Cablegate: Special 301 Spain Recommendation


DE RUEHMD #0211/01 0561742
R 251742Z FEB 08





E.O. 12958: N/A

REF: (A) MADRID 00137 (B) STATE 09475 (C) 07 MADRID
02305 (D) STATE 158938 (E) STATE 56080 (F)
STATE 30128 (G) 07 MADRID 02128

1. (U) This cable is sensitive but unclassified. It is not
repeat not for internet distribution.

2. (SBU) Summary: Embassy requests Washington agencies to
consider an out-of-cycle review for Spain in October 2008.
On March 9, parliamentary elections will be held in Spain and
a new government will assume office in April. Even if the
ruling PSOE is re-elected, we expect significant changes
among officials responsible for IPR policy. We propose to
tell the new government that Spain will appear on the Watch
List if it does not do three things by October 2008. First,
issue a GOS announcement stating that internet piracy is
illegal, and that the copyright levy system does not
compensate creators for copyrighted material acquired through
peer-to-peer file sharing. Second, amend the 2006 "Circular"
that is widely interpreted in Spain as saying that
peer-to-peer file sharing is legal. Third, announce that the
GOS will adopt measures along the lines of the French and/or
UK proposals aimed at curbing internet piracy by the summer
of 2009. As this message documents, the Embassy recognizes
that the lack of sufficient Spanish progress during the past
year could justify Spanish placement on the Watch List. Our
out-of-cycle request is made with the view that proceeding in
this way be more likely to result in constructive action by
the new government. End Summary.

3. (SBU) While the Spanish government has been very receptive
to technical advice from the USG (for instance in connection
with its November 2007 Madrid IPR conference) on Internet
Service Provider (ISP) liability issues, there has been no
"meaningful action to update and improve Spain's e-commerce
laws." Workable notice and takedown procedures have not been
established. The "actual knowledge" standard demanded prior
to requiring ISPs to remove illicit content from the internet
remains operative. About a year ago, the government had
proposed an amendment (Article 17 bis) to the Information
Society Law which would have created a fairly robust notice
system and an embryonic takedown procedure. The
copyright-based industries approved of Article 17 bis.
However, the Council of State rejected Article 17 bis on
procedural grounds. The government did not subsequently try
to resucitate Article 17 bis because of very public
opposition from Spain's internet surfer community
(represented by the "Asociacion Internauta", which is headed
by Victor Domingo). We suspect that Spain's Internet Service
Providers (ISPs) were also pleased to see Article 17 bis die.
Subsequently, the GOS revived the Ministry of Industry,
Tourism and Trade and Ministry of Culture led working group
for ISPs and content providers to see if some other solution
could be found. The government has convoked several meetings
during the year. Our content industry contacts tell us that
the proposals that have been discussed in this working group
have been significantly less ambitious than Article 17 bis.
They are looking for leadership from the GOS similar to the
leadership displayed by the French and UK governments with
respect to notice and takedown. The copyright-based
industries, which have been participating in these working
group meetings for three years, say that, at some point, the
government needs to pressure the ISPs to accept a great
degree of responsibility for curbing piracy on the internet.
In their judgment this has not happened so far. Our
evaluation is that the copyright-based industries' perception
is correct.

4. (SBU) The GOS has not established a working group to
consider the feasibility of administrative sanctions for
illegal internet downloads, although officials at the
Ministries of Industry and Culture have considered the

5. (SBU) We see no evidence of greater centralized
coordination of internet piracy investigations. However,
local trade associations do not complain about the lack of
centralization of police investigations into internet piracy.
In fact, as in years past, local trade associations continue
to praise the efforts of the police to combat both internet
and street piracy. The issue remains that the judiciary does
not issue deterrent-level sentences.

6. (SBU) The Fiscalia General's official instruction which

conveys the impression that peer-to-peer downloading is not a
crime remains operative. However, on 2/7/08, when the DCM
met with Spanish Secretary of State for Justice, Julio
Perez-Hernandez (Deputy Justice Minister equivalent), he
committed to comment in writing on this topic by 2/21/08 (ref
A). He appeared to be unaware of the uproar that this
Circular has generated. Also, the Teniente Fiscal del
Tribunal Supremo (Deputy Fiscal General equivalent) appeared
to be receptive to discussing the Circular during a 2/13/08
colloquium with visiting U.S. Patent and Trademark Office
Senior Counsel Michael Shapiro. Government officials insist
in meetings with Embassy officials that the Circular does not
legalize peer-to-peer file sharing, and technically they are
no doubt correct. The reality is though that during 2007 the
public perception that the Circular decriminalizes
peer-to-peer file sharing and downloading has continued to
grow. The normally pro-government daily, El Pais, wrote
about this in a January 12, 2008 article entitled: "About
Internet Downloads." The article says that "peer-to-peer
internet downloads are completely legal here." The article
quotes lawyer Carlos Sanchez Almeida, who notes that there is
not a single conviction against anybody for having conducted
illegal downloads (Note: In fairness this is probably true
for most EU Member States.) The problem though as the El
Pais article points out is that Spain's internet surfing
community constantly refers to the Circular to justify its
conduct, and the "internautas" are not contradicted by
government officials.

7. (SBU) A related problem with respect to peer-to-peer file
sharing is the widespread view in Spain that the copyright
levy system compensates for illegal internet downloads.
During the November 7-8, 2007 GOS-organized Madrid IPR
conference, a senior Ministry of Industry, Tourism and Trade
official, Juan Junquera Temprano, specifically said that the
copyright levy system does not constitute compensation for
peer-to-peer file sharing. Other GOS officials have said
this as well. But, this message has not been internalized by
Spanish society. The background is that Spanish law (like
many other continental European legal systems) permits
"private copies" to be made from legally acquired copyrighted
products. Copies obtained through peer-to-peer file sharing
are by definition not covered by the private copy exception
because they are not legally acquired. But this distinction
is lost on most Spaniards. (Comment: Copyright levies are,
in fact, not popular in Spain. The opposition conservative
PP party has promised to abolish copyright levies if it wins
the March 9, 2008 parliamentary elections. On balance, our
copyright interests would probably be better served were
Spain to abolish copyright levies as they constitute a
distraction to our efforts to seeing creators being properly
compensated. But given the private copy exception, which is
a strongly established element in Spanish jurisprudence,
Spain is likely to maintain a levy system for a number of
years to come even if the PP wins the elections.)

8. (SBU) An agreement between the government and the Spanish
Restaurant and Bar Association to post notices stating that
the making available of pirated CDs and DVDs is illegal has
not been concluded. In 2007, the Ministry of Culture sent a
letter to the association suggesting such a an accord. We
were told by a Ministry of Culture working-level contact that
several meetings were held, but in the end they did not yield
a result. "Mochileros" (vendors with backpacks) continue to
enter into establishments to sell pirated CDs and DVDs. Our
copyright-based industry contacts tell us that some local
governments such as Barcelona, San Sebastian, and Marbella
have made extra efforts against street piracy, which has also
had the positive effect of limiting mochilero activity there.
With respect to the "concerted action" items discussed in
the demarche, we have requested statistics from the Spanish
authorities. Street piracy clearly remains a problem in
Spain, although the industry trade associations talk about
internet piracy much more now than three or four years ago.


9. (SBU) EconOff and visiting USPTO senior counsel, Michael
Shapiro, met with Federacion Antipirateria (FAP) President
Jose Manuel Tourne on 2/11/08. The FAP represents the movie
and videogame industries. The Motion Picture Association of
America (MPAA) supports FAP. Tourne recommends placing Spain
on the Priority Watchlist. This posture springs in part from
declining revenues for the businesses Tourne represents.
This is clearest when it comes to DVD rentals. Rentals of
DVDs declined 32% in 2007, compared with 2006. In 2003, the
companies Tourne represented had a total of euros 413 million
in revenues, which have declined to euros 274 million in
2007. The FAP President conceded that it is always debatable
to what extent declining revenues are attributable to product
people are not interested in, and to what extent piracy is
responsible. However, given the growth of broadband internet
penetration in Spain in the last couple of years, it is
reasonable to assume that piracy is responsible for a
significant part of the declining revenues. In June 2007,
there were almost 5.9 million high-speed internet lines
installed in Spain, representing a 28.7% increase over a
period of a year. Tourne showed EconOff and Shapiro a widely
used website in Spain called Hispavista that is used by many
people to download movies. The site is by no means
"undercover" in any way. In fact, it looks professional and
aboveboard. Beyond strict business concerns, Tourne
expressed frustration with the way the government has handled
IPR matters over the last four years. The 2004 anti-piracy
plan, unveiled with much fanfare, had not generated tangible
results beyond a few publicity campaigns. Perhaps his
greatest irritation was the GOS-sponsored stakeholder working
group on notice and takedown, which he felt had been stacked
against content providers. The FAP's priorities included
provisions to permit filtering, and an independent authority
(along the lines proposed by French President Sarkozy) to
issue graduated responses against illegal internet
downloaders, and a functioning notice and takedown system for
the independent authority to work with. Tourne would like
to see the penal code amended to make graduated sanctions
against internet violators possible.

10. (SBU) EconOff and visiting USPTO senior counsel, Michael
Shapiro, also met with Promusicae President Antonio
Guisasola, on 2/11/08. Promusicae represents the music
business in Spain and is affiliated with the Internatiional
Federation of Phonogram Industries (IFPI), which in turn is
affiliated with the Recording Industry Association of America
(RIAA). Promusicae recommends watchlisting Spain. In 2007,
sales of DVDs in Spain declined by 27%, compared with 2006.
The legal digital market in Spain remains relatively small.
From Promusicae's perspective, the most damning statistic
with respect to the digital market is that 80% of the legal
market in Spain is for mobile phones, and only 20% regular
internet downloads. In other words, in the mobile market,
where illegal downloading is not possible, people pay for
legal music. In the internet, where illegal possibilities
flourish, the market is much less developed. Guisasola says
that this 80-20 split between mobile and internet legal music
business is most pronounced in Spain, but the Embassy does
not have numbers that confirm this assertion. Promusicae's
greatest frustration is that the notice and takedown
stakeholder working group simply has not agreed upon
solutions that address content provider concerns. At some
point, and that point was reached some time ago in
Guisasola's view, the government has to take the initiative.
The music industry represenative would like to see the
Spanish government adopt a posture similar to that of the
French and UK governments.

11. (SBU) EconOff discussed Special 301 with General Society
of Authors and Editors (SGAE) Corporate Relations Director
Pedro Farre on 2/13/08. Farre recommends the watchlist for
Spain. SGAE is an almost entirely Spanish entity, although
it has a relationship with the MPAA. This organization is
Spain's biggest collectors' society and as such is one of the
biggest defenders of the copyright levy system. But SGAE is
also one of the most vocal critics of the lack of government
actions against piracy. In fact, the numbers on piracy that
SGAE uses suggest that Spaniards have among the highest rates
of internet piracy in the world. The SGAE estimates on
internet piracy come from the European Interactive Publicity
Association (EIAA). According to EIAA, 58% of Spanish
internet users download music and 52% download movies and/or
videoclips from the internet. The EIAA says that the average
in Europe for these activities is 37% and 20% respectively.
We have no way of confirming these estimates, but it is
nonetheless noteworthy that SGAE cites these estimates. The
SGAE, while a vocal critic of the government on piracy
matters, is also something of a pillar of the Spanish
establishment. Its most prominent members tend more to the
left, which helps explain why the conservative opposition
proposes to eliminate the copyright levy system. In fact
though, SGAE has become so vocal on the government's lack of
action on peer-to-peer piracy that the Minstry of Industry
recently excluded SGAE from the working group dealing with
internet piracy. This is conceivably a sign that Spain's
premier collection society is quite aware that over the
medium-term, curbing piracy is likely to be even more
important to its members than copyright levies.

12. (SBU) EconOff had a conversation with the Business
Software Alliance (BSA) representative in Spain, Luis Frutos,
on 2/8/08. The BSA is not calling for Spain to be
watchlisted. Although software piracy levels in Spain remain
high, Frutos explained that the BSA is getting much of the
cooperation it wants from Spain's Ministry of Industry,
Tourism and Trade. This tracks with information from the
Ministry itself; BSA is without a doubt the Ministry's
favorite industry organization on these matters. The BSA is
primarily interested in ensuring that computer distributors
do not sell computers containing pirated software.
Apparently the Spanish government is cooperating to ensure
that this does not happen. The contrast between BSA's views
on Spain and the music and movie trade associations is
striking. A 2/7/08 interview in the leading business daily,
Expansion, with Microsoft executive Txema Arnedo is
illustrative. Arnedo is spearheading a one million euro
anti-piracy effort. Currently, the software piracy rate in
Spain is 46%, but he believes it can brought down to 36%
fairly quickly. He noted that in 1997 the software piracy
rate in Spain was 75%, but that it was reduced by 25% in
three years.


13. (U) Industry trade associations continue to praise the
actions of Spain's national and local police forces. There
is no doubt that the police are active. The issue remains
the lack of deterrent level sentencing for IPR offenders.
We are still in the process of collecting full 2007
statistics. We offer the following, non-exhaustive,
statistics for 2007 police activity.


Confiscated Goods (clothes, shoes, luxury goods, cosmetics,
cell phones, toys, electric door openers) 6.5million items
Closed Web Pages

Closed recording towers




The numbers demonstrate that Spanish authorities are far from
passive regarding this problem. But the fact remains that
the police interventions alone are not sufficient to deter
IPR violations significantly. Many arrested people are held
for a short period of time and then released, often to become
repeat offenders. The closed web pages are interesting and
reflect the police's increasingly sophisticated understanding
of the internet. We know from press reports that at least
several of the closed web pages trafficked in copyrighted
materials, although internet piracy per se is not the Spanish
police's priority. The Spanish police focus especially on
taking down web pages that deal in child pornography.


14. (U) Over the past year, the Embassy has used the ref (D)
demarche as the basis for our interactions with the Spanish
government on IPR matters at both the policy and working
levels. The GOS is aware of our specific IPR concerns. On
9/17/07, the Embassy coordinated a Washington-Madrid DVC on
internet-related IPR matters, which was well attended by GOS
officials. The Embassy also worked with Spanish authorities
on their 11/7-8/07 IPR conference in Madrid (ref G).
Associate Register of Copyrights David Carson and U.S. Patent
and Trademark Office Senior Counsel Michael Shapiro attended
that event and also lent their expertise at a U.S.-Spain
bilateral (ref G) on 11/7/07, which was headed by DCM Hugo
Llorens and Telecommunications Secretary of State Francisco
Ros. In connection with the 2/15-18/08 Madrid art show
(ARCO), Senior Counsel Michael Shapiro returned to Madrid and
conducted conversations on internet related IPR matters at
the Ministries of Industry and Culture.

15 (U) The DCM has encouraged the GOS to submit comments on
this year's Special 301 process by conducting a 2/5/08
meeting with Ministry of Industry, Tourism and Trade
Secretary of State for Telecommunications, Francisco Ros and

a 2/7/08 meeting with Ministry of Justice Secretary of State
Julio Perez Hernandez (ref A). A meeting had also been
scheduled for 1/31/08 Ministry of Culture Subsecretary Maria
Dolores Carrion Martin, but Carrion cancelled the day of the
appointment because she was ill. The DCM also sent
individually tailored letters, including once again, the
Special 301 demarche (Ref D. Note: The relevant GOS
authorities have received this demarche many times before,
but we thought it was worthwhile emphasizing once again that
the USG's inter-agency deliberations on Spain will be based
largely on this demarche.) The letter to the Secretary of
State for Industry emphasized notice and takedown; the letter
to the Ministry of Justice the Circular; and the letter to
the Ministry of Culture focused on an agreement between the
GOS and the Spanish Restaurant and Bar Association on
mochilero sales of pirated products.

16. (SBU) Secretary of State Ros told DCM that he was
"worried" about illegal content on the internet. Once again
though he suggested that it was very difficult to distinguish
between legal and illegal content on the internet, saying
that up to 70% of the content on the internet was generated
by users. He said that legislation was not possible now
because of the upcoming March 9 elections. Moreover, any
action at this point would be hopelessly politicized. He
complained, once again, that much of the illegal content on
the internet is uploaded outside Spain. Ros agreed that
French president Sarkozy's initiative was "very interesting",
and he said that continued international conversations on
internet piracy were very important. Ros said that changing
Spanish consumers' "culture" would be very difficult. He
argued that, as in the case of the struggle against illegal
drugs, it was more important to go after the supplier, rather
than the consumer. He conceded though that Spanish internet
users were very heavy consumers of illicit content.

17. (SBU) Per ref A, Hernandez told DCM that he was not very
familiar with the issues surrounding the 2006 Circular to
judges and prosecutors. However, he told DCM that he would
provide written comments on the topic by February 21.

18. (SBU) The GOS has been put on notice at both senior and
working levels regarding our Special 301 concerns. The
Ministry of Industry, Tourism and Trade is preparing comments
on the issue that will be provided the week of February 25.
Like last year, the trade part of the Ministry of Industry,
Tourism and Trade, headed by Secretary of State Pedro Mejia,
is coordinating the Spanish position. Our sense is that the
international trade elements of the Spanish government are
most sensitive to a possible watchlisting, which is possibly
why they are coordinating the Spanish comment on Special 301.
We have not heard what arguments the Spanish government will
make. We expect, however, the GOS to argue that it is up to
the stakeholders to agree among themselves on how to regulate
the internet.


19. (SBU) The Embassy recognizes that Spain may qualify for
placement on the Watch List. The USG and U.S. stakeholders
(and many Spanish stakeholders) have made good faith efforts
to work with the Spanish government since it unveiled its
anti-piracy plan in 2004. The results so far have not been
sufficient. The government has acknowledged the problem,
conducted publicity campaigns, conducted dialogues with
stakeholders to promote inter-industry agreements, encouraged
the police force to continue its good work, and works well
with the software industry. Spain abides by its
international patent-related commitments. However, we cannot
point to a single major success of interest to our music and
movie industries. This Embassy has consistently argued that
Spanish IPR performance should be analyzed in the context of
the other big EU economies. France and the UK are making
moves on internet piracy that industry organizations praise.
Italy is already on the Watch List. Our sense is that Spain
is now closer to Italy, at least with respect to IPR
performance of interest to the music and movie industries.
Should Washington agencies decide to place Spain on the Watch
List in April we would have no difficulties explaining why to
our interlocutors.

20. (SBU) Our request to Washington agencies to consider an
out-of-cycle review in October is predicated on the electoral
timetable and our belief that this may be more likely to
result in constructive GOS action. There will be a new
government in Spain in April. Ideally, it should not have to
be held responsible so soon after assuming office for the
lack of action by the previous government. Should the
socialists be reelected, there will likely be new
governmental players responsible for IPR policy. Should the
opposition conservative PP party win, it will certainly ask
us why it is being punished for the previous government's
lack of action. (Note: Currently the two major parties are in
a statistical dead heat according to most polls.) The
Embassy has a short, medium and long-term IPR strategy for
Spain (ref C). Our experience suggests that we need to put
the pressure on whatever government is elected during its
first year in office, so the short-term part of the strategy
is the most critical piece. On balance, we think we would
have a better chance getting a new government to move quickly
on a public peer-to-peer announcement, the Circular and
measures to stem internet piracy if we do not have to deal
immediately with the resistance that could be sparked by
placement on the Watch List. Our bottom line: consider
giving the new government six months, and if does not
perform, put Spain on the Watch List.


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