUNTARY INPUT REF: A. STATE 07944 ¶B. 2006 STATE 180082 ¶C. 2005 PANAMA 00413 ¶1. (SBU) SUMMARY. The legal framework governing IPR protection in Panama is substantive, although gaps exist both in domestic legislation and participation in the full complement of international treaties. Enforcement levels and resources remain weak but 2006 saw positive trends in seizures and convictions. Embassy Panama's IPR Subcommittee (Econ, FCS, NAS, PAS and AID) meets regularly to track IPR legislation and enforcement levels, identify equipment and resourcing needs, select candidates for U.S. Patent and Trademark Office (USPTO) and other IPR related training, organize public outreach and focus Panama's judiciary on IPR. Key Embassy sponsored events for 2006 included equipment donations to Panama's inter- institutional IPR Committee, MPAA sponsored movie screenings, judicial exchange between members of Panama's judiciary and U.S. District Court in conjunction with the Department of Justice. Of the industry association groups, IFPI and MPAA are the most active in Panama. Outreach to BSA, ESA and PhRMA by Econoff received friendly but noncommittal responses. END SUMMARY -------------- IT'S THE LAW -------------- ¶2. (U) Panama's domestic IPR legislation criminalizes patent, trademark and copyright violations with penalties ranging from two to four year jail terms. An Executive branch sponsored review of Panama's entire judicial code (Comision Codificadora) currently recommends increasing penalties to four to six year jail terms, initially with the exception of the use of published materials (copyright protection). Post raised with the GOP our concern that this exception under the proposed new judicial code would weaken copyright protection. Panama's Trade Ministry, working with the IPR Prosecutor and Panama's Inter-institutional IPR Committee, responded quickly to ensure the draft code would not weaken Panama's IPR legal framework. ¶3. (U) Panama is a signatory to the WIPO Copyright Treaty, WIPO Performances and Phonograms Treaty, the Geneva Phonograms Convention, the Brussels Satellite Convention, the Universal Copyright Convention, the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the International Convention for the Protection of Plant Varieties, and the Rome and Stockholm Conventions. However, Panama's domestic IPR legislation does not reflect all of its obligations under these treaties. Examples include the WIPO Copyright Treaty (WCT) and Performances and Phonograms Treaty (WPPT). In 2005-2006, Panama entered into a number of bilateral Free Trade Agreements including Mexico, Central America, and Taiwan which contained language supporting the enforcement of intellectual property rights. 4.(U) In December 2006, the U.S. and Panama concluded negotiations of a Trade Promotion Agreement (TPA),which includes a chapter on IPR. In this TPA, Panama agreed to ratify or accede to the Patent Cooperation Treaty, the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure, the Trademark Law Treaty, and the International Convention for the Protection of New Plant Varieties. Panama also committed in the TPA to make all reasonable efforts to ratify or accede to the Patent Law Treaty, the Hague Agreement concerning the International Registration of Industrial Designs and the Madrid Protocol. -------------- WHAT'S THE PROBLEM ? -------------- ¶5. (U) The primary IPR violations in Panama are copyright infringement (music and movie piracy) and trademark infringement (counterfeit designer clothing and accessories). In addition, Panama's Colon Free Zone (CFZ) is the primary conduit for blank CDs imported from Asia and re-exported throughout Latin America for use in audio and video piracy as well as for counterfeit designer goods. Wholesale vendors reported to the press an 80% decrease in sales from the prevalence of pirated CD's in Panama and a list of seven retail music stores/chains which have closed as a result. ¶6. (U) According to the 2005 BSA/IDC 3rd World-wide Study on Piracy, 71% of the software in use in Panama is pirated. Legally, the GOP is required to use only properly licensed software but anecdotal evidence suggests compliance within GOP departments is low. Despite these statistics, attempts to engage BSA/ESA in a compliance project by Post were unsuccessful. According to the IPR Prosecutor's office, only two cases of counterfeit pharmaceuticals were reported in 2006, only one of which resulted in a seizure and subsequent investigation. -------------- IPR ENFORCEMENT -------------- ¶7. (U) Panama has less than six prosecutors specializing in IPR violations, most of whom are based in Panama City. There is no dedicated court for IPR violations. IPR cases are tried in the geographic district in which they occur, which results in inconsistent application of the law depending on the sophistication and training of the sitting judge. The IPR Prosecutor's office remains underfunded and understaffed for the workload. Post's IPR Subcommittee has targeted resources (equipment, training and operational funding) for use by this organization. ¶8. (U) Nonetheless, available data indicates that IPR enforcement efforts undertaken in 2005 and 2006 were significantly higher than 2004 (Ref C). Panama's Customs Authority reported $10 million in pirated and counterfeited goods decommissioned between January and November of 2006. The primary products seized were fake designer watches, sweaters, sportswear, perfumes, jeans, shoes, hats and counterfeit cigarettes. According to Panama's IPR prosecutor, during the period between September 2005 and July 2006, 654 cases of IPR violations were reported. As of July 2006, 157 were under investigation and 471 proceeded to prosecution with 44 convictions, 4 acquittals and 34 were dismissals (SIC). Media reports claim that enforcement efforts in the Chiriqui province have significantly reduced the sale of pirated music and movies in the interior regions of Panama. -------------- ABSENTEE JUDICIARY -------------- ¶9. (SBU) The most significant IPR enforcement hurdle in Panama remains the apathy and ignorance of the judiciary. The sale of pirated goods is considered a victimless crime at a minimum, and at times an important source of financial support for poor Panamanians. Despite painstaking work by the Prosecutor's office, most Panamanian courts look for a technical violation in the application of procedural rules that will allow them to dismiss the case. ¶10. (U) As a result, Post specifically designed a program to raise the judiciary's consciousness on IPR issues. Working with DoJ's Office of Overseas Prosecutorial Development, Assistance and Training (OPDAT),a program of exchanges with U.S. District Judges began in 2006. Selected Panamanian judges are sent to observe proceedings in a U.S. District court to demonstrate the professionalism and efficiency of U.S. procedure and to build rapport. In 2007, it is anticipated that one or more U.S. District judges will come to Panama to conduct a seminar and assist the participating Panamanian judiciary in creating a "bench book" on how to try IPR cases in Panama. The first exchange took place in U.S. District court in Puerto Rico on December 4th and 5th. Thanks to the good offices of both DoJ and USPTO, Post was able to send the three participating judges directly onto Miami for the USPTO/SEICA Seminar for the Judiciary on IPR Enforcement December 6 to 8th. -------------- STAYING ON MESSAGE -------------- 11.(U) To counteract the perception of IPR violations as "victimless" crimes and/or only harming large multinational corporations, Post's IPR public diplomacy focuses on four key messages: 1) the impact on local Panamanian music, culture and indigenous art 2) the safety issues surrounding counterfeit goods 3) the financial support of large criminal organizations resulting from the purchase of pirated goods including the damage to the economy from the need to launder the proceeds and the lost tax revenue to the government; and 4) the negative impact on innovation and foreign direct investment from weak IPR enforcement. ¶12. (U) With the assistance of the MPAA, Embassy Panama sponsored a screening of "An Inconvenient Truth" and other films with opening remarks by the Ambassador in support of IPR enforcement. As part of a general outreach, several ELO's have visited the University of Panama's English language classes to engage in dialogue with young Panamanians on a variety of topics, including IPR. ¶13. During 2006, the Latin American arm of IFPI established the non-profit organization PRODUCE in Panama. PRODUCE will centralize the collection of royalties and other fees for the public use of copyrighted material to be remitted back to the appropriate artist/record company. PRODUCE represents Sony, BMG, Universal, Warner and EMI. The Panamanian government had some difficulty accepting this activity under the banner of "non-profit" but eventually IFPI/PRODUCE prevailed as they will also collect and remit royalties related to the use of indigenous music and Panamanian folklore which Warner has agreed to distribute internationally under its label. ¶13. (U) PRODUCE told Emboffs that it is working with Panama's small business organization (AMPYME) to assist street corner CD/DVD vendors in forming micro-businesses and distribute legitimate product. They are also planning a public relations campaign of TV and radio ads by local artist against piracy. A WIPO seminar is scheduled for the end of March/first week in April 2007 including a session on border IPR enforcement. -------------- COMMENT -------------- ¶14. (SBU) It is the consensus of Post's inter-agency IPR Subcommittee that Panama remains on a positive trajectory regarding IPR enforcement. The three main obstacles to IPR enforcement in Panama remain the strength of Panama's informal economy, lack of resources for law enforcement agencies, and a reluctant judiciary. The attitudes of Panamanian IPR law enforcement and civil authorities indicate a recognition of the importance of IPR protection. The financial impact of IPR losses to industry from Panama is relatively small compared to Mexico, Brazil, and others in the region. However, all industry groups express concern about the importance to the region of IPR enforcement within the CFZ. Eaton