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Cablegate: Ecuador 2008 Special 301 Report

VZCZCXYZ0037
OO RUEHWEB

DE RUEHQT #0161/01 0521715
ZNR UUUUU ZZH
O 211715Z FEB 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8489
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 7333
RUEHCV/AMEMBASSY CARACAS PRIORITY 2877
RUEHLP/AMEMBASSY LA PAZ FEB 0904
RUEHPE/AMEMBASSY LIMA PRIORITY 2378
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 3300
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS QUITO 000161

SIPDIS

SENSITIVE
SIPDIS

USTR FOR JENNIFER CHOE GROVES
STATE FOR EB/TPP/IPE JENNIFER BOGER

E.O. 12958: N/A
TAGS: KIPR ETRD ECON EC

SUBJECT: ECUADOR 2008 SPECIAL 301 REPORT

REF: State 9475

1. (SBU) Summary and recommendation. Post concurs with PhRMA
recommendation that Ecuador remain on the Special 301 Watch List for
2008. Overall protection for IPR goods has not changed
significantly over the past year, although the Ecuadorian
Intellectual Property Institute (IEPI) has new, more assertive
leadership and has made better use of available resources and
improved its effectiveness. Despite increased enforcement
activities on the part of IEPI and the Ecuadorian Customs, overall
enforcement of IPR remains a key problem, resulting in high piracy
levels in the software, publishing, recording, and film industries.
Data exclusivity and protection continue to be a problem. Ecuador's
health code permits granting marketing approvals without regard to
whether or not a medication is patented. End summary and
recommendation.

3. (U) Ecuador's comprehensive Intellectual Property law enacted in
May 1998 was a step forward for IPR protection, covering copyright,
trademark, patent, and semiconductor chip protection. It also
addressed preliminary enforcement measures and other procedures, and
required the creation of specialized IP courts. In addition, it
created the Ecuadorian Intellectual Property Institute (IEPI).

IEPI
----

3. (SBU) The Ecuadorian Intellectual Property Institute (IEPI) is
responsible for patent and trademark Registration, and is also the
lead GOE agency to coordinate IPR enforcement. A new IEPI
President, Alfredo Corral, was appointed in May 2007. According to
Corral, IEPI has developed initiatives to reduce the backlog of
trademark and patent registrations, hire additional personnel, and
buy computers to provide a better service and push for stronger IPR
enforcement. These efforts are supported by assistance from USAID
and other donors. According to PhRMA, the backlog of pending patent
cases within IEPI decreased in 2007 and patent examination
productivity increased by 300 percent. Corral reported that IEPI is
developing a national campaign to raise awareness of the importance
of respecting intellectual property rights.

Enforcement
-----------

4. (SBU) Lack of enforcement remains a key problem for Ecuador.
Production of pirate CDs is reaching large-scale levels. The
recording industry estimates that more than 80 million CD-Rs and
DVD-Rs legally enter Ecuador every year and a similar amount enters
as contraband, with most destined for piracy. This year, the
International Intellectual Property Alliance (IIPA) did not take a
position on Ecuador for the Special 301 process. However, in
earlier reports, IIPA estimated that pirated products accounted for
98% of the domestic record and music industry in Ecuador in 2006,
with estimated damage due to music piracy of USD 33 million. In
contrast, the official market for recordings in Ecuador amounted to
a mere 400,000 units in 2006, per IIPA, a 21 percent drop from 2005.


5. (SBU) The motion picture and gaming industries suffer equally
from widespread CD and DVD copying. Business software piracy, both
end-user piracy and pre-installed unlicensed software in new
computers, continues to be a problem. Pervasive commercial
photocopying piracy victimizes the book publishing industry,
including for educational textbooks.

6. (SBU) Corral reported that IEPI and the Ecuadorian Customs have
increased enforcement actions in their areas of competence,
administrative sanctions imposed by IEPI or interception of
counterfeit goods by Customs, when they can act without a formal
complaint by the right-holder. According to IEPI the number of
these enforcement actions increased from 3,826 operational cases in
September 2006 to April 2007, to 11,260 cases in May to December
2007. However, criminal enforcement actions must be initiated by a
prosecutor's office and enforced by the police. We do not have any
indication that there was any appreciable change in criminal
enforcement efforts in 2007, although without information from a
centralized data collection point such as IIPA, that perspective is
difficult to verify.

Legal Environment
--------------------
7. (SBU) The Law on Intellectual Property of 1998 required the
creation of specialized intellectual property courts, which to date
have not been established. According to officials from the Ministry
of Justice, the courts might not be created in 2008, because
National Judiciary Council is waiting for the new National
Constitution before making any significant reforms. This
long-awaited action, if it comes to be, would improve IPR
enforcement since Ecuador's judiciary in the past has largely been
ineffective in enforcing the IP law. Post will provide more
information when available.

8. (SBU) Reflecting potential positive change in the legal IPR
environment in Ecuador, a court decision in 2006 that characterized
efforts by a patent holder to remove illegal copies from the market
as an illegal competitive practice was overturned on appeal. The
court ruled in favor of the patent holder in October 2007.

TRIPS Compliance
----------------

9. (SBU) While the Ecuadorian Intellectual Property Law does
provide for data exclusivity, as does TRIPS Article 39.3, marketing
approval for copy products has been routinely granted based on data
produced by research companies for the original drug. In addition,
Instituto Izquieta Perez, the health authority, routinely provides
sanitary registrations to copy products of patented drugs.
According to PhRMA, the sanitary authorities have approved copies
for all innovative pharmaceutical products covered by patents in
Ecuador. A modification to Ecuador's health code in late 2006
permits sanitary registrations without regard to whether or not a
medication is patented, which could further facilitate the marketing
of patent-infringing pharmaceutical products. Ecuador, citing legal
opinions from the Andean Court of Justice, has failed to provide
patents for second uses.

Comment and Areas for Further Action
------------------------------------

10. (SBU) The Correa administration, which took office in January
2007, has rarely spoken on IPR matters. It has given IEPI the
autonomy to move forward with a moderately aggressive modernization
effort, but otherwise has not shown a strong interest in increasing
IPR enforcement. Likewise, it has not shown indications that it
wants to reduce the current level of IPR protection or modify the
current IPR law. However, some observers are concerned that a
competition law that is currently being drafted might have some
provisions affecting IPR protection. Corral reported that a
proposal to combine IEPI into a new competition agency has been
dropped. The law is being drafted in a very closed process, but
post will monitor the status of the competition law.

12. (SBU) Judges, local law enforcement and customs officials need
training on intellectual property rights protection and enforcement.
U.S. Patent and Trademark Office training in IP protection and
enforcement is a useful tool.

13. (SBU) Ecuador should correct contradictions between its Health
Code and its Intellectual Property Law, to prevent issuance of
sanitary registrations to products that violate registered patents
or to products whose applications are based on confidential data
submitted by another company.

JEWELL

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