US embassy cable - 04PANAMA441

UNCLAS SECTION 01 OF 03 PANAMA 000441 
 
SIPDIS 
 
 
DEPT FOR WHA/CEN AND EB/IPC - WILSON/QUIGLEY 
DOC FOR KSCHLEGELMILCH 
DEPT PLS PASS TO USTR - BPECK 
DEPT PLS PASS TO USPTO - JURBAN/DLASHLEY-JOHNSON 
DEPT PLS PASS TO LOC - STEPP 
 
 
E.O. 12958: N/A 
TAGS: ETRD, KIPR, PM, ECONOMIC AFFAIRS 
SUBJECT: PANAMA'S SCORECARD ON INTELLECTUAL PROPERTY RIGHTS 
 
1.  Summary and Comment:  Overall, Panama's intellectual 
property rights regime is headed in the right direction 
and has improved during the past year.  Panama has 
relatively well-developed intellectual property laws and 
institutions, and the GoP has increased specialized IPR 
training and technical support for local stakeholders. 
The GoP has also redoubled its efforts to legalize its 
software holdings this year, has strengthened its penal 
code, and is striving to fully implement its WCT and WPPT 
obligations. The specialized IP prosecutor,s office leads 
concrete and energetic GoP efforts to pursue cases and 
enforce the law. 
 
 
2.  Enforcement, however, is far from ideal as police, 
customs, and prosecutors suffer from a lack of resources, 
and cases often stall in the judicial system.  In addition, 
data exclusivity has become a concern. We are especially 
concerned with the dearth of resources for IPR enforcement 
in the Colon Free Zone (CFZ), outstanding international 
obligations, and the continuing lack of understanding of 
IPR within the judiciary.  In short, penalties applied in 
the CFZ have often not had a deterrent effect.  While 
the Embassy does not/not support a recommendation that 
Panama be placed on the Special 301 Watch List, we will 
continue to work with local stakeholders as well as U.S. 
industry representatives to press for continued 
improvement of IPR enforcement in Panama.  End Summary 
and Comment. 
 
 
Some GoP Institutions are Strong 
-------------------------------- 
 
 
3.  The GoP Inter-institutional Commission for Intellectual 
Property includes Public Ministry prosecutors, Customs and 
the Education Ministry's Copyright Office officials, Colon 
Free Zone (CFZ) administration, and representatives from 
the Commerce Ministry's international trade office 
(VICOMEX) and industrial property registry (DIGERPI).  The 
Commission takes the lead on IPR activities and is 
proactive in developing campaigns against IPR infringement. 
Using GoP funds, the Commission organized and executed a 
series of four regional workshops in 2003 throughout Panama 
to raise general awareness of IP, and also proactively 
sought Interamerican Development Bank matching funds for a 
total of $1 million to continue the campaign and also aid 
in modernizing Panama,s IP laws. 
 
 
4.  The Industrial Property Office (DIGERPI) of the 
Commerce Ministry maintains a centralized electronic 
database of all registered trademarks, accessible to remote 
users in the Intellectual Property Departments of both 
Customs and the CFZ, which allows those agencies to make 
determinations in potential infringement cases, and also to 
contribute information directly to the database.  In 2003, 
the system "went mobile" as investigators can now use 
wireless connectivity with laptop computers to access 
the data while actually inspecting merchandise at a port or 
at the CFZ. 
 
 
GoP,s Software Legalization Finally Underway 
-------------------------------------------- 
 
 
5.  The GoP negotiated a government software legalization 
agreement with the Business Software Alliance (BSA), 
which President Mireya Moscoso signed as Presidential 
Decree 273 on December 27, 2000.  The agreement allowed 
for an 18-month analysis period, during which every 
government agency would audit the extent of its piracy, 
followed by an 18-month period of implementation, during 
which the GoP would license its software stock.  The entire 
process was to be completed by December 2003.  In April 
2003, 40% of GoP agencies still hadn't undertaken the 
audit, and even fewer had legalized their holdings.  In 
response, the Ambassador and Embassy mounted an aggressive 
campaign to focus GoP attention on this matter, and 
included the agreement on the agenda of the Embassy-GoP Ad 
Hoc Investment Commission and the USTR-led Trade and 
Investment Committee.  In the past few months, the GoP has 
finally moved to catalogue its software and most major 
ministries have either legalized or appropriated funds to 
legalize their holdings.  In January 2004, BSA,s local 
representative noted the sea change with the GoP, and 
emphasized that it was the direct result of Embassy 
intervention. 
 
 
Panama Modernizes its IPR Penal Code 
------------------------------------- 
 
 
6.  Law 1, promulgated on January 5, 2004, consolidated 
four previous IP-related laws, including parts of 
Panama's penal code.  It clarifies the definition of IP 
itself and violations against it while strengthening IP 
penalties.  While minimum jail sentences remain at one 
year, maximums have been increased to six years 
generally, and even up to twelve if a prosecutor can 
prove a linkage between IP violations and money 
laundering.  The law also allows for "preventive 
detention" and sets a minimum of $5,000 for bond while 
cases are investigated.  While the law does not consider 
minimum financial penalties/fines, it does allow for 
companies, Colon Free Zone trading permits to be revoked, 
as well as suspension of work permits for street vendors. 
The law is a significant step forward for Panama.  It 
includes a number of punishments that can be harsh enough 
to dissuade possible criminals from acting, yet allows 
for compassion in those cases where it's warranted. 
 
 
Panama ratifies WIPO treaties, almost in full compliance 
--------------------------------------------- ----------- 
 
 
7.  The GoP has signed and ratified ten World Intellectual 
Property Organization (WIPO) instruments, including the 
Copyright Treaty (WCT) and the Performances and Phonograms 
Treaty (WPPT).  DIGERPI and the Education Ministry estimate 
that Panama's national law is about 90 percent in 
compliance with these two key international treaties, but 
the GoP readily recognizes that it must update its 
copyright laws to be completely in line.  The office 
of the Vice Minister of Education took the lead on a law 
project to modernize the copyright law, but the proposal 
died in committee in the second legislative session of 
2003.  To date, the Ministry has not given a timeline to 
the Embassy for re-introduction of the bill, though we 
have provided useful texts and guidance from private 
industry to help with drafting the law. 
 
 
Agencies Striving to Enforce IPR law 
------------------------------------- 
 
 
8.  The specialized IP prosecutor,s office with national 
jurisdiction (Ninth Circuit attorney--created in December 
2002), has streamlined the execution of IPR cases, and now 
has four staff lawyers (twice as many as in 2002).  The 
office has even taken on the role of training other 
prosecutors to serve in backup roles, most importantly the 
Tenth Circuit attorney.  In one significant operation in 
November 2003, the office led an interagency team of 
prosecutors from Chiriqui province, the Technical Judicial 
Police, and National Police into nine different warehouses 
in the city of David.  The operation led to the seizure of 
counterfeit Levis jeans and the closure of five of the 
warehouses.  In another significant case in May 2003, the 
IP prosecutor led a team that seized 5000 counterfeit 
books.  Panama's Customs Authority seized significant 
amounts of contraband and fake goods during the year, 
including over 20,000 pieces of diverse merchandise like 
Black&Decker in one operation in Balboa and 2 full 
containers of pirated CD's in another.  The Colon Free 
Zone IP office averaged one on-site inspection per week 
in 2003 and seized over 11,000 cases of counterfeit and 
pirated goods.  In a display of judicial strength, a 
circuit court judge ordered 7 million pirated CD's to 
be destroyed in December, related to cases that have 
resulted in 20 convictions since 1999. 
 
 
Lack of Resources and a Still Weak Judiciary 
-------------------------------------------- 
 
 
9. U.S. companies have expressed concern about the general 
scarcity of resources and low priority given to IPR cases 
by Panama's Attorney General's office.  The specialized IPR 
prosecutor lacks even basic resources to conduct 
investigations and handle cases--and his office is better 
equipped than most other prosecutors,.  Prosecutors often 
ask victims to pay fees for storing evidence and other 
incidental costs related to seizures and investigations. 
This is disturbing considering that enormous merchandise 
trade flows through the Colon Free Zone, mostly from Asia 
to other Latin American countries.  Indeed, over 70% of 
IPR-related seizures in the CFZ originated from Asia in 
2003.  In addition, the music industry estimates that 
sales dropped by 30% in 2003, in large part due to piracy. 
 
 
10.  In spite of some successes like the destruction of 7 
million CD's mentioned in para 8, Panama's judicial system 
is generally weak, and the slow and inefficient criminal 
processes against IPR violators often deny victims any 
meaningful remedy. (Note: Regrettably, this applies to the 
wider judicial system.)  Cases brought before the criminal 
courts usually take years to be heard.  Despite the 
GoP,s concerted efforts to instill a better understanding 
of IPR, judges still lack a fundamental grasp of IP law and 
regard IP violations as misdemeanors, though the new penal 
code simplifies the laws and clarifies crimes.  In one 
especially egregious example in Colon, a CFZ merchant who 
had been convicted of previous IP violations was acquitted 
in 2003 in a case that had first started in 1999.  The 
judge had direct personal connections to the merchant and 
the merchant's company was clearly shipping several 
containers of contraband Philip Morris product. 
 
 
Data Exclusivity a Concern 
-------------------------- 
 
 
11.  Panama's Health Ministry requires companies that wish 
to sell drugs and chemicals to apply for "sanitary 
registers" that detail chemical makeups and laboratory 
results related to the development of the products. 
Several U.S. companies have applied for the registers, 
been approved, and begun sale of their products, only to 
find that a generic, locally produced version appears on 
the market soon after.  This indicates that the Health 
Ministry is not respecting the data exclusivity clause of 
Panama's Law 23 and is allowing other companies to view 
the proprietary data used in applying for sanitary 
registers.  According to Health Ministry lawyers, the 
Ministry's organic law ("ley unica") does not contemplate 
data exclusivity and takes precedence over any other law. 
Ministry officials have expressed their willingness to 
address this issue and the Ministry is currently 
undertaking an extensive review of how to bring the two 
laws into harmonization, but has given no indication of 
when this might be achieved. 
 
 
USG Provides Resources, Training 
-------------------------------- 
 
 
12.  The Embassy has helped bridge some of the GoP,s more 
glaring resource gaps.  Using Narcotics Affairs Section 
(NAS) funds, we have provided a photocopier, cable 
internet connection, and a computer projector to the IPR 
prosecutor to help with IPR training and investigations. 
We have helped cover the costs of storing evidence for IPR 
cases.  The CFZ uses USG-donated computers in several 
offices, and we are now undertaking a broader strategy of 
strengthening CFZ institutions.  We have sent two DIGERPI 
officials to a USPTO conference in the United States in 
2003.  Finally, the Embassy is aggressively pursuing 
anti-corruption and justice reform programs. 
WATT