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DE RUEHMD #2128/01 3230903
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FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 3815
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 06 MADRID 002128

SIPDIS

SIPDIS

STATE FOR EB/TPP/IPE (JURBAN, JBOGER) AND EUR/WE (ESAMSON)
STATE PASS USTR (JGROVES, CWILSON)
STATE PASS COMMERCE (ITA - DCALVERT)
STATE PASS USPTO (MSHAPIRO)
STATE PASS U.S. COPYRIGHT OFFICE (MSKELTON)

E.O. 12958: DECL: 11/15/2012
TAGS: ECON ETRD KIPR PGOV ADCO SP
SUBJECT: USG REPRESENTATIVES REITERATE INTEREST IN WORKING
WITH SPAIN ON COPYRIGHT ISSUES IN CONNECTION WITH NOVEMBER
7-8, 2007 MADRID CONFERENCE

REF: (A) MADRID 01807 (B) SECSTATE 107629

Classified By: Deputy Charge d'Affaires a.i., Hugo Llorens, for reasons
1.5 b and d.

¶1. (U) Summary: Associate Register of Copyrights David
Carson, U.S. Patent & Trademark Office Senior Counsel Michael
Shapiro and Deputy Chief of Mission Hugo Llorens used the
Spanish government organized Madrid November 7-8, 2007
"Conference on Intellectual Property Rights in the Digital
Environment" to reiterate to the Spanish government our
continuing interest in working with Spain on
copyright-related intellectual property rights (IPR) issues.
Ministry of Industry, Tourism and Trade Secretary of State
Francisco Ros expressed an interest in judge-to-judge
exchanges on IPR matters. The Spanish government's view
remains that Internet Service Providers (ISPs) and content
providers should engage in self-regulation to limit internet
piracy. However, the government is considering mandating
that ISPs include in service contracts a provision that
service can be cut off if users infringe copyrights.
Moreover, the government is considering making a special
effort to encourage stakeholders to move quickly on an
internet notice system, leaving takedown for later. These
would be positive steps that would begin to address U.S.
concerns. Para 2 provides background. Paras 3-4 report on
the U.S.-Spain bilateral held on the margins of the
conference. Paras 5-6 report on the lunch DCM hosted in
connection with the conference. Paras 7-8 report on an
industry-government meeting held following the conference.
Para 9 summarizes highlights from the conference. Para 10
contains an Embassy concluding comment. End Summary

BACKGROUND
----------

¶2. (C) The Spanish government is aware that it came very
close to being watchlisted during the latest Special 301
process. This no doubt partly explained Secretary of State
Ros' desire to host the November 7-8 conference. His staff
made a point of inviting David Carson from the Copyright
Office to speak at the conference. The organizers also
invited representatives from the UK, France, South Korea and
the EU, as well as important local stakeholders. The
government is juggling sometimes conflicting objectives.
These objectives include, but are not necessarily limited to:
increasing broadband internet penetration, thereby benefiting
national champion Telefonica; limiting piracy both because
the Spanish government agrees with that objective and also to
keep Spain off the Special 301 watchlist; and containing the
possible political damage caused by consumer groups and
internet surfer ("internauta") groups. There are not many
Spaniards in the latter category, but they have a media
impact out of all proportion to their numbers. With
elections coming up in March 2008, the government is
sensitive to them.

U.S. - SPAIN BILATERAL
NOVEMBER 7, 2007
----------------------

¶3. (U) Participants: DCM Hugo Llorens, Associate Register of
Copyright David Carson, U.S. Patent and Trademark Office
Senior Counsel Michael Shapiro and Economic Officer Carl
Schonander participated for the U.S. Ministry of Industry,
Tourism and Trade Secretary of State for Telecommunications
Francisco Ros was accompanied by Chief of Staff Juan Junquera
Temprano and Subdirector General for Information Society
Services Salvador Luis Soriano Maldonado.

¶4. (C) DCM said that the U.S. remained very interested in
working with Spain on combatting internet related copyright
piracy, and that the conference was a laudable initiative.
Ros emphasized that the problems discussed at the conference
were "important" and "difficult." He expressed pleasure that
the attendees were "first level." Ros said that the internet
had to accomodate different business models, including those
who favored traditional copyright protection and those who
were interested in other models. Junquera said that it was
very difficult to change the "mentality" of Spaniards with
respect to internet downloading even though the government
had conducted several anti-piracy campaigns. He also said
that legal instruments were available to rights-holders to
protect their their intellectual property. Carson emphasized
that the U.S. experience was that public awareness campaigns

MADRID 00002128 002 OF 006


had to be accompanied by the prospect of "personal
consequences" for those who engaged in internet piracy. Ros
said that Spanish law did, in fact, permit action against
internet pirates, although the law had not been used
adequately by rights-holders. He also explained that his
ministry's proposed notice and takedown legislation had been
struck down because the Council of State found that the
proper consultation procedures had not been followed.
Shapiro recounted that a conference participant had said that
the cultural industry accounted for 4% of Spain's GDP and
that this should be kept in mind in framing internet piracy
policy. Ros reiterated that Spanish law provided for ways in
which rights-holders could protect their property, although
his Chief Staff added that the law was very "garantista,"
which in practice made it difficult for rights-holders to
protect their intellectual property. Shapiro suggested the
possibity of meetings between U.S. judges and Spanish judges
to compare experiences on how to deal with internet-related
piracy matters. Ros said he would talk to his Ministry of
Justice counterpart about this possibility. Soriano
mentioned that in the last two months, Spanish police had
shut down two internet portals and that the owners were being
prosecuted. (Note: Rights-holders typically have nothing but
praise for the police. Rights-holders' complaints center on
the judiciary, as well as a Justice Ministry "circular" to
prosecutors that effectively decriminalizes peer to peer file
sharing unless there is a commercial profit motive.) Ros
concluded by saying that his ministry would focus on judge to
judge meetings and more publicity campaigns.

DCM-HOSTED LUNCH
NOVEMBER 8, 2007
----------------

¶5. (U) Participants: Industry Ministry Subdirector General
Salvador Soriano, Industry Ministry Advisor for EU Trade
Policy Carmen Jordan Asensi, Promusicae Chairman and CEO
Antonio Guisasola, Federacion Antipiratera (FAP) Director
General Jose Manuel Tourne, Spanish General Society of
Authors and Publishers Corporate Relations Director Pedro
Farre Lopez, Microsoft Iberia Director Arnedo Txema, National
Association of Electronic and Telecommunications Industries
(AETIC) President D. Edmundo Fernandez participated from the
Spanish side. DCM Hugo LLorens was accompanied by Economic
Counselor James Dudley, David Carson, Michael Shapiro and
Carl Schonander.

¶6. (C) DCM opened by saying that the USG remained committed
to working with Spain to find ways to combat internet piracy,
and that he hoped the conference and the lunch would prove to
be two fora that contributed to achieving this goal. The
lunch exposed once again the divisions between the content
providers and the ISPs. The AETIC representative (AETIC
represents major ISPs such as Telefonica) emphasized that no
notice and takedown system for the internet could be
developed without "legal security." Content providers
complained that it was virtually impossible to obtain
information from ISPs on customers suspected of trafficking
in pirated property, and that ISPs were too slow to act
against internet piracy. Complaints from the content
providers were then directed to the Ministry of Industry,
Tourism and Trade representative, Salvador Soriano. He said
that the government remained committed to self-regulation
among the stakeholders. Soriano acknowledged, however, that
in the meantime a tremendous amount of piracy was taking
place on the internet. He suggested that the government and
stakeholders focus on developing a notice system for the
internet, leaving takedown for later.

CONFERENCE GENERATES MOMENTUM
IPR INDUSTRY - GOVERNMENT MEETING
NOVEMBER 13, 2007
---------------------------------

¶7. (C) Chief of Staff Juan Junquera Temprano and Subdirector
General Soriano met with FAP Director General Jose Manuel
Tourne and Promusicae President Antonio Guisasola on
11/13/07. (Note: EconOff received a read-out on this meeting
from Tourne.) Tourne said that Junquera had agreed to work
on the following measures:

a) An amendment to the 2002 Information Society Law in
Article 16.1 that would absolve ISPs of liability with
respect to rights-holders if they acted pursuant to voluntary
agreements with rights-holders. This would provide a measure

MADRID 00002128 003 OF 006


of legal security for ISPs with respect to lawsuits generated
by rights-holders, although presumably ISPs would still be
liable for "consumer" generated lawsuits. The point of this
legal amendment would be to encourage content provider-ISP
anti-piracy agreements.

b) Contracts between ISPs and customers would include a
clause stating that ISPs can suspend service to customers who
are found to be infringing copyrights.

c) A government-sponsored "urgent" negotiation on a notice
process, leaving takedown for later.

d) Assess the current "private copy" exception's negative
impact and make clear to the public that peer to peer
downloads are illegal.

e) Encourage sectoral meetings with a view to creating a
climate favoring the protection of content on the internet.

¶8. (C) Comment: In principle these measures are positive.
However, we have seen the Ministry of Industry, Tourism and
Trade promise action to the content industry in the past and
then fold when faced with opposition. Indeed, Tourne
received an 11/14/07 phone call from Junquera saying that
Senate approval would be difficult to obtain for the first
measure. Rights-holders and the government have agreed on a
low key approach for now. However, if the government wants
to do something serious to protect content on the internet,
it will have to withstand some criticism.

HIGHLIGHTS FROM
THE CONFERENCE
---------------

¶9. (U) For those who are interested in a conference agenda,
please contact Carl Schonander at SchonanderCE@state.gov.
Conference highlights follow below.

Secretary of State

SIPDIS
for Telecommunications
Francisco Ros
----------------------

Ros opened the conference. He spent a lot of time talking
about the vast quantities of information on the internet.
The Secretary of State emphasized the need for
self-regulation among the stakeholders. He called for
internet regulation which respected different business
models, including a model based on traditional copyright law.


Douglas Lippoldt
Directorate for
Science, Technology
and Industry, OECD
-------------------

Lippoldt mentioned the OECD's emphasis on fostering
innovation and shared tentative empirical findings suggesting
a positive relationship between protection for IPRs and the
flow of FDI.

Michael Keplinger
Deputy Director General
WIPO
-----------------------

Keplinger went through the fundamental tenets of the internet
treaties and mentioned that WIPO has posted a guide to the
treaties on its website. He said WIPO was committed to
creating an IPR "culture".

Tilman Luder
Unit Chief
DG Internal
Market and Services
European Commission
-------------------

Luder said that his Commissioner, Charles McGreevy, firmly
believed that "less is more" and that the EU was therefore
currently in an "evaluation mode" with respect to IPR
legislation in Europe. He spent quite a bit of time
reviewing a number of European cases that have to do with

MADRID 00002128 004 OF 006


defining what a reproduction is. He said that the Commission
was reviewing how effective ISPs were in preventing their
services from being abused to commit copyright policy
violations.

Helen Montluc
Head of Intellectual
Property Office
Ministry of Culture
France
--------------------

Montluc said that President Sarkozy was interested in
reducing internet piracy. The head of France's biggest music
retailer, FNAC, was working with stakeholders on proposals.
Montluc acknowledged that peer to peer file sharing caused
"grave damages". She said that peer to peer file sharing
must be curbed. The French government is considering whether
to reform the criminal code to provide for "proportional
sanctions" more along the lines of traffic fines, rather than
the maximum of three years in jail and/or a euros 300,000
fine that the law currently permits.

David Carson
Associate Register
U.S. Copyright Office
---------------------

Carson gave two presentations focusing on the main provisions
of the Digital Millenium Copyright Act (DMCA) and ISP
liability. He reviewed other legislation affecting ISP
liability and the Napster and Grokster cases. Carson
emphasized that consumers must believe that there will be
consequences for illegal downloading if piracy is to be
stemmed. He also suggested that because ISPs are now getting
into the content business, their traditional reluctance to
accomodate rights-holders' concerns may be receding.

Pedro Farre
Corporate Relations Director
Society of Authors and Editors
(SGAE)
------------------------------

Farre made an impassioned plea for understanding that
"content is king" on the internet, i.e. without content
nobody would buy internet services. He noted that cultural
industries represented 4% of Spain's GDP. Farre complained
that the government was not doing enough to stop internet
piracy. He said that the copyright levies that SGAE collects
on the sales of blank CDs and some electronic devices were
only a "palliative" compared with the losses his members were
suffering as a result of piracy.

Barbaro Navarro
Antipiracy Director
NBC Universal Spain
-------------------

Navarro shared information on successful anti-piracy
publicity campaigns in the UK.

Txema Arnedo
IP Development Director
Microsoft Spain
and Vice President
Business Software
Alliance (BSA)
Spain
-----------------------

Arnedo said that Spain's software piracy rate of 46% compared
unfavorably with 20% in the U.S.

Georg Herrnleben
Director for Central and
Eastern Europe, BSA
------------------------

Herrnleben said that the software piracy rate in Spain in
2006 was 10% higher than the EU average, 12% higher than the
western European average, 11% higher than the world average,
and 25% higher than the U.S. average. Herrnleben attributed
this to the fact that small and medium sized businesses are
dominant in Spain, and that they do not take software

MADRID 00002128 005 OF 006


seriously. He also said that retailers, eager to sell
computers, often loaded machines with free software to entice
customers. However, the BSA representative mentioned that
the Spanish government had conducted with BSA awareness
campaigns, and that the police had been cooperative.

Thierry Desurmont
Vice President
SACEM
France
-----------------

Desurmont called peer to peer file sharing "hugely
detrimental". He emphasized that nothing could be done about
the problem without real ISP collaboration. He said the EU's
2000 E-commerce directive needs to be "reopened" because it
does not impose effective responsibility on ISPs.

Luis Javier Martinez
Director of Pixbox
Distribution Platform
Telefonica
---------------------

Martinez acknowledged that content providers (Martinez was a
former Walt Disney executive before taking his current
position at Telefonica) had been slow to pass on some of the
savings that the new technologies made possible to consumers,
thereby contributing to engendering a consumer backlash
against content providers. However, he insisted that the
current culture of "gratis total" (totally free product over
the internet) was not sustainable.

Antonio Guisasola
President
Promusicae
-----------------

Guisasolo noted that in 2006 there was only euros 22 million
worth of legal internet music sales in Spain, and that 87% of
those sales were in the cell phone market. He said this was
because cell phone P2P file sharing does not work so
consumers were compelled to go the legal route for music.
Guisasola said that the big French music retailer, FNAC, did
no internet busines in Spain because internet piracy levels
were too high.

Victor Domingo
President
Internet Users
Association (AI)
Spain
----------------

Domingo said he wanted to issue a "declaration of innocence"
on behalf of internet users. He rejected the notion of
illegal internet downloads, saying that the levy system
compensates creators. Besides, judges had consistently ruled
in favor of internet users. He rejected the notion that
consumers believed in totally free content and referred to
the relatively high prices Spanish consumers pay for internet
service connections.

Juan Junquera Temprano
Chief of Staff to
Secretary of State for

SIPDIS
Telecommunications
Francisco Ros
Ministry of Industry, Tourism
and Trade
-----------------------------

Temprano made it very clear that the levy system did not
compensate for peer to peer file sharing. (Note and Comment:
The levy system theoretically exists to compensate
rights-holders for the private copies that consumers are
allowed to make in Spain. However, the copy has to be from a
legally acquired product. Material obtained through peer to
peer file sharing is not legally acquired so by definition it
is not a copy and therefore outside the levy system.
Temprano's statement was important because there is a
tremendous amount of damaging misinformation in Spain about
the levy system. End Note and Comment)

Jose Manuel Tourne

MADRID 00002128 006 OF 006


Director General
Antipiracy Federaton (FAP)
--------------------------

Tourne said that certain aspects of Spanish law had created a
"perfect storm" for the copyright-based industries. Notably,
he said that the "effective knowledge" requirement, i.e. a
court order rather than information provided by a
rights-holder, for ISPs to act against infringers puts
an undue burden on the movie and music industries. Tourne
said that in the UK, Germany and France, the law permitted
rights-holders to provide "effective knowledge" to
rights-holders. In Italy, "effective knowledge" is not
defined according to Tourne. The FAP representative said
that within the EU, Finland has a functioning notice and
takedown system.

Edmundo Fernandez
Electronics and
Environment Director
(AETIC)
--------------------

Fernandez, representing ISPs, said his organization remained
willing to discuss internet issues with rights-holders.
However, he said that AETIC demanded "legal security" for its
members.


COMMENT
-------

¶10. (C) Clearly, there are limits as to what can be achieved
between now and Spain's national elections, which will be
held in March 2008. However, we will be consulting closely
with industry and the government to see what can be done.
Certainly the kinds of actions described in para. 8 would be
welcome. Embassy appreciates David Carson's and Michael
Shapiro's participation in the bilateral and conference as
they helped highlight the USG's intense interest in internet
piracy. While the GOS will continue to cite political limits
on what it can achieve, the government is aware that it needs
to show some progress for Special 301 purposes.






LLORENS