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Cablegate: Embassy Comments On Gos Special 301 Observations

VZCZCXYZ0001
RR RUEHWEB

DE RUEHMD #0293/01 0711220
ZNR UUUUU ZZH
R 111220Z MAR 08
FM AMEMBASSY MADRID
TO SECSTATE WASHDC 4454

UNCLAS MADRID 000293

SIPDIS

SIPDIS

STATE FOR EEB/IP (BOLGER, URBAN)
STATE PASS USTR (CWILSON)
STATE PASS COMMERCE (DCALVERT)
STATE PASS USPTO (MSHAPIRO)
STATE PASS U.S. COPYRIGHT OFFICE (MSKELTON)

E.O. 12958: N/A
TAGS: ECON ETRD KIPR SP
SUBJECT: EMBASSY COMMENTS ON GOS SPECIAL 301 OBSERVATIONS

REF: A. A. FEBRUARY 25

B. 2008 GOS OBSERVATIONS B. MADRID 00211

1. Summary: The Embassy offers the following review of the
Spanish government's observations (ref A) on the
International Intellectual Property Alliance's (IIPA) Special
301 recommendation for Spain. Our review is keyed to the
Spanish document. Our assessment (ref B) of Spain's
copyright-related Intellectual Property Rights (IPR)
performance has not changed. We continue to believe that it
would best serve U.S. interests to consider a delay in
possible Watch List placement for Spain until the new
officials that we expect will take over the IPR portfolio
have had six months to improve copyright protection. As an
alternative, we ask Washington agencies to consider placing
Spain in the Special Mention category that IIPA recommends
for Germany. End Summary

Degree of Piracy
----------------

2. The GOS says that its data show music piracy in 2006-2007
to be 13.1%, as opposed to the 20% reported by IIPA. We do
not know whether the GOS data is more or less reliable than
the data cited by the IIPA. We do know, however, that the
Spanish Society of Authors and Editors (SGAE - Spain's
premier collection society - it is truly a Spanish
organization representing mostly Spanish creators and Spanish
interests) has said publicly that Spain is a world leader in
downloads of pirated songs. The SGAE relies on data compiled
by the European Association of Interactive Publicity (EIAA).
We think the SGAE data, coupled with anecdotal evidence from
the Motion Picture Association of America, suggests the Spain
truly does have a high rate of internet music and movie
piracy.

3. With respect to entertainment software piracy, the GOS
cites a PriceWaterhouse Coopers study showing entertainment
software sales increasing from USD 577 million in 2006 to USD
665 million in 2007 in Spain. We have discussed the matter
with the head of the Federacion Antipirateria (FAP), a major
industry anti-piracy organization with ties to the Motion
Picture Association of America and the Electronic Arts
Council. He says that, yes, sales of self-contained
electronic games have increased in Spain because piracy is
not physically possible with these games. However, the FAP
claims that in 2007, sales of game software used in personal
computers declined by 15%, and the FAP attributes a large
share of the decline to downloads of pirated software.

4. The Spanish government says that the IIPA asserts, without
backing up with data, that piracy has reached "endemic
levels" in Spain. The GOS notes that the Business Software
Alliance (BSA) does not state that Spain has higher piracy
levels than other countries. The BSA has not recommended
Watch List placement for Spain. This is a significant mark
in Spain's favor. Computer software companies appear to
think that they are getting the cooperation they need from
the government to reduce software piracy.

5. The Spanish government says that the IIPA numbers show
that music piracy in Spain decreased by 2% in Spain between
2006 and 2007. That may or may not be true. The more telling
numbers for the music sector are that in 2007, physical music
sales were euros 257 million, down from euros 346 million in
2006, i.e. sales were down by almost 26%. It is of course
possible that some of this drop is attributable to the
industry's offering less desirable product. And the reality
is that the music business is suffering in many markets. But
piracy must explain a significant percentage of this decline.
The legitimate internet download market was euros 3.5
million in 2006 and euros 5 million in 2007, i.e. it barely
made a dent in the decline of physical music products. The
head of the local music association, Promusicae, notes that
in 2007, the legitimate cellphone download market was euros
22 million, i.e. it was more than four times as large as the
legitimate internet music download market. His conclusion is
that if consumers face a desirable format for listening to
music and piracy is not possible, they will pay for the
product. If the internet is not adequately controlled,
consumers will download for free. This seems to us to be a
compelling argument that the GOS should do more to regulate
the internet.

6. The Spanish government does not comment on movie piracy,
which is one of the areas hightlighted by the IIPA and one of
our major concerns.
2006 Circular from the Office of the Prosecutor-General
--------------------------------------------- ----------


7. The GOS says that the Circular does not "depenalize"
peer-to-peer file sharing. We believe the government's
argument is probably legally correct. We believe that the
problem is that the message the Circular sends to Spanish
society is that peer-to-peer file sharing is acceptable as
long as there is no commercial profit motive. Most
Spaniards, including future judges and prosectors, to the
extent they have heard or read about the Circular, believe
that this document legitimizes individual downloads of movies
or music. The issue is further conflated with Spanish law's
right to a private copy. Creators are compensated in Spain
for private copies through copyright levies. In the public
imagination, a movie or music download is often considered
equivalent to making a private copy. As the private copy is
compensated through copyright levies, many Spaniards do not
see any moral, let alone legal, problem with individual
downloads of pirated music or movies. Spanish government
officials are fully aware that this is not a legally correct
interpretation of the law. In fact, in connection with the
November 6/7, 2007 Madrid IPR conference, a senior Spanish
official stated publicly that the copyright levy system does
not compensate creators for music or movie downloads because
the private copy has to be made from a legally acquired
product. By definition, downloads of pirated products are
not legally acquired products. The Spanish government has
not done enough to undo the harm unleashed, albeit probably
not by design, by the Circular. We would like to see the
Circular amended in a public way so as to educate Spanish
society that peer-to-peer file sharing is not legal.

Legislative reform
------------------

8. The Spanish government notes that the IIPA criticizes the
absence of a notice and takedown provision in the Information
Society Law (LSSI). The government says that it tried to get
such a provision passed through Article 17bis, but that the
Council of State censured it because interested stakeholders
had not been given an opportunity to comment on the article.
However, Article 17 bis, or a variant thereof, has been
discussed in a GOS-stakholder working group since 2005. The
Spanish government is in effect saying that it committed a
procedural mistake that explains the lack of results in this
area.

9. Like last year, the Spanish government notes that the
Commission has not initiated proceedings against Spain for
inadequate transposition of the EU's Directives on
enforcement and electronic commerce. This is an argument
that has some merit to it. The GOS claims, in addition, that
the Promusicae vs. Telefonica case confirms that "Spanish law
is "fully compatible with Community law as concerns
enforcement and the right to information." That case states
that there needs to be a balance between the right to privacy
and the need to protect copyright. We can credibly claim
that Spain has not done enough in this regard.

10. The Spanish government claims that Spanish law does
protect technological protection measures (TPMs), contrary to
what IIPA says. It says that Article 139(1) g) of the
consolidated text of the Intellectual Property Act and
Article 270(3) of the Criminal Code provide for TPM
protection. We cannot evaluate this assertion, but we think
the IIPA should be made aware of these specific legal
provisions cited by the Spanish government.

Mediation between stakeholders; Government leadership
--------------------------------------------- --------

11. The Spanish government notes that it created a working
group comprised of content owners and Internet Service
Providers (ISPs) to encourage self-regulation. This is true,
but this group has been meeting since early 2005 with no
results. The GOS says that it is its "intention to
strengthen its role with a view to facilitating negotiations
and overcoming inflexible stands taken by the parties." We
welcome this objective, but during the past three years, the
music and movie industries have seen revenues decline, while
ISPs have seen their revenues increase, and the government
has not succeeded in getting the ISPs to be more cooperative
with content providers.

12. The 1/30/08 Ministry of Culture-Spanish Federation of
Hotels and Restaurants agreement to conduct training and
awareness-raising with a view to eliminating illegal sales in
bars and restaurants is a positive step. However, at this
stage we cannot evaluate when it might actually reduce the
"mochilero" problem in Spain.

Activities undertaken by the Government to fight piracy
--------------------------------------------- ----------

13. We tend to accept the Spanish government's views
regarding the degree of coordination and cooperation in the
fight against piracy, although there are clearly weaknesses
with respect to the internet.

14. The Public opinion and social reality poll is a useful
tool, but so far it has not prompted effective anti-piracy
action.

15. The Ministry of Culture runs awareness programs, but so
far they have not had a discernible impact on, for instance,
the public's views with respect to internet downloads.

16. The training programs the Spanish government talks about
are valuable, particularly the programs directed at the
police and the judiciary.

Police intervention and legal judgments
---------------------------------------

17. We accept the Spanish government's view that the good
police work highlighted by the IIPA does receive high-level
political support. We note also that some webpages
trafficking in pirated copyrighted materials have been closed
down. On March 3, 2008 a Barcelona judge ordered blocking
access to a website trafficking in counterfeited goods from
China. There are frequent law enforcement actions against
pirates. However, the GOS has never appointed a
political-level person to be the public face of the "National
Anti-piracy Plan" referred to in the Spanish government's
comments. There is no political-level inter-ministerial
coordinator for the plan. Without a single coordinator,
accountability is dispersed, particularly with respect to
shaping views on the all-important issue of protecting
copyrighted materials on the internet.

COMMENT
-------

18. The Embassy does not underestimate the political
challenge facing the policy-level officials in charge of IPR
issues (some of whom are likely to be new even though the
socialist government was reelected on March 9). Public
opinions about the internet and copyright are, frankly,
hopelessly muddled. Our sense though is that we may be able
to use the momentum generated by France and the UK moving
against internet piracy more effectively without Spain's
being placed on the Watch List, at least not immediately. On
balance, therefore, we think that for now our IPR agenda in
Spain would be served more effectively without Spanish
placement on the Watch List, at least not immediately. For
instance we know that USEU and Washington agencies are
working to put together a "road show" which would come to
Spain in the spring or early summer. The road show would
include French and British experts (ideally Denis Olivennes
among others) on internet piracy. We think the Spaniards
would be more receptive to hearing what France and the UK are
doing without a Watch List designation. Alternatively, a
Special Mention for Spain might be worth considering given
that, according to IIPA, internet piracy is a very serious
problem there. Judging from the IIPA submission, there are
many similarities between the German and Spanish internet
piracy situations. In any event, the first year of this
newly reelected governemnt's mandate will be crucial in
making progress on internet piracy in Spain. l

AGUIRRE

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