OPTIONAL 2007 SPECIAL 301 REPORT

UNCLAS SAN SALVADOR 000330

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/IPE - J. Boger
STATE PASS USTR - J. Choe-Groves
STATE PASS AID/LAC
USDOC FOR 4332/ITA/MAC/MSIEGELMAN
USDOC FOR 3134/ITA/USFCS/OIO/MKESHISHIAN/BARTHUR
USDOC FOR C. PETERS

E.O. 12958: N/A
TAGS: KIPR ETRD ECON ES
SUBJECT: OPTIONAL 2007 SPECIAL 301 REPORT

REF: A) STATE 07944; B) 06 SAN SALVADOR 464


1. (SBU) Summary: One year since CAFTA-DR' entry into force, El
Salvador has made little headway in IPR protection. Law enforcement
agencies are making some use of their new ex-oficio powers, but
there remains unfamiliarity with those powers in some offices.
Resource constraints and other law enforcement challenges are also a
hindrance to improved IPR protection. Authorities have yet to
establish regulatory systems to provide data protection to
pharmaceuticals or agricultural chemicals. Post continues to
support training and technical assistance to support El Salvador's
efforts to implement CAFTA-DR IPR commitments. End summary.

Notorious Markets
--------------

2. (U) Infringing goods are readily available in cities throughout
El Salvador, usually in informal markets. The largest concentration
of such goods is offered for sale by informal venders of DVDs and
CDs who have built stalls along 4a. Avenida Sur y Norte in downtown
San Salvador, a few blocks east of the Central Market.

Optical Media Piracy
--------------

3. (SBU) The Civilian National Police (PNC) and Attorney General's
Office have targeted large-scale distributors of optical media over
the last year in an effort to maximize scarce resources and minimize
potential public opposition to targeting street vendors. In 2006,
authorities seized 194,610 pirated DVDs and CDs, down from 331,046
units seized in 2005. Also seized was equipment used to produce
optical media. Meanwhile, local industry association Promotion and
Protection of Intellectual Property (FOMPI) reports that 26 million
blank optical media were imported in 2006.


4. (U) FOMPI and other industry groups report the police are
effectively using limited resources to target distributors, but that
the Attorney General's Office has been unwilling to aggressively use
new ex-oficio (CAFTA-DR required) enforcement powers. FOMPI
representatives report that the Attorney General's Office still
requires a complaint from the original rights holder (not a licensee
or distributor) before continuing with an investigation and eventual
prosecution.

Use/Procurement of Government Software
--------------

5. (U) Representatives of the Business Software Alliance (BSA) and
Ministry of Economy are working together on a new campaign to
eliminate illegal software from government computers. The legal
framework for that cooperation is an Executive Order dated February
20, 2006, requiring government offices to use legitimate software.
The first step in the campaign is an inventory of government
software, which is scheduled for completion in March 2007.
Government offices are to report the results of the survey to the
Ministry of Finance, which will incorporate procurement of
legitimate software in the budget process. The most recent survey
of government software use, which BSA conducted in 2002, indicated
that the piracy rate was 25 percent. It identified the following
offices for their flagrant use of unlicensed software: Ministry of
Health, Electoral Council, National Civilian Police, Human Rights
Office, and the Public Defender's Office.

TRIPS Compliance, FTA Implementation and Other IP Related Issues
-------------- --------------

6. (U) Ref. B summarizes legislation passed in December 2005 to
meet CAFTA-DR IPR obligations. Reforms included the extension of
copyright protection from 50 to 70 years, extension of
pharmaceutical patent terms from 15 to 20 years, and establishment
of data protection pharmaceuticals (five years) and agricultural
chemicals (ten years). Also significant were amendments to the
Penal Code intended to strengthen law enforcement efforts to
discipline IPR violations, including a provision to allow
enforcement agencies to seize suspected pirated and counterfeit
goods, the equipment used to produce them, and documentary evidence.


Data Protection
--------------

7. (SBU) Despite CAFTA-DR obligations that El Salvador provide
test-data protection for new pharmaceuticals and agricultural
chemicals, such protection is still not available one year after the
trade agreement's entry into force. The Superior Council for Public
Health (CNSP),which is tasked with providing marketing approval for
new drugs, is working with the Ministry of Economy and National
Registry Center (CNR) to prepare an implementing regulation for data
protection and patent linkage. Meanwhile, the Ministry of
Agriculture is working with the Ministry of Economy on an
implementing regulation for agricultural chemicals. However,
interagency squabbles and a lack of transparency in the consultative
process for developing these regulations have led to numerous
delays. In October 2006, at Post's insistence, the Ministry of
Economy shared a draft regulation on data protection for drugs with
industry representatives PhRMA and FEDEFARMA. FEDEFARMA provided
feedback on the regulations, and as of February 2007 Ministry of
Economy officials report the regulation is near completion. A draft
for agricultural chemicals is not yet available.

Production, Import, and Export of Counterfeit Goods and Enforcement
-------------- --------------

8. (SBU) See paragraph 3 for information on enforcement issues
related to optical media. Trademark violations are also widespread,
most notably for clothing and footwear. BSA estimates the rate of
software piracy at 80 percent, despite a 2006 campaign that
encouraged 213 businesses to purchase licensed software. In the
first part of 2006, BSA representatives reported difficulties
working with the Attorney General's Office on software piracy cases
similar to those described in paragraph 3. However, they report
more aggressive investigation and prosecution in recent months,
thanks in part to the naming of a new Attorney General who
previously headed the CNR.


9. (U) The Attorney General's Crimes against Private Property and
Intellectual Property Unit is responsible for criminal enforcement
of IPR laws in the metropolitan area of San Salvador. Three
prosecutors in that office work part-time on IPR cases. In the rest
of the country, IPR cases are handled by different regional and
sub-regional offices of the Attorney General, but there are no
specialized units. The National Police financial crimes unit
supports the Attorney General's Office, but it also conducts its own
investigations and raids. The number of officers in that office was
recently cut in half from more than 600. Many of those officers
were re-assigned to units focusing on the prevention and
investigation of gang-related violent crime, a severe problem in El
Salvador.


10. (SBU) There was one conviction on an IPR-related crime in 2006,
the result of a guilty plea. There is a widespread view that most
Salvadoran judges lack adequate legal preparation to adjudicate IPR
cases. Currently, IPR violations are seen in mercantile and penal
Courts, and there are no specialized IPR courts.


11. (SBU) McDonald's is involved in a trademark dispute, and
related contractual dispute, with a former franchisee. In June
2003, the Supreme Court ruled in favor of McDonald's and the company
was allowed to remove infringing names and arches from the
restaurants of the former franchisee. In December 2005, an appeals
court ruled against McDonald's on a related contractual issue,
awarding the former franchisee $24 million in compensation and
damages. McDonald's is appealing the ruling to the Supreme Court.


Treaties
--------------

12. (U) The WIPO Performance and Phonograms Treaty entered into
force in El Salvador on May 20, 2002, while the WIPO Copyright
Treaty entered into force on March 6, 2002.

Training
--------------

13. (U) Post supports a variety of IPR training opportunities for
Salvadoran officials. In 2006, Econoffs identified fifteen
Salvadoran judges, prosecutors, police, and other officials to
participate in USPTO training sessions on topic such as patent
examination, law enforcement, and genetic resources. The Public
Affairs Section has organized videoconferences on IPR issues and
encouraged U.S. artists in El Salvador on USG-funded travel
highlight IPR. Econoffs have also helped government officials
access private-sector expertise to help implement CAFTA-DR
obligations related to IPR. For example, Post encouraged PhRMA to
provide technical assistance to draft an implementing regulation for
data protection and patent linkage.


14. (U) Post also helped Ministry of Economy officials contact IFPI
representatives to develop a conversion program for vendors of
pirated optical media. In early 2006, Post's ICE Attache organized
training for police, prosecutors, and judges on how to enforce the
new IPR laws, especially the ex-oficio search and seizure
provisions. In March 2007, ICE will sponsor a regional conference
on IPR enforcement in San Salvador. In May 2007, OPDAT and INL will
sponsor a workshop at which the participants will create a standard
operating procedure manual for conducting criminal investigations of
IPR violations. A second workshop is planned for judges who will
create a bench book to serve as a guide for managing IPR trial
cases.

Butler