US embassy cable - 04MADRID1853

UNCLAS MADRID 001853 
 
SIPDIS 
 
STATE FOR EUR/WE AND EB/IPC URBAN 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, ECON, SP 
SUBJECT: SPAIN IPR: ABERRANT MOD CHIP RULING 
 
REF: A. URBAN-YOUTH EMAILS 
     B. MADRID 639 
 
1. According to an April 2004 ruling made by Barcelona Penal 
Court 3, the installation of mod chips (devices that allow 
customers to alter their video game consoles so they can 
operate games downloaded from the internet or from other 
regions) is legal.  The Guardia Civil had investigated the 
practice and filed the suit against the Barcelona games 
shops, Innovagames.  The case was weak as the Guardia Civil 
did not have any evidence of mod chip installation and was 
only able to find two mod chips after combing the premises. 
 
2. The judge ruled in favor of Innovagames, basing his 
decision on what he views as a loophole in Spanish 
Intellectual Property laws.  Article 270 of the Spanish Penal 
Code prohibits the "manufacture, distribution or possession 
of means to crack computer program security codes," but makes 
no reference to what the ruling refers to as "electronic 
instruments destined to copy video and sound software." 
While the case has been cause for alarm in some circles and 
celebration in others, the victory for pirates will be 
short-lived.  Spain's amended Penal Code enters into force on 
October 1, 2004 and much more clearly defines IP protection, 
specifically extending protection to audio, visual and 
audiovisual instruments. 
 
3. The Guardia Civil does not appeal court decisions, and the 
IP industry associations who would normally become involved 
have decided to keep a low profile to reduce the "buzz" on 
the decision.  They acknowledge the case is so weak that it 
is extremely unlikely they would get a favorable decision on 
appeal. 
 
4. In addition, the decision is at odds with the rulings on 
four similar cases in Spain that found the use of mod chips 
clearly violates the intellectual property rights of video 
game console and program manufacturers.  In 2001, in the 
first Spanish court case against mod chips, a Madrid court 
ruled that mod-chips are illegal because they permit use of 
illegal copies.  In October 2002 a Barcelona court found that 
possession of mod chips is a punishable offense because they 
are a "mechanism to neutralize protection measures in 
software."  A Leon court concluded in November 2003 that the 
distribution and installation of mod chips are IP crimes.  In 
February 2004, a Logrono court differentiated between mod 
chip installation and possession.  It found the former to be 
a crime, but not the latter. 
 
5. In a recent press release, the International Intellectual 
Property Alliance (IIPA) condemned the 2004 Barcelona court 
ruling, saying that it was "damaging."  While we agree the 
court decision is of concern, we do not consider it 
representative of the view in Spain.  Our contacts at the 
Ministry of Culture's Copyright Office had not been aware of 
the ruling until we brought the IIPA release to their 
attention.  They do not see the decision as significant or 
trendsetting.  They have been working with the new Minister 
of Culture to prepare the transposition of the European 
Copyright Directive into Spanish law (details to be reported 
septel).  Since the Directive requires EC member states to 
provide "adequate legal protection against circumvention of 
any effective technological measures," Spanish transposition 
of the Directive may also help clarify the legal status of 
mod chips.  We plan to track the transposition of the 
directive closely. 
ARGYROS