VZCZCXYZ0008
OO RUEHWEB

DE RUEHQT #0404/01 0531951
ZNR UUUUU ZZH
O 221951Z FEB 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6361
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6452
RUEHCV/AMEMBASSY CARACAS PRIORITY 2380
RUEHLP/AMEMBASSY LA PAZ FEB 0428
RUEHPE/AMEMBASSY LIMA PRIORITY 1422
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 1913
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS QUITO 000404 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USTR FOR JENNIFER CHOE GROVES 
STATE FOR EB/TPP/IPE JENNIFER BOGER 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON EC
 
SUBJECT:  ECUADOR 2007 SPECIAL 301 REPORT 
 
REF: State 7944 
 
¶1.  (SBU) Summary and recommendation.  Post concurs with IIPA and 
PhRMA recommendations that Ecuador remain on the Special 301 Watch 
List for 2007.  Ecuador has not taken sufficient steps to adequately 
address IPR deficiencies over the past year.  Despite some 
enforcement activities to seize pirated CDs and DVDs, overall 
enforcement of IPR remains a key problem, resulting in high piracy 
levels in the software, publishing, recording, and film industries. 
The Ecuadorian Intellectual Property Institute (IEPI) remains 
understaffed and underfinanced, resulting in weakened efforts at IPR 
protection and enforcement. 
 
¶2.  (SBU) Data exclusivity and protection continue to be major 
problems.  A recent modification to Ecuador's health code explicitly 
permits granting marketing approvals without regard to whether or 
not a medication is patented, which could facilitate the entry of 
patent-infringing pharmaceutical products.  On the other hand, the 
GOE's proposed budget for 2007 reportedly includes funds to 
establish a specialized IP court, as required by its 1998 
intellectual property law.  Further monitoring is required to ensure 
the GOE meets its domestic and international commitments to IPR 
protection and enforcement.  End summary and recommendation. 
 
¶3.  (U) Ecuador's comprehensive Intellectual Property law enacted in 
May 1998 was a step forward for IPR protection, covering copyright, 
trademark, patent, and semiconductor chip protection.  It also 
addressed preliminary enforcement measures and other procedures, and 
required the creation of specialized IP courts.  In addition, it 
created the Ecuadorian Intellectual Property Institute (IEPI). 
 
IEPI 
---- 
 
¶4.  (SBU) The Ecuadorian Intellectual Property Institute (IEPI) is 
responsible for patent and trademark registration, and is also the 
lead GOE agency to coordinate IPR enforcement.  However, IEPI 
remains under-funded and undertakes few enforcement actions as a 
result.  The national police and the customs service are responsible 
for carrying out IEPI orders, but rarely do so outside of Quito. 
Current IEPI head Cesar Davila hopes to stay on in his position 
under Ecuador's new administration and push for stronger IPR 
enforcement.  According to PhRMA, the backlog of pending patent 
cases within IEPI continued to increase in 2006.  Davila reports 
IEPI does not have the legal authority to work with the Health 
Ministry on test data issues (see para 10 for discussion on test 
data). 
 
New Administration's Views on IPR 
--------------------------------- 
 
¶5.  (SBU) New president Rafael Correa has on occasion criticized the 
current international framework for IPR.  In a meeting with a 
visiting U.S. delegation, he noted that patents and copyrights 
protect new technologies and make them more expensive, whereas they 
should be available without cost, to be shared as would a public 
good.  To that end he has suggested establishment of a "world fund" 
to facilitate technology transfer for developing countries.  The 
Director General for World Trade in the Foreign Ministry told 
econoff that patenting a product in many cases is taking credit for 
traditional knowledge that does not belong to the patent holder. 
Maria Espinosa, the new Foreign Minister (and formerly part of 
Ecuador's IPR negotiating team for the U.S.-Ecuador FTA) has been a 
strong proponent of protecting traditional knowledge as intellectual 
property.  Since the Correa administration only took office January 
15, as yet it is unclear what practical effect these views will have 
on IPR protection in Ecuador.  It is also unclear whether President 
Correa will retain Davila as head of the IEPI or how much support 
his administration will provide IEPI. 
 
Enforcement 
----------- 
 
¶6.  (SBU) Lack of enforcement remains a key problem for Ecuador. 
Production of pirate CDs is reaching large-scale levels.  The 
recording industry estimates that more than 80 million CD-Rs and 
DVD-Rs legally enter Ecuador every year and a similar amount enters 
as contraband, with most destined for piracy.  The International 
Intellectual Property Alliance (IIPA) estimates that pirated 
products accounted for 98% of the domestic record and music industry 
in Ecuador in 2006, with estimated damage due to music piracy of USD 
33 million.  In contrast, the official market for recordings in 
Ecuador amounted to a mere 400,000 units in 2006, per IIPA, a 21 
percent drop from 2005.   The IIPA also reports that in 2006 
Guayaquil, the largest city in the country, lost its last standing 
legitimate music seller.  There is limited local support or 
awareness for anti-piracy actions. 
 
¶7.  (SBU) The motion picture and gaming industries suffer equally 
from widespread CD and DVD copying.  Business software piracy, both 
end-user piracy and pre-installed unlicensed software in new 
computers, continues to be a problem.  Pervasive commercial 
photocopying piracy victimizes the book publishing industry, 
including for educational textbooks. 
 
Legal Environment 
-------------------- 
 
¶8.  (SBU) IEPI's Davila reports that the GOE's proposed 2007 budget 
includes funds to establish specialized IP courts (as required by 
the GOE 1998 intellectual property law), which most likely would be 
used to create tribunals in the major cities of Quito, Guayaquil, 
and Cuenca.  This long-awaited action should improve IPR enforcement 
since Ecuador's judiciary in the past has largely been ineffective 
in enforcing the IP law.  Post will provide more information when 
available. 
 
¶9.  (SBU) Reflecting potential positive change in the legal IPR 
environment in Ecuador, a court decision in 2006 that characterized 
efforts by a patent holder to remove illegal copies from the market 
as an illegal competitive practice was overturned on appeal in 2007. 
 
 
TRIPS Compliance 
---------------- 
 
¶10.  (SBU) While the Ecuadorian Intellectual Property Law does 
provide for data exclusivity, as does TRIPS Article 39.3, marketing 
approval for copy products has been routinely granted based on data 
produced by research companies for the original drug.  In addition, 
Instituto Izquieta Perez, the health authority, routinely provides 
sanitary registrations to copy products of patented drugs. 
According to PhRMA, the sanitary authorities have approved more than 
40 copies of five of the eight innovative pharmaceutical products 
covered by patents in Ecuador.  A recent modification to Ecuador's 
health code in late 2006 permits sanitary registrations without 
regard to whether or not a medication is patented, which could 
further facilitate the marketing of patent-infringing pharmaceutical 
products.  Ecuador, citing legal opinions from the Andean Court of 
Justice, has failed to provide patents for second uses. 
 
Comment and Areas for Further Action 
------------------------------------ 
 
¶11.  (SBU) IPR enforcement languished for two years under the 
previous Palacio administration.  We do not have any strong 
indications of what the current Correa administration will do on IPR 
enforcement.  Some of Correa's rhetoric before taking office 
suggests that he may be ambivalent or even opposed to some aspects 
of IPR, but we do not know how that will translate into practical 
results (in other fields, Correa appears to have moderated some of 
his views upon taking office).  Funding for new IPR courts, if it 
comes to be, would be welcome news that the government will comply 
with a requirement of the 1998 Intellectual Property Law and ensure 
that judges with the requisite expertise rule on IPR cases. 
 
¶12.  (SBU) Judges, local law enforcement and customs officials need 
training on intellectual property rights protection and enforcement. 
 (Note:  U.S. Patent and Trademark Office training in IP protection 
and enforcement is a useful tool for this, but Ecuadorian officials 
are often unable to take full advantage of this training due to 
limited English skills.  Simultaneous interpretation into Spanish or 
training offered in Spanish would make this program much more 
accessible to Ecuadorian officials).  IEPI should be properly funded 
to effectively combat piracy and administer IPR laws. 
 
¶13.  (SBU) Ecuador should correct contradictions between its Health 
Code and its Intellectual Property Law, to prevent issuance of 
sanitary registrations to products that violate registered patents 
or to products whose applications are based on confidential data 
submitted by another company. 
 
JEWELL