VZCZCXRO8437
OO RUEHPOD
DE RUEHRO #0387/01 0580626
ZNR UUUUU ZZH
O 270626Z FEB 07
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7278
INFO RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
RUCNMEU/EU INTEREST COLLECTIVE
RUEHFL/AMCONSUL FLORENCE 2197
RUEHMIL/AMCONSUL MILAN 8395
RUEHNP/AMCONSUL NAPLES 2346

UNCLAS SECTION 01 OF 07 ROME 000387 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR FOR JAMES SANFORD, JENNIFER CHOE GROVES, 
PAUL BURKHEAD, STAN MCCOY, VICTORIA ESPINEL 
STATE FOR EB/TPP/IPE JOELLEN URBAN, CANDY GREEN, JENNIFER 
BOGER 
DOC PASS FOR USPTO AND LOC STEPP 
DOJ FOR DAAG LAURA PARSKY 
DHS PASS FOR ICE 
 
E.O. 12958: N/A 
TAGS: EINV ETRD IT KIPR
SUBJECT: 2007 IPR SPECIAL 301, MISSION ITALY INPUT 
 
REF: A. ROME 337 
     ¶B. ROME 323 
     ¶C. ROME 290 
     ¶D. ROME 137 
     ¶E. SECSTATE 7944 
     ¶F. 06 ROME 3334 
     ¶G. 06 SECSTATE 196848 
     ¶H. 06 ROME 3243 
     ¶I. 06 ROME 3205 
     ¶J. 06 SECSTATE 180082 
     ¶K. 06 ROME 2428 
     ¶L. 06 ROME 1908 
 
ROME 00000387  001.2 OF 007 
 
 
------------------- 
SUMMARY AND COMMENT 
------------------- 
 
¶1.  Italian authorities have taken several significant steps 
to improve Intellectual Property Rights (IPR) protection 
here, and there are emerging signs of government agencies 
acting in concert with each other, and with industry, 
academic, and union partners to address IPR illegality.  In 
addition, the interest of Italy's largest labor union in IPR 
(ref A) is a new and particularly heartening development. 
However, IPR protection in Italy continues to suffer from 
poor enforcement and minimal or no sentencing; senior 
government leaders have failed to publicly address the 
importance of respecting IPR; there is confusing IPR 
legislation; and there is an absence of comprehensive data on 
IPR violations and enforcement. These factors, combined with 
organized crime's growing involvement in piracy and 
counterfeiting and the public's poor grasp of the importance 
of IPR to Italy's economic development and culture all 
indicate Italy should continue to remain on the 301 Watch 
List for 2007.  END SUMMARY AND COMMENT. 
 
¶2.  This message conveys an overview of IPR protection in 
Italy in 2006, and responses to ref E questions (in paras 
30-39).  ConGens Florence, Milan, and Naples all contributed 
to the Mission's understanding of the IPR problem, and our 
attack on IPR infringements. 
 
--------------------------------------------- ------------- 
SOME REINVIGORATED POLITICAL-LEVEL INTEREST IN 301 AND IPR 
--------------------------------------------- ------------- 
 
¶3.  In recent demarches on the 2007 301 process, Mauro Masi, 
the senior GOI official with responsibility for IPR, 
expressed a strong desire to improve the IPR situation here 
(ref D).  He has indicated that Foreign Minister/Deputy Prime 
Minister D'Alema and Justice Minister Mastella are also 
committed to that goal, and would likely support new IPR 
initiatives and stronger enforcement.  Masi also volunteered 
to prepare a statement for submission on Italy's position on 
the 301 Watch List to the USG as part of the 301 review 
process. (NOTE:  Post has not yet received this submission, 
but has received some enforcement statistics. END NOTE). 
 
¶4.  In his recent Washington meetings, Minister of Economic 
Development Bersani acknowledged that getting Italy off the 
Special 301 Watch List is key to improving bilateral trade 
with the U.S.  Bersani has expressed interest in exploring 
new measures to improve Italy's IPR.  In addition, the Office 
of the Undersecretary of the Prime Minister, along with Masi, 
both of whom have expressed continuing interest in the 
proposed Anti-Counterfeiting Treaty Agreement (ACTA), do 
recognize that Italy must take effective steps to come off 
the 301 Watch List in order to participate in negotiating the 
treaty (refs D and I). 
 
------------------------------------------ 
OPERATIONAL IMPROVEMENTS IN IPR PROTECTION 
------------------------------------------ 
 
¶5.  Mission Italy has seen some well-intentioned, but 
disconnected efforts by governmental authorities to address 
IPR protection.  For example, the new GOI High Commissioner 
on Anti-Counterfeiting (ACHC), Giovanni Kessler, has outlined 
an ambitious program to review Italy's IPR laws; coordinate 
anti-piracy efforts among the seventeen different GOI 
agencies with IPR competency; and compile comprehensive IPR 
 
ROME 00000387  002.2 OF 007 
 
 
enforcement data (Italy does not have such data).  He has 
also opened dialogues with industry (including the American 
Chamber of Commerce) and consumer groups, and requested 
Embassy assistance for ACHC staff enforcement training 
(COMMENT:  It is unclear whether Kessler and ACHC have real 
authority to coordinate all of the facets of IPR enforcement 
effectively (ref D).  END COMMENT). 
 
¶6.  In addition, the Association of Mayors of Italian Cities 
(ANCI-Associazione Nazionale Comuni Italiani) is inaugurating 
plans to improve efforts at curbing IPR violations in large 
urban centers.  ConGen Florence lobbied hard to convince the 
Florence Mayor to lead the way on this project.  Mission 
Italy will continue to engage ANCI on this good idea, but it 
is unclear whether this effort will actually materialize in 
the hundreds of urban areas here. 
 
¶7.  The Italian police and magistracy are also preparing to 
include IPR enforcement in new 2007 training initiatives for 
police and judges.  Our contacts have invited input from Post 
on potential speakers for their programs. 
 
¶8. The Office of the Prime Minister (OPM) has also included 
information about Mission Italy's "Building a Culture of IPR 
Legality" Roundtable, held in Florence in November 2006 (ref 
F), on the OPM's website, with links to IPR information on 
Embassy Rome's website. 
--------------------------------------- 
MISSION EFFORTS TO SPREAD IPR AWARENESS 
--------------------------------------- 
 
¶9.  Mission efforts to raise awareness in other parts of 
Italian society on the need to protect IPR better, including 
with Italy's unions, are detailed in refs. In 2006, CGIL 
Confederazione Generale Italiana del Lavoro), Italy's largest 
trade union confederation, took a strong public stand on the 
need for effective enforcement of IPR laws in Italy (ref A). 
 
¶10. Mission hosted a roundtable in November 2006 (para 8 and 
ref F), and included the software, music, film, and internet 
provider industries, as well as academia and government, to 
seek their recognition of IPR as a problem and to propose 
specific, self-funded and self-organized projects to address 
IPR issues in Italy. 
 
¶11.  Post hopes that the efforts detailed above will 
counteract the stubborn idea that persists among many 
Italians--both government officials and regular 
citizens--that piracy is acceptable and that the trade in 
fake goods provides a legitimate livelihood to immigrants, 
who might otherwise engage in more serious criminal activity. 
 
--------------------------------------------- ---- 
SOME EVIDENCE OF IMPROVED LAW ENFORCEMENT EFFORTS 
--------------------------------------------- ---- 
 
¶12.  The GOI/Italian police authorities have no comprehensive 
figures on arrests or convictions.  However, generally rising 
confiscations of pirated goods suggest that there is some 
increased effort. 
 
¶13.  The Guardia di Finanza (GdF, the Finance Ministry's 
national police force with jurisdiction over financial crime) 
continues to increase its enforcement efforts.  According to 
GdF statistics, the GdF devoted over 838,000 man hours to IPR 
cases in 2006, an increase of roughly ten percent from 2005. 
Interestingly, GdF seized about the same number of 
fashion-related counterfeit items in both years (14,240,047 
in 2005; 14,298,076 in 2006), but seized almost 30 percent 
more electronic pirated material (20,156,180 in 2005; 
29,446,407 in 2006).  Of electronic items seized, CDs, DVDs, 
and other audio-video increased from roughly 12 million in 
2005 to 16.5 million in 2006; software confiscations declined 
from 131 thousand pieces in 2005 to 113 thousand in 2006; and 
videogames increased from roughly 2,800 to 9,400 pieces from 
2005 to 2006.  Telephones and telephone accessories made up 
the greatest percentage increase in items seized, with 
roughly 1.3 million confiscated in 2005 and almost 7.5 
million seized in 2006. 
 
¶14.  Data provided by the GOI Delegate on IPR (Masi) also 
 
ROME 00000387  003.2 OF 007 
 
 
shows increases in Carabinieri (the Italian military-police 
corps) anti-piracy efforts.  Successfully executed 
Carabinieri seizure operations of counterfeit and pirated 
goods rose from 2,508 in 2005 to 3,346 in 2006. 
Fashion-related goods confiscated rose from roughly 92,000 
items in 2005 to roughly 500,000 in 2006.  CD, DVD and other 
audio-video seizures increased from roughly 544,000 to 
roughly 616,000; and software seizures increased marginally 
from 46,000 in 2005 to roughly 50,000 in 2006. 
 
¶15.  As reported in several SIPRNet pieces (see SIPRNet 
reports from October 5, 2006, October 25, 2006; November 24, 
2006; December 13, 2006; January 19, 2007; January 31, 2007), 
Italian law enforcement officials have made several large 
piracy and counterfeiting arrests and confiscations in 2006. 
(COMMENT:  What is not known is the overall share of 
pirated/counterfeit products available on the market.  ConGen 
Milan reports that while the number of seizures and products 
seized are going up, so are the number of counterfeit 
products, particularly in the electronic/audio-visual sector. 
 It is likely that the actual number of goods seized compared 
to goods available on the market is getting smaller.  END 
COMMENT). 
 
--------------------------------- 
THE "CHINA THREAT" SPARKS ACTION. 
--------------------------------- 
 
¶16. Much of the GOI enforcement actions in 2006 focused on 
trademarks and was a direct reaction to the growing threat 
posed by Chinese counterfeiting.  Italian authorities are 
increasingly conducting raids in Chinese immigrant 
communities.  The threat pose by both Chinese counterfeiting 
and lower Chinese labor costs to Italian producers and 
retailers also has pushed CGIL to take IPR protection 
seriously.  As evidence of CGIL's awareness of the Chinese 
role in the market for pirated goods, CGIL invited an 
official from the Chinese National Association of Textile 
Companies to its IPR conference in January of 2007 (ref A). 
 
-------------------------------- 
BUT SIGNIFICANT PROBLEMS REMAIN. 
-------------------------------- 
 
¶17.  While we have sought to make the case above that there 
has been a change in some Italian attitudes toward IPR, the 
increase in piracy rates, ubiquitous and flagrant street 
vending of pirated goods, and lack of consistent enforcement, 
confiscation, and adjudication with effective penalties, 
inform our recommendation not to remove Italy from the 301 
Watch List. 
 
PIRACY REMAINS RAMPANT. 
----------------------- 
 
¶18.  Estimated cases of intellectual property piracy, as 
reported by member associations of the International 
Intellectual Property Alliance (IIPA), actually increased in 
2006 over 2005. Further, IIPA believes that Italy has one of 
the highest piracy rates in Europe.  Music piracy increased 
seven percent from 2005 to 2006, and entertainment software 
piracy increased ten percent.  The business software sector 
reports a decrease from three percent from 2005 to 2006, but 
the sector believes that growing internet and optical media 
piracy, combined with one of the highest rates of business 
software piracy in Europe, makes Italy an ongoing IPR 
challenge.  While the film and publishing industries do not 
yet have 2006 statistics, our contacts report that piracy 
problems continue, due to illegal internet downloading and 
physical copying of copyrighted materials. 
 
¶19. There are flagrant cases of illegal street vending in the 
major tourist areas in Rome.  Pirated music, film, and 
software, in addition to counterfeit designer merchandise, 
are still sold openly on Italian streets (almost always by 
immigrants).  The approach of GdF or other law enforcement 
vehicles to an area where counterfeit vendors are operating 
induces momentary flight; but when law enforcement moves on, 
the vendors return.  ConGen Naples reports CDs and DVDs still 
very much on sale in the streets of Naples--including in 
middle- and upper-class neighborhoods.  However, ConGen 
 
ROME 00000387  004.2 OF 007 
 
 
Naples sources report a decrease in optical disk vending in 
Palermo, probably because of the growing popularity of 
internet piracy.  Similarly, ConGen Milan has observed street 
vendors shift away from optical media in favor of fake luxury 
goods, probably due to internet downloading. 
 
NO COMPREHENSIVE GOI STATISTICS ON IPR 
-------------------------------------- 
 
¶20.  As discussed above, the GOI has provided some initial 
IPR-related statistics for 2005-2006 (paras 13-14).  However, 
the GOI does not have information or statistics on the total 
dimensions of piracy in Italy (para 15), nor does it posses 
definitive statistics on prosecution and sentencing of IPR 
crimes. 
 
FEWER ARRESTS 
------------- 
 
¶21.  While we believe there has been an increase in 
confiscations, actual arrests have decreased.  The GdF 
pursued slightly fewer IPR cases in 2006, compared with 2005 
(17,801 in 2005; 17,691 in 2006), which resulted in fewer 
arrests in 2006 (587 in 2005; 455 in 2006).  Similarly, while 
the Carabinieri pursued more IPR cases in 2006 (1,367) 
compared to 2005 (1,160), arrests declined from 905 in 2005 
to 792 in 2006. 
 
¶22.  GdF officials report they are concentrating on landing 
the "big fish," the more important IPR criminals, those who 
are directing street vendors and small-time duplicators, and 
who have ties to organized crime.  This policy strategy 
leaves efforts to combat the street-level trade to local 
authorities.  However, local authorities, especially in 
small- and medium-sized cities, say they are not equipped to 
combat street piracy. 
 
LEGAL OBSTACLES TO EFFECTIVE ENFORCEMENT 
---------------------------------------- 
 
-- Judicial Leniency 
 
¶23. Italy is often credited with having one of the strongest 
IPR laws in Europe.  However, the law's effectiveness is 
minimal for several reasons.  The most apparent is judicial 
leniency in sentencing.  While industry associations and GOI 
officials credit Mission Italy's outreach efforts 
(particularly our annual IPR retreats for Italian judges (ref 
K)) with improving awareness of IPR crime among the 
judiciary, Italian judges generally continue to treat IPR 
crime with excessive leniency.  As stated in para 11, many in 
Italy, judges included, believe that piracy is not a serious 
offense; many judges are reluctant to impose deterrent 
sentencing provided by the law.  Nevertheless, there are 
judges who "get it" on IPR, and who are educating their peers 
about the heavy involvement of organized crime in IPR 
illegality. 
 
-- The "Indulto" 
 
¶24. In summer 2006, Parliament passed a "Pardon Law" (aka the 
Indulto), which provided a general amnesty for all offenders 
convicted of crimes with jail terms of three years or less, 
and reduced by three years all jail terms of more than three 
years.  Since the maximum sentence for IPR violations is 
three to four years, this law effectively wiped out the great 
majority of IPR cases from the past several years.  Industry 
groups worry that the "Indulto" conveys a message that the 
government is not serious about IPR enforcement. 
 
-- The "Ex-Cirielli Law" 
 
¶25. In November 2005, Italy's Parliament passed a judicial 
reform law (the "ex-Cirielli" bill) to speed the notoriously 
slow pace of criminal trials by restricting the statute of 
limitations for most crimes.  Industry groups believe the 
reform will exacerbate the existing problem of IPR defendants 
stalling criminal trials until the statute of limitation runs 
out and the case is dismissed.  The GOI, however, strongly 
denies "ex-Cirielli" will affect IPR prosecutions and claims 
that, by increasing penalties for repeat offenders, the 
 
ROME 00000387  005.2 OF 007 
 
 
reform actually creates a greater deterrent against career 
IPR thieves.  It will be several years before the true effect 
of "ex-Cirielli" is fully understood. 
 
-- The "Pecorella Law" 
 
¶26.  Passed in 2006, the so-called Pecorella Law prevents 
public prosecutors from appealing defendants' acquittals or 
not-guilty verdicts, leaving only recourse to the Italian 
Supreme Court as an option.  Defendants, however, retain the 
right to an initial appeal and, upon that appeal's failure, 
the right to an additional appeal to the Supreme Court. 
Industry fears that IPR violators may take advantage of this 
law to delay decisions, which could result in expiration of 
the statute of limitations on their crimes.  Recently, a part 
of the law has been declared unconstitutional; and public 
prosecutors again have power to appeal acquittals.  Post will 
continue to monitor developments on this law. 
 
-- Internet Piracy Law Weakened 
 
¶27. In 2005, Parliament revised the "Urbani Law," Italy's 
internet piracy statute, enacted in 2004.  The original law 
stipulated potential prison sentences for internet piracy, 
regardless of whether uploading was done for monetary gain, 
or not.  Under pressure from internet service providers 
(ISPs), however, Parliament revised the Urbani Law to apply 
prison sentences only to commercial, for-profit, on-line 
piracy.  Sharing copyrighted works for free technically 
remains a criminal offense, but it no longer carries the 
threat of jail time; and those caught can avoid a conviction 
by paying a fine (NOTE:  There is ongoing tension between 
ISPs and copyright holders on this law.  END NOTE). 
 
-- Poorly Administered IPR Consumer Law 
 
¶28. In May 2005, Parliament enacted a Euro 10,000 fine 
(roughly $13,000) for the purchase of counterfeit items. 
However, the measure is simply not applied.  Many in the GOI, 
in addition to the general public, believe the fine is 
unreasonable.  Post believes that the public and law 
enforcement views that the fine is unreasonable means the 
fine does not help protect IPR in Italy. 
 
---------------------------------- 
Italy Is TRIPS Compliant On Paper. 
---------------------------------- 
 
¶29. The continuing failure of Italian courts to adequately 
punish IPR crime (para 23) and Italy's costly, slow civil 
process raises concerns about Italy's TRIPS compliance in 
practice.  However, Italy's IPR legal regime is compliant 
with the TRIPS Agreement. 
 
--------------------------------------- 
Additional Responses to Ref E Questions 
--------------------------------------- 
 
Optical Media Controls 
---------------------- 
 
¶30. SIAE (Societa' Italiana degli Autori ed Editori), the GOI 
royalty collection agency, encourages optical disk producers 
to use source identification codes, but this suggestion is 
not mandated by law.  The music industry has lobbied (as yet 
unsuccessfully) for inserting greater controls on optical 
media production equipment and inputs into Italy's Copyright 
Law. 
 
Use and Procurement of Government Software 
------------------------------------------ 
 
¶31. Italy has varied forms of software procurement 
regulations depending on whether procured for central or 
local government agencies.  National government offices have 
mostly legal software, though the use of unlicensed software 
remains a problem in some regional or local governments. A 
proposed 2007 outreach initiative headed up by Microsoft 
Italy may begin to address this and other similar issues in 
local government software use. 
 
 
ROME 00000387  006.2 OF 007 
 
 
Geographic Indicators, Folklore, Genetic Resources 
--------------------------------------------- ----- 
 
¶32. Embassy is aware of no new legislation covering 
geographic indicators, folklore expression, or genetic 
resources.  However, the Ministry of Foreign Trade has stated 
that an agreement on geographical indicators remains a 
priority for Italy in the WTO Doha Round negotiations (ref 
B). 
 
Pharmaceuticals 
--------------- 
 
¶33.  Mission notes PhRMA concerns with the GOI using spending 
ceilings to control drug prices.  We will continue to urge 
the GOI to adopt more transparent, fair and equitable 
regulations; but we do not agree with PhRMA's suggestion that 
the USG place Italy on the Priority Watch List. 
Pharmaceutical patents are, overall, better protected in 
Italy than copyrights or trademarks.  Italy's distribution 
system is well controlled, with strict tracking 
specifications for medications that discourage 
counterfeiting.  There are very few cases of counterfeit 
pharmaceuticals, and those about which the Italian 
authorities have expressed most concern relate to imported 
herbal remedies.  Post has not heard complaints about 
inadequate protection of test data. 
 
WIPO Treaties 
------------- 
 
¶34. Italy has signed, but not yet ratified, both the WIPO 
Copyright Treaty and the Performances and Phonograms Treaty. 
Embassy will continue to push for ratification. 
 
Training 
-------- 
 
¶35. Italian law enforcement agencies are enthusiastic 
participants in USG-sponsored training programs, but a 
worsening budget situation limited Italian participation 
in Washington-based programs in 2006. 
 
¶36. Post sees a special need for more training of Italian 
judges and law enforcement officials on implementing and 
executing IPR laws.  To that end, Post has organized a 
one-day IPR training session for ACHC officials sponsored by 
the International Anti-Counterfeiting Coalition (IACC).  ACHC 
has further committed to sending several officials to USPTO's 
IPR Enforcement Academy program, summer 2007. 
 
¶37.  As mentioned in para 7 above, the Italian Police 
Directorate is incorporating IPR training into its 2007 
program for its officers. Further, Italy's magistracy 
recently held a regional program in Milan for Italian judges 
on technical aspects of judging IPR cases.  The magistracy is 
also planning to institute IPR training for judges throughout 
Italy. 
 
¶38. Mission Italy sponsored several training initiatives in 
¶2006.  Embassy Rome hosted its fourth annual IPR Retreat in 
May 2006 that convened Italian judges to discuss best 
practices in IPR enforcement and judicial review (ref K). 
The Embassy and ConGen Florence also hosted a roundtable 
discussion in November 2006 for IPR industry representatives, 
GOI officials, and other interested parties on "Building a 
Culture of IPR Legality" (paras 8 and 10, and ref F).  The 
USPTO participated in the Florence session.  Embassy Rome's 
DHS/ICE attach conducted an IPR training seminar for GdF 
officials in May 2006.  ConGen Naples supported the 
organization of an IPR seminar for Treasury Police in Salerno 
(in the Campania region of Italy), where increased pirate 
activity has been reported.  ConGen Milan regularly nominates 
officials from GdF or Postal Police every year for 
IPR-related State Department International Visitor Programs. 
 
¶39.  The Embassy will host a new IPR roundtable for Italian 
judges in spring 2007, in Gubbio, Italy.  This program 
represents an advance in Post's strategy for addressing 
judicial deficiencies in Italian sentencing of IPR-related 
crimes.  Post will invite members of Italy's judiciary who 
 
ROME 00000387  007.2 OF 007 
 
 
hold positions as judicial trainers in each region of Italy. 
These judges are in charge of continuing education for their 
fellow judges, and determine the curriculum for their 
colleagues in their respective regions.  Post believes that 
sensitizing these judges to the need for more stringent IPR 
prosecution and sentencing will result in larger numbers of 
judges reviewing IPR cases.  This program will also dovetail 
with the Italian judiciary's plans for judicial training in 
the future. 
SPOGLI