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Cablegate: Nicaragua: 2008 Special 301 Review

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #0225/01 0572330
ZNR UUUUU ZZH
R 262330Z FEB 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 2141
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS MANAGUA 000225

SIPDIS

STATE FOR WHA/CEN, EB/TPP/MTA/IPC
STATE PLEASE ALSO PASS TO USTR FOR ANDREA MALITO
TREASURY FOR SARA GRAY
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: KIPR ECON USTR NU
SUBJECT: NICARAGUA: 2008 SPECIAL 301 REVIEW

REFS: A) SECSTATE 9475, B) 07 MANAGUA 2654, C) 07 MANAGUA 2616

SUMMARY AND INTRODUCTION
------------------------

1. (SBU) Nicaragua's participation in the United States - Central
America - Dominican Republic Free Trade Agreement (CAFTA-DR)
required the passage of legislation making the country's framework
for the enforcement and protection of intellectual property rights
(IPR) consistent with U.S. and emerging international standards.
However, the Government of Nicaragua (GON) subsequently passed
legislation that repealed provisions that had strengthened criminal
penalties for IPR theft and allowed the GON to initiate ex oficio
IPR investigations, a CAFTA-DR requirement. Moreover, as the
Pharmaceutical Research and Manufacturers of America (PhRMA) raises
in its 2008 Special 301 Submission, patent linkage and test data
protection for pharmaceutical products, also CAFTA-DR requirements,
remain unimplemented.

2. (SBU) Nicaragua's failure to meet CAFTA-DR IPR commitments is a
serious concern. However, CAFTA-DR is still young, and many GON
officials lack familiarity with IPR issues. The fact is that GON
officials and industry are cooperating to combat piracy, trademark
infringements, and copyright violations. In 2007, the GON conducted
20 raids and the police seized 58,547 pirated DVDs, 21,629 CDs, 13
computers, 3 multi-purpose copiers, and other audiovisual equipment
worth approximately $123,000. Officials at the Ministry of Trade,
Industry, and Development (MIFIC) are interested in meeting CAFTA-DR
IPR commitments. On February 22, after receiving notification that
PhRMA had named Nicaragua in its 2008 Special 301 Submission, MIFIC
Minister Solorzano wrote Health Minister Gonzalez seeking his
cooperation on test data protection.

3. (SBU) For these reasons, post would like to work with GON
officials over the course of the year to find a way to resolve
Nicaragua's IPR issues. In lieu of naming Nicaragua to the 2008
Special 301 Watch List, we recommend that a senior Washington-based
official pen a letter to President Ortega outlining our IPR concerns
in terms of CAFTA-DR commitments. We believe that naming Nicaragua
to the Watch List this year could result in a negative political
reaction that would complicate our efforts to help Nicaragua comply
with its CAFTA-DR IPR commitments.

CAFTA-DR IMPROVES LEGAL FRAMEWORK
---------------------------------

4. (SBU) CAFTA-DR made Nicaraguan standards for protection and
enforcement of IPR consistent with U.S. and emerging international
standards. To implement the agreement the GON passed several new
IPR laws that 1) provide state-of-the-art protections for digital
products such as software, music, text and videos; 2) afford
stronger protection for patents, trademarks and test data, including
an electronic system for the registration and maintenance of
trademarks; and, 3) deter piracy and counterfeiting. Major IPR laws
include the Patent, Utility Model, and Industrial Design Law
(amended 2007/634); the Copyright and Related Rights Law (2006/577);
the Satellite Signal Programming Protection Law (amended 2006/578);
and the Trademark and Other Distinctive Signs Law (amended
2006/580).

NEW CRIMINAL CODE UNDERMINES CAFTA-DR REFORMS
---------------------------------------------

5. (SBU) Unfortunately, recent reforms to the new Criminal Code
would weaken IPR enforcement and undermine legislation passed in
2006 to implement CAFTA-DR. On April 16, 2006, the GON approved
amendments to the Copyright Law to add a provision that the
Prosecutor General's Office could investigate an IPR crime ex
oficio, without a formal complaint. However, a new Criminal Code
approved on November 13, 2007, repeals this provision. The code
awaits publication.

6. (SBU) The Ortega administration has also weakened penalties for
copyright violations under the new Criminal Code. In 2006,
amendments to the Copyright Law stiffened penalties for IPR crimes,
including fines ranging from 3,000 to 25,000 cordobas ($160 to
$1,315) and prison sentences of up to two years. The new Criminal
Code approved on November 13, 2007 adopts aspects of Sweden's penal
code to calculate the fine for an IPR offender based on one-third of
that person's daily salary multiplied by 90 to 150, depending on the
severity of the crime. The new Criminal Code also reduces prison
sentences to a maximum of one year.

7. (SBU) The new Criminal Code will come into effect once published
in the Official Gazette, a process that has been delayed as part of
President Daniel Ortega's power struggle with former President
Arnoldo Aleman over unrelated provisions of the new Criminal Code
(Ref C). A MIFIC official responsible for CAFTA-DR implementation
was surprised to learn that the new Criminal Code would repeal
legislation allowing ex oficio IPR investigations and weaken
penalties for copyright violations; he clearly understood the
implications for CAFTA-DR compliance.

TEST DATA PROTECTION AND PATENT LINKAGE
---------------------------------------

8. (SBU) PhRMA's 2008 Special 301 Submission claims that the GON has
yet to implement an effective system for test data protection and
patent linkage for pharmaceutical products, as required by CAFTA-DR.
Post shares PhRMA's concern that nearly two years after the
agreement's entry into force and more than a year after President
Ortega took office, the GON has not met these CAFTA-DR commitments.
Industry representatives visited Nicaragua several times in 2007 to
encourage officials at the Ministry of Health (MINSA) and Ministry
of Trade, Industry, and Development (MIFIC) to implement these
CAFTA-DR requirements. Neither ministry took an active role in
pushing for implementation in 2007, but on February 22, after
receiving notification that PhRMA had named Nicaragua in its 2008
Special 301 submission, MIFIC Minister Solorzano wrote Health
Minister Gonzalez seeking his cooperation on test data protection.
On agricultural chemical test data, a representative of CropLife
Latin America reports that the Nicaraguan Ministry of Agriculture
and Livestock has established an effective system.

LIMITED PROGRESS ON IPR ENFORCEMENT
-----------------------------------

9. (SBU) In 2007, the GON conducted 20 raids and the police seized
58,547 pirated DVDs, 21,629 CDs, 13 computers, 3 multi-purpose
copiers, and other audiovisual equipment worth approximately
$123,000. For 2008, the National Police launched a public awareness
campaign in three major open markets in Managua to inform vendors
who sell pirated goods that they risk arrest. Government officials
say that in March the police will begin to seize pirated goods and
arrest the vendors in those markets.

10. (SBU) In July 2007, the GON successfully prosecuted a case in a
local court against a Nicaraguan citizen selling pirated music CDs.
In the case, originally filed in 2005, the offender was sentenced to
two years in prison -- later reduced to parole -- and fined 5,000
cordobas ($267). Indeed, GON officials complain about the courts'
slow adjudication of IPR cases. The Prosecutor General's Office
filed 17 IPR cases in 2006 and 2007, but the courts have not ruled
on any of them. The Prosecutor General and National Police are
currently investigating 28 intellectual property cases for possible
prosecution.

COOPERATION AND TRAINING
------------------------

11. (SBU) GON officials and industry are cooperating to combat
piracy, trademark infringements, and copyright violations. A
representative of Nicautor, an association that advocates IPR
enforcement and protection for book authors and music companies,
said the police and public prosecutors normally respond promptly to
formal complaints on IPR crimes. GON officials noted that they and
industry representatives are meeting to finalize an IPR best
practices manual they began drafting in a USG-funded IPR training
course in December 2007 (Ref C). One Nicautor representative added
that GON officials and industry representatives may establish an
interagency working group on IPR enforcement.

COMMENT AND RECOMMENDATION
--------------------------

12. (SBU) Unfamiliarity with IPR issues among new Health Ministry
officials and a lack of interagency cooperation within the GON, now
that the Technical Secretariat of the Presidency has been disbanded,
complicate implementation of CAFTA-DR commitments on test data
protection and patent linkage. We are not sure what is behind the
repeal of legislation providing for ex oficio investigation of IPR
crimes and stronger sentences for copyright violators. Poor
interagency coordination is at least partly to blame, as we do know
that law enforcement officers and trade officials have been caught
by surprise by what is happening. We suspect that the rest of the
blame belongs with National Assembly politics and special
interests.

13. (SBU) On the positive side, MIFIC appears to have the political
will to tackle the issues raised by PhRMA and to force the
government to take a closer look at implications to CAFTA-DR
embodied by changes to the Criminal Code. We have seen interagency
cooperation at the working level on the IPR best practices manual.
We are building a relationship with key officials and are committed
to helping their staff members participate in USG-funded IPR
training with the U.S. Patent and Trademark Office and the
Department of Justice's Office of Overseas Prosecutorial
Development, Assistance, and Training.

14. (SBU) Post believes that more engagement with mid-level and
senior-level GON officials will encourage Nicaragua to enhance its
IPR enforcement and protection efforts in compliance with CAFTA-DR.
The Embassy has good communication with GON working-level
counterparts on IPR. However, IPR is a low priority for mid- and
senior-level officials. We would like to work with these officials
over the course of the year to raise the profile of IPR and find a
way to resolve these CAFTA anomalies. In lieu of naming Nicaragua
to the 2008 Special 301 Watch List, we recommend that a senior
Washington-based official pen a letter to President Ortega outlining
our IPR concerns in terms of CAFTA-DR commitments. We would follow
up at the ministerial level and with members of the National
Assembly. We believe that naming Nicaragua to the Watch List this
year could result in a negative political reaction that would
complicate our efforts to help Nicaragua comply with its CAFTA-DR
IPR commitments.

TRIVELLI

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