NICARAGUA: 2009 SPECIAL 301 REVIEW

UNCLAS MANAGUA 000227

STATE FOR WHA/CEN, EB/TPP/MTA/IPC
STATE PLEASE ALSO PASS TO USTR FOR ANDREA MALITO
TREASURY FOR SARA GRAY
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD KIPR ECON USTR NU
SUBJECT: NICARAGUA: 2009 SPECIAL 301 REVIEW

REFS: A) SECSTATE 8410, B) 08 MANAGUA 1051, C) 08 MANAGUA 0225

SUMMARY
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1. (SBU) Although IPR enforcement and protection remain a low
priority for senior GON officials, we believe continued engagement
in 2009 will have a positive effect. We cooperate well with working
and mid-level police and prosecutors and we would like to step up
our efforts to work with senior-level GON officials. We recommend
that Nicaragua not be named to the 2009 Special 301 Watch List. See
Action Request in Paragraph 6.


2. (SBU) The Government of Nicaragua's (GON) enactment of the
new criminal code in July 2009 does not restrict the Nicaraguan
National Police to initiate ex-oficio IPR investigations, a CAFTA-DR
requirement, because the 2001 criminal procedure code does. The new
criminal code, however, does not allow the Prosecutor General's
Office to conduct ex-oficio IPR investigations without a private
party making a formal complaint. The new criminal code weakens
penalties for all copyright violations. Moreover, patent linkage
and data protection for pharmaceutical products, which are CAFTA-DR
commitments, remain unimplemented. We believe that we are making
progress in these areas and plan to continue our efforts to engage
with senior government officials to help them fulfill Nicaragua's
CAFTA-DR commitments.


3. (SBU) Government and industry officials in the software, motion
picture, and music industries are cooperating to combat piracy,
trademark infringements, and copyright violations. The police, with
assistance from the Prosecutor General's Office and industry,
implemented a strategy in 2008 to raise public awareness to combat
piracy, train staff on the application of IPR laws and the detection
of pirated goods, and conduct targeted raids and seizures of pirated
goods and production equipment.

CLARITY ON EX-OFICIO ENFORCEMENT
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4. (SBU) On February 19, Econoff spoke with Dr. Leyla Prado, head of
the IPR Unit for the Prosecutor General's Office. Prado explained
that while the new criminal code, which came into effect on July 9,
2008, does not explicitly state that the police can conduct
ex-oficio investigations, the 2001 criminal procedure code does.
She confessed that neither her office nor the police had a clear
understanding of the new criminal code until the interagency
meetings with the Ministry of Trade, Industry and Development
(MIFIC) cleared up matters last September (Ref B). She pointed out
that the new criminal code does not allow the Prosecutor General's
Office to conduct raids without a formal complaint. The 2006
Copyright Law allowed prosecutors to conduct targeted raids without
a formal complaint. She complained that the new criminal code
weakens her office's IPR enforcement capabilities, but acknowledged
that an improved working relationship with the police allows her
unit to respond quickly to formal complaints.

WEAKER PENALTIES FOR IPR CRIMES
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5. (SBU) Prado admitted that penalties against copyright violations
remain weak. In 2006, amendments to the Copyright Law stiffened
penalties for IPR crimes, allowing fines ranging from 3,000 to
25,000 cordobas ($150 to $1,250) and prison sentences of up to two
years. The new criminal code borrowed aspects of Sweden's penal
code to calculate the fine for an IPR offender, i.e., one-third of
the person's monthly salary multiplied by 90 to 150, depending on
the severity of the crime. However, the new criminal code reduces
prison sentences to a maximum of one year. She noted that she and
her colleagues in the police and MIFIC have attempted to persuade
senior government officials to revert to the 2006 Copyright Law for
IPR penalties and fines.

TEST DATA PROTECTION AND PATENT LINKAGE
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6. (SBU) The Pharmaceutical Research and Manufacturers of America's (PhRMA) 2009 Special 301 submission states that the GON has yet to implement an effective system for test data protection and patent linkages on pharmaceutical products, as required by CAFTA-DR. Post shares PhRMA's concern. In February 2008 we met with officials from the Ministry of Health (MINSA) and MIFIC to discuss when the GON would implement these requirements. MINSA officials stated that data protection would be extended according to CAFTA-DR standards for drugs manufactured in countries that have signed the agreement. In February 2009, MIFIC acknowledged that there was no system in place to provide patent linkage. Action Request: We would appreciate USTR assistance in reviewing Nicaragua's compliance with test data protection provisions in CAFTA-DR.

MIXED RESULTS ON ENFORCEMENT EFFORTS
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7. (SBU) The police, with assistance from the Prosecutor General's
Office and local industry, implemented a strategy in 2008 to raise
public awareness to combat piracy, train staff on the application of
IPR laws and the detection of pirated goods, and conduct targeted
raids and seizures of pirated goods and production equipment (Ref
B). The police believe that their campaign has raised public
awareness about pirated goods. Nevertheless, the GON did not
convict, fine, or imprison an IPR offender in 2008.


8. (SBU) With regard to raids and seizures of pirated goods, the
police conducted six raids in 2008, considerably fewer than the 20
raids they conducted in 2007. In 2008, the police conducted six
raids and the police seized 350,000 pirated music CDs and music
video DVDs, 80,000 blank CDs and DVDs, 938 drums of bottled water,
46 televisions, 12 computers, 6 recording units and 3 multicolor
copiers. The monetary value of the seized goods is approximately
$803,000.


9. (SBU) The Prosecutor General's Office indicted 25 IPR offenders
in 2008. Two cases are before the court awaiting a ruling while one
case was resolved through mediation. The Prosecutor General's
Office also conducted two raids with assistance from the police to
investigate formal complaints it received concerning trademark
infringement of "Pura Fuente (Pure Fountain) and Lacoste clothing.
Prado asserted that the Prosecutor General's Office would like to do
more on IPR enforcement, but the loss of staff and budget cuts in
fiscal year 2008 limited her unit's ability to participate in raids,
conduct investigations, and file cases in court. She feared that
more budget cuts are on the way in fiscal year 2009 because of the
government's recent budget shortfall, as a result of the reduction
in donor assistance to the GON based on the fraudulent November 9,
2008, municipal elections.

COOPERATION AND TRAINING
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10. (SBU) Government and industry officials in the software, motion
picture, and music industries are cooperating to combat piracy,
trademark infringements, and copyright violations. A representative
of NICAUTOR, an association that advocates IPR enforcement and
protection for book authors and music companies, commended the
police and public prosecutors for their prompt response to formal
complaints on IPR crimes. With regard to training, government and
industry officials organized six IPR enforcement workshops for
police, public prosecutors, and customs officials in 2008. The
police seek more assistance from industry on detecting trademark and
copyright infringement, and better equipment, such as computers and
scanners, digital cameras, and digital product code scanners to
enhance their capabilities. Post also sent three judges, two MIFIC
officials, and one public prosecutor to U.S. Patent and Trademark
(USPTO) training in Washington in 2008.

LOW PRIORITY FOR SENIOR GON OFFICIALS
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11. (SBU) IPR enforcement and protection remain a low priority for
senior-level GON officials. In 2008, we met frequently with working
level and mid-level officials from MIFIC, the Prosecutor General's
Office, and the police to encourage IPR enforcement and improve
interagency cooperation to enhance IPR protection. However, these
agencies are struggling with budget and staff cuts. Prado said that
on occasions, the police are instructed not to pursue illegal
producers and vendors because of government policies. In fact,
Prado told us that President Ortega met with a national association
of illegal producers and vendors of pirated goods in September 2008.
The result of the meeting was that President Ortega and the
association reached an informal agreement that would continue to
allow the selling of pirated goods. She noted that these kinds of
actions by senior-level officials deter any effective action against
IPR offenders because no one wants to lose his/her job.


COMMENT AND RECOMMENDATION
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12. (SBU) The lack of familiarity with IPR issues in MINSA impedes
the implementation of test data protection. USTR's review of
MINSA's interpretation on test data protection and engagement on
patent linkage would likely prompt GON compliance with its CAFTA-DR
obligations. We are not sure why the GON has failed to implement
patent linkage, but poor interagency cooperation is partly to blame.
Politics and special interests have weakened enforcement efforts to
combat IPR crimes against the behest of law enforcement and trade
officials.


13. (SBU) On the positive side, the GON has clarified that police
have the authority to conduct ex-oficio investigations of IPR
crimes. While public prosecutors are no longer able to conduct
ex-oficio investigations under the new criminal code, good relations
with the police allow them to respond quickly to formal complaints.
We continue playing an important role in building relationships
between key GON officials and industry, and in improving interagency
cooperation on IPR enforcement and developing capacity with
USPTO-funded training. For example, we organized a roundtable
discussion on improving cooperation between the police and industry
in August 2008 per the request of Major Francisco Obando, National
Police Director for the Economic Crimes Unit.


14. (SBU) We believe that we should step up our efforts to engage
senior officials to improve IPR enforcement and protection and
enforcement, especially as it relates to commitments under CAFTA-DR.
In 2008, the Embassy established strong ties with working and
mid-level officials. Continued cooperation would raise the profile
of IPR with senior officials. We believe that naming Nicaragua to
the Watch List this year would complicate our efforts to help
Nicaragua comply with its CAFTA-DR commitments.

CALLAHAN