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Cablegate: Brazil: Post Ocr Findings

DE RUEHBR #2038/01 2991845
P 261845Z OCT 07





E.O. 12958: N/A
REF: A) State 107819; B) Brasilia 1620; C) Brasilia 680; D) Brasilia


1. (SBU) Summary: Post recommends retaining Brazil on the Watch
List based on its continued strong overall anti-piracy enforcement
efforts and in light of some continuing problem areas. The value of
pirated and contraband items seized by Receita Federal in the first
six months of 2007 was over USD 285.5 million - an increase of more
than 36 percent over the same period in 2006 and only 15 percent
less than reported confiscations over the first nine months of last
year. GOB state and federal authorities have conducted anti-piracy
operations in the Tri-Border Area and have taken action against
street vendors and shops in some of the more notorious piracy
districts of Sao Paulo and Rio de Janeiro, including the Stand
Center, Galeria Page and various Camelodromos. Projections based on
Federal Police data predict a significant increase for 2007 in
Federal Police confiscations of counterfeit and contraband
electronics and pharmaceutical drugs, an 8.5 percent drop in
seizures of pirated CDs and DVDs, and a slight decrease (3.5
percent) in collections of contraband electronic goods. (Note: The
third major federal anti-piracy enforcement agency, Rodoviaria
Federal - Federal Highway Patrol - did not provide interdiction data
to Post. End note.) GOB action against internet piracy resulted in
the removal of 19,878 internet advertisements, the ejection of 3,882
companies from the internet and the closure of 183 web sites through
September 2007.

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2. (SBU) The GoB is streamlining patent and trademark processing
and expects backlogs for both areas to continue to decrease.
Legislation developed by the public-private National Anti-Piracy
Council (CNCP) that addresses many industry concerns, including
partial sampling and destruction of pirated goods, has widespread
support among key GoB ministries. The bill is currently in
President Lula's office for final, and expected, approval before
submission to the Brazilian Congress for consideration. Despite
this progress, a number of issues remain outstanding. A leading
industry association continues to complain about copyright
violations of printed materials at campus copy-shops. Post has
received no indication of increased GoB vigilance at alternative
border crossings. The GoB has not been able to provide numbers for
arrests and convictions of IPR violators, although based on past
experience, this number is expected to remain low. End Summary.

3 (U) Per reftel A, the following is Embassy Brasilia's input for
the Special 301 Out-of-Cycle (OCR) Review of Brazil. Because the
GoB typically publishes its enforcement data at year-end, certain
final data on its anti-piracy enforcement actions is not yet
available for this report. Nonetheless, Post believes that
sufficient information is currently available to provide an accurate
portrait of GoB anti-piracy enforcement efforts for 2007.

Enforcement Activities

4. (SBU) Two of the three main federal enforcement agencies
involved in anti-piracy interdiction - Receita Federal (the
Brazilian Customs and Internal Revenue Service) and the Federal
Police - provided data on 2007 anti-piracy activities. The third,
Rodoviaria Federal (Federal Highway Patrol), did not. The National
Council Against Piracy (CNCP) provided consolidated state and
federal data on major raids. Receita Federal reported that it
apprehended over USD 285.5 million in contraband items in the first
six months of 2007, an increase of over 36 percent in comparison to
the same period in 2006 (Note: All figures were converted using
the 10/19/07 exchange rate of BR 1.80/USD. End Note.)

5. (SBU) Based on Federal Police data on quantities of contraband
seized through August 10, Post estimates an 8.5 percent drop in
Federal Police confiscations of pirated CDs and DVDs and a slight
drop (3.5 percent) in collections of contraband electronic goods for
calendar year 2007. In contrast, confiscations of counterfeit and
contraband electronics and pharmaceutical drugs are projected to
increase in 2007, up 15.6 and 43.4 percent respectively.

6. (SBU) National Council Against Piracy (CNCP) data indicates that
federal and state enforcement officials seized 1,472,528 contraband
items in raids on known marketplaces through September 2007. Among
these actions is a year-long operation targeting buses crossing into
Brazil in the Tri-Border area (538,038 seizures as of August 31) and
ongoing actions against street vendors and shops in some of the more
notorious piracy districts in Sao Paulo and Rio de Janeiro,
including the Stand Center, Galeria Page and various Camelodromos.

BRASILIA 00002038 002 OF 003

Internet Piracy

7. (SBU) The GoB appears to be taking internet piracy more
seriously. A key GoB official, Vice Minister of Justice Luiz Paulo
Barreto assured recording industry representatives in April that he
would drop his previous public opposition to legal actions filed by
them against Brazilian end-users of pirated music (reftel C). CNCP
data showed that, through September 2007, Brazilian authorities had
removed 19,878 internet advertisements touting pirated items,
removed 3,882 companies from the internet and shut down 183 web
sites - all for violation of Brazil's anti-piracy statutes.

Patents and Trademarks

8. (SBU) Although Brazil's patent backlog remains high, estimated
at between 130,000 and 150,000 applications, the GoB has taken
concrete steps to streamline processing, including an upgrade of its
outdated computer system. Over the past two years it has increased
the number of patent and trademark examiners over 155% from 180 to
460 and increased median salaries 50% to retain experienced
employees. By the end of 2007, the GoB estimates that new patent
applications will be adjudicated within five years of submission; by
the end of 2009 the goal is four years. The GoB has also raised
trademark approvals almost six-fold since 2003 and expects to
shorten processing time to less than a year by the end of 2007, down
from the current 18 month wait.

Federal Legislation

9. (SBU) The CNCP's Legislation Working Group, with input from a
private sector forum, developed draft legislation in 2005 that
proposes a number of changes in the country's penal code and
industrial property law. Among the suggested changes are:
expansion of vehicle seizure authority, clarification of procedures
for seizure and destruction of goods, and permission for law
enforcement agencies to retain only samples for use in litigation.
The bill also allows for different penalties for individual
offenders from those involved in larger operations; incorporates
penalties for software copyright violation into the penal code; and
stiffens penalties if pirated goods are imported (reftel D). The
bill, widely supported by GoB Ministries, is currently in President
Lula's office for final, and expected, approval before submission to
the Brazilian Congress for consideration. (Comment: GoB
anti-piracy legislation is generally TRIPS compliant. End Comment.)

10. (SBU) GoB interlocutors have told EconOff they oppose any
legislation that would impose a blanket increase in jail time for
IPR violators on the grounds that there is no room in already
overcrowded Brazilian prisons for small-time IPR offenders. They
also feel there is a social cost to incarcerating low income IPR
violators, who are usually the sole support for their families.

Pharmaceutical Data Protection

11. (SBU) Although the Brazilian Law on Industrial Property
currently prohibits disclosure and use of undisclosed test data,
pharmaceutical industry representatives continue to voice concern
over the potential for release of confidential data submitted to
ANVISA as part of the drug patent approval process. Brazil's
multinational pharmaceutical industry association, Interfarma (which
also includes representatives of U.S. companies), has been
unsuccessful in its attempts to get Congress to pass a law
specifically addressing data protection. Currently, civil action is
the only avenue available to drug companies harmed by the release of
confidential data. However, Interfarma has not brought to Post's

attention any cases in which data confidentiality has, in fact, been

Border Crossings

BRASILIA 00002038 003 OF 003

12. (SBU) Brazil's opening of a customs office in front of the
Amistad bridge crossing into Brazil has been a significant step in
combating IPR piracy, increasing the cost to smugglers who have to
use less convenient alternative routes. Unfortunately, Post has
received reports that these secondary routes, in particular through
the state of Mato Grosso, are seeing more use and border crossings
are not manned full-time by the GoB. There are also indications
that smugglers are taking advantage of Mercosul transportation rules
and transporting pirated goods across Argentina to enter Brazil
through Uruguay.

Campus Copy-Shops

13. (SBU) A representative of ABDR (Brazilian Association for
Reprographic Rights) recently characterized the book piracy
situation in Brazil as "critical" to EmbOff. He attributed this
problem to a lack of attention by GoB authorities, in particular the
Ministry of Education, adding that the progress made with regards to
software and music piracy is lacking in the book publishing

14. (SBU) According to ABDR, internal rules issued by University of
Sao Paulo (USP) and the Pontifical Catholic University of Rio de
Janeiro (PUC) allow books not written in Portuguese to be freely
copied, if not available for sale at campus book stores. ABDR
claims that the university justifies its internal rule by stating
that access to knowledge and education are fundamentally protected
under the Brazilian constitution. (Comment: Under Brazilian
copyright law, "the one-time reproduction of small passages of a
work for the copier's private use without the intention of making a
profit" is allowed, but the Law does not define what constitutes a
"small passage." End Comment.)

Arrests and Convictions

15. (SBU) GoB interlocutors were unable to provide consolidated
arrest and conviction statistics for piracy and contraband
activities. The information provided by the CNCP on its IPR Hotline
indicates that 17,622 emails, 2,958 calls and 1,935 other notices
resulted in 67 "judicial actions."

Other Significant Developments

16. (U) Other significant developments since Post's Special 301
submission in February include:

-- Executive Director Andre Barcellos attended a June session of the
USPTO Global Intellecutual Property Academy (GIPA) training in
Virginia - a first for a CNCP Executive Director.

-- The Brazilian state of Bahia recently formed an anti-piracy
police unit, joining the states of Sao Paulo, Rio de Janeiro, Minas
Gerais, Pernambuco and Rio Grande do Sul, which already have
established state anti-piracy committees.

-- The governor of Pernambuco, Eduardo Campos, has publicly directed
his state police force to cooperate with Federal Police in enforcing
IPR statutes.

17. (SBU) Comment: Post recommends that Brazil remain on the
Special 301 Watch List based on the GoB's ongoing commitment to a
strong overall anti-piracy enforcement regime and its determined
actions to improve its patent and trademark processing. However,
Post feels that the GOB's need to undertake a more vigorous effort
to address photocopying of copyrighted material by campus copy
shops, improve a low rate of convictions for IPR piracy, and
adequately police secondary smuggling routes into the country
preclude any upgrade of the country's status at this time.


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