NIGERIA: WIDESPREAD IPR VIOLATIONS INCREASE COSTS

UNCLAS SECTION 01 OF 02 LAGOS 000116 SIPDIS SIPDIS STATE FOR AF/W, COMMERCE FOR KBURRESS USDOC FOR USPTA PAUL SALMON STATE PASS USTR FOR LISER, AGAMA USDOJ FOR MARIE-FLORE KOUAME E.O. 12958: N/A TAGS: KIPR ECON PGOV NI SUBJECT: NIGERIA: WIDESPREAD IPR VIOLATIONS INCREASE COSTS IN NIGERIA LAGOS 00000116 001.3 OF 002 Sensitive but Unclassified; Handle Accordingly ¶1. (SBU) Summary: The prevalence of software piracy in large, established Nigerian companies and in the movie industry hinders Microsoft in identifying domestic partners in the fight to enforce intellectual property rights. U.S. company Schlumberger faces theft of proprietary information required for bids submitted via Nigeria's electronic petroleum exchange. Pfizer claims the government could control fraudulent pharmaceuticals by requiring distribution from monitored facilities, but lacks the political will to do so. IPR violations raise costs for businesses, discourage foreign investment, and ultimately hinder Nigeria's economic development. End Summary. ¶2. (SBU) During a March 10 meeting with representatives of Microsoft, Schlumberger, and Pfizer, Nigeria Desk Officer Andrew Silski shared information regarding benchmarks under the Special 301 Watch List process. Company representatives described Nigeria's challenging environment for protection of intellectual property rights (IPR). -------------- Microsoft Seeks Partners, Finds Many Lacking -------------- ¶3. (SBU) John Okereke of Microsoft and of the Business Sofware Alliance (BSA) told Deskoff that a BSA worldwide study of intellectual property rights (IPR) violation rates indicate globally 80 percent of IPR are violated and a forthcoming study on Nigeria demonstrates a similar high rate. (Note: The U.S. rate is approximately 21 percent. End note.). Piracy goes far beyond small business and retail users and extends to large, respected businesses, such as a large Nigerian commercial bank running 4,500 unregistered software packages. Even after meetings to address the problem, the bank is dragging its feet both in admitting the scale of the problem, and in rectifying the situation, though they have begun uninstalling several hundred of the illegal packages. ¶4. (SBU) Microsoft's Memorandum of Understanding (MOU) with the Economic and Financial Crimes Commission (EFCC) several years ago formalizes the agreement between the EFCC and Microsoft to work together in addressing IPR software violations, now most often conducted through the Cyber Crime unit of the EFCC. Okereke described the working relationship between the two entities as "good." The actions by the EFCC in February 2008 to close down a pirated software market in Lagos showed its effectiveness at one-off enforcement actions; generally, however, the software pirates continue to operate unimpeded, said Okereke. Working with the Nigerian Copyright Commission (NCC) has potential, however, the NCC is hampered by financial constraints and the lack of political will. When asked by the Deskoff if Nollywood, Nigeria's movie industry, was a potential partner on IPR issues, Okereke replied it would be in theory; but, most Nigerian movie production companies pirate the Adobe software used in film editing. -------------- Schlumberger Wary of Weaknesses in Electronic, Physical Monitoring Systems -------------- ¶5. (SBU) Steve Fulgham, Managing Director of Schlumberger, told DeskOff his company is concerned about the Nigerian Petroleum Exchange (NIPEX) and its ability to protect proprietary data. NIPEX is an electronic on-line exchange through which oil field service companies submit bids for work in Nigerian oilfields. Fulgham described the lack of transparency in the exchange rules, particularly the requirement that bidders upload technical drawings and specifications as part of the bid. NIPEX does not offer sufficient guarantees that the company's proprietary and sensitive information will not be shared with competitors, LAGOS 00000116 002 OF 002 Fulgham said. Technical abilities and standards, commercial capabilities, and technical drawings are all routinely submitted via the exchange. In one recent case, NIPEX officials held bidding open past the published deadline to allow a Nigerian company to submit a late bid; in Fulgham's view, the exchange may prove similarly incapable of protecting proprietary information. ¶6. (SBU) Fulgham noted that IPR violations have serious safety consequences for the oil industry. Pirated oilfield equipment, often imported from China, is sub-standard, untraceable to a production batch for quality assurance, and made of non-approved materials that cannot withstand the extreme conditions to which they are subjected to in the oilfield, said Fulgham. To avoid problems with pirated pharmaceuticals, Schlumberger imports medications for its staff rather than trust drugs procured locally. -------------- -------------- Pfizer Sees Little Political Will to Change -------------- -------------- ¶7. (SBU) Bunmi Femi-Oyekan of Pfizer described the current registration process implemented by the National Agency for Food, Drug Administration and Control (NAFDAC) as "challenging" at best and "chaotic" at worst. Pfizer finds the Customs Service to be the company's largest hurdle in combating fake drugs, describing Customs enforcement as ineffective. Pfizer supports training for Customs and advocates that the industry send a strong, consistent, unified message to Customs and other law enforcement agencies about the high costs of IPR violations and the necessity of combating them at all levels. She also suggested that the government knows one important way to solve the fraudulent pharmaceuticals problem, i.e. pharmaceutical distribution from monitored facilities only, but lacks the will to implement it. ¶5. (SBU) Weaknesses throughout the distribution process allow IPR violations to flourish, the group contended. Customs officials are easily bribed to allow pirated or sub-standard products into the country. Once in country, even legitimate goods can be exchanged for fake goods at any point between the warehouse and the retail distribution point, Fulgham and others pointed out. In addition, import bans and local content laws drive up the price of legitimate foreign and domestic goods, fueling the demand for fakes. ¶7. (SBU) Comment: Combating piracy in Nigeria requires a broad approach across many sectors; not just the software and pharmaceutical industries. IPR violations raise costs for business consumers, making Nigeria an increasingly expensive place to do business, discourages U.S. investment, and hinders the country's economic development. We are in a continuing dialogue with GON agencies and at the April Trade Investment Framework Agreement quarterly meeting, Post will again push for increased engagement and results from the NCC, Customs and the Ministry of Commerce and Industry. End Comment. ¶8. This cable has been cleared by Embassy Abuja. BLAIR