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O 280535Z FEB 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9908
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UNCLAS SECTION 01 OF 05 MANILA 000497 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MTS, EAP/EP, AND EB/IFD 
DEPARTMENT FOR EEB/TPP/MTA/IPC 
STATE PASS USTR FOR BWEISEL, RBAE AND KEHLERS 
STATE ALSO PASS USAID, OPIC, USDA 
BANGKOK FOR USPTO JENNIFER NESS 
TREASURY FOR OASIA 
USDOC FOR 4430/ITA/MAC 
USDOC PASS USPTO 
STATE ALSO PASS LOC 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR ECON RP
SUBJECT:  Philippines: 2008 Special 301 Report 
 
REF:  A. State 9475 
 ¶B. 07 Manila 552 
 
¶1. (SBU) Summary.  Embassy recommends retaining the Philippines on 
the Special 301 Watch List.  The GRP increased its IPR enforcement 
actions during 2007, especially against optical disk piracy.  The 
number and value of seizures in 2007 rose significantly.  There 
remain issues of serious concern, especially the lack of convictions 
of IPR violators and the need for further coordination of IPR 
enforcement agencies.  Retention on the Special 301 Watch List will 
signal our recognition of the GRP's progress and also will maintain 
the leverage which has been responsible in some part for this 
progress.  End summary. 
 
¶2. (U) This report is divided into three sections:  Part I on the 
GRP's progress on IPR protection, Part II on areas that warrant GRP 
attention, and Part III on our recommendation. 
 
Part I:  GRP Progress on IPR Protection 
--------------------------------------- 
 
¶3. (U) In February, 2006, USTR lowered the Philippines from the 
Special 301 Priority Watch List to the Watch List.  At that time, 
USTR issued a Special 301 Action Plan for the Philippines.  Over the 
past two years, the GRP has stepped up its efforts to protect 
intellectual property, focusing on seizures of counterfeit goods, 
especially optical media disks.  The GRP has actively engaged the 
USG on intellectual property protection, meeting regularly with 
Embassy and USTR representatives, and seeking training opportunities 
with the USPTO.  Around 30 GRP officials received training at 
USPTO's Global Intellectual Property Academy in Virginia in 2007, 
and two IPO officials completed the six-month Foreign Examiners in 
Residence program.  Three other officials participated in an 
International Visitor Leadership Program on IPR.  Enforcement 
actions against IPR violations were more numerous and widespread in 
¶2007.  While serious deficiencies remain, the GRP has taken positive 
steps over the past year to improve its IPR protection regime. 
 
Committed Leaders on IPR within GRP Ranks 
--------------------------------------- 
 
¶4. (SBU) Among Philippine champions of IPR, we would highlight in 
particular Adrian Cristobal, the Director General of the 
Intellectual Property Office, Peter Favila, the Secretary of Trade 
and Industry, Eduardo Manzano, Chairman of the Optical Media Board, 
and Dennis Gonzalez, Chairman of the National Book Development 
Board.  These officials have worked hard to raise the profile of IPR 
protection within the GRP, and they have been behind the increased 
public attention that President Arroyo now pays to intellectual 
property issues. 
 
The Intellectual Property Office 
-------------------------------- 
 
¶5. (U) The Intellectual Property Office (IPO), by statute, is the 
coordinating body for IPR enforcement in the Philippines.  It has 
functions equivalent to the USPTO, and also coordinates the 
interagency National Committee on Intellectual Property Rights, 
hosting its biweekly meetings.  Its Director General, Adrian 
Cristobal, reports to the President through the Secretary of Trade 
and Industry.  Industry representatives praise Cristobal's efforts, 
describing him as dedicated and energetic. 
 
¶6. (U) In addition to its coordinating role, the IPO also organizes 
campaigns to enhance the public profile of IPR protection.  Over 
2007, it continued to organize an average of one public lecture or 
workshop per week, holding events throughout the country.  It held 
events for government agencies, both national and local, for private 
business, and conducted seminars at five universities.  Cristobal 
remarked to Post officers that as the IPO does not have primary 
jurisdiction over enforcement of IPR law, he views public education 
as his office's most important responsibility. 
 
¶7. (U) The IPO maintains an online database of intellectual property 
cases intended to permit real-time verification of the status of 
intellectual property criminal cases.  Six agencies have now 
contributed information to the database.  However, the IPO has 
companied that the legal representatives of some intellectual 
property owners have not provided information on cases that are 
 
MANILA 00000497  002 OF 005 
 
 
still before the courts.  In January 2007, the IPO signed a 
Memorandum of Understanding with the United States Patent and 
Trademark Office that aims to improve the intellectual property 
protection system through information sharing and capacity building. 
 The MOU has not been implemented by the IPO, and the IPO has yet to 
submit the implementation work plan it is responsible for under the 
MOU. 
 
The Optical Media Board 
----------------------- 
 
¶8. (U) The GRP created the Optical Media Board (OMB) in early 2004, 
and over the past three years the OMB has asserted its role as the 
regulatory authority for the licensing of replicating machines and 
equipment and the materials used for making optical disks.  The OMB 
has been fully operational over the past year, and now carries out 
raids on a fairly continuous basis.  The chairman of the OMB, 
popular film actor Eduardo Manzano, has leveraged his public persona 
into media attention for the OMB and its work.  Manzano appears 
frequently in the local media, both in interviews and in staged 
events such as the destruction of seized pirated DVD's. 
 
¶9. (U) The OMB estimates that most pirated optical media purchased 
in the Philippines is imported, principally from China, Indonesia, 
and Malaysia.  However, based on increased seizures of replicating 
machines and mass burners, it believes that the share of pirated 
media produced in country is growing.  The OMB seized over 4.8 
million optical discs in 2007 valued at USD 28 million, compared to 
1.6 million disks in 2006.  It carried out 2,504 inspections over 
the course of 2007 compared to 942 inspections the previous year. 
 
¶10. (SBU) Manzano's public profile also makes him a lightning rod 
for criticism.  He is often accused of using the OMB as a tool for 
obtaining publicity for his television projects.  Manzano's critics 
accuse him of spending less time and putting less effort into his 
duties at the OMB than into his show biz career.  As we noted in ref 
B, the OMB remains understaffed by perhaps half and its budget is 
grossly inadequate.  Manzano reportedly has paid some of the costs 
of undertaking raids out of his own pocket.  Manzano's rocky 
relationship with many in Congress has not helped the budget 
situation.  After Manzano did not show up to testify personally in 
budget hearings, the Senate initially granted the OMB a budget of 
one peso (2.5 U.S. cents) for 2008, though it finally relented and 
straight-lined the agency from 2007. 
 
¶11. (SBU) The OMB has had mixed success with its search warrants, 
many of which have been quashed on appeal, an apparent result of its 
weak legal office. The work of the OMB needs to be better integrated 
with that of the Philippine National Police and the National Bureau 
of Investigation.  The Optical Media Act of 2004 gives OMB the lead 
in all matters involving pirated optical discs, but in practice 
large raids and seizures typically require the assistance of law 
enforcement officers.  Interagency coordination remains poor. 
 
¶12. (SBU) Manzano told Post that he plans to spend the coming year 
fighting not only for more resources, but for improvements to the 
Optical Media Act that enumerates the Board's powers.  Manzano hopes 
that the OMB's jurisdiction will be expanded to include Internet 
piracy--which will be a more significant problem in the Philippines 
as home broadband access becomes more common--in addition to optical 
disks.  Manzano is also calling for legislation that will make it 
easier to prosecute "camcording" of movies in theaters, reportedly a 
growing problem. 
 
Philippine National Police and National Bureau of Investigation 
--------------------------------------- 
 
¶13. (U) Within the Philippine National Police, intellectual property 
cases come under the jurisdiction of the Anti-Fraud and Commercial 
Crimes Division, led by Colonel Rene Ong, who replaced Noel delos 
Reyes in the middle of 2007.  In 2007, the Division served 241 
search warrants and made 59 arrests, filed 28 cases, and made 
seizures worth more than USD 9 million.  During the past year, the 
Division stepped up its enforcement actions on trademark 
infringements, conducting several raids against warehouses that 
stored counterfeit products.  Police carried out enforcement actions 
against internet cafes in Metro Manila, Cebu. and Davao City, 
cracking down on the use of illegal software, and on the downloading 
of copyrighted files in the cafes. 
 
MANILA 00000497  003 OF 005 
 
 
 
¶14. (U) The Intellectual Property Rights Division of the National 
Bureau of Investigation, led by Elfren Meneses, served 310 search 
warrants, filed 423 cases and seized goods worth nearly USD 6 
million during the year.  The Bureau conducted raids against 
retailers, call centers, internet cafes, construction and 
engineering design firms, as well as business establishments that 
use illegal copies of computer software.  These high-profile raids 
were conducted in Metro Manila, Nueva Ecija Province, Cavite 
Province, Cebu and Laguna Province in 2007. 
 
Bureau of Customs 
----------------- 
 
¶15. (U) While the Intellectual Property Unit at the Bureau of 
Customs remains a small ad-hoc group, it had many important seizures 
of trademark-infringing goods from China during the year.  In 
January 2007 it assisted in seizing four DVD replicating machines 
being smuggled into the country, other items seized included pirated 
DVDs, counterfeit cellphone accessories, bags, shoes & apparel, and 
cigarettes. Overall, the Unit made 34 seizures worth about USD 22 
million in 2007. 
 
National Book Development Board 
------------------------------- 
 
¶16. (U) Over the past two years, the GRP has increased the amount of 
attention it pays to copyright piracy.  Book piracy in the 
Philippines focuses on academic textbooks.  The National Book 
Development Board (NBDB), a policy making body created by an act of 
the Philippine Congress, works with the Philippine Reproduction 
Rights Organization to monitor book sellers and copy shops. 
 
¶17.  (SBU) The Philippine government is considering methods for 
licensing the photocopying of copyrighted materials.  While the 
absence of a licensing scheme may be contributing to the widespread 
unauthorized photocopying of textbooks, U.S. publishers have 
expressed concerns about this proposal, given that early versions of 
it suggested that publishers would be compelled to participate, 
royalties would be low, and payments would go mainly to Philippine 
publishers. 
 
The "Cheaper Medicines" Bill 
---------------------------- 
 
¶18. (U) For the second straight year, the highest profile IPR issue 
in the Philippines was the Congressional proposal for a "Cheaper 
Medicines Act" to reduce the prices of prescription drugs, the 
highest in Asia after Japan, by regulating drug prices, loosening 
patent protection for pharmaceuticals, and permitting parallel 
imports. 
 
¶19. (SBU) After the May 2007 elections, legislators introduced 25 
different versions of the bill, though over the following months 
consolidated House and Senate versions emerged.  We remain concerned 
that both the House and Senate bills bar the issuance of new use 
patents and have provisions on compulsory licensing that are not 
fully consistent with TRIPS.  The legislation is expected to pass 
congress in 2008. 
 
Part II:  Areas of Particular Concern 
------------------------------------- 
 
¶20. (SBU) Despite the progress that the GRP made in enhancing IPR 
protection during the year, there are still issues that warrant the 
continuation of the Philippines on the Special 301 Watch List.  The 
most important areas of concern remain the institutionalization of 
IPR protection, and the inability of GRP authorities to translate 
raids into convictions of IPR infringers. 
 
The Department of Justice (DOJ) and Prosecutions 
--------------------------------------- 
 
¶21. (SBU) The lack of prosecutions and convictions of IPR violators 
continued to be the biggest weakness in IPR enforcement this year. 
A year that saw 468 search warrants issued and USD 73 million in 
seizures produced no convictions. 
 
¶22. (SBU) In late 2005, the Department of Justice reconstituted its 
 
MANILA 00000497  004 OF 005 
 
 
Task Force on anti-Intellectual Property Piracy.  Despite its name, 
the 10 prosecutors on the task force spend only around 10% of their 
time on IPR.  DOJ's backlog of unresolved IPR cases may soon reach 
1,000 cases.  However, Senior Prosecutor Aileen Marie Gutierrez has 
distinguished herself in pressing forward with the criminal 
prosecution of notorious Cotabato City cable pirate Estrellita 
Tamano despite Tamano's political influence locally and in Manila. 
 
¶23. (SBU) The failure of the Department of Justice to prosecute IPR 
cases is just one aspect of a weak criminal justice system in the 
Philippines.  Only seven percent of all trials result in 
convictions.  Procedural rules on appeals afford defendants many 
opportunities to delay the progress of cases, and judges across the 
system lack what one local attorney calls "a sense of judicial 
urgency."  Progress on a host of issues that interest the USG are 
contingent on improvements in the judicial system, and significant 
USG resources are being invested in efforts to help the Philippines 
improve its judicial system. 
 
Institutionalization and Financing of Enforcement 
--------------------------------------- 
 
¶24.  (SBU) Progress needs to be made in the development of 
enforcement institutions, and funding for enforcement needs to be 
set aside.  A reorganization of the Bureau of Customs, which would 
make the IPR unit permanent, has been pending for several years 
without action.  The annual enforcement budget of the OMB has been 
PHP 1 million (about USD 25,000) for the past three years, a level 
that would permit only a few actions per year without outside 
sponsorship. 
 
WIPO Internet Treaties 
---------------------- 
 
¶25. (U) The Philippine Congress has yet to pass legislation amending 
the Intellectual Property Code to incorporate the provisions of the 
WIPO Copyright Treaty and the WIPO Performances and Phonograms 
Treaty.  When the new Congress assembled after the May 2007 
elections, Sen. Edgardo Angara reintroduced Senate Bill 880 to 
implement the Treaties.  The International Intellectual Property 
Association has said that the bill, if enacted, would establish 
"world class copyright legislation." 
 
Cable Piracy 
------------ 
 
¶26. (SBU) The illegal retransmission of pay-TV signals continues to 
be a problem in the Philippines, especially outside Manila.  In 
rural areas, some smaller regional companies take broadcast signals, 
often using illegal decoders, and redistribute them to customers 
without payment to rights-holders.  The National Telecommunications 
Commission renews the licenses of these companies without regard to 
whether they engage in signal theft. 
 
Notorious Markets 
----------------- 
 
¶27. (SBU) There remain many places in Manila where pirated and 
counterfeit merchandise is openly sold.  The most notorious are in 
street stalls the neighborhoods of Quiapo and Binondo.  Several 
shopping malls openly sell counterfeit goods, including Makati 
Cinema Square, 168 Mall, and Greenhills Shopping Center.  Executive 
Order of November 17, 2006 establishes landlord liability for 
tenants who sell pirated merchandise. 
 
Part III:  Post Recommends Retention on the Special 301 Watch List 
--------------------------------------- 
 
¶28. (SBU) The Embassy recommends retaining the Philippines on the 
Special 301 Watch List this year.  Years of pressure have raised GRP 
awareness of the importance of IPR protection, and the government 
has begun to take action as documented above.  GRP officials are 
sensitive to the country's 301 status.  If the Philippines were to 
be raised back to the Priority Watch List, we believe it would 
undermine those in the GRP who are working to promote intellectual 
property protection.  Far from increasing GRP efforts to combat IPR 
violations, elevation to the Priority Watch List could reduce the 
influence of our allies and discourage them.  We believe our 
continued engagement and sustained efforts will bring about more 
 
MANILA 00000497  005 OF 005 
 
 
progress in 2008. 
 
Kenney