IPR SPECIAL 301 REVIEW -- MISSION ITALY INPUT

UNCLAS SECTION 01 OF 04 ROME 000227

SIPDIS

STATE PLEASE PASS TO USTR FOR JENNIFER CHOE GROVES, LESLIE
YANG, CHRISTOPHER WILSON
STATE PLEASE PASS TO EEB/TPP/IPE JOELLEN URBAN, TIMOTHY
MCGOWAN, ROBERT WATTS
DEPT OF COMMERCE FOR SUSAN WILSON AND AMANDA WILSON
DHS PASS TO ICE

E.O. 12958: N/A
TAGS: IT KIPR ETRD ECON EINT
SUBJECT: IPR SPECIAL 301 REVIEW -- MISSION ITALY INPUT

REF: A. SECSTATE 8410

B. ROME 143

C. ROME 89

D. 08 ROME 1337


1. (U) Summary: The fall of the Prodi government in 2008
understandably interrupted what had been strong momentum on
IPR issues in Italy. Post has recently seen a renewed
executive branch determination to tackle IPR issues, in
particular, on-line piracy. Problems still exist, especially
the current lack of "notice and take down" procedures, as
well as in the failure to strike a balance between privacy
concerns and protection of IPR. Moreover, weak data
collection efforts hinder efforts to gauge the scope of IPR
problems and to benchmark progress. For these reasons,
Mission recommends that Italy remain on the Special 301 Watch
list and that the report mention the issues cited, together
with attention to links between the Mafia and counterfeiting
operations. We also recommend that this year's report
acknowledge efforts the GOI has made and continues to make in
drawing public attention to the IPR issue and in the
integration of IPR into Italian foreign policy. GOI contacts
have repeatedly expressed disappointment in the 2008 Special
301 report, specifically asserting that Italy was not given
recognition for efforts to raise the profile of IPR
protection in Italy. Post acknowledges that strides were
made in this area, but they have not been supported by
tangible dissuasive actions by the judicial system. End
Summary

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Overview of IPR in Italy
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2. (U) Italy has adequate IPR laws in place, but relatively
few IPR cases are brought to trial. Judges still regard IPR
violations (particularly copyright violations) as petty
offenses, and the magistracy can be said to be the weak link
in combating IPR theft in Italy. The Italian Finance Police
(GDF) and Italy's Customs police (Dogana) are active and
skilled investigators, but they are frustrated by the fact
that few cases reach final sentencing. Historically there
has been a reluctance by judicial officials to impose
deterrent penalties. A new bill already approved by the
Chamber of Deputies and expected to be approved soon by the
Senate will increase penalties for a range of crimes,
including counterfeiting and piracy. While some judges still
seem reluctant to view IP infringement as a serious crime,
the GOI has made IP instruction part of the regular training
that all judges must receive, and some high ranking members
of the judiciary publicly supported the view that IPR crimes
should be treated seriously.


3. (U) Historically, the Italian government has viewed
trademark infringement more seriously than crimes against
copyright and has focused on getting illegal vendors off the
streets. Recently, we believe we have seen a shift "up the
food chain," with more attention on the distributors behind
the vendors. Prosecutors in southern Italy say the sale of
counterfeit items, including clothing, CDs, DVDs, software
and even iPods, funds Mafia groups (especially the Neapolitan
Camorra) and they see combating counterfeiting as a part of
the fight against organized crime. They also say that these
counterfeit distribution networks are large and
sophisticated, with branches in other European countries,
Australia and the United States.


4. (U) Though key figures in the government now seem to
recognize the importance of IPR protection, Italy is still
lacking a coordinated effort among government agencies. This
is evidenced by a lack of balance between protection of
privacy and protection of IPR, with privacy concerns favored.
In addition, there is a continued lack of a comprehensive
action plan to protect intellectual property rights, or even
a comprehensive data set detailing IPR infractions
investigated and actions taken.


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Examples of IP enforcement in 2008
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5. (U) The GDF and Dogana are actively engaged in

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investigations and seizures throughout Italy. A few examples
of large or significant seizures in 2008 include the
following:

-- In December police shut down a large counterfeit goods
operation in Tuscany. Chinese and Senegalese nationals were
arrested and police seized one million products (clothes,
bags and shoes). Press reports put the value of the products
at 55 million euros. Products were manufactured in China and
were found in 19 warehouses in Tuscany. For the first time
in Tuscany, local magistrates levied Rico-style charges
against members of the organization.

-- Also in Tuscany, police seized nearly two million pairs of
children's footwear with fake "true leather" labels that were
found to have been manufactured with toxic materials. In
this case, magistrates charged Chinese distributors with
crimes against public health and charged several Italians
with fraud. (Comment: Typically in Italy, IPR infringement
is viewed more seriously when linked with organized crime or
public health. End comment.)

-- In Milan, a successful investigation by the Guardia di
Finanza led to seizure of property (bank accounts, cars, real
estate) owned by a network of clothing counterfeiters led by
a group of Chinese. The network was headquartered in Milan
but was active in Bologna, Florence and several other cities.
The counterfeited property was worth $7 million.

-- In Catania (Sicily),GDF agents closed down a 13,000
square meter market of pirated and counterfeit goods in
October 2008. Thirty stands and over 80,000 articles of fake
merchandise (including clothes, toys and electric appliances)
were confiscated.

-- Also in Catania, in December, the GDF confiscated some
75,000 fake articles (mainly jewelry and watches) in the
city's historic center.


6. (U) In 2008 an Italian judge ordered Italian Internet
Service Providers to block the Sweden-based file-sharing Web
site "The Pirate Bay." Though the blocking of the site was
later deemed illegal, GOI contacts report that the Italian
government used diplomatic channels to formally complain to
the Swedish government about the site's illegal on-line
activities.


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GOI efforts, a pause (and frustrations)
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7. (U) GOI officials have repeatedly told the Embassy that
they do not feel adequate credit was given to their IP
protection efforts in the last Special 301 report. In
2007-2008 the Embassy worked intensively and successfully
with the GOI to secure high level endorsement of IPR
protection at the highest levels of government. In addition,
the Anti-Counterfeiting High Commissioner's office was
actively raising the public profile of IP-related crimes.
Post recognizes that this was a real step forward in
government attitude and that momentum on IPR issues was high
when the previous Prodi government collapsed in the Spring of

2008.


8. (U) This collapse stalled IPR protection efforts for
months while elections were held and a new government
organized. Shortly after the formation of the new government
under PM Silvio Berlusconi, the office of the
Anti-Counterfeiting High Commissioner was closed for budget
reasons. The GOI asserts that the responsibilities of this
office were not eliminated, but were folded into the Economic
Development Ministry. This may be the case, but the loss of
this office lowered its profile and independence, and
continues to be mourned by IP industries.


9. (U) Despite this pause, some key figures in the government
express determination to produce real results in IP
protection. In 2008, the Economic Development Ministry
created a General Directorate for Intellectual Property to
take on functions previously shared between the Italian
Patent and Trademark Office and the Anti-Counterfeiting High
Commission. It is too early to judge the effectiveness of

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this change, however.

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Tackling Internet Piracy
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10. (U) Italy's G-8 presidency has provided an additional
motivation to tackle on-line piracy. In early 2009, the GOI
created an interministerial committee tasked with coming up
with a workable action plan for tackling on-line piracy.
Committee hearings with stakeholders are expected to begin in
early March, and GOI contacts say they expect to see a plan
that places some responsibility on Internet Service Providers
and takes into consideration plans put forth in France and
the UK. In addition, the GOI is pushing "Internet
Regulation" as a G-8 topic. While there has been some
concern, especially among critics of the government, that
this might translate into suppression of on-line speech, the
GOI contends that the intention is to protect IP on-line and
to combat other Internet crime. The committee has also
created an anti-piracy web site where industry and members of
the public can monitor the committee's progress and comment
on the issue.

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Inclination to Protect On-line Privacy More than On-line IPR
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11. (U) Alongside these positive steps have come some
setbacks. Recent rulings from the Data Protection Authority
(also known as the Privacy Authority) have effectively
stopped investigation and prosecution of illegal downloading
of copyrighted material (Reftel C). The Privacy Authority
decided that monitoring of peer-to-peer traffic is a
violation of privacy rights. Monitoring of peer-to-peer
traffic by rights holders had been the starting point of the
majority of criminal cases made against illegal downloaders.
IP industries say this decision seriously harms enforcement
of copyright protection in Italy. (Comment: Though the
Privacy Authority is an autonomous body, an effort by the GOI
to cooperatively examine IPR and Privacy Rights could lead to
methods to protect both rights. The Privacy Authority appears
unwilling to consider intellectual property rights as it
makes its decisions and without an Authority looking out for
IPR, this effectively places privacy above IPR protection.
End comment.)

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Additional Responses to Reftel A Points
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12. (U) Enforcement statistics: There is still a lack of
uniform enforcement statistics since each enforcement agency
keeps its own data and cases that pass from one agency to
another may even be counted twice. In addition, there is very
limited information available concerning judicial action
related to IPR enforcement.


13. (U) TRIPS implementation: Italy's de jure IPR regime is
compliant with the TRIPS agreement.


14. (U) Data Protection: Though the pharmaceutical industry
still disputes Italy's pharmaceutical pricing practices, the
embassy has had no complaints from industry regarding the
protection of pharmaceutical or agricultural test data.


15. (U) Optical Media Piracy: While use of source
identification codes is encouraged in the optical disc
industries, their use is not mandated by law.


16. (U) Use/Procurement of Government Software: National
government offices contain mostly legal software, though
problems still exist at the local and regional level. In its
role as G-8 president, Italy is pushing for the G-8
Intellectual Property Experts Group (IPEG) to adopt
guidelines for government use of software in compliance with
intellectual property rights. A non-paper was submitted
containing the guidelines and will be discussed for possible
adoption at the next IPEG meeting in April.

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Mission Efforts to Promote IPR Protection

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17. (U) Over the last 15 or so years the Embassy and
Consulates have organized successful IPR promotion efforts
ranging from roundtables with key GOI figures, public
speeches by the ambassador and others, to awards for
successful enforcement action and seminars designed to
sensitize the magistracy to IPR issues. These programs have
effectively raised the profile of IPR with GOI officials, as
evidenced by the seriousness with which IPR and the Special
301 list are now viewed. In order to ensure that IPR
protection in Italy is driven by Italians, who are best
equipped to orchestrate successful IP action in their own
country, the Mission is pushing IP industries in Italy to
take the lead in programming events and in letting their
concerns be known to officials. Officers at the Embassy and
Consulates continue to meet regularly with government
officials to push for policy changes that will improve IPR
protection, as well as with members of investigative services
to monitor IPR protection in Italy and to offer consultation.
In addition the Embassy and Consulates continue to work with
industry contacts to support them in their IPR promotion
efforts. Mission officials also raise awareness of the
problems through both public and private comments.
DIBBLE