US embassy cable - 05MANILA4395

UNCLAS SECTION 01 OF 04 MANILA 004395 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/EP, EB/TPP/IPE, EB/IFD, EB/TPP/BTA/ANA 
STATE PASS USTR FOR BWEISEL AND DKATZ 
STATE PASS USAID FOR CDOWNEY 
USDOC FOR 4430/ITA/MAC/DBISBEE 
USDOC PASS USPTO FOR PFOWLER, KHAUDA 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, KIPR, PGOV, PREL, BEXP, RP 
SUBJECT: IPR ROUNDTABLE 2: IMPROVED PROSECUTION OF IPR CASES 
NEEDED 
 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
REF: MANILA 02813 
 
1.  (U) Summary:  On September 13, Embassy conducted its second 
IPR roundtable to review IPR issues with US company reps and GRP 
officials.  Roundtable participants praised the government for 
recent initiatives, notably its crackdown on pirated optical 
media goods, but stressed the need to prosecute IPR violators and 
create an effective deterrent effect.  The Director General of 
the Intellectual Property Office (IPO) presented current GRP 
initiatives to coordinate better IPR enforcement and to support 
the creation of specialized courts and prosecutors for IPR cases. 
Private sector representatives applauded the creation of IP 
courts, but emphasized the need for effective training of court 
personnel and streamlining procedures to avoid duplicating the 
bottlenecks now encountered in the commercial courts where IP 
cases are now tried.  Feedback during a follow-up private sector 
meeting revealed mixed opinions about the recent progress and 
future prospects for greater IPR enforcement.  End Summary. 
 
2.  (U) As a follow-up to the June 7 IPR roundtable with 
representatives of U.S. IP rights holders (reftel), Embassy 
conducted an expanded "Roundtable 2" on September 13, with over 
60 private sector representatives and eight key GRP IPR 
officials, including IPO Director General Adrian Cristobal.  The 
Charg, Cristobal, and representatives from three industry groups 
delivered remarks, followed by an open forum discussion between 
participants and GRP IPR officials on current priorities for 
improving IPR protection, paying particular attention to the 
creation of specialized courts and prosecutors for IPR cases. 
The roundtable concluded with a separate session for U.S. 
business representatives and Embassy officers. 
 
3.  (U) In his opening remarks, the Charg acknowledged recent 
GRP progress such as the passage and implementation of the 
Optical Media Act in 2004 and stepped up enforcement actions this 
year, but he highlighted several areas where further progress is 
needed.  Most importantly, the GRP must create a more credible 
deterrent to piracy by improving the prosecution of IPR 
violators, he said.  In addition, he noted the needs for 
legislation to implement WIPO treaties and for better education 
and training for IPR enforcers.  While stressing the U.S. 
interest in IPR issues, the Charg underscored the importance of 
f 
IPR protection to encourage investment and economic growth in the 
Philippines. 
 
--------------- 
RECENT PROGRESS 
--------------- 
 
4.  (SBU) Several company representatives praised the Optical 
Media Board (OMB) members and its chairman, Eduardo Manzano, for 
their efforts to step up enforcement actions on optical disc 
piracy.  A representative of the International Federation of 
Phonographic Industries (IFPI) noted a dramatic improvement 
during the past year in the number of raids OMB conducted, a more 
rigorous program of plant inspections, and greater transparency 
in the seizure of pirated goods.  Other representatives of the 
optical media industry, including representatives of film and 
software industry groups and individual companies, echoed this 
assessment. 
 
5.  (U) Cristobal described government initiatives to improve 
coordination of IPR enforcement and raise public awareness of the 
importance of IPR for domestic industry and economic development. 
He described how the IPO has strengthened its role in leading 
interagency coordination on IPR protection.  IPO is also 
tabulating information about IPR enforcement actions and 
prosecutions for posting on the IPO website (www.ipophil.gov.ph). 
(Note: The Philippine Department of Justice (DOJ) recently 
ordered a nationwide inventory of IPR cases currently in process 
as part of this effort, but the data collection is proceeding 
slowly.  End Note.)  The IPO is also improving awareness of IPR 
within the GRP and advocating IPR protection with other executive 
agencies, according to Cristobal. 
 
6.  (U) Cristobal added that the IPO is working to increase its 
role in offering alternative mechanisms to adjudicate cases and 
impose penalties on IPR violators.  Several company 
representatives expressed interest in using these mechanisms if 
they could be guaranteed that the procedures would progress 
quickly and that fines and penalties imposed will be enforced. 
Cable TV industry representatives took issue with the claim that 
these administrative procedures by regulators are a viable 
alternative to filing cases in court, saying that rights holders 
often face the same types of delays and inequities with these 
mechanisms as they do with traditional courts.  They noted that 
the National Telecommunications Commission (NTC) has failed to 
take action on a complaint filed against a rogue cable operator 
over one year ago, even though the attorneys for that operator 
have simply failed to appear at scheduled hearings.  They also 
pointed out the difficulty they face from a lack of effective 
interagency coordination on these procedures.  According to 
participants, regulators, such as NTC for cable TV or the Bureau 
of Food and Drugs (BFAD) for pharmaceuticals, often deflect or 
deny jurisdictional authority over alleged IPR violations, but 
IPO insists it cannot intervene in licensing issues controlled by 
another agency.  Cristobal said he is working to clarify the 
division of responsibility between the various agencies.  For 
example, an IPO agreement with the NTC may allow the IPO to 
adjudicate 20 cases that have languished under NTC's 
jurisdiction. 
 
----------------------------------- 
WEAK JUDICIARY INHIBITS PROSECUTION 
----------------------------------- 
 
7.  (SBU) Several participants underscored the extreme 
difficulties they have encountered in prosecuting cases and the 
ease with which IPR violators exploit judicial weaknesses to 
dismiss or delay cases filed against them.  One participant 
summed up the feelings of the group: "The judiciary is the crux 
of the problem."  The IFPI representative cited several specific 
cases where search warrants were quashed for questionable reasons 
or cases were delayed for years with no trial.  He noted that 
years of attempted prosecutions have failed to yield one single 
conviction, except when the defendant pleaded guilty to lesser 
charges.  Pharmaceutical and cable industry representatives also 
reported little success in prosecuting cases in the courts. 
Roundtable participants emphasized the importance of the 
improvements in enforcement actions, but urged GRP officials to 
move beyond the mentality that enforcement actions are 
sufficient.  The time has come, they said, to follow through more 
effectively with prosecutions.  It is also vital, they said, to 
focus not only on low-level infringers, such as street vendors, 
but to move up the chain to the "people behind the 
establishments" and the kingpins.  Participants urged improved 
coordination between Philippine authorities and their 
counterparts in neighboring countries; they claimed that much of 
the money backing pirate operations here comes from abroad. 
 
8.  (SBU) Cristobal, noting that in the Philippine system an 
aggrieved party must pursue prosecution in private cases such as 
IPR violations, replied that enforcement agencies have sometimes 
been frustrated when rights holders refused to pursue prosecution 
of arrested IPR violators.  Participants countered this claim by 
saying they often choose not to pursue prosecution because -- 
based on past experience -- they have no faith in the ability of 
the DOJ successfully to prosecute a case or the ability of the 
Philippine courts successfully to conduct an IPR trial.  One 
participant retorted, "I choose not to pursue prosecution because 
I know it will never go to court.  There is no point in throwing 
good money away."  Another responded to Cristobal, "If you had 
ever pursued a case through the DOJ and the courts, you would 
know what a disincentive it is."  Participants pointed out that 
their reluctance to pursue prosecution is rational behavior given 
the costs of litigation and the minimal likelihood of successful 
prosecution.  Cristobal also urged rights holders to share more 
proactively information about infringers with GRP authorities. 
Rights holders responded that they most often do not share 
information because doing so normally compromises any enforcement 
actions they may be contemplating.  They said they have little to 
no trust in the operational security of GRP enforcement agencies. 
 
9.  (U) Industry representatives also raised concerns over the 
failure of customs and immigration officials to stem the import 
of pirated goods and pursue charges against foreign IPR violators 
arrested in the Philippines.  Participants noted that most 
pirated goods are imported and foreigners involved are normally 
processed on immigration charges, and later released or deported. 
Participants claimed that deportation sets these infringers free, 
so many of these same individuals return illegally to the 
Philippines and resume IPR violation under new identities. 
Cristobal explained that the IPO is trying to work with the 
customs and immigration services as well as the Philippine 
Economic Zone Authority (PEZA) to address these issues. 
 
----------------------------------- 
PHARMACEUTICAL PATENTS UNDER THREAT 
----------------------------------- 
 
10.  (U) The Pharmaceutical and Healthcare Association of the 
Philippines (PHAP) expressed concern over proposed legislation 
and administrative decisions that may reduce IPR protection of 
the pharmaceutical sector.  One proposal to expand the GRP's 
parallel importation scheme for medicines in competition with 
exclusive distributors will likely increase the proliferation of 
counterfeit medicine.  Two bills recently proposed to shorten 
pharmaceutical patents from 20 to 10 years also concern the 
industry.  PHAP questioned the legality of Department of Health 
Administrative Order No. 85, which allows the import of branded 
products without the consent of brand owners.  PHAP emphasized 
the importance of IPR protection to ensure incentives for further 
drug development and underscored the industry's willingness to 
support affordable access to medicine. 
 
--------------------------------------------- - 
SUPPORT FOR SPECIALIZED COURTS AND PROSECUTORS 
--------------------------------------------- - 
 
11.  (SBU) Participants expressed support for recent moves to 
establish specialized courts and prosecutors for IPR cases; one 
called it a "massive step forward."  Following discussion of this 
issue at the last roundtable (reftel), private sector groups and 
the Joint Foreign Chambers of Commerce joined the IPO in lobbying 
successfully for the creation of dedicated IPR courts.  Cristobal 
expects IP courts to be operational by the end of 2005.  IPO will 
help to provide training for judges and court personnel and it 
will consult with the Supreme Court to plan the phased transfer 
of more than one thousand outstanding IPR cases to these courts. 
Cristobal underscored the opportunity provided by these courts to 
restore some confidence in the prosecution IPR cases.  IFPI, 
offered to provide support for the training of IP court personnel 
and others also said they would look at ways of assisting IPO on 
capacity building for court personnel and DOJ prosecutors. 
Cristobal thanked them for their offers and welcomed involvement 
with law enforcement agencies, but appeared reluctant to accept 
direct private sector involvement in setting up the IP courts. 
(Note: Embassy, through USAID, is evaluating how we could help 
package these offers of assistance into a form that would 
maximize their impact and allay GRP conflict of interest concerns 
over too direct involvement by IP rights holders in setting 
internal policy.  End Note.) 
 
12.  (U) Some participants suggested that the IP courts should 
create special rules of procedure to avoid duplicating the 
problems in regular courts.  Specifically, participants called 
for continuous hearings for cases and the elimination of 
interlocutory appeals; steps were needed to reduce the use of 
delaying tactics that now discourage prosecution.  Attorney 
Joshua Lapuz, representing the Supreme Court Office of Public 
Information, said that special rules may be possible and he 
advised interested parties to make these recommendations to the 
Supreme Court (which administers the court system in the RP). 
Lapuz noted that no additional legislation would be required to 
streamline the new IP courts.  Cristobal initially expressed 
reluctance to pressure the courts on procedural issues and 
emphasized that these issues should be left to the courts to 
decide. 
 
13.  (SBU) Cristobal later privately asked if the USG and 
possibly other countries would weigh in with the Supreme Court to 
encourage streamlined procedures for new IP courts.  Emboff 
promised to sound out USG colleagues on this point and review our 
experience here with judicial reforms, but noted that it would 
probably be easier to initiate streamlining measures prior to 
setting up the courts.  These measures might include "technical 
changes" such as the elimination of interlocutory appeals (which 
permit endless objections by plaintiffs to even trivial matters 
in order to bring the pace of prosecution to a virtual halt). 
Cristobal expressed interest but made no commitment. 
 
------- 
Wrap-up 
------- 
 
14.  (SBU) In a concluding session involving Embassy officers and 
private sector representatives, participants gave mixed reviews 
to the GRP's efforts on IPR.  Some expressed the view that, if 
the GRP continues on its current trajectory, the USG should 
seriously consider removing the RP from the Special 301 Priority 
Watch List.  Others said that such a move is premature, claiming 
that the GRP still needs to prove its long-term commitment to 
continued improvement of IPR protection.  Participants also 
discussed several ways to increase public awareness of IPR issues 
and mobilize greater public support for IPO initiatives.  Many of 
the represented firms are interested in collaborating with IPO to 
plan public information campaigns.  The US-ASEAN Business Council 
in its planned October visit as well as other business groups may 
also urge President Arroyo to express her strong support for 
greater IPR protection in order to add momentum to IPO efforts in 
upcoming meetings and further empower IPO, OMB, and others. 
 
------- 
COMMENT 
------- 
 
15.  (SBU) As expected, the roundtable discussion focused on 
problems with the judicial system in which prosecution of IPR 
cases remains problematic.  There was a consensus among 
participants that the new IP courts offer an opportunity to 
expedite the prosecution of IPR cases, but effective training and 
other support will be critical to make these courts effective. 
Stakeholders may lobby for special court procedures to avoid 
duplicating the delays seen in regular courts.  It is unclear 
whether the Supreme Court will be receptive to this suggestion. 
Most company representatives seemed resigned to the fact that 
prosecutions will continue to be the major obstacle to improved 
IPR protection in the RP and remained skeptical about prospects 
for further progress with prosecutions. 
 
16.  (SBU) Embassy received positive feedback from participants 
regarding the usefulness of the discussion.  Cristobal 
complained, with good humor, that we had put him on the "hot 
seat," but also said it was useful for him to see the breadth of 
interests represented at the table.  The discussion focused 
mostly on the big IPR interests: entertainment, software, books, 
and medicines.  Some representative from other industries, such 
as the apparel and IT industries, told econoffs that they felt 
"overwhelmed" by the magnitude of the concerns they had heard in 
comparison to their own issues.  However, they confirmed that IPR 
infringement is rapidly growing in their industries and must be 
addressed.  Embassy plans to facilitate discussions between GRP 
officials and representatives of these other groups in a series 
of smaller roundtables focused on some of the industries that are 
often pushed aside in the IPR debate.  Showing that IPR is more 
than music, movies and "Microsoft" is crucial to the creation of 
an enduring respect for and valuing of IPR in the Philippines. 
 
JOHNSON