VZCZCXYZ0000
PP RUEHWEB

DE RUEHPE #0523/01 0531837
ZNR UUUUU ZZH
P 221837Z FEB 07
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC PRIORITY 4073
INFO RUEHBO/AMEMBASSY BOGOTA 4389
RUEHQT/AMEMBASSY QUITO 1035
RUEHLP/AMEMBASSY LA PAZ FEB SANTIAGO 1128
RUEHCV/AMEMBASSY CARACAS 0190
RUEHBU/AMEMBASSY BUENOS AIRES 2799
RUEHME/AMEMBASSY MEXICO 3472
RUEHBR/AMEMBASSY BRASILIA 7227
RUEHSO/AMCONSUL SAO PAULO 1711
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS LIMA 000523 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EB/IPE-JBOGER,JURBAN, WHA/AND 
COMMERCE FOR 4331/MAC/WH/MCAMERON, ITA/MAC/OIPR/CPETERS 
COMMERCE PASS USPTO 
SAO PAULO FOR DMAZURKEVICH 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD USTR PE
SUBJECT: IPR IN PERU: SPECIAL 301 REVIEW 
 
REF: A. STATE 7944 
¶B. 06 LIMA 2529 
¶C. 06 LIMA 1718 
 
Summary 
------- 
 
¶1.  Post concurs with industry recommendations that Peru remain on 
USTR's Special 301 Watch List for 2007.  Peru saw improvements in 
IPR protection that resulted in a slightly higher market share for 
certain copyrighted and patented products.  The GOP's IP agency used 
preliminary injunctions to halt the sale of suspected illegal copies 
of pharmaceuticals, clothing and other items pending final rulings. 
In December 2006 and January 2007, the GOP for the first time 
assigned IPR duties to several national courts of first instance and 
one appeals court, and increased the number of prosecutorial offices 
with IP responsibilities.  Due care should be taken in the public 
announcement of Peru's standing in the Special 301 review to 
acknowledge these positive developments. 
 
¶2.  Still, Peru continues to face high levels of patent, copyright 
and trademark infringements in all sectors, including media, toys, 
and apparel.  Challenges include strengthening enforcement and 
border controls, combating public acceptance of pirated and 
counterfeit goods, enacting deterrent sentences, and further 
reducing government use of unlicensed software.  The USG and GOP 
signed the U.S.-Peru Trade Promotion Agreement (PTPA) in April 2006, 
and the Peruvian Congress passed the agreement in June 2006.  If 
passed by the U.S. Congress and properly implemented, the PTPA will 
help improve the protection of IP in Peru.  End Summary. 
 
Laws and Regulations: PTPA Would Help 
------------------------------------- 
 
¶3.  Peru's IP laws are generally adequate and TRIPS compliant.  The 
pending U.S.-Peru Trade Promotion Agreement (PTPA) would correct 
shortcomings and increase some protections beyond TRIPS 
requirements.  For example, the PTPA includes provisions that 
enhance trademark protections, provide copyright protection related 
to the Internet, mandate government use of legal software, protect 
confidential pharmaceutical and agrochemical test data and trade 
secrets, and increase penalties for IP violations. 
 
Overall Infringement Levels: Very High 
-------------------------------------- 
 
¶4.  According to the International Intellectual Property Alliance's 
(IIPA) 2006 estimates, 98% of sound recordings (same level as in 
2005) and 70% of business software (down from 73% in 2005) in Peru 
were pirated, representing a loss of $80.5 million (down from $109 
million in 2005).  According to the Business Software Alliance, Peru 
is in the middle of the pack among Latin American countries in terms 
of software piracy.  The audiovisual industry estimates a 75% piracy 
rate, which was a major factor in the closure of all of 
Blockbuster's stores in Peru.  The Pharmaceutical Research and 
Manufacturers of America (PhRMA) estimates that patent and data 
protection damages totaled 23.2% of sales in Peru.  Pirated CDs and 
DVDs, illegal copies of books, and counterfeit clothing and toys can 
be found throughout the country.  Some markets are known for selling 
illegal goods, which can also be bought on many of Lima's street 
corners. 
 
GOP Efforts and... 
------------------ 
 
¶5.  The GOP has made some effort to combat IP violations, and has 
committed itself to further improvements by approving the PTPA.  In 
May 2006, the GOP issued Supreme Decree 009-2006-PRODUCE, declaring 
the fight against IPR violations to be of national interest and 
bolstering the activities of relevant agencies.  Indecopi's (the 
GOP's IP administrative agency) trademark, patent and copyright 
offices do good work with limited staff and funding.  The patent, 
trademark, and copyright registration processes have been 
burdensome, especially for small businesses.  Indecopi has made 
significant headway in reducing the time it takes for these 
registrations, which should help improve the IP climate.  Indecopi 
officials and public ministry prosecutors have ex oficio powers, 
allowing them to conduct investigations and seizures, and file 
charges, without an industry complaint. 
 
...Public Indifference 
---------------------- 
 
¶6.  In a national survey on corruption and crime conducted in 
September 2006, only 17% of Peruvians objected to the purchase of 
pirated products, making IPR violations the most tolerated crime in 
the survey by far.  Other crimes included in the survey included 
nepotism, not paying transportation fares, bribing police to avoid a 
ticket, not requesting a receipt to avoid the VAT, and giving a gift 
or money to accelerate judicial or municipal transactions.  Changing 
the public's perception is perhaps one of the more difficult 
challenges facing those who want to improve IPR protection in Peru. 
 
¶7.  April 23-27 was "Intellectual Property Week" in Peru (Ref C), 
celebrated with book giveaways and massive destructions of seized 
products.  Indecopi commemorated its second annual Destruction Day, 
destroying more than 300,000 confiscated pirated CDs and DVDs, and 
educating the public about how IPR violations hurt the overall 
well-being of Peruvians.  Indecopi also highlighted the need to 
protect copyrighted printed material and held a two-day seminar for 
local government officials, bringing in speakers from the 
audiovisual, music and book industries to explain how IPR violations 
directly affect Peruvians.  The Peruvian Book Association sponsored 
special sales on books on April 22 in more than 50 locations 
throughout Peru in an effort to promote the sale of legitimate 
books. 
 
...Patents: U.S. Pharmaceuticals Winning 
---------------------------------------- 
 
¶8.  U.S. pharmaceutical companies said they began to note a positive 
shift of the burden of proof from the patent holder to the accused 
copier in Indecopi's proceedings.  Indecopi often issued preliminary 
injunctions against presumably illegal copies.  U.S. pharmaceutical 
companies also won several important patent infringement court cases 
in 2006 (see Ref B for an example).  Confidential test data 
submitted for the marketing approval of pharmaceutical and 
agrochemical products remains unprotected, though the PTPA should 
resolve this once implemented. 
 
...Trademarks: Fines Increasing 
------------------------------- 
 
¶9.  Indecopi's Trademark Office opened 477 infringement cases in 
2006 (67 of them ex oficio), and conducted 423 inspections (30 of 
them outside of Lima).  During the year, the Trademarks Office found 
that 224 charges were founded, issuing 174 fines (totaling almost 
$500,000) and 44 cautions.  The fines issued by the Trademark Office 
in the three previous years totaled $314,000 (2005), $158,000 
(2004), and $124,000 (2003).  Most of the Trademark Office cases 
involve clothing and branded items from companies like Disney, 
Marvel, and Warner Brothers. 
 
...Copyrights: Ubiquitous Optical Discs 
--------------------------------------- 
 
¶10.  Indecopi continued its "Anti-Piracy Crusade," which began in 
¶2002.  In July, the Anti-Piracy Crusade presented an advanced 
screening of "Superman Returns" in an effort to increase public 
awareness about IPR.  Indecopi's Copyrights Office conducted 51 
inspections of businesses alleged to use illegal software in 2006, 
presenting 28 formal cases, and issuing 22 fines.  In all, the 
Copyrights Office conducted 270 inspections in 2006, 155 of which 
involved music CDs. 
 
Government Software: Some Improvements 
-------------------------------------- 
 
¶11.  In 2003, the GOP passed a decree mandating that all government 
agencies use legally procured software by March 31, 2005.  This 
deadline was extended to December 31, 2006, and, regrettably, again 
to July 31, 2008.  The E-Government Office in the Prime Minister's 
Office has the lead in implementing this project.  Enrique Saldivar, 
the new Director of the E-Government Office, told us that the 
percentage of central government computers carrying pirated software 
had decreased from over 73% in 2005 to 41% in the last quarter of 
¶2006.  Implementing the measure within the police and military has 
been particularly difficult because of the decentralized nature of 
their IT offices.  Cleaning up government computers, especially in 
law enforcement, would provide a positive example to the public. 
The GOP is making an effort to meet its targets before the new 
deadline, and committed to resolve this problem in the PTPA. 
 
Law Enforcement: More Raids and Seizures Needed 
--------------------------------------------- -- 
 
¶12.  In 2006, Indecopi led 65 operations resulting in $2.5 million 
worth of seizures of clothing, accessories, CDs, DVDs, toys, etc. 
The Peruvian National Police's (PNP) Department of IPR 
Investigations conducted 64 raids from January-August 2006, 
detaining 1,175 people and seizing over $6 million of pirated or 
counterfeit items.  From January-May 2006, the Peruvian National 
Police's elite "Green Squad" seized 1,955 bags of pirated CDs, DVDs 
and VHS tapes; compared with only 318 bags in all of 2005.  Peru's 
Customs office also sporadically seized counterfeit goods entering 
Peru's land borders from Chile, Bolivia and Ecuador, as well as the 
primary seaport of Callao.  The Customs Special Operations unit gave 
excellent cooperation in interdicting a container of pirated Nike 
products, advancing the information to Chilean Customs, who seized 
the goods and began to work with U.S. law enforcement to dispose of 
the goods and track down the shipper.  Given the magnitude of the IP 
problems in Peru, additional law enforcement resources should be 
used in a concerted campaign. 
 
Judicial Process: Few Convictions, New Courts Give Hope 
--------------------------------------------- ---------- 
 
¶13.  Despite the numerous raids and seizures over the years, the 
number of penal convictions and deterrent sentences are close to 
zero.  According to an IP prosecutor, there are over 1,000 
IP-related cases pending judicial action.  For years, industry, 
Indecopi and post had been emphasizing the need for specialized IP 
courts, so that judges could develop an IP knowledge base. 
 
¶14.  The January 2007 implementation of the late 2006 decisions to 
assign IP responsibilities to specific courts and to increase the 
number of IP prosecutors should finally help to improve this lack of 
judicial enforcement.  These reforms assigned IP duties to four 
national penal courts of first instance (with one judge and one 
assistant each) and a national penal appeals court (with 16 judges, 
including a president of the court).  The appeals court used to be 
focused on terrorism and corruption cases, and is respected for its 
independence and competency. 
 
¶15.  Before January 2007, Peru had two prosecutors' offices 
dedicated to IP, with three prosecutors in each office.  There are 
now three prosecutors' offices (with three prosecutors each) in the 
city of Lima, plus two district prosecutors' offices (in Lima Norte 
and in Callao, which includes Peru's main seaport and airport), with 
IP responsibilities.  These offices were given additional preventive 
and investigative duties. 
 
¶16.  In addition to the regular training Indecopi and Customs 
provide law enforcement officials, these entities have developed 
extensive training for the new judges and prosecutors.  Given the 
importance that these judicial officials are able to do their jobs 
well, post plans on organizing a judicial IPR enforcement seminar in 
the latter part of 2007.  Indecopi and the American Chamber of 
Commerce in Peru have already indicated a willingness to 
collaborate.  Thanks to USPTO, post has already been able to send 
the president of the new IP appeals court and one of the new lead 
prosecutors to enforcement training in Alexandria. 
 
Treaties: Peru Signed Nearly All of Them 
---------------------------------------- 
 
¶17.  Peru is a member of the World Intellectual Property 
Organization (WIPO).  It is also a member of the Paris Convention, 
Berne Convention, Rome Convention, Geneva Phonograms Convention, 
Brussels Satellites Convention, Universal Copyright Convention, the 
WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms 
Treaty (WPPT).  Peru joined the WCT in July 2001 and the WPPT in 
February 2002.  The U.S. does not have a bilateral investment treaty 
with Peru, but the pending U.S.-Peru Trade Promotion Agreement 
(PTPA) contains a state-of-the-art IPR chapter. 
 
Other Post Efforts: Toolkit, AmCham, Training 
--------------------------------------------- 
 
¶18.  Post launched a comprehensive IPR Toolkit, available on FCS' 
website (http://www.buyusa.gov/peru/en/389.doc).  Post welcomed the 
assignment of a Department of Commerce regional IP attache' to Sao 
Paulo in 2006, and he has already visited Peru.  Post again helped 
to organize AmCham's successful annual IPR conference, which had 203 
attendees plus two industry-specific workshops in 2006.  Post 
participates in AmCham Peru's very active IP Committee, which meets 
regularly.  The Committee established three subcommittees in 2007 -- 
enforcement, FTA implementation, and making IPR protection a state 
priority -- to further bolster IPR efforts.  Post sent at least 14 
Peruvians to USPTO and USDOJ IPR training courses in 2006.  Post met 
with numerous U.S. companies throughout the year on IP issues, and 
has successfully advocated on their behalf when appropriate. 
 
Comment: Recommend No Change in Status 
-------------------------------------- 
 
¶19.  Post recommends that Peru remain on USTR's Special 301 Watch 
List due to the continued high levels of copyright and trademark 
infringements, the lack of protection for confidential test data 
submitted for the marketing approval of pharmaceutical and 
agrochemical products, and the need for increased enforcement 
efforts, particularly the application of strong penalties for IPR 
violators necessary for deterrence.  Post applauds the efforts of 
Indecopi and the designation of new IP-focused courts and 
prosecutors, which, together with implementation of the PTPA, will 
lead to improvements in Peru's IP environment.  Post requests that 
the public announcement of Peru's standing in the Special 301 review 
acknowledge the country's positive achievements. 
STRUBLE