IPR ROUNDTABLE FOR A/S SULLIVAN'S VISIT TO SAO PAULO

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E.O. 12958: N/A
TAGS: EFIN EINV ECON BR
SUBJECT: IPR ROUNDTABLE FOR A/S SULLIVAN'S VISIT TO SAO PAULO



1. SUMMARY: Assistant Secretary for the Bureau of Economic, Energy,
and Business Affairs Daniel S. Sullivan held a roundtable on
intellectual property rights (IPR) on December 12 at the U.S.
Consulate in Sao Paulo. Representatives from recording, film,
publishing, healthcare, and Sao Paulo state industry all voiced
concern about the growing preponderance of intellectual property
rights violations in the country. The common themes were the
adverse affect on Brazilian culture that pirated goods represent and
the apparent lack of interest by the Government of Brazil in
enforcement of existing laws. According to several of the
interlocutors present, universities and the Government of Brazil
(GOB) itself also distribute pirated goods. A/S Sullivan told the
group he would convey to the GOB the group's message about the
damage to a country's cultural heritage pirated goods represent, and
encouraged the participants to do the same. END SUMMARY.

Music and Film
--------------


2. Jorge Wilson Clayton, an attorney for the Association Against
Piracy for the Movie and Music Industry (APCM) noted that the big
problem in Brazil is sales of pirated CDs on the streets. He noted
more than 200 "burners" in Brazil where music and movies are
illegally copied for sale in Brazil. As a result, many legitimate
movie rental chains (including Blockbuster which sold its chain of
stores in Brazil to Lojas Americanas) have closed because they
cannot compete with pirated videos sold on the street. He noted 59
percent of films sold in Brazil are pirated, but that the police
regard movie piracy with a lower priority despite precincts
dedicated to fighting IPR violations. Clayton argued that the lack
of prosecution encourages the behavior to continue because no one
believes they will be punished for buying or selling pirated goods.



3. Clayton highlighted that piracy is not only of American artists,
but of Brazilian movies and music as well. The Brazilian movie
Tropa de Elite (The Elite Troup) released earlier this year is the
most pirated film in Brazil to date. [Note: Millions of Brazilians
watched pirated versions of this Paramount Studios movie before it
came out in theaters, forcing Paramount to release the movie a month
earlier than anticipated. End Note.] Furthermore, 80 percent of
music sold in Brazil is of Brazilian bands and artists. According
to Clayton, Brazilian record labels are launching fewer bands each
year because they are not generating adequate profits due to
copyright violations. He emphasized that local talent suffers in
the long run and that eventually only foreign talent would be
present in Brazil.

Books and Educational Materials
--------------


4. Representatives from the publishing industry complained of a
similar disregard for copyright laws for textbooks. Dalton Spencer
Morato Filho, Legal Director for the Brazilian Association of
Reproduction Rights (ABDR) told A/S Sullivan that universities and
students are the biggest culprits of pirated books and articles,
including best sellers and books in foreign languages. According to
Dalton, ABDR raids of university copy centers that started in 2004
have reduced the physical copying of books and articles; however,
book piracy has moved to university intranet sites and to the
internet. ABDR has been somewhat successful in suspending Brazilian
websites, but many foreign sites also host pirated material,
including U.S. based websites. Dalton noted the government and
police have not seriously condemned book piracy because of the
public perception that students are poor and have the right to free
access to educational materials.


5. Dalton directed A/S Sullivan to a 2005 policy of the University
of Sao Paulo, Brazil's largest and best public institution, that
allows books that are not written in Portuguese and/or not published
in Brazil to be reproduced without penalty. ABDR claims the policy

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has created a standard for other universities and educational
centers to follow. Even though this activity is considered illegal
according to Dalton, the GOB has not done anything to stop this
activity.

Healthcare
--------------


6. Elter Santos, Coordinator of Operations at the Brazilian
Association of Eyeglasses and Sunglasses (ABIOTICA),told A/S
Sullivan that Brazil's informal economy supplies 50 percent of
eyeglasses, creating an important health concern. In 2006, there
were 1.4 million glasses seized (both Brazilian and foreign brands)
and ABIOTICA estimates the authorities seize only 10 percent of
imported knock-offs, he said. The verification process is
time-consuming and expensive. Santos estimated that it costs
approximately USD 250 to 300 to test a single pair of glasses for
authenticity, and that each pair within a shipment needs to be
tested at an importer's expense. As transportation, distribution,
and marketing costs increase, legitimate importers are unable to
cover the costs of pursuing fraudulent merchandise. Furthermore,
Santos said the government holds auctions to sell any fraudulent
merchandise recovered.

Sao Paulo Industry Perspective
--------------


7. The Sao Paulo Federation of Industries (FIESP) representative
for IPR issues Ana Paula Villela stated that although Brazil is a
huge consumer of pirated goods, most production occurs outside
Brazil's borders. As a result, FIESP focuses its efforts on
educational seminars and training sessions to familiarize consumers
on IPR issues (some of which U.S. Patent and Trade Office (USPTO)
contributes to),and about the health and security concerns of
pirated products. She said that despite their efforts, a recent
survey by the American Chamber of Commerce showed that Brazilians
are aware they are buying pirated products, but value the price
advantage of pirated goods over the legal implications of their
actions. In 2006, FIESP visited 12 ports and border regions to
train customs agents and federal and local police about pirated
goods and provide them the legal framework for IPR protection. For
the most part, FIESP has received positive feedback from training
participants.

Lack of Enforcement
--------------


8. All participants at the IPR Roundtable complained about the lack
of committed IPR enforcement in Brazil. FIESP noted in particular
the need to increase criminal penalties for trademark
counterfeiting. According to participants, the current criminal
penalty for copyright piracy is two to four years, while only one to
six months for trademark counterfeiting. A bill to increase the
counterfeiting penalty has been stuck in Congress since 1999. While
the Lower House approved the original bill in 2001 and the Senate
revised portions of the bill and approved it in September 2003,
Congress has not promulgated the bill into law.


9. The Manager of Information Control at the Brazilian
Telecommunications Company (EMBRATEL) Anderson Luis Cantarine also
expressed concerns that the Federal government is devoting fewer
resources to enforcement. He noted that early internet reports
suggest that the Federal government will be reducing transfers to
the state governments for security, implying fewer resources
available for IP enforcement.


10. COMMENT: A/S Sullivan mentioned to the IPR Roundtable that he
is beginning to see traction in many countries for stronger IPR
enforcement driven by governments' concerns for their own artists
and culture and that IPR protection is not only an American issue,
but has worldwide implications that many developing countries are

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now waking up to. He noted that he would be seeing Brazilian
officials the next day and would be raising these issues. The
assembled group agreed that it is also incumbent upon them to take
the concerns of Brazilian industry to the Government of Brazil to
underscore how the lack of enforcement has a negative economic
impact on Brazilian companies. A/S Sullivan cited groups of young
entrepreneurs and executives such as those gathered as the strongest
and most effective force for building better understanding that
piracy is a serious crime. Focusing this problem as detrimental to
Brazilian workers, companies, artists, and culture will help
highlight the issue for the GOB. END COMMENT.


12. This cable has been cleared by A/S Sullivan's delegation.

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