VZCZCXYZ0029
RR RUEHWEB

DE RUEHMD #0211/01 0561742
ZNR UUUUU ZZH
R 251742Z FEB 08
FM AMEMBASSY MADRID
TO SECSTATE WASHDC 4334

UNCLAS MADRID 000211 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EEB/IP (BOLGER, URBAN) 
STATE PASS USTR (WILSON) 
STATE PASS COMMERCE (ITA - DCALVERT) 
STATE PASS USTPTO (MSHAPIRO) 
STATE PASS U.S. COPYRIGHT OFFICE (MSKELTON) 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR SP
SUBJECT: SPECIAL 301 SPAIN RECOMMENDATION 
 
REF: (A) MADRID 00137 (B) STATE 09475 (C) 07 MADRID 
     02305 (D) STATE 158938 (E) STATE 56080 (F) 
     STATE 30128 (G) 07 MADRID 02128 
 
 ¶1. (U) This cable is sensitive but unclassified.  It is not 
repeat not for internet distribution. 
 
¶2. (SBU) Summary: Embassy requests Washington agencies to 
consider an out-of-cycle review for Spain in October 2008. 
On March 9, parliamentary elections will be held in Spain and 
a new government will assume office in April.  Even if the 
ruling PSOE is re-elected, we expect significant changes 
among officials responsible for IPR policy.  We propose to 
tell the new government that Spain will appear on the Watch 
List if it does not do three things by October 2008.  First, 
issue a GOS announcement stating that internet piracy is 
illegal, and that the copyright levy system does not 
compensate creators for copyrighted material acquired through 
peer-to-peer file sharing.  Second, amend the 2006 "Circular" 
that is widely interpreted in Spain as saying that 
peer-to-peer file sharing is legal.  Third, announce that the 
GOS will adopt measures along the lines of the French and/or 
UK proposals aimed at curbing internet piracy by the summer 
of 2009.  As this message documents, the Embassy recognizes 
that the lack of sufficient Spanish progress during the past 
year could justify Spanish placement on the Watch List.  Our 
out-of-cycle request is made with the view that proceeding in 
this way be more likely to result in constructive action by 
the new government. End Summary. 
SPANISH ACTIONS WITH 
RESPECT TO THE SPAIN 
SPECIAL 301 INITIATIVE 
---------------------- 
 
¶3. (SBU) While the Spanish government has been very receptive 
to technical advice from the USG (for instance in connection 
with its November 2007 Madrid IPR conference) on Internet 
Service Provider (ISP) liability issues, there has been no 
"meaningful action to update and improve Spain's e-commerce 
laws."  Workable notice and takedown procedures have not been 
established.  The "actual knowledge" standard demanded prior 
to requiring ISPs to remove illicit content from the internet 
remains operative.  About a year ago, the government had 
proposed an amendment (Article 17 bis) to the Information 
Society Law which would have created a fairly robust notice 
system and an embryonic takedown procedure.  The 
copyright-based industries approved of Article 17 bis. 
However, the Council of State rejected Article 17 bis on 
procedural grounds.  The government did not subsequently try 
to resucitate Article 17 bis because of very public 
opposition from Spain's internet surfer community 
(represented by the "Asociacion Internauta", which is headed 
by Victor Domingo).  We suspect that Spain's Internet Service 
Providers (ISPs) were also pleased to see Article 17 bis die. 
 Subsequently, the GOS revived the Ministry of Industry, 
Tourism and Trade and Ministry of Culture led working group 
for ISPs and content providers to see if some other solution 
could be found.  The government has convoked several meetings 
during the year.  Our content industry contacts tell us that 
the proposals that have been discussed in this working group 
have been significantly less ambitious than Article 17 bis. 
They are looking for leadership from the GOS similar to the 
leadership displayed by the French and UK governments with 
respect to notice and takedown.  The copyright-based 
industries, which have been participating in these working 
group meetings for three years, say that, at some point, the 
government needs to pressure the ISPs to accept a great 
degree of responsibility for curbing piracy on the internet. 
In their judgment this has not happened so far.  Our 
evaluation is that the copyright-based industries' perception 
is correct. 
 
¶4. (SBU) The GOS has not established a working group to 
consider the feasibility of administrative sanctions for 
illegal internet downloads, although officials at the 
Ministries of Industry and Culture have considered the 
possibility. 
 
¶5. (SBU) We see no evidence of greater centralized 
coordination of internet piracy investigations.  However, 
local trade associations do not complain about the lack of 
centralization of police investigations into internet piracy. 
 In fact, as in years past, local trade associations continue 
to praise the efforts of the police to combat both internet 
and street piracy.  The issue remains that the judiciary does 
not issue deterrent-level sentences. 
 
¶6. (SBU) The Fiscalia General's official instruction which 
 
conveys the impression that peer-to-peer downloading is not a 
crime remains operative.  However, on 2/7/08, when the DCM 
met with Spanish Secretary of State for Justice, Julio 
Perez-Hernandez (Deputy Justice Minister equivalent), he 
committed to comment in writing on this topic by 2/21/08 (ref 
A).  He appeared to be unaware of the uproar that this 
Circular has generated.  Also, the Teniente Fiscal del 
Tribunal Supremo (Deputy Fiscal General equivalent) appeared 
to be receptive to discussing the Circular during a 2/13/08 
colloquium with visiting U.S. Patent and Trademark Office 
Senior Counsel Michael Shapiro.  Government officials insist 
in meetings with Embassy officials that the Circular does not 
legalize peer-to-peer file sharing, and technically they are 
no doubt correct.  The reality is though that during 2007 the 
public perception that the Circular decriminalizes 
peer-to-peer file sharing and downloading has continued to 
grow.  The normally pro-government daily, El Pais, wrote 
about this in a January 12, 2008 article entitled: "About 
Internet Downloads."  The article says that "peer-to-peer 
internet downloads are completely legal here."  The article 
quotes lawyer Carlos Sanchez Almeida, who notes that there is 
not a single conviction against anybody for having conducted 
illegal downloads (Note: In fairness this is probably true 
for most EU Member States.)  The problem though as the El 
Pais article points out is that Spain's internet surfing 
community constantly refers to the Circular to justify its 
conduct, and the "internautas" are not contradicted by 
government officials. 
 
¶7. (SBU) A related problem with respect to peer-to-peer file 
sharing is the widespread view in Spain that the copyright 
levy system compensates for illegal internet downloads. 
During the November 7-8, 2007 GOS-organized Madrid IPR 
conference, a senior Ministry of Industry, Tourism and Trade 
official, Juan Junquera Temprano, specifically said that the 
copyright levy system does not constitute compensation for 
peer-to-peer file sharing.  Other GOS officials have said 
this as well.  But, this message has not been internalized by 
Spanish society.  The background is that Spanish law (like 
many other continental European legal systems) permits 
"private copies" to be made from legally acquired copyrighted 
products.  Copies obtained through peer-to-peer file sharing 
are by definition not covered by the private copy exception 
because they are not legally acquired.  But this distinction 
is lost on most Spaniards.  (Comment: Copyright levies are, 
in fact, not popular in Spain.  The opposition conservative 
PP party has promised to abolish copyright levies if it wins 
the March 9, 2008 parliamentary elections.  On balance, our 
copyright interests would probably be better served were 
Spain to abolish copyright levies as they constitute a 
distraction to our efforts to seeing creators being properly 
compensated.  But given the private copy exception, which is 
a strongly established element in Spanish jurisprudence, 
Spain is likely to maintain a levy system for a number of 
years to come even if the PP wins the elections.) 
 
 
¶8. (SBU) An agreement between the government and the Spanish 
Restaurant and Bar Association to post notices stating that 
the making available of pirated CDs and DVDs is illegal has 
not been concluded.  In 2007, the Ministry of Culture sent a 
letter to the association suggesting such a an accord.  We 
were told by a Ministry of Culture working-level contact that 
several meetings were held, but in the end they did not yield 
a result.  "Mochileros" (vendors with backpacks) continue to 
enter into establishments to sell pirated CDs and DVDs.  Our 
copyright-based industry contacts tell us that some local 
governments such as Barcelona, San Sebastian, and Marbella 
have made extra efforts against street piracy, which has also 
had the positive effect of limiting mochilero activity there. 
 With respect to the "concerted action" items discussed in 
the demarche, we have requested statistics from the Spanish 
authorities.  Street piracy clearly remains a problem in 
Spain, although the industry trade associations talk about 
internet piracy much more now than three or four years ago. 
 
INDUSTRY TRADE ASSOCIATION VIEWS 
-------------------------------- 
 
¶9. (SBU) EconOff and visiting USPTO senior counsel, Michael 
Shapiro, met with Federacion Antipirateria (FAP) President 
Jose Manuel Tourne on 2/11/08.  The FAP represents the movie 
and videogame industries.  The Motion Picture Association of 
America (MPAA) supports FAP.  Tourne recommends placing Spain 
on the Priority Watchlist.  This posture springs in part from 
declining revenues for the businesses Tourne represents. 
This is clearest when it comes to DVD rentals.  Rentals of 
DVDs declined 32% in 2007, compared with 2006.  In 2003, the 
companies Tourne represented had a total of euros 413 million 
in revenues, which have declined to euros 274 million in 
¶2007.  The FAP President conceded that it is always debatable 
to what extent declining revenues are attributable to product 
people are not interested in, and to what extent piracy is 
responsible.  However, given the growth of broadband internet 
penetration in Spain in the last couple of years, it is 
reasonable to assume that piracy is responsible for a 
significant part of the declining revenues.  In June 2007, 
there were almost 5.9 million high-speed internet lines 
installed in Spain, representing a 28.7% increase over a 
period of a year.  Tourne showed EconOff and Shapiro a widely 
used website in Spain called Hispavista that is used by many 
people to download movies.  The site is by no means 
"undercover" in any way.  In fact, it looks professional and 
aboveboard.  Beyond strict business concerns, Tourne 
expressed frustration with the way the government has handled 
IPR matters over the last four years.  The 2004 anti-piracy 
plan, unveiled with much fanfare, had not generated tangible 
results beyond a few publicity campaigns.  Perhaps his 
greatest irritation was the GOS-sponsored stakeholder working 
group on notice and takedown, which he felt had been stacked 
against content providers.  The FAP's priorities included 
provisions to permit filtering, and an independent authority 
(along the lines proposed by French President Sarkozy) to 
issue graduated responses against illegal internet 
downloaders, and a functioning notice and takedown system for 
the independent authority to work with.   Tourne would like 
to see the penal code amended to make graduated sanctions 
against internet violators possible. 
 
¶10. (SBU) EconOff and visiting USPTO senior counsel, Michael 
Shapiro, also met with Promusicae President Antonio 
Guisasola, on 2/11/08.  Promusicae represents the music 
business in Spain and is affiliated with the Internatiional 
Federation of Phonogram Industries (IFPI), which in turn is 
affiliated with the Recording Industry Association of America 
(RIAA).  Promusicae recommends watchlisting Spain.  In 2007, 
sales of DVDs in Spain declined by 27%, compared with 2006. 
The legal digital market in Spain remains relatively small. 
From Promusicae's perspective, the most damning statistic 
with respect to the digital market is that 80% of the legal 
market in Spain is for mobile phones, and only 20% regular 
internet downloads.  In other words, in the mobile market, 
where illegal downloading is not  possible, people pay for 
legal music.  In the internet, where illegal possibilities 
flourish, the market is much less developed.  Guisasola says 
that this 80-20 split between mobile and internet legal music 
business is most pronounced in Spain, but the Embassy does 
not have numbers that confirm this assertion.  Promusicae's 
greatest frustration is that the notice and takedown 
stakeholder working group simply has not agreed upon 
solutions that address content provider concerns.  At some 
point, and that point was reached some time ago in 
Guisasola's view, the government has to take the initiative. 
The music industry represenative would like to see the 
Spanish government adopt a posture similar to that of the 
French and UK governments. 
 
¶11. (SBU) EconOff discussed Special 301 with General Society 
of Authors and Editors (SGAE) Corporate Relations Director 
Pedro Farre on 2/13/08.  Farre recommends the watchlist for 
Spain.  SGAE is an almost entirely Spanish entity, although 
it has a relationship with the MPAA. This organization is 
Spain's biggest collectors' society and as such is one of the 
biggest defenders of the copyright levy system.  But SGAE is 
also one of the most vocal critics of the lack of government 
actions against piracy.  In fact, the numbers on piracy that 
SGAE uses suggest that Spaniards have among the highest rates 
of internet piracy in the world.  The SGAE estimates on 
internet piracy come from the European Interactive Publicity 
Association (EIAA).  According to EIAA, 58% of Spanish 
internet users download music and 52% download movies and/or 
videoclips from the internet.  The EIAA says that the average 
in Europe for these activities is 37% and 20% respectively. 
We have no way of confirming these estimates, but it is 
nonetheless noteworthy that SGAE cites these estimates.  The 
SGAE, while a vocal critic of the government on piracy 
matters, is also something of a pillar of the Spanish 
establishment.  Its most prominent members tend more to the 
left, which helps explain why the conservative opposition 
proposes to eliminate the copyright levy system.  In fact 
though, SGAE has become so vocal on the government's lack of 
action on peer-to-peer piracy that the Minstry of Industry 
recently excluded SGAE from the working group dealing with 
internet piracy.  This is conceivably a sign that Spain's 
premier collection society is quite aware that over the 
medium-term, curbing piracy is likely to be even more 
important to its members than copyright levies. 
 
¶12. (SBU) EconOff had a conversation with the Business 
Software Alliance (BSA) representative in Spain, Luis Frutos, 
on 2/8/08.  The BSA is not calling for Spain to be 
watchlisted.  Although software piracy levels in Spain remain 
high, Frutos explained that the BSA is getting much of the 
cooperation it wants from Spain's Ministry of Industry, 
Tourism and Trade.  This tracks with information from the 
Ministry itself; BSA is without a doubt the Ministry's 
favorite industry organization on these matters.  The BSA is 
primarily interested in ensuring that computer distributors 
do not sell computers containing pirated software. 
Apparently the Spanish government is cooperating to ensure 
that this does not happen.  The contrast between BSA's views 
on Spain and the music and movie trade associations is 
striking.  A 2/7/08 interview in the leading business daily, 
Expansion, with Microsoft executive Txema Arnedo is 
illustrative.  Arnedo is spearheading a one million euro 
anti-piracy effort.  Currently, the software piracy rate in 
Spain is 46%, but he believes it can brought down to 36% 
fairly quickly.  He noted that in 1997 the software piracy 
rate in Spain was 75%, but that it was reduced by 25% in 
three years. 
 
POLICE ACTIONS 
-------------- 
 
¶13. (U) Industry trade associations continue to praise the 
actions of Spain's national and local police forces.  There 
is no doubt that the police are active.  The issue remains 
the lack of deterrent level sentencing for IPR offenders. 
We are still in the process of collecting full 2007 
statistics.  We offer the following, non-exhaustive, 
statistics for 2007 police activity. 
 
Arrests 
                  245 
 
Confiscated Goods (clothes, shoes, luxury goods, cosmetics, 
cell phones, toys, electric door openers) 6.5million items 
Closed Web Pages 
                        14 
 
 
Closed recording towers 
                              20 
 
Recorders 
                  160 
 
DVDs 
            65,000 
 
CDs 
            45,000 
 
The numbers demonstrate that Spanish authorities are far from 
passive regarding this problem.  But the fact remains that 
the police interventions alone are not sufficient to deter 
IPR violations significantly.  Many arrested people are held 
for a short period of time and then released, often to become 
repeat offenders.  The closed web pages are interesting and 
reflect the police's increasingly sophisticated understanding 
of the internet.  We know from press reports that at least 
several of the closed web pages trafficked in copyrighted 
materials, although internet piracy per se is not the Spanish 
police's priority.  The Spanish police focus especially on 
taking down web pages that deal in child pornography. 
 
EMBASSY ACTION ON SPECIAL 301 
----------------------------- 
 
¶14. (U)  Over the past year, the Embassy has used the ref (D) 
demarche as the basis for our interactions with the Spanish 
government on IPR matters at both the policy and working 
levels.  The GOS is aware of our specific IPR concerns.  On 
9/17/07, the Embassy coordinated a Washington-Madrid DVC on 
internet-related IPR matters, which was well attended by GOS 
officials.  The Embassy also worked with Spanish authorities 
on their 11/7-8/07 IPR conference in Madrid (ref G). 
Associate Register of Copyrights David Carson and U.S. Patent 
and Trademark Office Senior Counsel Michael Shapiro attended 
that event and also lent their expertise at a U.S.-Spain 
bilateral (ref G) on 11/7/07, which was headed by DCM Hugo 
Llorens and Telecommunications Secretary of State Francisco 
Ros.  In connection with the 2/15-18/08 Madrid art show 
(ARCO), Senior Counsel Michael Shapiro returned to Madrid and 
conducted conversations on internet related IPR matters at 
the Ministries of Industry and Culture. 
 
15 (U) The DCM has encouraged the GOS to submit comments on 
this year's Special 301 process by conducting a 2/5/08 
meeting with Ministry of Industry, Tourism and Trade 
Secretary of State for Telecommunications, Francisco Ros and 
 
SIPDIS 
a 2/7/08 meeting with Ministry of Justice Secretary of State 
Julio Perez Hernandez (ref A).  A meeting had also been 
scheduled for 1/31/08 Ministry of Culture Subsecretary Maria 
Dolores Carrion Martin, but Carrion cancelled the day of the 
appointment because she was ill.  The DCM also sent 
individually tailored letters, including once again, the 
Special 301 demarche (Ref D. Note: The relevant GOS 
authorities have received this demarche many times before, 
but we thought it was worthwhile emphasizing once again that 
the USG's inter-agency deliberations on Spain will be based 
largely on this demarche.)  The letter to the Secretary of 
State for Industry emphasized notice and takedown; the letter 
to the Ministry of Justice the Circular; and the letter to 
the Ministry of Culture focused on an agreement between the 
GOS and the Spanish Restaurant and Bar Association on 
mochilero sales of pirated products. 
 
¶16. (SBU) Secretary of State Ros told DCM that he was 
"worried" about illegal content on the internet.  Once again 
though he suggested that it was very difficult to distinguish 
between legal and illegal content on the internet, saying 
that up to 70% of the content on the internet was generated 
by users.  He said that legislation was not possible now 
because of the upcoming March 9 elections.  Moreover, any 
action at this point would be hopelessly politicized.  He 
complained, once again, that much of the illegal content on 
the internet is uploaded outside Spain.  Ros agreed that 
French president Sarkozy's initiative was "very interesting", 
and he said that continued international conversations on 
internet piracy were very important.  Ros said that changing 
Spanish consumers' "culture" would be very difficult.  He 
argued that, as in the case of the struggle against illegal 
drugs, it was more important to go after the supplier, rather 
than the consumer.  He conceded though that Spanish internet 
users were very heavy consumers of illicit content. 
 
¶17. (SBU) Per ref A, Hernandez told DCM that he was not very 
familiar with the issues surrounding the 2006 Circular to 
judges and prosecutors.  However, he told DCM that he would 
provide written comments on the topic by February 21. 
 
¶18. (SBU) The GOS has been put on notice at both senior and 
working levels regarding our Special 301 concerns.  The 
Ministry of Industry, Tourism and Trade is preparing comments 
on the issue that will be provided the week of February 25. 
Like last year, the trade part of the Ministry of Industry, 
Tourism and Trade, headed by Secretary of State Pedro Mejia, 
is coordinating the Spanish position.  Our sense is that the 
international trade elements of the Spanish government are 
most sensitive to a possible watchlisting, which is possibly 
why they are coordinating the Spanish comment on Special 301. 
 We have not heard what arguments the Spanish government will 
make.  We expect, however, the GOS to argue that it is up to 
the stakeholders to agree among themselves on how to regulate 
the internet. 
 
COMMENT 
------- 
 
¶19. (SBU) The Embassy recognizes that Spain may qualify for 
placement on the Watch List.   The USG and U.S. stakeholders 
(and many Spanish stakeholders) have made good faith efforts 
to work with the Spanish government since it unveiled its 
anti-piracy plan in 2004.  The results so far have not been 
sufficient.  The government has acknowledged the problem, 
conducted publicity campaigns, conducted dialogues with 
stakeholders to promote inter-industry agreements, encouraged 
the police force to continue its good work, and works well 
with the software industry.  Spain abides by its 
international patent-related commitments.  However, we cannot 
point to a single major success of interest to our music and 
movie industries.  This Embassy has consistently argued that 
Spanish IPR performance should be analyzed in the context of 
the other big EU economies.  France and the UK are making 
moves on internet piracy that industry organizations praise. 
Italy is already on the Watch List. Our sense is that Spain 
is now closer to Italy, at least with respect to IPR 
performance of interest to the music and movie industries. 
Should Washington agencies decide to place Spain on the Watch 
List in April we would have no difficulties explaining why to 
our interlocutors. 
 
¶20. (SBU)  Our request to Washington agencies to consider an 
out-of-cycle review in October is predicated on the electoral 
timetable and our belief that this may be more likely to 
result in constructive GOS action.  There will be a new 
government in Spain in April.  Ideally, it should not have to 
be held responsible so soon after assuming office for the 
lack of action by the previous government.  Should the 
socialists be reelected, there will likely be new 
governmental players responsible for IPR policy.  Should the 
opposition conservative PP party win, it will certainly ask 
us why it is being punished for the previous government's 
lack of action. (Note: Currently the two major parties are in 
a statistical dead heat according to most polls.)  The 
Embassy has a short, medium and long-term IPR strategy for 
Spain (ref C).  Our experience suggests that we need to put 
the pressure on whatever government is elected during its 
first year in office, so the short-term part of the strategy 
is the most critical piece.  On balance, we think we would 
have a better chance getting a new government to move quickly 
on a public peer-to-peer announcement, the Circular and 
measures to stem internet piracy if we do not have to deal 
immediately with the resistance that could be sparked by 
placement on the Watch List.  Our bottom line: consider 
giving the new government six months, and if does not 
perform, put Spain on the Watch List. 
 
 
 
 
 
AGUIRRE