US embassy cable - 04ROME709

UNCLAS  ROME 000709 
 
SIPDIS 
 
 
DEPT FOR EB/IPC WILSON 
DEPT PASS TO USTR- BPECK 
COMMERCE FOR KSCHEGELMILCH 
COMMERCE ALSO FOR USPTO - DURBAN/PLASHLEY-JOHNSON, 
 
USDOC FOR 4220/MAC/EUR/SED/DDEFALCO 
 
E.O. 12958: N/A 
TAGS: KIPR, ECON, ETRD, IT 
SUBJECT: MISSION ITALY INPUT FOR 2004 SPECIAL 301 REVIEW 
 
Ref: (A) State 29551 
 
(B) 03 Rome 5420 
 
1.  Summary:  Mission Italy recommends that Italy remain on 
the 301 watch list.  Overall frequency of copyright piracy has 
remained essentially stable since 2000, when Italy's copyright 
law was enacted.  Nonetheless, total losses due to piracy are 
mounting, and Italy's piracy and counterfeiting rates are 
among the highest in Western Europe.  Law enforcement activity 
by prosecutors and Italy's Finance Police (Guardia di Finanza) 
has become more aggressive, but street vending and local 
enforcement remain significant problems.  Industry 
associations are concerned that high levels of traditional 
piracy are now combined with the use of digital copying and 
counterfeiting technologies and new distribution modalities. 
Tenacious problems persist with the judiciary and, with 
respect to business software stickering and the SIAE, Italy's 
copyright royalty collection agency.  Following the June 2003 
U.S.-Italy Joint Declaration on Cooperation on Intellectual 
Property and subsequent outreach efforts on the part of the 
Embassy (ref b), magistrates are becoming more aware of 
economic and criminal implications of piracy.  End Summary. 
 
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PIRACY RATES 
------------ 
 
2.  According to our industry and Finance Police contacts, 
piracy and counterfeit rates in Italy have remained 
essentially stable since the enactment of the 2000 Copyright 
Law.  The software industry (BSA - Business Software Alliance) 
reports piracy at about 47 percent of the market with 
estimated annual losses in the range of 510 million USD.  This 
rate represents a two-percent increase over the previous year, 
compared with falling rates elsewhere in Europe.  The music 
industry (FPM) reports piracy at approximately 25 percent of 
the market with estimated yearly losses to industry in the 
range of 150 million USD.  The film industry (FAPAV) reports 
piracy at approximately 20 percent of the market with losses 
to industry in the range of 140 million USD.  Another concern 
expressed by all industry representatives is that high levels 
of traditional piracy in Italy are now combined with the use 
of digital copying and counterfeiting technologies and new 
distribution modalities.  Damages from digital piracy are not 
quantifiable. 
 
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LEGAL ENVIRONMENT AND ENFORCEMENT 
--------------------------------- 
 
3.  There have been several positive developments. 
Associations and enforcement agencies believe that Italy's 
legislative environment is among the more advanced in Europe 
with the 2000 Copyright Law providing for relatively severe 
criminal penalties for serious piracy violations.  A new law 
also requires the immediate destruction of pirated material. 
Industry associations tell us that enforcement activities at 
the national level have been more aggressive, with the Finance 
Police being particularly committed to combating pirates. 
Italian national enforcement agencies and some local judiciary 
representatives seem to understand the economic and social 
implications of piracy, and the close ties between pirates and 
organized crime.  Naples prosecutors and police officials have 
carried out several investigations that reveal such 
connections, uncovering a number of well-organized groups 
operating internationally, from Europe to Asia.  High-level 
Finance Police officials stress that profits from 
counterfeiting activities are just part of a wider web of 
criminal activity, including narcotics, arms and human 
trafficking.  According to IP industry representatives, many 
Italian prosecutors are active in the prosecution of piracy 
violations.  Anti-mafia prosecutors have expressed their 
commitment to investigating piracy connected to mafia 
organizations. 
 
--------------------------------- 
THE WEAK LINKS: LOCAL AUTHORITIES 
--------------------------------- 
 
4.  On the other hand, our IP industry contacts lament weak 
enforcement by local administrations.  Enforcement varies from 
city to city, depending upon municipal officials.  In general, 
 
local authorities are reluctant to dedicate significant energy 
to combating pirates and counterfeiters and tend to 
underestimate the problem.  For example, the mayor and prefect 
in Rome have been unwilling to allow police to act 
systematically against street vendors of pirated/counterfeited 
material.  As a result, such street sales have continued 
largely unimpeded.  This inaction, according to our industry 
sources, causes immediate economic damage, and perpetuates the 
perception among citizens that piracy and counterfeiting are 
minor offences, and that street vending of illegal products is 
acceptable.  A Naples retailers' association has publicly 
criticized the lack of action by local authorities, calling 
for stronger measures against street vendors selling 
counterfeited products directly in front of stores in Naples 
shopping areas.  In Milan, by contrast, local police are 
cracking down on street vending, making thousands of seizures 
of counterfeit goods annually. 
 
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AND JUDGES 
---------- 
 
5.  Aside from the lack of attention by local authorities, 
judges are considered the real weak link in combating piracy 
in Italy.  Most judges still view piracy as a petty offence. 
They argue that it is better for street vendors sell 
counterfeit goods than to commit more serious crimes. 
Magistrates do not associate piracy with organized crime and 
financial fraud.  They are often unwilling to convict, arguing 
that "minor" economic crimes do not justify criminal 
treatment.  As a result, existing laws are loosely applied, or 
not applied at all.  The situation may improve as a result of 
the U.S.-Italy Joint Declaration of Cooperation, signed June 
20, 2003, regarding exchanges on the judicial aspects of IPR 
protection.  Another example of Italy taking IP more seriously 
is the creation in 2002 of a dozen new specialized 
administrative and civil IPR court sections.  While these 
sections focus on civil litigation, they have raised the 
profile and importance of IPR protection, and magistrates are 
now more aware of the economic implications of IP violations. 
 
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SIAE -- THE STICKER PEOPLE 
-------------------------- 
 
6.  In early 2003, Italy amended the implementing regulations 
of the 2000 copyright law to permit routine exemptions from 
the SIAE sticker for business software.  However, the BSA 
remains concerned with the current SIAE sticker waiver 
procedure since, while free of direct costs, it imposes heavy 
administrative and procedural burdens on the business software 
industry.  Moreover, BSA claims that the sticker waiver in its 
current form leaves unresolved the serious problems related to 
protection of products that are not stickered.  Some IP 
industry representatives maintain that software lacking the 
SIAE sticker, although legitimate, may not be protected under 
the current laws. 
 
7.  We have received no complaints/information regarding 
government use of pirated software. 
 
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COMMENT 
------- 
 
8.  Industry contacts recommend that Italy remain on the 301 
Watch List.  We agree.  While law enforcement agencies and 
prosecutors have increased their commitment to combating 
piracy, magistrates and local authorities, as well as many in 
the business community, still remain largely non-engaged.  A 
continued vigorous outreach effort, which Embassy, Consulates 
and industry associations are pursuing, is still warranted. 
End Comment. 
 
 
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 2004ROME00709 - Classification: UNCLASSIFIED