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Cablegate: 2008 Special 301 Review - Costa Rica

VZCZCXYZ0014
RR RUEHWEB

DE RUEHSJ #0155/01 0572158
ZNR UUUUU ZZH
R 262158Z FEB 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 9473
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS SAN JOSE 000155

SIPDIS

SIPDIS

DEPT FOR WHA/CEN
EEB/TPP/IPE FOR JBOGER
STATE PASS TO USTR FOR JENNIFER CHOE GROVES

E.O. 12958: N/A
TAGS: ETRD ECON KIPR CS
SUBJECT: 2008 SPECIAL 301 REVIEW - COSTA RICA

REF: A) 05 SAN JOSE 0508

B) 06 SAN JOSE 0464
C) 07 SAN JOSE 0335

=======
SUMMARY
=======

1. Since last year's report (Ref C), the GOCR has made
some progress in advancing laws related to Intellectual
Property Rights (IPR) required by the Central American Free
Trade Agreement (CAFTA-DR). However, Costa Rica must still
take several major steps to adequately protect and enforce
IPR, beginning with enacting the necessary IPR laws and
regulations to meet its CAFTA-DR obligations. In addition,
Costa Rica has not demonstrated a concerted resolve to
enforce its current IPR laws. Instead, the country's
Attorney General has publicly and repeatedly stated that
Costa Rica should use its limited investigative and
prosecutorial resources to pursue violent and drug-related
crimes. Nonetheless, there has been some progress. The
Costa Rican office that issues patents has recently ended a
lengthy pause in examining patent applications. A number
of Costa Rican officials have received training in IPR
enforcement, administration, prosecution, and customs from
USPTO, DHS, WIPO, and others. Due to these slight
improvements, as well as to the understanding that the GOCR
will address the additional shortcomings in Costa Rica's
laws and regulations this year, Post recommends that Costa
Rica remain on the Watch List.

============================
IPR BACKGROUND IN COSTA RICA
============================

2. Issues related to IPR rose to the forefront of Costa
Rica's public debate during the campaign leading up to the
October 7, 2007 nationwide referendum to ratify the
country's participation in CAFTA-DR. This was the first
referendum in Costa Rica's history and generated enormous
national interest in all of the issues associated with
CAFTA-DR, including IPR. Those opposed to CAFTA-DR
routinely spoke out against the agreement's requirements to
create effective deterrents against IPR infringement as
well as protections for IPR, politicizing the issues.
Opposition leaders asserted that increased penalties for
IPR violators would "send students to jail for copying
textbooks" and increased IPR protection would bankrupt the
local social security system that would be forced to
purchase original, innovative pharmaceuticals rather than
generics. The Costa Rican public ultimately rejected such
arguments and approved CAFTA-DR by a slim margin, but the
negative campaign created an environment where issues
related to IPR remained controversial.

============================================= ==============
AIMING FOR TRIPS COMPLIANCE THROUGH A LEGISLATIVE AGENDA
============================================= ==============

3. After Costa Rica was included in the Priority Watch
List in 2001, the country took the necessary steps to bring
into force the WIPO Copyright Treaty (WCT) and the WIPO
Performance and Phonograms Treaty (WPPT) on March 6, 2002
and May 20, 2002, respectively. Costa Rica has also
ratified the Patent Cooperation Treaty (PCT).
Nevertheless, the country remained non-compliant with
several TRIPS measures, such as data protection and
deterrent measures. These deficiencies are addressed in
CAFTA-DR, which the country signed in 2004, but has not yet
implemented and entered-into-force.

4. Since last year's Special 301 Report, Costa Rica has
made some progress in enacting needed legislative reforms
to become compliant with CAFTA-DR obligations related to
IPR. The legislature is working one four bills and the
ratification of two treaties that deal with IPR. When
these bills are enacted and the treaties ratified, Costa
Rica should be compliant with TRIPS. Since the opponents
of increased IPR protection attempted to water-down the IPR
bills through the introduction of hundreds of amendments,
the progress of bills has been very slow. Nevertheless,
the GOCR is energetically directing the legislative process
and is confident that the laws, when finally enacted, will
meet the country's CAFTA-DR obligations. To date, the
legislature has approved one of the four IPR-related laws
(on trademarks) and both of the treaties (Budapest and
UPOV). Supreme Court review and further legislative action
remain to be completed, however.
===================================
BUT SADDLED BY ENFORCEMENT PROBLEMS
===================================

5. Despite these legislative victories, real challenges
remain in effectively ensuring that the laws have an impact
on the local IPR environment. Throughout 2007, Costa Rica
continued to falter in enforcing its current IPR laws.
While the country's current laws do not provide for
significant prison time or monetary damages for IPR
violators, they do criminalize counterfeiting and piracy.
Nevertheless, the country's public prosecutors have
consistently demurred from prosecuting IPR cases. The
prosecution of IPR crimes is handled by public prosecutors
in the "various crimes" divisions of the branch offices of
the Attorney General's office. Crimes related to IPR,
however, form only a small portion of the portfolio of
these prosecutors and receive little or no attention.
Rather, the prosecutors invoke "opportunity criteria" (akin
to prosecutorial discretion) to avoid opening an
investigation into reported IPR crimes.

6. In late 2007, the Attorney General of Costa Rica,
Francisco Dall'anese, publicly reiterated that he does not
support diverting limited resources to the prosecution of
IPR crimes. Rather, he maintains that private companies
can seek redress in civil courts or can initiate a criminal
public action through private application. By this
process, a private party (almost always through an
attorney) files a complaint and jointly conducts the
investigation and prosecution of the case with the public
prosecutor. While this could be an effective means of
prosecuting IPR violators, the reality is that prosecutors
continue to avoid handling IPR cases by invoking
opportunity criteria. When that occurs, private attorneys
do not have the standing to petition for the seizure of
counterfeit goods. Likewise, the use of the civil courts
to pursue private cases against IPR violators is hampered
by the extreme length of time it takes to receive a civil
judgment (up to 15 years) and the small monetary damages
awarded.

7. Industry and others have asked Dall'anese to halt the
nearly automatic use of opportunity criteria with IPR
crimes, but he has rebuffed their calls. The position of
Attorney General in Costa Rica is entirely independent of
the Costa Rican Executive and Legislative Branches.
Constitutionally, the position falls under the Judiciary,
but, in practice, it is almost completely autonomous.
Dall'anese was unexpectedly reelected to another four year
term as Attorney General in late 2007.

8. The few prosecutions that have wound their way through
the criminal court system over the last two years were
originally started several years ago. In February 2008,
industry successfully concluded a prosecution against a
counterfeiter of apparel. As has been the case in previous
successful prosecutions of IPR violators, the judge
immediately paroled the convicted counterfeiter as it was
her first offense and the sentence was for less than three
years. (COMMENT: No matter the crime, judges in Costa Rica
have the latitude to immediately parole first-offenders who
have been sentenced to less than three years of prison.
Judges generally use this power in all criminal cases when
it can be applied. END COMMENT.)

======================================
AT THE BORDER: ARE THE GOODS GENUINE?
======================================

9. Costa Rica's Customs service continues to face
difficulties in halting the flow of counterfeit goods into
the country. The leadership of Customs is aware of the
importance of seizing pirated goods, but most customs
agents lack the necessary training to recognize
counterfeits. In April 2007, the U.S. Embassy took
advantage of a regional program offered by DHS to send a
number of Costa Rican officials for training in recognizing
counterfeits. Local industry has also expressed an
interest in providing counterfeit recognition training to
Customs officials.

10. In addition, the laws regulating the filing of criminal
cases can impede the seizure of pirated goods at the
border. If a customs agent recognizes that a shipment
contains pirated goods, the agent can order the shipment
seized for 48 hours. If, at the end of that period, the
holder of the IPR has not filed a criminal complaint
against the importer, the customs agent must either release
the goods or file a criminal complaint, which can open the
agent up to personal liability through a countersuit by the
importer if the criminal complaint is ultimately
unsuccessful. Increased communication between Customs and
industry would help solve this problem by providing time
for the owner of the trademark or patent to file the police
report. In such cases, even if the prosecutor ultimately
invokes opportunity criteria and abandons his/her role in
the criminal prosecution, the private party could continue
the action, aided by the fact that the goods have already
been seized by Customs.

============================================= ===
COSTA RICAN PATENT OFFICE: CAPACITY BY CONTRACT
============================================= ===

11. Throughout most of 2007, the Costa Rican Industrial
Property (IP) Office continued to experience severe delays
in processing patent applications. Patent attorneys in
Costa Rica relate that the office has not yet begun
processing patent cases first submitted in 2004 and 2005.
Currently, the IP Office does not have any in-house patent
examiners. Instead, the office relies on a contract
relationship with the Costa Rican Technical Institute and
the Pharmacists Board Association to provide technical
experts to serve as examiners. The IP Office has been
formalizing this arrangement for at least two years. It
previously contracted with the University of Costa Rica's
PROINNOVA office to conduct patent examinations. That
entity, however, never began concerted work in examining
patents, and its relationship with the IP Office terminated
in late 2006.

12. This "out-sourcing" arrangement has only just begun to
result in examined applications, with the examiners
affiliated with the Pharmacists Board completing the first
20 pharmaceutical examinations in December 2007. The IP
Office will likely use these outside examiners to move
through the enormous backlog of thousands of patent
applications that have accumulated over the last several
years (during which virtually no applications were
examined). Additionally, the IP Office intends to hire its
own in-house experts to better oversee the work of the
outside examiners.

13. The World Intellectual Property Organization (WIPO)
has worked closely with the Costa Rican IP Office to train
employees. WIPO has also started to offer training to
officials in the judiciary that have an interest in IPR.
In addition, the U.S. Embassy has sent several Costa Rican
officials to the USPTO's Global Intellectual Property
Academy for training.

======================================
USE/PROCUREMENT OF GOVERNMENT SOFTWARE
======================================

14. The 2002 Executive Decree #30, 151-J, mandated that
all government ministries use only legally licensed
computer software. According to this decree, each ministry
was to conduct an internal audit and submit a statement of
compliance no later than July 31, 2003. The government
subsequently claimed full certification of all ministries,
although there had been no independent confirmation.

=======
COMMENT
=======

15. In general, Costa Rica does not yet view IPR as a tool
to spur innovation. The measures underway in the
legislature are more the result of outside pressure, than
of a home-grown realization that increased IPR protections
can spark innovation which can fuel greater high-tech
economic development. However, the GOCR's incremental
improvements to the IPR protection and enforcement regime
are a positive sign. The GOCR must further advance by
finalizing the related IPR bills and corresponding
regulations so that the country will be compliant with its
CAFTA-DR obligations. Post believes that the GOCR will
ultimately complete all the CAFTA-DR required implementing
legislation and regulations in 2008. Therefore, based on
the GOCR's progress to date (albeit limited) in improving
the country's IPR regime, Post recommends that Costa Rica
remain on the Watch List. This is the properly-modulated
message, in our view. To lower Costa Rica's standing at
precisely the time the GOCR is (finally) completing its
CAFTA-DR implementation obligations would be too harsh a
signal that might risk stalling the current CAFTA-DR
momentum. Such a move might also be viewed as provocative
by the Arias administration, and especially by the Attorney
General. This would be counterproductive to our low-key
but steady efforts to work with the GOCR to improve IPR
protection.

BRENNAN

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