2007 SPECIAL 301 REVIEW - COSTA RICA

UNCLAS SAN JOSE 000335

SIPDIS

SIPDIS
SENSITIVE

WHA/CEN
EEB FOR JBOGER
STATE PASS TO USTR FOR JENNIFER CHOE GROVES

E.O. 12958: N/A
TAGS: ETRD ECON KIPR CS
SUBJECT: 2007 SPECIAL 301 REVIEW - COSTA RICA

REF: A. 05 SAN JOSE 0508

B. 06 SAN JOSE 0464

1.(U) SUMMARY. Costa Rica is making progress in passing laws to
protect intellectual property rights (IPR),but still falls short in
the area of enforcement due to lack of resources and weak political
will. Chapter 15 of the U.S.-Central America-Dominican Republic
Free Trade Agreement (CAFTA-DR) contains important provisions to
strengthen the legal and enforcement framework, but the treaty is
not yet in force. The agreement was signed on August 5, 2004 (i.e.,
some two and a half years ago) and we expect ratification during the
first half of 2007 and implementation before the February 29, 2008
deadline. Opposition by roughly one third of Costa Ricans including
very strong opposition by a small but vocal minority has so far
succeeded in delaying the treaty's ratification and implementation.
However, significant progress has been made in the past eight
months. President Oscar Arias is pursuing a dual track approach in
the national assembly to simultaneously consider both ratification
and passage of the necessary implementing legislation, including
several new laws related to IPR. Meanwhile, post continues to
successfully recruit candidates for IPR training from various
sectors of the government including Costa Rica's Supreme Court, and
local businesses are pursuing IPR educational initiatives. 2006 saw
the first IPR enforcement case that resulted in a conviction in many
years. Taking all of these factors into consideration, Post
recommends that Costa Rica remain on the Watch List (WL). End
Summary

--------------
TRIPS COMPLIANCE AND LEGISLATIVE ISSUES
--------------


2. (U) Since inclusion on the Priority Watch List (PWL) in 2001, the
GOCR has sought to improve its legal framework for protection of IPR
and most importantly has significant new legislation necessary to
implement CAFTA under active consideration. Costa Rica brought into
force the WIPO Copyright Treaty (WCT) and the WIPO Performance and
Phonograms Treaty (WPPT) on March 6, 2002 and May 20, 2002,
respectively. Costa Rica has also ratified the Patent Cooperation
Treaty (PCT). Despite these ratifications, Costa Rica's IPR legal
regime is noncompliant on certain TRIPS provisions. Areas of
concern are Costa Rica's lack of strongly defined time periods of
protection and insufficient criminal sentences. However, these
issues are addressed in several pending bills required to bring
CAFTA-DR into force, bills that have been the subject of many weeks
of legislative hearings in late 2006. The IPR bills are included on
a priority agenda for legislation action, and post expects the IPR
legislative package to be enacted before the end of 2007. It is
likely that these bills will take effect even before CAFTA-DR
actually comes into force.

--------------
ENFORCEMENT
--------------


3. (U) Despite significant progress being made in the legislature in
recent months, industry sources remain very concerned with the small
degree of enforcement of existing laws. Costa Rican laws provide
for both criminal and civil enforcement of IPR. The Attorney
General is widely quoted as saying that given the workload his
office faces with limited resources, IPR prosecutions are a low
priority. Industry sources say the Attorney General has recommended
that private civil actions be pursued. However, the civil system is
viewed as inadequate due primarily to the difficulties in
establishing damages. Further, the amount of statutory damages is
too small to serve as an incentive to pursue civil actions.
Accordingly, the vast majority of matters are brought through the
criminal system. One case, involving a defendant accused of selling
t-shirts with a fake trademark, was successfully prosecuted in late

2006. However, because it was his first criminal conviction, the
defendant received a suspended sentence as required under Costa
Rican law. Moreover, the IPR community was disappointed that local
media failed to report the conviction, which might have served as a
disincentive to other IPR violators.


4. (U) The Ministry of Public Security has a special organized crime
division to combat organized and trans-national crimes occurring in
Costa Rica. The unit focuses on gangs, child sexual exploitation,
stolen car smuggling, and a wide range of other miscellaneous
crimes. Within that unit there are a handful of employees dedicated
to investigating IPR violations.


5. (U) The chief prosecutor's office (Fiscalia General) is divided into
several branches dedicated to particular crimes. Under the current
system, IPR crimes fall to a unit designated as "all other crimes."
Due to IP's inclusion in this unit that covers a wide variety of
unrelated criminal activity, the prosecution of IP-related crimes is
adversely affected. Their varied workload means individual
prosecutors have difficulty acquiring the specialized knowledge and

expertise necessary for successful IPR prosecutions.


6. (U) Post management has regularly stressed the importance of IPR
enforcement when meeting with Costa Rica's chief prosecutor,
Francisco Dall'Anese. While he says he recognizes the importance of
IPR enforcement, Dall'Anese additionally states that due to the
limited resources of his office, he could not make IPR enforcement a
priority. The prosecutor believes he faces strong public pressure
to focus attention on other "more important" areas (e.g. prosecution
of corruption scandals involving three former presidents, bribery
allegations involving the government's telecom monopoly, drug
trafficking and organized crime). Dall'Anese indicates that
attention to these other areas is necessitated by internal
realities, whereas IPR enforcement is generally viewed as stemming
solely from bilateral or multilateral obligations such as WIPO and
CAFTA-DR. Dall'Anese, whose term expires at the end of 2007, has
suggested that one remedy might be the creation of an effective
administrative process designed solely for the right holder to
procure a seizure of goods without further criminal prosecution.


7. (U) Another enforcement problem involves gathering and validating
evidence. Even when a search warrant is issued, upon entering a
manufacturer, vendor, or distributor of counterfeited goods,
investigators can only seize those goods that are counterfeits of
the company that presented the complaint. Thus, while counterfeit
goods of several brands may be present, only those of one brand may
be taken as evidence. Furthermore, a company that has submitted a
complaint must send an expert witness to Costa Rica to testify that
the pirated goods are indeed different than the original. Because
of the small size of the Costa Rican market, this often is not
worthwhile to the affected companies.


8. (U) Post believes that there are two specific areas of improvement
in enforcement that would greatly enhance IPR protection. First, a
dedicated and specialized prosecutor's IP unit should be established
separate from the various crimes unit. Although this might not be
feasible in all judicial districts of the country, the creation of a
unit serving the San Jose metropolitan area would greatly increase
the efficiency of enforcement. Second, increased resources should
be provided to the IP investigatory unit of the Ministry of Public
Security so that they can expand the efficiency and quality of their
services.


9. (U) The Arias administration has voiced a commitment to improved
enforcement of IPR laws, but so far this has not been accompanied by
additional appropriations. Budgetary constraints have forced the
GOCR to make difficult decisions regarding the allocation of
available funds. Currently, although parts of the GOCR recognize
the need for improvements in IPR enforcement, other areas of
enforcement are given a higher priority. One basis for this
prioritization is the widely held view that IPR enforcement mainly
serves the interests of foreign corporations. Some GOCR officials
hope that through greater local participation in IPR issues and
continued education and public outreach programs, adequate resources
might eventually be committed.

-------------- --------------
CREATING A POLITICAL ENVIRONMENT CONDUCIVE TO IPR ENFORCEMENT
-------------- --------------


10. (U) Building upon past training initiatives, post has actively
recruited numerous candidates for various IPR training programs
offered by the U.S. Patent and Trademark Office. Costa Rica's
National Registry refers patent review work to the University of
Costa Rica's office known at PROINNOVA. This year for the first
time post sent two industrial design engineers and the general
counsel from PROINNOVA to USPTO courses on industrial design review
and advanced patent law, respectively. In addition post recruited
key personnel from the Ministry of Foreign Trade to attend a course
about copyright in the digital age. It was significant that for the
first time post recruited five members of the judiciary, including
members of the Supreme Court, to participate in IPR enforcement
conferences and training to better understand the country's
obligations under CAFTA-DR. One member of the Supreme Court has
become so interested in IPR issues that he is pursuing academic
training in the field and told Econoff he is working on a special
IPR project for the Supreme Court.


11. (U) Efforts to educate and create IPR interest groups are in the
gestation stage. Industry sources report development of an informal
network of professionals with IPR interests. The local American
Chamber of Commerce is working with the U.S. Chamber of Commerce on
a pilot project to assess public attitudes towards IPR, with a
public education campaign to be based upon survey results, similar
to an IPR project the U.S. Chamber of Commerce funded in Brazil. As
public interest in IPR protections grows, the political will to take
enforcement seriously is more likely to take hold.

--------------
USE/PROCUREMENT OF GOVERNMENT SOFTWARE
--------------


12. (U) In 2002, Executive Decree #30, 151-J mandated that all
government ministries use only legally licensed computer software.
According to this decree, each ministry was to conduct an internal
audit and submit a statement of compliance no later than July 31,

2003. The government subsequently claimed full certification of all
ministries, although there has been no independent confirmation.

--------------
RESPONSE TO PUBLIC COMMENTS
--------------


13. (U) All public comments that post has seen to date, including those
from the IIPA, IACC and PhRMA recommend that Costa Rica be moved
from the Watch List to the Priority Watch List. These postures
reflect the high level of frustration over IP enforcement post
shares with many firms trying to do business in Costa Rica. While
readily acknowledging these difficulties, we nonetheless believe
that such a move now would be counter-productive to our long-term
goals by lessening the probability that Costa Rica will be able to
ratify and implement CAFTA-DR. Among the laws necessary to
implement the treaty, the IPR legislative package has not generated
public opposition like that which exists for opening the telecom and
insurance monopolies. IPR bills required by CAFTA-DR are moving
forward in the legislative process and have made significant
progress. It appears likely that these bills will be passed and may
even take effect regardless of whether CAFTA-DR is ultimately
brought into force.

--------------
COMMENT AND RECOMMENDATION
--------------


14. (SBU) What has been most lacking in the past in Costa Rica is
political will. President Arias has made ratification and
implementation of CAFTA-DR his highest priority. He and his cabinet
are exercising strong leadership to confront obstructionists in the
legislature and the opposition of powerful unions. Post believes
that bringing CAFTA-DR into force is by far the most effective way
to obtain the IPR protections sought by industry. Costa Rica has to
implement significant IPR legislation to bring CAFTA into force by
the Feb. 29, 2008 deadline. That means that the USG will have a
very clear picture of what Costa Rica's IPR regime will look like
for many years before the next 301 report is due. Given the real
possibility for significant improvement during 2007 in legal
guarantees for intellectual property under Costa Rican law, post
favors maintenance of the status quo for one more year. In the
event that the GOCR is unable to implement the significant IPR
legislation required under CAFTA before the next 301 review, we
likely would strongly encourage moving Costa Rica to the Priority
Watch List at the next review. For the above reasons post
recommends Costa Rica remain on the Watch List in 2007.
FRISBIE