VZCZCXYZ0006
RR RUEHWEB

DE RUEHSJ #0335/01 0511917
ZNR UUUUU ZZH
R 201917Z FEB 07
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 7289
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS SAN JOSE 000335 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
WHA/CEN 
EEB FOR JBOGER 
STATE PASS TO USTR FOR JENNIFER CHOE GROVES 
 
E.O. 12958: N/A 
TAGS: ETRD ECON KIPR CS
SUBJECT: 2007 SPECIAL 301 REVIEW - COSTA RICA 
 
REF:  A. 05 SAN JOSE 0508 
      ¶B. 06 SAN JOSE 0464 
 
1.(U)  SUMMARY. Costa Rica is making progress in passing laws to 
protect intellectual property rights (IPR), but still falls short in 
the area of enforcement due to lack of resources and weak political 
will.  Chapter 15 of the U.S.-Central America-Dominican Republic 
Free Trade Agreement (CAFTA-DR) contains important provisions to 
strengthen the legal and enforcement framework, but the treaty is 
not yet in force.  The agreement was signed on August 5, 2004 (i.e., 
some two and a half years ago) and we expect ratification during the 
first half of 2007 and implementation before the February 29, 2008 
deadline.  Opposition by roughly one third of Costa Ricans including 
very strong opposition by a small but vocal minority has so far 
succeeded in delaying the treaty's ratification and implementation. 
However, significant progress has been made in the past eight 
months.  President Oscar Arias is pursuing a dual track approach in 
the national assembly to simultaneously consider both ratification 
and passage of the necessary implementing legislation, including 
several new laws related to IPR.  Meanwhile, post continues to 
successfully recruit candidates for IPR training from various 
sectors of the government including Costa Rica's Supreme Court, and 
local businesses are pursuing IPR educational initiatives.  2006 saw 
the first IPR enforcement case that resulted in a conviction in many 
years.  Taking all of these factors into consideration, Post 
recommends that Costa Rica remain on the Watch List (WL).  End 
Summary 
 
--------------------------------------- 
TRIPS COMPLIANCE AND LEGISLATIVE ISSUES 
--------------------------------------- 
 
¶2. (U) Since inclusion on the Priority Watch List (PWL) in 2001, the 
GOCR has sought to improve its legal framework for protection of IPR 
and most importantly has significant new legislation necessary to 
implement CAFTA under active consideration.  Costa Rica brought into 
force the WIPO Copyright Treaty (WCT) and the WIPO Performance and 
Phonograms Treaty (WPPT) on March 6, 2002 and May 20, 2002, 
respectively.  Costa Rica has also ratified the Patent Cooperation 
Treaty (PCT).  Despite these ratifications, Costa Rica's IPR legal 
regime is noncompliant on certain TRIPS provisions.  Areas of 
concern are Costa Rica's lack of strongly defined time periods of 
protection and insufficient criminal sentences.  However, these 
issues are addressed in several pending bills required to bring 
CAFTA-DR into force, bills that have been the subject of many weeks 
of legislative hearings in late 2006.  The IPR bills are included on 
a priority agenda for legislation action, and post expects the IPR 
legislative package to be enacted before the end of 2007.  It is 
likely that these bills will take effect even before CAFTA-DR 
actually comes into force. 
 
----------- 
ENFORCEMENT 
----------- 
 
¶3. (U) Despite significant progress being made in the legislature in 
recent months, industry sources remain very concerned with the small 
degree of enforcement of existing laws.  Costa Rican laws provide 
for both criminal and civil enforcement of IPR.  The Attorney 
General is widely quoted as saying that given the workload his 
office faces with limited resources, IPR prosecutions are a low 
priority.  Industry sources say the Attorney General has recommended 
that private civil actions be pursued.  However, the civil system is 
viewed as inadequate due primarily to the difficulties in 
establishing damages.  Further, the amount of statutory damages is 
too small to serve as an incentive to pursue civil actions. 
Accordingly, the vast majority of matters are brought through the 
criminal system.  One case, involving a defendant accused of selling 
t-shirts with a fake trademark, was successfully prosecuted in late 
¶2006.  However, because it was his first criminal conviction, the 
defendant received a suspended sentence as required under Costa 
Rican law.  Moreover, the IPR community was disappointed that local 
media failed to report the conviction, which might have served as a 
disincentive to other IPR violators. 
 
¶4. (U) The Ministry of Public Security has a special organized crime 
division to combat organized and trans-national crimes occurring in 
Costa Rica.  The unit focuses on gangs, child sexual exploitation, 
stolen car smuggling, and a wide range of other miscellaneous 
crimes.  Within that unit there are a handful of employees dedicated 
to investigating IPR violations. 
 
¶5. (U) The chief prosecutor's office (Fiscalia General) is divided into 
several branches dedicated to particular crimes.  Under the current 
system, IPR crimes fall to a unit designated as "all other crimes." 
Due to IP's inclusion in this unit that covers a wide variety of 
unrelated criminal activity, the prosecution of IP-related crimes is 
adversely affected.  Their varied workload means individual 
prosecutors have difficulty acquiring the specialized knowledge and 
 
expertise necessary for successful IPR prosecutions. 
 
¶6. (U) Post management has regularly stressed the importance of IPR 
enforcement when meeting with Costa Rica's chief prosecutor, 
Francisco Dall'Anese.  While he says he recognizes the importance of 
IPR enforcement, Dall'Anese additionally states that due to the 
limited resources of his office, he could not make IPR enforcement a 
priority.  The prosecutor believes he faces strong public pressure 
to focus attention on other "more important" areas (e.g. prosecution 
of corruption scandals involving three former presidents, bribery 
allegations involving the government's telecom monopoly, drug 
trafficking and organized crime).  Dall'Anese indicates that 
attention to these other areas is necessitated by internal 
realities, whereas IPR enforcement is generally viewed as stemming 
solely from bilateral or multilateral obligations such as WIPO and 
CAFTA-DR.  Dall'Anese, whose term expires at the end of 2007, has 
suggested that one remedy might be the creation of an effective 
administrative process designed solely for the right holder to 
procure a seizure of goods without further criminal prosecution. 
 
¶7. (U) Another enforcement problem involves gathering and validating 
evidence.  Even when a search warrant is issued, upon entering a 
manufacturer, vendor, or distributor of counterfeited goods, 
investigators can only seize those goods that are counterfeits of 
the company that presented the complaint.  Thus, while counterfeit 
goods of several brands may be present, only those of one brand may 
be taken as evidence.  Furthermore, a company that has submitted a 
complaint must send an expert witness to Costa Rica to testify that 
the pirated goods are indeed different than the original.  Because 
of the small size of the Costa Rican market, this often is not 
worthwhile to the affected companies. 
 
¶8. (U) Post believes that there are two specific areas of improvement 
in enforcement that would greatly enhance IPR protection.  First, a 
dedicated and specialized prosecutor's IP unit should be established 
separate from the various crimes unit.  Although this might not be 
feasible in all judicial districts of the country, the creation of a 
unit serving the San Jose metropolitan area would greatly increase 
the efficiency of enforcement.  Second, increased resources should 
be provided to the IP investigatory unit of the Ministry of Public 
Security so that they can expand the efficiency and quality of their 
services. 
 
¶9. (U) The Arias administration has voiced a commitment to improved 
enforcement of IPR laws, but so far this has not been accompanied by 
additional appropriations.  Budgetary constraints have forced the 
GOCR to make difficult decisions regarding the allocation of 
available funds.  Currently, although parts of the GOCR recognize 
the need for improvements in IPR enforcement, other areas of 
enforcement are given a higher priority.  One basis for this 
prioritization is the widely held view that IPR enforcement mainly 
serves the interests of foreign corporations.  Some GOCR officials 
hope that through greater local participation in IPR issues and 
continued education and public outreach programs, adequate resources 
might eventually be committed. 
 
--------------------------------------------- ----- 
CREATING A POLITICAL ENVIRONMENT CONDUCIVE TO IPR ENFORCEMENT 
--------------------------------------------- ----- 
 
¶10. (U) Building upon past training initiatives, post has actively 
recruited numerous candidates for various IPR training programs 
offered by the U.S. Patent and Trademark Office.  Costa Rica's 
National Registry refers patent review work to the University of 
Costa Rica's office known at PROINNOVA.  This year for the first 
time post sent two industrial design engineers and the general 
counsel from PROINNOVA to USPTO courses on industrial design review 
and advanced patent law, respectively.  In addition post recruited 
key personnel from the Ministry of Foreign Trade to attend a course 
about copyright in the digital age.  It was significant that for the 
first time post recruited five members of the judiciary, including 
members of the Supreme Court, to participate in IPR enforcement 
conferences and training to better understand the country's 
obligations under CAFTA-DR.  One member of the Supreme Court has 
become so interested in IPR issues that he is pursuing academic 
training in the field and told Econoff he is working on a special 
IPR project for the Supreme Court. 
 
¶11. (U) Efforts to educate and create IPR interest groups are in the 
gestation stage.  Industry sources report development of an informal 
network of professionals with IPR interests.  The local American 
Chamber of Commerce is working with the U.S. Chamber of Commerce on 
a pilot project to assess public attitudes towards IPR, with a 
public education campaign to be based upon survey results, similar 
to an IPR project the U.S. Chamber of Commerce funded in Brazil.  As 
public interest in IPR protections grows, the political will to take 
enforcement seriously is more likely to take hold. 
 
-------------------------------------- 
USE/PROCUREMENT OF GOVERNMENT SOFTWARE 
-------------------------------------- 
 
¶12. (U) In 2002, Executive Decree #30, 151-J mandated that all 
government ministries use only legally licensed computer software. 
According to this decree, each ministry was to conduct an internal 
audit and submit a statement of compliance no later than July 31, 
¶2003.  The government subsequently claimed full certification of all 
ministries, although there has been no independent confirmation. 
 
--------------------------- 
RESPONSE TO PUBLIC COMMENTS 
--------------------------- 
 
¶13. (U) All public comments that post has seen to date, including those 
from the IIPA, IACC and PhRMA recommend that Costa Rica be moved 
from the Watch List to the Priority Watch List.  These postures 
reflect the high level of frustration over IP enforcement post 
shares with many firms trying to do business in Costa Rica.  While 
readily acknowledging these difficulties, we nonetheless believe 
that such a move now would be counter-productive to our long-term 
goals by lessening the probability that Costa Rica will be able to 
ratify and implement CAFTA-DR.  Among the laws necessary to 
implement the treaty, the IPR legislative package has not generated 
public opposition like that which exists for opening the telecom and 
insurance monopolies.  IPR bills required by CAFTA-DR are moving 
forward in the legislative process and have made significant 
progress.  It appears likely that these bills will be passed and may 
even take effect regardless of whether CAFTA-DR is ultimately 
brought into force. 
 
-------------------------- 
COMMENT AND RECOMMENDATION 
-------------------------- 
 
¶14.  (SBU) What has been most lacking in the past in Costa Rica is 
political will.  President Arias has made ratification and 
implementation of CAFTA-DR his highest priority.  He and his cabinet 
are exercising strong leadership to confront obstructionists in the 
legislature and the opposition of powerful unions.  Post believes 
that bringing CAFTA-DR into force is by far the most effective way 
to obtain the IPR protections sought by industry.  Costa Rica has to 
implement significant IPR legislation to bring CAFTA into force by 
the Feb. 29, 2008 deadline.  That means that the USG will have a 
very clear picture of what Costa Rica's IPR regime will look like 
for many years before the next 301 report is due.  Given the real 
possibility for significant improvement during 2007 in legal 
guarantees for intellectual property under Costa Rican law, post 
favors maintenance of the status quo for one more year.  In the 
event that the GOCR is unable to implement the significant IPR 
legislation required under CAFTA before the next 301 review, we 
likely would strongly encourage moving Costa Rica to the Priority 
Watch List at the next review.  For the above reasons post 
recommends Costa Rica remain on the Watch List in 2007. 
FRISBIE