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Cablegate: Nigeria: Widespread Ipr Violations Increase Costs

VZCZCXRO6980
RR RUEHMA RUEHPA
DE RUEHOS #0116/01 0880640
ZNR UUUUU ZZH
R 280640Z MAR 08 ZDK
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 9832
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 9553
RUEHYD/AMEMBASSY YAOUNDE 0123
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEOMFD/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK

UNCLAS SECTION 01 OF 02 LAGOS 000116

SIPDIS

SIPDIS

STATE FOR AF/W,
COMMERCE FOR KBURRESS
USDOC FOR USPTA PAUL SALMON
STATE PASS USTR FOR LISER, AGAMA
USDOJ FOR MARIE-FLORE KOUAME

E.O. 12958: N/A
TAGS: KIPR ECON PGOV NI
SUBJECT: NIGERIA: WIDESPREAD IPR VIOLATIONS INCREASE COSTS
IN NIGERIA

LAGOS 00000116 001.3 OF 002


Sensitive but Unclassified; Handle Accordingly

1. (SBU) Summary: The prevalence of software piracy in large,
established Nigerian companies and in the movie industry
hinders Microsoft in identifying domestic partners in the
fight to enforce intellectual property rights. U.S. company
Schlumberger faces theft of proprietary information required
for bids submitted via Nigeria's electronic petroleum
exchange. Pfizer claims the government could control
fraudulent pharmaceuticals by requiring distribution from
monitored facilities, but lacks the political will to do so.
IPR violations raise costs for businesses, discourage foreign
investment, and ultimately hinder Nigeria's economic
development. End Summary.

2. (SBU) During a March 10 meeting with representatives of
Microsoft, Schlumberger, and Pfizer, Nigeria Desk Officer
Andrew Silski shared information regarding benchmarks under
the Special 301 Watch List process. Company representatives
described Nigeria's challenging environment for protection of
intellectual property rights (IPR).

--------------------------------------------
Microsoft Seeks Partners, Finds Many Lacking
--------------------------------------------

3. (SBU) John Okereke of Microsoft and of the Business
Sofware Alliance (BSA) told Deskoff that a BSA worldwide
study of intellectual property rights (IPR) violation rates
indicate globally 80 percent of IPR are violated and a
forthcoming study on Nigeria demonstrates a similar high
rate. (Note: The U.S. rate is approximately 21 percent. End
note.). Piracy goes far beyond small business and retail
users and extends to large, respected businesses, such as a
large Nigerian commercial bank running 4,500 unregistered
software packages. Even after meetings to address the
problem, the bank is dragging its feet both in admitting the
scale of the problem, and in rectifying the situation, though
they have begun uninstalling several hundred of the illegal
packages.

4. (SBU) Microsoft's Memorandum of Understanding (MOU) with
the Economic and Financial Crimes Commission (EFCC) several
years ago formalizes the agreement between the EFCC and
Microsoft to work together in addressing IPR software
violations, now most often conducted through the Cyber Crime
unit of the EFCC. Okereke described the working relationship
between the two entities as "good." The actions by the EFCC
in February 2008 to close down a pirated software market in
Lagos showed its effectiveness at one-off enforcement
actions; generally, however, the software pirates continue to
operate unimpeded, said Okereke. Working with the Nigerian
Copyright Commission (NCC) has potential, however, the NCC is
hampered by financial constraints and the lack of political
will. When asked by the Deskoff if Nollywood, Nigeria's
movie industry, was a potential partner on IPR issues,
Okereke replied it would be in theory; but, most Nigerian
movie production companies pirate the Adobe software used in
film editing.

----------------------------------------
Schlumberger Wary of Weaknesses in
Electronic, Physical Monitoring Systems
----------------------------------------

5. (SBU) Steve Fulgham, Managing Director of Schlumberger,
told DeskOff his company is concerned about the Nigerian
Petroleum Exchange (NIPEX) and its ability to protect
proprietary data. NIPEX is an electronic on-line exchange
through which oil field service companies submit bids for
work in Nigerian oilfields. Fulgham described the lack of
transparency in the exchange rules, particularly the
requirement that bidders upload technical drawings and
specifications as part of the bid. NIPEX does not offer
sufficient guarantees that the company's proprietary and
sensitive information will not be shared with competitors,

LAGOS 00000116 002 OF 002


Fulgham said. Technical abilities and standards, commercial
capabilities, and technical drawings are all routinely
submitted via the exchange. In one recent case, NIPEX
officials held bidding open past the published deadline to
allow a Nigerian company to submit a late bid; in Fulgham's
view, the exchange may prove similarly incapable of
protecting proprietary information.

6. (SBU) Fulgham noted that IPR violations have serious
safety consequences for the oil industry. Pirated oilfield
equipment, often imported from China, is sub-standard,
untraceable to a production batch for quality assurance, and
made of non-approved materials that cannot withstand the
extreme conditions to which they are subjected to in the
oilfield, said Fulgham. To avoid problems with pirated
pharmaceuticals, Schlumberger imports medications for its
staff rather than trust drugs procured locally.
--------------------------------------------- ------
Pfizer Sees Little Political Will to Change
--------------------------------------------- ------

7. (SBU) Bunmi Femi-Oyekan of Pfizer described the current
registration process implemented by the National Agency for
Food, Drug Administration and Control (NAFDAC) as
"challenging" at best and "chaotic" at worst. Pfizer finds
the Customs Service to be the company's largest hurdle in
combating fake drugs, describing Customs enforcement as
ineffective. Pfizer supports training for Customs and
advocates that the industry send a strong, consistent,
unified message to Customs and other law enforcement agencies
about the high costs of IPR violations and the necessity of
combating them at all levels. She also suggested that the
government knows one important way to solve the fraudulent
pharmaceuticals problem, i.e. pharmaceutical distribution
from monitored facilities only, but lacks the will to
implement it.

5. (SBU) Weaknesses throughout the distribution process allow
IPR violations to flourish, the group contended. Customs
officials are easily bribed to allow pirated or sub-standard
products into the country. Once in country, even legitimate
goods can be exchanged for fake goods at any point between
the warehouse and the retail distribution point, Fulgham and
others pointed out. In addition, import bans and local
content laws drive up the price of legitimate foreign and
domestic goods, fueling the demand for fakes.

7. (SBU) Comment: Combating piracy in Nigeria requires a
broad approach across many sectors; not just the software and
pharmaceutical industries. IPR violations raise costs for
business consumers, making Nigeria an increasingly expensive
place to do business, discourages U.S. investment, and
hinders the country's economic development. We are in a
continuing dialogue with GON agencies and at the April Trade
Investment Framework Agreement quarterly meeting, Post will
again push for increased engagement and results from the NCC,
Customs and the Ministry of Commerce and Industry. End
Comment.

8. This cable has been cleared by Embassy Abuja.
BLAIR

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