This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 MADRID 000736 
 
SIPDIS 
 
DEPT FOR EB/IPC WILSON, DEPT PLS PASS TO USTR BPECK, DOC 
KSCHLEGELMILCH, USPTO JURBAN/DLASHLEY-JOHNSON 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD SP
SUBJECT: SPECIAL 301: PROGRESS NOT PERFECTION 
 
REF: A. STATE 38125 
 
     ¶B. STATE 29549 
     ¶C. MADRID 639 
     ¶D. MADRID 606 
     ¶E. MADRID 386 
     ¶F. 03 MADRID 04259 
     ¶G. 03 MADRID 04164 
     ¶H. 03 MADRID 02481 
 
¶1. SUMMARY: Despite the strong political will of government 
officials and the stepped up enforcement efforts of police, 
piracy continues to be a significant problem in Spain as 
pirates adapt their way of doing business to avoid police, to 
take advantage of legislative loopholes, and to better use 
the internet.  While illegal software sales have hit a 
plateau and there has been minimal positive movement in the 
percentage of illegal CD sales, pirate DVD sales increased 
slightly.  Enforcement efforts are impressive, with over 5 
million music and sound recordings seized during raids. 
Police were successful in thwarting pirates during the prime 
holiday shopping season.  There was also progress in the 
courts: Nike gained control of its trademark after a 14-year 
legal battle.  The GOS revised its Penal Code to increase 
punishments for IP offenders, and has continued its efforts 
to train judges and provide consumer education on IP issues. 
Spain seems to have faced up to its piracy problem and is 
committed to apply the training and enforcement resources to 
stem the tide.  In light of these efforts and our sense of 
GOS committment to continue the fight, we recommend keeping 
Spain off the 301 watchlist this year.  END SUMMARY 
 
Overall IP Climate 
------------------ 
 
¶2. MUSIC, VIDEOGAMES AND MOVIES:  Industry and police 
contacts in Spain have told us that over the past year, their 
enforcement actions have yielded some success in deterring 
pirates and reducing street sales of CDs and DVDs. 
Nonetheless, the problem continues to be significant --- 
estimates for CD piracy range between 20% and 30%.  DVD 
piracy is estimated to be much lower.  Moreover, pirates are 
adapting their methods and sales to thwart government and 
industry enforcement efforts.  Sales of pirated CDs continue 
to be handled mostly by illegal immigrants who display their 
pirate CD wares on blankets ("mantas," the sellers are 
therefore called "manteros" in Spanish) on city sidewalks in 
shopping districts and in subway stations.  Because police 
have cracked down on manteros, a few would-be manteros are 
now trading in blankets for backpacks to peddle pirate CDs. 
Some manteros and backpack sellers also carry DVDs.  Fewer 
still sell videogames.  More sophisticated pirates have moved 
on-line.  Internet  peer-to-peer networks are also on the 
rise.  Industry representatives in Madrid have told us that 
street sales now concern them much less than the rise of 
internet piracy sales and illegal downloads. 
 
¶3. SOFTWARE: Illegal software sales in Spain seem to have 
leveled off at about 49%.  While this is a definite 
improvement over the 74% figure of 1995, there is still much 
work to be done.  The Business Software Alliance (BSA) works 
with the GOS to increase awareness in small businesses (the 
main users of illegal software).  In addition, police have 
been active in trying to combat retail sales of illegal 
software. 
 
¶4. TRADEMARK ISSUES: In February 2004, after more than 14 
years of court battles, Nike won a major victory in the 
Spanish Constitutional Court that once again allows the 
company to use its trademark (both the name and the swoosh) 
on apparel sold in Spain.  In response to Nike's appeal of a 
negative 1999 Supreme Court ruling, the Spanish 
Constitutional Court sided with Nike, annulling the other 
court's decision.  It returned the decision to the Supreme 
Court asking that it revise its decision based on the 
findings of Constitutional Court justices.  Nike is hoping 
that the new Supreme Court ruling, expected to be issued 
within the next 12 months, will be fair and objective. 
 
¶5. PHARMACEUTICAL PATENTS: Spain's pharmaceutical patent 
problem is a legacy of its old process patent law which was 
in effect until October 1992.  From that point on, all 
pharmaceutical patents granted have been product patents. 
Pharmaceutical companies complain that non-innovative 
producers are able to easily obtain permission to produce 
"legal copies" of their process patented drugs if they make 
minor changes in the production process.  Like other 
countries that have a recent history of process patents, this 
is a problem that only time will solve.  For the next eight 
years the legacy of the old patent system will continue to 
irk pharmaceutical companies, but until all process patents 
are expired, we do not anticipate a significant change in the 
situation. 
 
¶6. POLICE ENFORCEMENT EFFORTS: Police focus on and action 
against IP offenses, most notably pirated CDs, have increased 
over the past year.  Combined total raids for national 
police, Guardia Civil and municipal police against music, 
videogame, and movie pirates and sellers exceed 10,000 in 
¶2003.  Over 5 million movie and sound recordings were seized. 
 Police are frustrated that legislative loopholes, illegal 
immigrant status of some of those apprehended, and uneven and 
slow judicial decisions undermine some of their efforts.  Our 
police contacts believe their effectiveness will be enhanced 
when the revised Penal Code goes into effect later this year 
(see para 8).  In addition to raiding production facilities, 
police are also making headway in getting "manteros" off the 
street.  Year 2003 police interventions in Spain's piracy 
focal point, Madrid, surpassed double the number witnessed in 
¶2002.  The Madrid municipal police force added extra officers 
at the end of the year specifically to deter manteros during 
the peak holiday and New Year shopping season.  In Barcelona, 
frequent raids on a market renowned as a center for pirated 
software has reduced by half the sales of pirated programs. 
National police and Guardia Civil are especially equipped and 
increasing their work to combat on-line piracy. 
 
¶7. EDUCATION EFFORTS: Last year Spain's Interministerial 
Anti-Piracy Commission and the Consejo Superior Judicial 
(Spanish administrative body which oversees the courts) 
signed an agreement to train judges on IP issues.  The two 
bodies will collaborate on two training courses, in April and 
October, to train 40 to 45 judges each time.  More 
importantly, the contents of each course will be published 
and distributed to Spanish judges throughout Spain.  The 
Copyright Office at the Ministry of Culture is also working 
on an education campaign targeting children between 12 and 18 
to explain the production process and manpower that goes into 
making copyright products.  The Congreso de los Diputados 
(the lower house of Spanish Parliament) established a 
parliamentary sub-committee to propose actions that should be 
taken to protect IP.  At year-end 2003, the sub-committee 
published a set of recommendations directed at the Spanish 
government bureaucracy, law enforcement agencies, and Spanish 
society as a whole, to send a clear signal of the importance 
of IP protection. 
 
¶8. PENAL CODE REFORM: On November 25, 2003, the GOS modified 
its Penal Code to reinforce intellectual and industrial 
property protection.  The revised Spanish Penal Code 
increases the punishments for crimes against IP 
infringements, especially for repeat offenders.  It will 
enter into force on October 1, 2004. 
 
Ongoing Areas of Review 
----------------------- 
 
¶9. OPTICAL MEDIA PIRACY REGULATIONS:  Article 25 of Spain's 
IP legislation establishes a tax on optical manufacturing 
equipment; operators are required to apply for licenses. 
There is no legislation requiring that SID (source 
identification) codes be used on locally manufactured CDs. 
Despite this however, 12 out of 13 Spanish compact disc 
manufacturers have signed SID accords with Phillips and IFPI. 
 
¶10. USE/PROCUREMENT OF GOVERNMENT SOFTWARE:  As previously 
reported, in 2000 the GOS published guidelines entitled "The 
Intellectual Property of Software Programs."  These 
guidelines are for government ministries and outline 
measures, recommendations and good practices for acquiring 
and using software.  The guidelines have been explained in 
workshops and are widely available to Spanish government 
officials, including on the internet. 
 
¶11. TRIPS COMPLIANCE: The GOS counts itself in complete 
compliance with TRIPS since 1997. 
 
¶12. ENFORCEMENT: See para 6 above. 
 
¶13. COMMENT: In our 301 cable last year we reported that the 
Spanish government had finally faced up to the magnitude of 
its piracy problem and was making good faith efforts to 
combat it.  Since then, GOS officials in various ministries 
have continued their work on the issue and the various 
domestic police forces have been exceptional in the quantity 
and scope of their efforts to roll back IP piracy in Spain. 
The passage of the revised Penal Code also bodes well for 
continued progress in the fight against pirates.  Despite all 
of these and other abovementioned efforts, the piracy problem 
in Spain continues to be significant.  It is our judgment 
that Spanish authorities are aware of the problem and have 
the political will to fight it.  But it will take time.  We 
believe Spain should remain off the Special 301 list. 
Spain's inclusion on the list will not hasten its progress 
and may only serve to dampen rather than encourage enthusiasm 
to take action as a new government takes the reins in a few 
months.  At present our GOS IP contacts are receptive and 
willing to take our suggestions and listen to our concerns. 
We will continue to work with them and to monitor Spain's 
progress and provide assistance and information whenever 
possible -- and place the fight against IP pirates at the top 
of our agenda with the responsible officials in the next 
Spanish government. 
 
 
ARGYROS