Cablegate: Philippines: Intellectual Property Rights Updates For

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UNCLAS SECTION 01 OF 03 MANILA 002327

SENSITIVE

SIPDIS

STATE FOR EAP/MTS, EAP/EP, AND EB/IFD
DEPARTMENT FOR EEB/TPP/IPE
STATE PASS USTR FOR BWEISEL, RBAE AND BKLEIN
STATE ALSO PASS USAID, OPIC, USDA
BANGKOK FOR USPTO JENNIFER NESS
TREASURY FOR OASIA
USDOC FOR 4430/ITA/MAC
USDOC PASS USPTO
STATE ALSO PASS LOC

E.O. 12958: N/A
TAGS: ETRD KIPR ECON RP
SUBJECT: Philippines: Intellectual Property Rights Updates for
Out-of-Cycle Review

REF: A. Manila 505; B. Manila 1923

1. Summary. The U.S. Trade Representative (USTR) announced in April
2009 that the Philippines would remain on the intellectual property
rights (IPR) Special 301 Watch List, but that USTR would conduct an
Out-of-Cycle Review (OCR) to gauge progress on key issues. While
progress is being made in judicial reform, anti-camcording
legislation, and IPR outreach, other initiatives have stalled. In
particular, implementing legislation for the World Intellectual
Property Organization (WIPO) Internet treaties has seen little
movement, and funding for some intellectual property (IP) units
remain uncertain. Passage of the Cheaper Medicines Act raised
concerns about patent protection, and compulsory licensing is still
a possibility. While the strengthening of IP-focused governmental
institutions remains a challenge, maturing institutions such as the
Intellectual Property Office (IPO) and National Committee on IPR
(NCIPR) suggest some momentum in favor of improved IPR protection in
the Philippines. End Summary.

Proposal for New Rules of Procedures for IP Cases Delivered to the
Philippine Supreme Court
------------------------------

2. (U) The Philippine judicial system is often cited by IP
stakeholders as a bottleneck to effective IPR protection. In
response to Supreme Court Chief Justice Reynato Puno's November 2008
request, a special working group delivered a proposal for new
procedural rules to govern IP litigation on October 27 to expedite
and clarify the judiciary's IPR litigation process (reftel A). The
working group members represent the IPO, NCIPR, state prosecutors,
law enforcement, customs, regional trial court judges, and private
sector lawyers.

3. (SBU) The proposed rules aim for cases to be resolved within an
average of one year. Specific provisions include procedures for the
quick destruction of seized counterfeit goods; streamlined
procedures for subject matter expert testimony; alternative dispute
resolution; and the establishment of specialized IP courts with
national jurisdiction. The Supreme Court is directing the formation
of a judicial study committee to review the proposed rules and
present the revised procedures to the Supreme Court for adoption.
These two steps are expected to conclude within Chief Justice Puno's
term, which expires in May 2010.

Recent and Ongoing Judicial Cases
----------------------------------

4. (SBU) Two notable and recent out-of-court settlements uphold IPR
rights, although many more cases are pending. In July 2009, Turtle
Cable reached a settlement with Cable and Satellite Broadcasting
Association of Asia (CASBAA) approximately one year after the case
was filed with IPO's Bureau of Legal Affairs (IPO/BLA). The
settlement required Turtle Cable to publicly apologize for cable
piracy, commit to the use of only authorized programming, and
symbolic restitution. Still, Newell Rubbermaid continues to press
its trademark infringement cases again its former partner,
Amalgamated Specialties Corporation (AMSPEC) through the IPO
adjudication process, as well as in local courts, first filed in
June 2008. There appears to be little movement in the long-standing
case against Phillips Seafood Philippines Corporation (PSPC), a
subsidiary of U.S.-based Phillips Seafood, in which competitor
Kanemitsu Yamaoka alleges patent infringement in tuna processing.
The case has been pending with IPO/BLA since mid-2003.

Patents: The Cheaper Medicines Act
------------------------------------

5. (U) The passage and implementation of the Cheaper Medicines Act
raised concerns within the pharmaceutical industry about the
possible weakening of patent protection. Since the last cycle
review, President Macapagal-Arroyo reduced the price of five brand
name pharmaceuticals by executive order (reftel B). These price
controls have not been accompanied by any movement towards
compulsory licensing, however. After many months, the issue remains
in the discussion phase within the IPO and the Philippine Department
of Health.

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6. (U) In a related issue, pharmaceutical company Pfizer filed a
complaint against United Laboratories alleging patent infringement
of the anti-cholesterol drug Lipitor. The case was filed with the
Makati Regional Trial Court on October 6, with Pfizer maintaining
that it owns the patent on atorvastatin, the active ingredient of
Lipitor, until 2012. Unilab had previously filed a case with the
IPO seeking to invalidate Pfizer's patent on atorvastatin.

Mixed Progress Confronting Digital Piracy
-----------------------------------------

7. (SBU) The passage of national anti-camcording legislation during
this session is uncertain. The House passed the Anti-Camcording Act
(House Bill 5699) in February and the counterpart (Senate Bill 3300)
was filed in June. The Senate Committee on Public Information and
Mass Media conducted technical working group meetings and public
hearings. The Committee report is being circulated for member
signatures. Congress is expected to take up the bill soon after it
resumes session in November. Several influential senators are
supportive of the anti-camcording bill, though the committee
encourages stakeholders to actively advocate passage, suggesting it
needs a push.

8. (U) In 2008, the Manila City Legislative Council passed a city
ordinance against camcording in movie theaters. Two nationwide
movie theater chains, Shoe Mart (SM) and Ayala, regularly run
trailers asking viewers to alert management if they see patrons
using recording devices. At theater entrances, large signs
explaining the camcording prohibition greet movie-goers.

9. (U) The slow pace of WIPO Internet treaty implementation
illustrates the difficulty of capturing legislators' attention in an
election year. Contacts in the IP community cite the need for
better education of legislators and the public regarding WIPO and
the enabling legal framework that those treaties would provide
Philippine IP enforcement units.

Control over Pirated Goods Distribution Improves
--------------------------------------------- ----

10. (SBU) Seizures in the first nine months of 2009 have already
surpassed 2008 totals, and include eight replicating machines with
an annual capacity of 32 million DVDs; and 17 confiscations worth
about $20 million USD of pirated DVDs, counterfeit shoes and
apparel, cell phone accessories, and automobile parts, mostly
originating from China.

11. (SBU) The Intellectual Property Rights Division of the National
Bureau of Investigation (IPR/NBI) conducted 31 operations, served
214 search warrants, filed 202 cases and seized goods worth more
than $11 million USD from January to September of 2009. With nine
agents based in Metro Manila, IPR/NBI uncovered unlicensed software
usage by retailers, business process outsourcing firms, multimedia
and creative design firms, construction and engineering design
firms, as well other establishments. During the same period, the
Anti-Fraud and Commercial Crimes Division of the Philippine National
Police (PNP) conducted 28 operations, served 164 search warrants,
and made seizures worth more than $51.3 million. Police carried out
enforcement actions against offices using unlicensed Microsoft and
Autocad software, and retail outlets and warehouses that were
selling counterfeit products that range from luxury bags, shoes,
apparel, beauty products, batteries, and electrical products.
Despite the high volume of seizures, we are not aware of any
resulting convictions or penalties.

12. (SBU) In addition to these law enforcement efforts, the Optical
Media Board seized more than 3.2 million optical disks valued at
$20.9 million USD in the first nine months of 2009, and carried out
958 inspections in the first three quarters of 2009.

13. (U) New collective licensing agreements between publishers and
universities aim to reduce certain types of piracy. The Filipinas
Copyright Licensing Society (FILCOLS) is working with the National
Book Development Board and the IPO to impress upon universities the
importance of intellectual property. Working with De La Salle
University, FILCOLS expects to pilot a collective licensing
agreement on the use of copyrighted books and materials by the end

MANILA 00002327 003 OF 003

of the year. De La Salle University is one of 29 universities in
the Philippines with an explicit IP policy, the result of efforts
stemming from a Memorandum of Understanding (MoU) between IPO and
the Commission of Higher Education.

The Challenge of Institutionalization
---------------------------------------

14. (SBU) Although the 2008 Executive Order creating IP units
within key executive agencies was a welcome move, many of those
units have been hampered by low budgets and demoralized staff. More
recently, some IP Units have received additional fiscal and
personnel resources. For example, Executive Order 736 converted the
Bureau of Customs IP Unit into a permanent administrative division
(reftel A) and Finance Secretary Teves approved staff increases for
the division. Although its permanent establishment and budget have
not yet been formally approved by the Department of Budget and
Management, the Unit moved to a new, larger office in October 2009.

15. (SBU) The Optical Media Board (OMB) continues to face budget
constraints (reftel A). For this reason, the OMB has had difficulty
attracting managers who are knowledgeable in IP and dedicated to
institutional development. Like his predecessor, the new chairman
of OMB, who was appointed October 23, is a former actor considered
to have electoral ambitions; it is too early to tell whether he will
be vigorous in carrying out enforcement activities.

IPR for National Development
-----------------------------

16. (U) IPO is pushing public-private initiatives with a recent
focus on the judiciary. Its annual colloquium on intellectual
property hosts substantive discussion of IPR, this year on
procedural rules for IP litigation. The IPO also advocated for a
judicial branch member on the National Committee on Intellectual
Property Rights (NCIPR).

17. (U) In the area of commercialization and management of IP
assets, the Intellectual Property Research and Training Institute
(IPRTI), established in 2008, has trained over 200 scientists,
researchers, lawyers, business executives. Since 2007, over 43
regulators and practitioners working in the field have traveled to
the U.S. for IPR-related training. The Philippine government is
becoming more engaged at the regional and global level on
intellectual property protection and assumed the chairmanship of the
Association of Southeast Asian Nations (ASEAN) Coordinating
Committee on Intellectual Property Policy and Cooperation (ACIPC) in
June 2009.

Comment
--------

18. (SBU) In each branch of national government, some positive
developments indicate modest progress on IPR protection. The
Philippine Supreme Court is leading the much-needed reform of the IP
litigation process. Significant improvement in judicial reform
would render enforcement more consequential, complementing the
executive branch's upward trend in pirated goods seizures. An
anti-camcording law would also bolster enforcement, although passage
of the bill remains uncertain in this election cycle. For longer
term gains, the IPO engages broadly with the university, business,
and scientific communities to assert IPR as a tool for national
development. While substantial areas for improvement remain in the
Philippines, this set of initiatives targets increasingly limited
government resources on attainable goals.

KENNEY

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