SPECIAL 301 REVIEW: SPAIN

UNCLAS SECTION 01 OF 06 MADRID 000224

SENSITIVE
SIPDIS

STATE FOR EUR/WE AND EEB/TPP/IPE
STATE PASS USTR FOR JGROVES AND DWEINER
STATE PASS U.S. COPYRIGHT OFFICE
USDOC FOR 4212/DCALVERT
USDOC ALSO FOR PTO

E.O. 12958: N/A
TAGS: KIPR ETRD ECON SP
SUBJECT: SPECIAL 301 REVIEW: SPAIN

REF: A. STATE 08410

B. 08 MADRID 1351

C. 08 MADRID 1346

D. 08 MADRID 1318

E. 08 MADRID 1257

F. 08 MADRID 1194

G. 08 MADRID 1150 AND PREVIOUS

H. 08 STATE 45107

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SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY

SUMMARY AND RECOMMENDATION


1. (SBU) Spain was placed on the Special 301 Watch List in
April 2008 primarily due to the government's failure to take
specific, concrete measures to address a growing Internet
piracy problem. One year later, Internet piracy continues to
grow. The government is attempting to address the problem in
several ways - most notably by pressing for results in
negotiations between Internet Service Providers (ISPs) and
rights-holders on measures to prevent unauthorized downloads.
Because it does not want to take potentially controversial
action without the agreement of both parties, the government
has not yet initiated any legislative or regulatory measures
to combat digital piracy, pending the conclusion of
negotiations. The government has taken a number of other
steps to discourage piracy and raise public awareness. In
November 2008, the Minister of Culture introduced the
government's third anti-piracy public awareness campaign in
the past four years. In the same month, the Ministry of
Industry, Tourism, and Trade hosted its second annual
conference on IPR in the digital environment, which featured
a USG speaker. Rights-holder groups praised the release by a
GOS inter-agency group of an IPR good practices manual that
includes guidance on investigating and prosecuting IPR
crimes. Notably, the manual emphasizes that unauthorized
peer-to-peer (P2P) downloads are always illegal.


2. (SBU) The government is not investigating or prosecuting
cases of file-sharing or P2P downloading, due in large part
to the 2006 Circular of the Fiscalia (Prosecutor General's
Office) stating that such activity should not be subject to
criminal prosecution but rather treated as a civil violation.
In civil proceedings, investigators are unable to obtain
identifying information from ISPs, making the civil route
unproductive; the government may seek to address this problem
once negotiations are completed. Post is not aware of any
efforts by the government to modify the Circular despite our
efforts. Separately, the Business Software Alliance reports
strong cooperation on the part of the GOS, and Microsoft says
software piracy levels declined in 2008. Rights-holders
praise the ongoing work of the National Police and Civil
Guard in combating street piracy at the national level but
note that Internet piracy is now a more important problem.
Separately, police actions against informal street sellers
have come under growing public criticism, and a movement to
decriminalize such street sales has garnered media and
Congressional attention.


3. (SBU) Recommendation: As described above, the GOS is
acting against piracy in a number of significant ways.
However, most observers agree that Internet piracy will
continue to flourish until the ISPs and the GOS agree to
regulatory and possibly legislative actions. Post believes
the private-sector negotiations will eventually produce an
agreement that the government will then assist in
implementing, but it is not clear whether this will happen in
the next few months. For this reason, post recommends
keeping Spain on the Watch List. End Summary and
Recommendation.


4. (SBU) Intellectual property rights policy in Spain is the
province of the Ministry of Industry, Tourism, and Trade and
the Ministry of Culture. The Ministry of Interior (which
oversees the National Police and Civil Guard) and the
Ministry of Justice (of which the Fiscalia is an independent
branch) are responsible for enforcement. Within the Ministry
of Industry, Tourism, and Trade, the Office of Patents and
Trademarks manages industrial property issues and receives
high marks from industry representatives for its
professionalism. The Ministry of Culture has the lead on
copyright issues in tandem with the Ministry of Industry,
Tourism, and Trade's Secretariat of State for
Telecommunications and the Information Society. The Minister

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of Culture chairs an Inter-Sectoral Committee created in 2005
to implement the national anti-piracy plan and has been
perhaps the most visible public figure speaking in defense of
improving Spain's IPR enforcement. Rights-holders give the
Ministry of Culture credit for his understanding of the
problem and strong desire to fix it, but lament the
Ministry's lack of resources and clout. The government has
not centralized coordination of the fight against Internet
piracy; however, a lack of coordination is less an issue than
deficiencies in the legal regime.

INTERNET PIRACY - GOVERNMENT PUSHES PRIVATE SECTOR
NEGOTIATIONS


5. (SBU) At the urging of the Ministry of Industry, Tourism,
and Trade, Redtel, the association comprising Spain's four
largest ISPs (Telefonica, Orange, Vodaphone, Ono),began in
May 2008 to meet with the Anti-Piracy Coalition, which
represents the film, music, and video games industries and
copyright management societies, to discuss ways to combat
internet piracy. After extensive discussions and exchanges
of information, it was not until late September that Redtel
made its initial proposal for the creation of a new
government commisssion to hear complaints of digital
copyright infringement and send notifications to alleged
violators. Content providers deemed Redtel's proposal
problematic in various respects - cumbersome, potentially
unworkable, not far-reaching enough - and had concerns as
well about the cost burdens, but accepted it as a basis for
further discussions. The parties have continued to meet, and
all agree the talks are serious and are advancing, albeit
slowly and with occasional steps back. The Minister of
Industry, Tourism, and Trade, Miguel Sebastian, called for
the parties to present to the government by December 31 a
document listing their areas of agreement and disagreement,
but they failed to meet this deadline. The new target date
is the first week of March, at which time the government
hopes to make a public announcement.


6. (SBU) Rights-holders groups advise that any decision
reached by that date will be general in nature, with many
details remaining to be worked out. The two sides and their
lawyers are reportedly far apart on the legal measures that
will be required to implement any such agreement, with the
content providers arguing that a Ministerial decree may be
sufficient while the ISPs have suggested that four or five
laws may need to be amended, a process that would take at
least two years and probably longer. Progress on adopting a
framework to make some content legally available online has
been mixed, with the Redtel pushing hard for access to more
music and especially films than the rights-holders are
prepared to make available. While rights-holders frequently
complain about the slow pace of negotiations and about
Redtel's tactics, and several have at one time or another
threatened to pull out, the parties appear interested in
reaching agreement, though the early March deadline may be
unrealistic. The GOS would prefer that the two sides reach
agreement on as many aspects as possible, and one official
has privately expressed concern that they may put forward two
different proposals, requiring the government to act as
broker.


7. (SBU) It should be noted that differing priorities and
interests among the rights-holders' groups that comprise the
Coalition have complicated the negotiations. The music and
film industries, for example, are at odds over Redtel's
insistence that penalties for repeat offenders will not
include suspension or cancellation of Internet services. The
Music Producers of Spain contend that the threat to cut off
repeat violators must be an option, even if rarely exercised,
for the system to work. The Motion Picture Association and
its local allies believe there are alternative sanctions,
such as a significant reduction in bandwidth, that would be
sufficient to deter recidivists.


8. (SBU) The government, for its part, has pushed the
parties to continue to negotiate and has promised to assist
in implementing any agreement once the parties agree on what
regulatory/legislative changes are needed. It remains
reluctant to propose any legislative or regulatory measures
that are not fully supported by the private sector, believing
that any such initiatives would be unpopular and unlikely to
succeed. As a result, several legal obstacles to effective
IPR protection that the USG has urged the government to

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modify - e.g., the "actual knowledge" standard for ISP
liability, the prohibition against identifying alleged
infringers in the context of civil litigation - remain in
place. The government says it has prepared a number of
possible legislative proposals, depending on what service
providers and rights-holders agree to. The government, like
most rights-holders, is hopeful that relatively few, modest
legal changes may be sufficient.


9. (SBU) Industry figures show that between July 2007 and
June 2008, there were 1.9 billion music downloads, of which 4
percent were from legal, paid services, and 250,000 film
downloads, of which 2 percent were legal and paid, Cynics
among the rights-holders assert that the government's posture
actually gives the ISPs an incentive to negotiate slowly,
since an agreement could trigger government actions that the
service providers would prefer to delay as long as possible.
In pushing the parties to reach agreement, the government has
threatened to impose its own solution if negotiations fail
but is clearly reluctant to take such a step, and the parties
know it. The government, all agree, wants Telefonica and the
other telecommunications companies that own the ISPs to
voluntarily make some concessions - especially, to agree to a
graduated response regime modeled on some combination of
British and French approaches to the problem - in order to
spare the government from having to take politically
unpopular measures unilaterally. However, the ISPs, eager to
avoid customer resentment, stress that they will do whatever
government requires through law or regulation, but only
because they are required to do so. Telefonica, as part of
its corporate social responsibility programs, participates in
a prominent anti-piracy public education campaign. However,
a company spokesperson recently told mass circulation daily
El Pais that Telefonica is "neither judge nor party" in the
controversy over file-sharing and P2P downloads and that it
"will do whatever our regulator says when a decision is made"
but is otherwise totally neutral on Internet piracy questions.

SIGNS OF LEGISLATIVE SUPPORT


10. (U) On November 5, the Congress of Deputies issued a
non-binding resolution urging the government to "promote an
effective strategy, approved by consensus, to fight
activities in the digital environment that violate
intellectual property rights, based on agreement among all
sectors involved: the content industry, internet operators,
consumers, and users." The government was not involved in
the development of this resolution, but took it as a positive
sign that, once the private parties agree on a way forward,
there will be support in the Congress for enabling
legislation. A Ministry of Culture representative told
Econoffs February 25 that Congress's Culture Committee had
issued a resolution calling for a panel of experts to draft
revisions to the Intellectual Property law, but post has no
further information.

GOS PUBLIC AWARENESS ACTIVITIES


11. (U) The GOS considers public opinion to be a key
battleground in the struggle against all forms of IPR piracy,
and public education and awareness to be critical elements in
protecting digital content. All observers agree that many
Spaniards still do not view online piracy as a problem or
even as an offense. Due in part to the Fiscalia's 2006
Circular, some believe peer-to-peer downloading is akin to
making a private copy of a digital file and is thus
permitted. Others simply can't understand how there could be
an issue over such an easy, convenient, unimpeded act. Yet
others see such downloading, though considered "wrong" by
some, as a form of Robin Hood activity, stealing from wealthy
artists, entertainers, and companies.


12. (U) The government has undertaken a number of activities
in the past year to promote responsible Internet use and to
discourage piracy. The Ministry of Industry, Tourism, and
Trade organized an International Conference on Digital
Content (FICOD) in late November, with a separate conference
involving many of the same participants on Protecting IPR in
the Digital Environment. The Minister, Miguel Sebastian,
spoke at FICOD, and the Secretary of State for
Telecommunications, Francisco Ros, at the IPR Conference.
Both underscored the need for stronger IPR protection if the
sector is to grow, and highlighted the government's
commitment to combating digital piracy. Also in late

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November, Minister of Culture Cesar Antonio Molina launched
the government's third anti-piracy public education campaign,
aimed especially at young people, with the slogan, "If you're
legal, you're all right." The campaign and Minister Molina's
public statements that the GOS would soon be publishing new
regulations to protect digital content sparked expressions of
concern among Spain's vocal pro-piracy Internet users' lobby,
though both their effort to have Molina fired and a
pro-piracy demonstration fizzled. The Culture Ministry is
planning to launch another public awareness campaign after
the current one ends at the end of March and is also
organizing seminars on subjects related to IPR protection.
The Ministry of Industry, Tourism, and Trade, meanwhile, will
begin on March 31 a campaign with the Business Software
Alliance and a Spanish industry group to promote use of legal
software.

GOOD PRACTICES MANUAL

13 (U) Another important GOS initiative was the December 11
launch of a new "Manual of Good Practices" prepared by a
broad inter-agency group coordinated by the Ministry of
Culture. The Manual is a general reference on IPR issues
combined with guidelines and practical suggestions on how to
recognize potentially infringing activity, conduct
investigations, and prepare cases to be brought before
judges. Rights-holders' groups hailed the Manual as
establishing "approved criteria" for investigating and
prosecuting IPR crime. In its section on Investigations, the
Manual describes the phenomenon of P2P downloads and
underscores that, when done without the content owner's
authorization, such downloads are always illegal and, in
contrast with the Fiscalia's Circular, characterizes as
"erroneous" any notion that they might constitute permitted
private copying.

THE CIRCULAR REMAINS UNCHANGED


14. (SBU) One major issue that rights-holders unanimously
cite as the main obstacle to effective online IPR enforcement
is the 2006 "Circular" issued by the Fiscalia. The Circular,
a 115-page document consisting of instructions to
prosecutors, was an attempt to incorporate into practice the
2003 IPR amendments to the Penal Code, which among other
things made IPR violations a public crime subject to ex
officio action by authorities rather than an offense
requiring a private complaint. Numerous experts have praised
the Circular as a significant advance for the protection of
IPR, especially industrial property (patents and trademarks).
At the same time, there is near universal agreement that its
treatment of Internet piracy, especially P2P file-sharing and
downloading, constitutes a combination of misunderstanding,
dubious interpretation, and misguided policy. The Circular
states that while websites that make available links to
protected material are clearly not engaged in making a
"private copy" as permitted under the so-called "Digital
Canon," an Internet user who downloads from such a link or
from a P2P network is in fact making a private copy. In
addition, the Fiscalia redefines "profit motive," identified
by the Penal Code as a prerequisite for prosecuting
IPR-infringing activity as a crime, to mean "commercial
profit motive" and specifies that infringing activity must be
of commercial scale to constitute a crime. As such, no
individual who downloads protected material can be criminally
prosecuted, and those who make it available can be prosecuted
only if they charge for the service, or, in theory, if they
promote the availability of the material on their websites as
a means of selling advertising.


15. (SBU) The Fiscalia's argument for treating illicit
downloads and file-sharing as a civil, rather than as a
criminal, offense, was twofold: That criminalizing all
IPR-infringing activity as well as a broad cross-section of
society that uses Internet technologies would violate the
principle of "minimal intervention" by law enforcement (in
other words, we can't prosecute half the population); and
that criminal prosecution should be reserved for serious
offenses and that illicit downloading represents a minor
offense which can more appropriately be addressed in the
civil courts. The Circular has been interpreted by many
Internet users, as well as by many police, prosecutors, and
judges, as declaring P2P downloading to be a permitted
activity that is no business of law enforcement. Some judges
have rejected criminal charges against infringing website

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operators based on the Circular's reasoning.


16. (SBU) A Fiscalia official with whom post met recently
repeated the GOS argument that the Circular is not binding on
judges nor a statement of what the law is or is not, but
rather a series of instructions designed to help orient
prosecutors in their handling of IPR cases. At the same
time, she argued that the Circular was legally correct in its
reflection of the Penal Code's "profit motive" requirement.
If police decline to open criminal investigations against
internet IPR violators, and prosecutors decline to press
charges, they are correctly interpreting the Circular's
intent. However, it is not the Fiscalia's fault, she
stressed, if some people misinterpret the Circular to mean
that P2P downloading and file-sharing are permitted, legally
sanctioned activities. Nor can the Fiscalia be blamed for
the fact that civil cases for Internet piracy tend to run
aground on the Data Protection Law, which imposes a high
threshold for identifying users according to the Internet
Protocol addresses. Those who don't like the Circular's
assignment of P2P to civil jurisdiction, she suggested,
should focus on either amending the Penal Code or improving
civil procedure. The Fiscalia has not considered issuing any
sort of modification or clarification of the Circular, she
said. Nor, as far has post has been able to determine, has
anyone in the government made a serious effort to convince it
to do so, despite our efforts. However, if private-sector
negotiations produce an effective system of dissuasive
measures, the Circular will likely become less of an issue.

SOFTWARE PIRACY DECLINING


17. The Business Software Alliance (BSA) is not a member of
the Anti-Piracy Coalition. While BSA reports significant
piracy problems, including on the Internet, it also enjoys
strong and constructive relations with the government.
Microsoft recently published a report citing GOS action
against piracy and stating that software piracy rates
declined in 2008 from their 2007 levels.

ADVANCES AGAINST STREET PIRACY


18. (U) Rights-holders and government representatives all
agree that law enforcement has done a good job of enforcing
IPR laws against the sale of pirated and counterfeit goods.
The National Police and the Civil Guard have conducted
numerous investigations, resulting in a number of raids on
street markets, of which the most significant were in June
and November. While statistics are not yet available for
2008, preliminary estimates indicate that authorities
conducted at least 40 IPR enforcement actions resulting in
more than 300 arrests and the seizures of at least 26 million
euros worth of pirated or counterfeit merchandise. In
addition, last month the National Police seized 1,150
unauthorized copying and modification devices that enable
video games to be uploaded to portable Nintendo consoles.
Rights-holders note that coordination between national and
local law enforcement varies from one city to another across
Spain and tends to depend on relations between national
government representatives and municipal governments, which
may in turn depend on the political orientation of Mayors and
city councils. Catalonia is one region where the
coordination is reported to be especially good, whereas
representatives of the music industry cited Granada in the
south as an example of a city where street piracy remains a
problem due to poor coordination between national and local
law enforcement. Another problem cited by rights-holders is
a lack of proactivity on the part of some public prosecutors
in investigating and prosecuting offending vendors and an
unwillingness on the part of some judges to levy fines and
jail sentences. In addition, one content providers'
association head complained that police still require his
organization to defray the costs of transporting and storing
seized material. That said, everyone we talked to agreed
that authorities have continued to increase and improve their
enforcement efforts against street piracy over the past year.



19. (U) Many, however, expressed concern over a new movement
to decriminalize "top manta," the practice of selling pirated
videos, CDs, video games, and other portable contraband
displayed on sheets or blankets which can quickly be folded
and gathered up to conceal the merchandise when police
approach. Police arrested approximately 700 "manteros" or

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blanket people in 2008, and some 62 are in jail after being
convicted of IPR violations. A few recording artists have
lent their names to a campaign calling for leniency for
arrested manteros and for a change in the law. One judge on
Spain's Audiencia Nacional (High Court) has characterized top
manta (which is generally conducted by immigrants from
Africa) as "a minority business by the poor and for the poor"
and referred to enforcement efforts against it as
"criminalizing poverty." Some even argue that street sales
of pirated goods are insignificant because music, films, and
games can be obtained so much more easily over the Internet.
The campaign to decriminalize "top manta" has gained
sympathetic media coverage in recent weeks and has come to
legislators' attention. On February 13, a group of
Congressmen from small, left-wing parties from Catalonia
introduced in the Justice Committee a resolution calling on
the government to decriminalize blanket sales. Although GOS
officials say they will oppose this initiative,
rights-holders are concerned that an adverse climate of
public opinion may demoralize police and lead to a diminution
of enforcement actions.

EMBASSY IPR ACTIVITIES


20. (U) At the suggestion of Minister of Industry, Tourism,
and Trade Sebastian following Spain's placement on the Watch
List, Embassy set up a bilateral IPR working group with
representatives of the Ministry of Industry, Tourism, and
Trade and the Ministry of Culture. The group has met several
times to assess progress on the USG's recommendations and on
ways to improve Spain's IPR performance. The Ambassador met
twice with Minister Sebastian and once with Minister of
Culture Molina to advocate a more activist approach to
combating piracy. Both the outgoing and incoming DCMs
discussed our IPR concerns with Secretary of State for
Telecommunications and the Information Society Francisco Ros.
USPTO attorney-advisor Michael Shapiro was a presenter on
two panels at the November IPR/Digital conference; during his
visit, DCM hosted a lunch for representatives of the
government, the Anti-Piracy Coalition, and Redtel. Econoff
meets regularly with rights-holders, service providers, and
government officials to highlight USG's interest in the
success of negotiations and the promulgation of effective
legislation.

COMMENT


21. (SBU) Post believes the many GOS actions to discourage
piracy are significant, and that the GOS-promoted
negotiations between rights-holders and ISPs are likely to
identify measures that will reduce Internet piracy. For
these reasons, post does not recommend placing Spain on the
Priority Watch List. However, until ISPs and rights-holders
reach agreement and the GOS begins to take the necessary
implementing actions, we see no argument for removing Spain
from the Watch List.


22. (SBU) We believe the year ahead offers important
opportunities for us to press the GOS to take definitive
steps forward. The government is increasingly sensitive to
its international image in the run-up to its assumption of
the EU Presidency in January 2010. It is also eager to
strengthen and expand bilateral engagement with the new U.S.
Administration, and hopes for high-level visits and meetings.
In this context, the government is aware that Spain's
continuing Internet piracy problem hurts overall relations.
We need to find additional ways to use this sentiment to our
advantage. End Comment.
CHACON