|This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 MADRID 000736
DEPT FOR EB/IPC WILSON, DEPT PLS PASS TO USTR BPECK, DOC
KSCHLEGELMILCH, USPTO JURBAN/DLASHLEY-JOHNSON
E.O. 12958: N/A
TAGS: KIPR, ETRD, SP
SUBJECT: SPECIAL 301: PROGRESS NOT PERFECTION
REF: A. STATE 38125
B. STATE 29549
C. MADRID 639
D. MADRID 606
E. MADRID 386
F. 03 MADRID 04259
G. 03 MADRID 04164
H. 03 MADRID 02481
1. SUMMARY: Despite the strong political will of government
officials and the stepped up enforcement efforts of police,
piracy continues to be a significant problem in Spain as
pirates adapt their way of doing business to avoid police, to
take advantage of legislative loopholes, and to better use
the internet. While illegal software sales have hit a
plateau and there has been minimal positive movement in the
percentage of illegal CD sales, pirate DVD sales increased
slightly. Enforcement efforts are impressive, with over 5
million music and sound recordings seized during raids.
Police were successful in thwarting pirates during the prime
holiday shopping season. There was also progress in the
courts: Nike gained control of its trademark after a 14-year
legal battle. The GOS revised its Penal Code to increase
punishments for IP offenders, and has continued its efforts
to train judges and provide consumer education on IP issues.
Spain seems to have faced up to its piracy problem and is
committed to apply the training and enforcement resources to
stem the tide. In light of these efforts and our sense of
GOS committment to continue the fight, we recommend keeping
Spain off the 301 watchlist this year. END SUMMARY
Overall IP Climate
2. MUSIC, VIDEOGAMES AND MOVIES: Industry and police
contacts in Spain have told us that over the past year, their
enforcement actions have yielded some success in deterring
pirates and reducing street sales of CDs and DVDs.
Nonetheless, the problem continues to be significant ---
estimates for CD piracy range between 20% and 30%. DVD
piracy is estimated to be much lower. Moreover, pirates are
adapting their methods and sales to thwart government and
industry enforcement efforts. Sales of pirated CDs continue
to be handled mostly by illegal immigrants who display their
pirate CD wares on blankets ("mantas," the sellers are
therefore called "manteros" in Spanish) on city sidewalks in
shopping districts and in subway stations. Because police
have cracked down on manteros, a few would-be manteros are
now trading in blankets for backpacks to peddle pirate CDs.
Some manteros and backpack sellers also carry DVDs. Fewer
still sell videogames. More sophisticated pirates have moved
on-line. Internet peer-to-peer networks are also on the
rise. Industry representatives in Madrid have told us that
street sales now concern them much less than the rise of
internet piracy sales and illegal downloads.
3. SOFTWARE: Illegal software sales in Spain seem to have
leveled off at about 49%. While this is a definite
improvement over the 74% figure of 1995, there is still much
work to be done. The Business Software Alliance (BSA) works
with the GOS to increase awareness in small businesses (the
main users of illegal software). In addition, police have
been active in trying to combat retail sales of illegal
4. TRADEMARK ISSUES: In February 2004, after more than 14
years of court battles, Nike won a major victory in the
Spanish Constitutional Court that once again allows the
company to use its trademark (both the name and the swoosh)
on apparel sold in Spain. In response to Nike's appeal of a
negative 1999 Supreme Court ruling, the Spanish
Constitutional Court sided with Nike, annulling the other
court's decision. It returned the decision to the Supreme
Court asking that it revise its decision based on the
findings of Constitutional Court justices. Nike is hoping
that the new Supreme Court ruling, expected to be issued
within the next 12 months, will be fair and objective.
5. PHARMACEUTICAL PATENTS: Spain's pharmaceutical patent
problem is a legacy of its old process patent law which was
in effect until October 1992. From that point on, all
pharmaceutical patents granted have been product patents.
Pharmaceutical companies complain that non-innovative
producers are able to easily obtain permission to produce
"legal copies" of their process patented drugs if they make
minor changes in the production process. Like other
countries that have a recent history of process patents, this
is a problem that only time will solve. For the next eight
years the legacy of the old patent system will continue to
irk pharmaceutical companies, but until all process patents
are expired, we do not anticipate a significant change in the
6. POLICE ENFORCEMENT EFFORTS: Police focus on and action
against IP offenses, most notably pirated CDs, have increased
over the past year. Combined total raids for national
police, Guardia Civil and municipal police against music,
videogame, and movie pirates and sellers exceed 10,000 in
2003. Over 5 million movie and sound recordings were seized.
Police are frustrated that legislative loopholes, illegal
immigrant status of some of those apprehended, and uneven and
slow judicial decisions undermine some of their efforts. Our
police contacts believe their effectiveness will be enhanced
when the revised Penal Code goes into effect later this year
(see para 8). In addition to raiding production facilities,
police are also making headway in getting "manteros" off the
street. Year 2003 police interventions in Spain's piracy
focal point, Madrid, surpassed double the number witnessed in
2002. The Madrid municipal police force added extra officers
at the end of the year specifically to deter manteros during
the peak holiday and New Year shopping season. In Barcelona,
frequent raids on a market renowned as a center for pirated
software has reduced by half the sales of pirated programs.
National police and Guardia Civil are especially equipped and
increasing their work to combat on-line piracy.
7. EDUCATION EFFORTS: Last year Spain's Interministerial
Anti-Piracy Commission and the Consejo Superior Judicial
(Spanish administrative body which oversees the courts)
signed an agreement to train judges on IP issues. The two
bodies will collaborate on two training courses, in April and
October, to train 40 to 45 judges each time. More
importantly, the contents of each course will be published
and distributed to Spanish judges throughout Spain. The
Copyright Office at the Ministry of Culture is also working
on an education campaign targeting children between 12 and 18
to explain the production process and manpower that goes into
making copyright products. The Congreso de los Diputados
(the lower house of Spanish Parliament) established a
parliamentary sub-committee to propose actions that should be
taken to protect IP. At year-end 2003, the sub-committee
published a set of recommendations directed at the Spanish
government bureaucracy, law enforcement agencies, and Spanish
society as a whole, to send a clear signal of the importance
of IP protection.
8. PENAL CODE REFORM: On November 25, 2003, the GOS modified
its Penal Code to reinforce intellectual and industrial
property protection. The revised Spanish Penal Code
increases the punishments for crimes against IP
infringements, especially for repeat offenders. It will
enter into force on October 1, 2004.
Ongoing Areas of Review
9. OPTICAL MEDIA PIRACY REGULATIONS: Article 25 of Spain's
IP legislation establishes a tax on optical manufacturing
equipment; operators are required to apply for licenses.
There is no legislation requiring that SID (source
identification) codes be used on locally manufactured CDs.
Despite this however, 12 out of 13 Spanish compact disc
manufacturers have signed SID accords with Phillips and IFPI.
10. USE/PROCUREMENT OF GOVERNMENT SOFTWARE: As previously
reported, in 2000 the GOS published guidelines entitled "The
Intellectual Property of Software Programs." These
guidelines are for government ministries and outline
measures, recommendations and good practices for acquiring
and using software. The guidelines have been explained in
workshops and are widely available to Spanish government
officials, including on the internet.
11. TRIPS COMPLIANCE: The GOS counts itself in complete
compliance with TRIPS since 1997.
12. ENFORCEMENT: See para 6 above.
13. COMMENT: In our 301 cable last year we reported that the
Spanish government had finally faced up to the magnitude of
its piracy problem and was making good faith efforts to
combat it. Since then, GOS officials in various ministries
have continued their work on the issue and the various
domestic police forces have been exceptional in the quantity
and scope of their efforts to roll back IP piracy in Spain.
The passage of the revised Penal Code also bodes well for
continued progress in the fight against pirates. Despite all
of these and other abovementioned efforts, the piracy problem
in Spain continues to be significant. It is our judgment
that Spanish authorities are aware of the problem and have
the political will to fight it. But it will take time. We
believe Spain should remain off the Special 301 list.
Spain's inclusion on the list will not hasten its progress
and may only serve to dampen rather than encourage enthusiasm
to take action as a new government takes the reins in a few
months. At present our GOS IP contacts are receptive and
willing to take our suggestions and listen to our concerns.
We will continue to work with them and to monitor Spain's
progress and provide assistance and information whenever
possible -- and place the fight against IP pirates at the top
of our agenda with the responsible officials in the next
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