US embassy cable - 04BRASILIA2150

UNCLAS SECTION 01 OF 05 BRASILIA 002150 
 
SIPDIS 
 
STATE FOR WHA/BSC, EB/TPP/MTA/IPC SWILSON, AND CA/VO 
STATE PASS TO USTR FOR SCRONIN, LYANG AND BPECK 
USDOC FOR 
4322/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/DMCDO UGALL/DRISCOLL 
USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO 
TREASURY FOR OASIA/SEGAL 
NCS FOR DEMPSEY 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, KCRM, PGOV, ECON, BR, IPR & Biotech 
SUBJECT: PIRACY CPI CONCLUDES; NEW LEGISLATION PUT FORWARD 
 
REFS: A) BRASILIA 2017 B) BRASILIA 1668 
 
1.  The highly respected Chamber of Deputies' Parliamentary 
Investigative Commission (CPI) on Piracy (ref B) formally 
concluded its year-long proceedings on August 11, 2004.  In 
the three-hour-long closing ceremony, members of the 
commission and from the private sector uniformly stressed 
the need for a greater recognition within society of the 
importance of intellectual-property protection, and for 
active follow-up to the CPI's report.  In at times 
emotional statements, the Deputies called for a cultural 
mind-shift, emphasizing that beyond the self-evident 
economic damage caused by piracy -- the loss of tax 
revenues and of jobs, the stifling of creativity and 
innovation - basic governance in Brazil is threatened by 
the growth of the informal economy and of organized crime 
associated with piracy.  Deputy Semeghini noted with some 
consternation that the USG is threatening to remove trade 
benefits from Brazil under the Generalized System of 
Preferences for inadequate IPR protection at the very time 
Brazil is itself mobilizing to address the issue (ref A). 
 
2.  In a formal ceremony on August 12, Deputy Medeiros led 
the CPI in presenting the Commission's final report to 
President Lula, who was flanked by Minister of Political 
Coordination, Aldo Rebelo, and Minister of Justice Marcio 
Bastos.  President Lula did not speak, but Minister Bastos 
used the occasion to announce the formation of a public- 
private sector National Council for the Defense of 
Intellectual Property and for the Fight Against Piracy.  As 
of this report, the decree establishing this council is not 
final; report to follow septel. 
 
3.  As a result of their work, Deputies of the CPI 
introduced on July 16, 2004 five pieces of legislation, 
three aimed at stiffening penalties for copyright 
infringement.  Although the CPI deputies are intent on 
making this legislation a priority, it is unlikely the 
Brazilian Congress will pass these bills before spring of 
2005.  Below is Embassy's unofficial translation of one of 
the bills (the other four will be transmitted septel.)  The 
"Justification" which follows the text of the bill provides 
a summary of the changes being introduced into domestic IPR 
legislation and their rationale. 
 
4.  "Bill PL 3964/2004 of the Piracy CPI 
 
Modifies Articles 184 and 186 and adds Article 184-A to the 
Penal Code; alters regulations in the Criminal Procedure 
Code, with regard to crimes against non-material property. 
 
The National Congress decrees: 
 
Article 1 - This Law modifies and adds regulations to the 
Penal Code and Criminal Procedure Code to aid the fight 
against piracy. 
 
Article 2 - Article 184 of Decree-law no. 2.848 of December 
7, 1940, is amended with the new text in paragraphs 1 and 2 
and the following paragraph 5 below being added: 
 
"Article 184. ........................................... 
 
Paragraph 1:  If the violation consists in the total or 
partial reproduction, by any means or process, fixed in any 
support, tangible or intangible, with the intent to profit 
directly or indirectly, from an intellectual work, computer 
software, phonogram, videotape, interpretation or 
execution, without the express authorization of the author, 
interpreter, executor, producer or of those who represent 
them: 
 
Penalty - detention for 2 (two) years and 2 (two) months to 
4 (four) years, and a fine. 
 
Paragraph 2: The same penalty applies to whoever acquires, 
distributes, sells, puts on sale, rents, introduces into 
the country, hides, loans, exchanges or warehouses, with 
the intent to profit directly or indirectly, original or 
copy of an intellectual work or express audiovisual by any 
means or fixed in any support, tangible or intangible, 
produced or reproduced in violation of the author's rights, 
without the express authorization of the owners of the 
rights or those who represent them. 
 
Paragraph 3: ........................................... 
 
Paragraph 4: ........................................... 
 
Paragraph 5: Independent of the conviction of the 
perpetrator of the crime, whenever the counterfeiting of an 
intellectual work or industrial product is certified 
through an expert's finding, the judge can, ex officio, by 
means of a petition from the author whose rights were 
violated or by the Public Ministry, determine the 
destruction of the criminal production or reproduction, or 
send it to aid institutions or social programs that house 
minors or elderly people, as long as the substance is not 
detrimental to health or physical well-being." (new 
wording) 
 
Article 3 - Decree-law no. 2.848 of December 7, 1940, will 
now be amended to include the following Article 184-A: 
 
"Article 184-A.  To publish, offer publicity services or 
transmit by any means, conventional or electronic, ads or 
information destined towards the purchase, sale, rental, 
import, export of original or copy of an intellectual work 
in violation of the author's or interpreter's rights, 
phonogram, videotape or any industrialized product 
registered under the terms of Law no. 9.279/96 without the 
express authorization of the owners of the rights or their 
representatives. 
 
Penalty - detention for 2 (two) years and 2 (two) months to 
4 (four) years, and a fine. 
 
Paragraph 1 - The same penalty applies to whoever divulges 
information about the means, form of manufacture or 
acquisition of raw materials destined to the counterfeiting 
of products listed in the caput of this article, even if 
the author of the counterfeiting is not identified and 
independent of his conviction. 
 
Paragraph 2 - In case of recidivism, the penalty will be 
increased by two-thirds." 
 
Article 4 - Clause II of Art. 186 of Decree-law no. 2.848, 
of December 7, 1940, will be amended to include the 
following text: 
 
"Article 186 ........................................... 
 
II unconditional public penal action, for crimes covered in 
paragraphs of Article 184 and in the circumstances 
described in art. 184-A; (new wording)" 
 
Article 5 - Article nos. 527, 530-B to 530-F and 530-H of 
Decree-law no. 3.689, of October 3, 1941, will be amended 
to include the following text: 
 
"Art. 527.  The search or seizure investigation, in the 
case of private penal action, will be performed by two 
experts named by the judge, who will verify the existence 
of grounds for the seizure, and whether this happens or 
not, the expert opinion will be presented within 3 (three) 
days after closure of the search process. (new wording) 
 
Art. 530-B.  In cases of infractions determined in the 
paragraphs of Articles 184, 184-A of the Penal Code and 
paragraphs 1 and 2 of Article 12 of Law no. 9.609/98, the 
police authority will proceed with the seizure of goods 
illegally produced or reproduced, support and material that 
contribute to counterfeiting, as long as they are 
principally destined to illegal practices or 
commercialization of their product. 
 
Art. 530-C.  At the time of seizure a document will be 
drafted, signed by 2 (two) or more witnesses, containing 
the description of all seized goods and information about 
the location of seizure, and, if possible, of the person 
who had them in his possession, in a way that will permit 
his identification and individualization, which will become 
an integral part of the police inquiry or trial. (new 
wording) 
 
Art. 530-D. Subsequent to the seizure, an investigation 
will be done, by official experts, or lacking these, by a 
technically apt person, on samples of the seized goods in 
sufficient quantity to prove the crime, and a report will 
be prepared that will become part of the police inquiry or 
trial. (new wording) 
 
Art. 530-E.  The titleholders of author's rights and those 
connected to them or, alternatively, the association of 
titleholders of author's rights and those connected to 
them, will be the true holders of all seized goods, placing 
them at the disposition of the judge during the trial. 
 
Art. 530-F.  Except for the necessity of preserving the 
corpus delicti (material evidence), the judge can 
determine, before passing sentence or during the 
inquisitorial phase, at the request of the injured party or 
the Public Ministry, the latter always being heard, the 
destruction of the seized production or reproduction when 
its legitimacy is not contested or when the penal action 
cannot be initiated due to lack of determination of the 
author of the crime. 
 
Sole paragraph: Independent of the conviction of the author 
of the crime, the judge can determine the use of the 
counterfeit merchandise by aid entities or social programs 
for children, adolescents or the aged, as long as it is not 
detrimental to the health or physical safety of the 
recipients. (new wording) 
 
Art. 530-H. The associations of copyright titleholders and 
those connected to them can, in their own name, function as 
assistants to the prosecution for the crimes determined in 
Art. 184 and 184-A of the Penal Code and art. 12 of Law no. 
9.609 of February 19, 1998, when those crimes are to the 
detriment of any of its associates. 
 
Article 6 - This law goes into effect on the date of its 
publication. 
 
JUSTIFICATION 
 
The bill that the Piracy CPI hereby presents has as its 
objective to modify the penal law in order to fight piracy, 
so prevalent in our society. 
 
During all these months of work, besides all those directly 
affected by piracy, the Commission heard various 
representatives of the Public Ministry.  They were 
unanimous in stating that despite the good intentions of 
the legislature with regard to Laws no. 9.099 and 10.259/00 
concerning Special Civil and Criminal State and Federal 
Judgeships respectively, the regulations in Art. 89 of Law 
9.099, described in Law no. 10.259/00, create the 
impression that piracy is a crime of lesser importance. 
 
These regulations concede the benefit of procedural sursis 
to the author of a crime whose minimum penalty is equal to 
or less than one year. 
 
Since as a result of the work done by the CPI the 
connection between piracy and organized crime became 
overwhelmingly proven, the stiffening of some penalties is 
necessary, not simply for the sake of saying that the law 
is rigorous, but to avoid that people involved in these 
criminal organizations operate on the margins of the law, 
freely transiting Brazilian territory, with so-called 
organized crime becoming more and more deeply rooted, and 
reinforcing a "sense of impunity". 
 
The minimum and maximum fines set forth in Article 184 were 
also removed, inasmuch as the system adopted in the general 
part of the Penal Code allows the imposition of even larger 
penalties.  Besides, it is known that monetary penalties in 
nominal values lose their impact over time, which is not 
desirable. 
 
Also, a provision was added to the Penal Code to establish 
as a crime the advertising (by various means), manufacture 
or acquisition of raw materials for the counterfeiting of 
pirated products, even in cases in which the identity of 
the counterfeiter is unknown and independent of the 
counterfeiter's conviction, because it is unacceptable to 
exclude this type of crime and culpability from the law 
when the perpetrator is unknown, since his existence is 
proven. 
 
Regarding the changes to the Criminal Procedure Code, we 
strove to make them compatible with changes made by this PL 
to the Penal Code, and, in the case of art. 530-B, 
determined that the investigations of search and seizure 
should encompass the totality of counterfeit merchandise 
and the equipment for its non-authorized production or 
reproduction, besides enabling the seizure of documents 
that can identify those who acquire the counterfeit 
material or the members that make up a specific gang. 
 
The modification of Article 530-C is to ensure that the act 
of seizure be as detailed as possible, since it becomes an 
integral part of the evidence. 
 
Currently, art. 530-D determines that an expert opinion on 
seized merchandise be done on all goods seized.  Seizures 
can consist of hundreds of thousands of units of the same 
product.  It is not reasonable to demand an expert opinion 
on all of them.  A sampling, in this case, is a measure of 
reasonability, by which we propose "expert opinion on 
samples of the goods seized in a quantity sufficient to 
prove crime." 
 
Evoking the same measure of reasonability, we are proposing 
a change in Article 530-E, so that associations of 
titleholders of author's rights can be named valid holders, 
since most of the time it is impossible for an individual 
to maintain sufficient storage to accommodate the absurd 
amount of merchandise being seized in Brazil. 
 
Article 530-E is compatible with paragraph 5, inserted by 
us in Art. 184 of the Penal Code. 
 
Finally, the new version of Article 530-H allows that in 
new cases covered in Article 184-A of the Penal Code, 
contained in this bill, and in cases of Article 12 of Law 
no. 9.609 of February 19, 1998, that regulates the 
protection of software intellectual property, the 
associations of titleholders of author's rights and those 
connected to them can, in their own name, function as 
assistants to the prosecution. 
 
Through the above and the belief that the adoption of the 
measures hereby proposed will aid in the fight against 
piracy, the Piracy CPI counts on the support of the 
illustrious Deputies for the conversion of this bill into 
law. 
 
Deputy Medeiros, President 
Deputy Josias Quintal, Reporter" 
 
(End Unofficial Embassy Translation.) 
 
Danilovich