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INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
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UNCLAS SECTION 01 OF 05 MEXICO 000512 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EEB/IPE JENNIFER BOGER 
STATE PASS USTR FOR JENNIFERCHOE GROVES 
COMMERCE FOR ITA/MAC/OIPR CASSIE PETERS 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON
SUBJECT: MISSION INPUT ON 2008 SPECIAL 301 REVIEW: MEXICO 
 
REF: SECSTATE 9475 
 
¶1. (U) Summary: Mission recommends that Mexico remain on the 
Special 301 Watch List for 2008.  In the first year of the 
Calderon administration, there have been significant advances 
in a number of areas of concern highlighted in last year's 
report, with little or no progress on others.  The advances 
registered have not succeeded in rolling back the widespread 
commercial piracy and counterfeiting that continue to plague 
the Mexican market, but they do provide momentum to an 
increasingly comprehensive approach to protecting 
intellectual property rights (IPR) here that we believe will 
bear concrete results over the medium and long-term.  Embassy 
and constituent posts will continue to monitor and encourage 
Mexican efforts to strengthen enforcement and safeguard the 
interests of right-holders.  At the same time, we expect to 
continue our robust cooperation with Mexico on IPR issues in 
the multilateral and regional arenas, and see this 
cooperation as exerting a positive influence on domestic IPR 
protection.  End summary. 
 
Overall Assessment of IPR Climate 
--------------------------------- 
 
¶2. (U) Mexico continues to suffer from rampant and largely 
undeterred commercial IPR infringement that causes huge 
losses to Mexican, U.S., and third country IP right-holders. 
The federal government and a small number of state and 
municipal governments have significantly ramped up their IPR 
protection efforts and intra-governmental coordination this 
past year, including enforcement actions.  Cooperation 
between government , but legislative loopholes, a cumbersome 
judiciary process, continuing lack of cooperation from many 
states and municipalities, and a widespread cultural 
acceptance of illegal commerce continue to hinder effective 
deterrence of piracy and counterfeiting.  We believe that 
inclusion of Mexico on the Watch List would clearly 
demonstrate the serious ongoing nature of the problems it 
faces, while not moving Mexico to the Priority Watch List 
would demonstrate our cognizance of the impressive efforts 
that Mexico is making to better protect IPR. 
 
¶3. (U) On the international front, Mexico continues to play a 
positive role.  It has spoken up against attempts to 
undermine intellectual property rights in global health fora, 
was the first developing country to agree to being an initial 
negotiating party to the Anti-Counterfeiting Trade Agreement, 
and has actively pushed ahead the IPR Working Group under the 
trilateral Security and Prosperity Partnership of North 
America (SPP).  President Bush and the leaders of Mexico and 
Canada announced an SPP IPR Action Plan at their August 2007 
meeting in Montebello, Canada.  The plan has three broad 
categories of activity: detection and deterrence; public 
education and outreach; and measuring piracy.  The three 
governments are actively pursuing specific action items under 
all three of these broad categories. 
 
Scorecard on Areas of Concern from 2007 
--------------------------------------- 
 
¶4. (U) In last year's report, we identified a number of areas 
where we believed Mexico could take action to improve its 
situation.  Here is how we grade its performance in those 
areas: 
 
-- A bill to grant ex officio powers to law enforcement 
officials to pursue IPR crimes passed the Senate in April 
2007 but has not been voted on in the Chamber of Deputies.  A 
Mexican congressional delegation that visited Washington 
February 11-13 predicted that the bill would be passed into 
law before the current legislative session ends in April 
¶2008.  We will continue to lobby on behalf of this 
legislation. 
 
-- We have had success in including Mexican administrative 
and penal judges in several training and exchange programs 
over the past year.  In November 2007, the Embassy, the 
Mexican judiciary, and the Mexican Institute of Industrial 
Property (IMPI - rough equivalent of U.S. PTO) jointly 
organized a two-day seminar on trademarks.  U.S. PTO arranged 
for a U.S. federal district court judge, a PTO administrative 
judge from the Trademark Trial and Appeal Board, and a U.S. 
 
MEXICO 00000512  002 OF 005 
 
 
PTO attorney-advisor to speak at this event, in which dozens 
of Mexican administrative judges, IMPI officials, and private 
sector attorneys participated.  In December 2007, two Mexican 
federal penal judges attended a workshop on inter-agency and 
inter-sectorial coordination in combating piracy and 
counterfeiting held in Monterrey, Mexico, where they 
exchanged views on why criminal convictions are so hard to 
obtain with U.S. and Mexican IPR prosecutors.  Four Mexican 
federal judges (both administrative and penal) are planning 
to participate in a U.S. PTO Global IP Academy course for 
judges scheduled for early March 2008.  Perhaps the clearest 
sign of growing judicial interest in IPR is the international 
conference being organized by the Mexican judiciary in late 
February 2008 in Cancun, Mexico.  Judges, prosecutors, 
right-holders, and IPR officials have been invited from 
Canada, the United States, Europe, and Latin America to 
participate in a three-day forum covering the whole range of 
legal issues related to copyrights, trademarks, patents and 
data protection, and enforcement.  The President of Mexico's 
Supreme Court, Mexico's Prosecutor General, the head of IMPI, 
and a large number of Mexican federal administrative and 
penal judges are expected to attend, as are two U.S. federal 
district court judges and experts from the U.S. Copyright 
Office, U.S. PTO, and the Department of Commerce.  This surge 
in judicial exchanges has not eliminated the serious 
obstacles to effective administrative and penal IPR 
enforcement posed by Mexico's justice system, but has created 
unprecedented dialogue between Mexican judges, enforcement 
officials, and right-holders.  This dialogue is identifying 
the key obstacles and helping to build political support to 
eliminate them. 
 
-- Regarding tapping into existing law enforcement resources 
and authorities that target organized crime, the special IPR 
unit in the Office of the Prosecutor General of the Republic 
(PGR - rough equivalent of the Department of Justice) has 
improved its intelligence targeting of pirating networks but 
still has not made use of organized crime authorities to seek 
stiffer penalties on commercial infringers. 
 
-- The State of Mexico and the Municipality of Toluca signed 
agreements with Mexico's federal government (PGR and IMPI are 
both actively involved) and right-holders to cooperate in 
combating piracy and promoting legitimate commerce in 2007. 
Cooperation has improved drastically with those governments. 
Private sector sources say that a number of other state and 
municipal-level agreements will likely be signed in 2008, 
including with the State of Morelos and the municipality of 
Ciudad Juarez.  The government of Mexico City has not signed 
such an agreement, but has worked closely with federal law 
enforcement officials in attacking all forms of illegal 
commerce in the city center.  The government of the State of 
Jalisco entered into an agreement with IMPI and the Business 
Software Alliance (BSA) to "Clean House," a program under 
which IMPI and BSA will help ensure that all software being 
used in state government offices is licensed.  Most Mexican 
states and cities remain relatively unengaged in the fight 
against IPR infringement.  But 2007 saw a sea change from 
from zero prior involvement of states and cities to a 
situation in which a number of very prominent sub-federal 
governments are now actively committed to the protection of 
IPR, with more poised to follow their lead, motivated at 
least in part by the competition to attract high quality 
foreign investment. 
 
-- We have not heard from either industy or the GoM on 
purchases of infringing medicines by state-run health 
institutions.  Patent linkage has been respected in 2007, 
though a number of cases from 2006 in which the health 
authorities granted registrations to generic versions of 
patented drugs remain unresolved.  Data protection will be 
discussed below. 
 
-- The Mission (CBP, ICE, and Economic Section), together 
with the Department of Justice,  organized two large-scale 
capacity-building events for Mexican customs officials in the 
past year, first at the Port of Veracruz in July 2007 and 
more recently at the Port of Manzanillo in February 2008.  In 
both cases, PGR and IPMI officials, as well as private sector 
experts, formed part of the faculty and stressed the 
importance of stopping fakes at the port of entry and the 
need for interagency cooperation to make this happen given 
 
MEXICO 00000512  003 OF 005 
 
 
Mexican Customs' inability to take action on its own. 
Officials from other ports attended both trainings, which we 
believe were very successful.  For example, the Port of 
Lazaro Cardenas, the second-largest on the Pacific Coast, had 
never detained a shipment of IPR-infringing goods before 
2007, but since the Veracruz training (attended by several 
customs officers from Lazaro Cardenas), seven shipments have 
been stopped and turned over to either the PGR or IMPI for 
further enforcement action, including arrests. 
 
-- The Mexican Congress is expected to act on a major 
initiative to overhaul the entire Mexican penal justice 
system early this year that will more fully empower police 
and prosecutors and streamline the judicial process while 
strengthening the civil rights of the accused.  If passed 
into law in its present form, this could significantly 
improve all forms of criminal enforcement in Mexico. 
 
Specific Areas of Concern 
 
¶5. (U) This section adopts the format for specific areas of 
concern used in reftel. 
 
¶A. Notorious Markets: Informal markets throughout Mexico 
feature vendors blatantly selling pirated audio-visual 
materials and counterfeit name-brand goods.  In Mexico City, 
Tepito remains the main warehousing and distribution center 
for infringing products, and hosts scores of retail stalls to 
boot.  Other markets of particularly ill repute include the 
Plaza Meave, the Eje Central, Lomas Verdes, and the Pericoapa 
Bazaar in Mexico City, San Juan de Dios in Guadalajara, 
Simitrio-La Cuchilla in Puebla, and the Pulgas of Monterrey. 
Authorities do conduct raids in these markets, but usually at 
night to avoid violent confrontations that daylight raids can 
provoke.  Some media reports indicate that the elevated pace 
of government raids, confiscations, and seizures of real 
estate in Tepito might be forcing some illegal vendors to 
migrate to La Cuchilla market in Puebla, but Tepito still 
remains the principal nexus of Mexico's black market. 
 
¶B. Optical Media Piracy: Piracy of movies, music, video games 
and business software is rampant in Mexico.  According to the 
International Intellectual Property Alliance (IIPA), U.S. 
copyright industries (not including the film industry) 
suffered losses to piracy of more than $1.2 billion in 2007. 
MPAA estimates that its member companies lost $483 million 
last year in Mexico, and other film companies (foreign and 
domestic) another $100-200 million.  Mexico continues to 
import hundreds of millions of blank optical media units in 
excess of its legitimate demand. 
 
¶C. Use/Procurement of Government Software: The federal 
government generally purchases and uses legitimate software. 
As noted in para 4 above, in 2007 the Business Software 
Alliance (BSA), IMPI, and the government of the State of 
Jalisco launched an initiative to "Clean House" by ensuring 
that all software used in state government offices was 
licensed.  Mission Mexico is working with IMPI and BSA to get 
other state and city governments to agree to participate in 
"Cleaning House" programs. 
 
¶D. TRIPS Implementation, NAFTA Implementation and Other 
IP-Related Issues: As reported last year, Mexican law is 
largely in compliance with TRIPS and NAFTA obligations, with 
data protection (see below) standing out as a possible 
exception.  With regard to implementation of its own laws, an 
argument could be made that the application of deterrent 
penalties as required under TRIPS Article 61 and NAFTA 1717 
are the exception rather than the rule. 
 
¶E. Data Protection: Neither Mexican law nor the relevant 
health regulations provide clear rules that either define or 
mandate data protection.  Mexican officials argue that NAFTA 
1711 (Trade Secrets) is self-executing, thus obviating the 
need for further legislative or regulatory action.  Over the 
course of the past year, the Mission, working with the 
research-and-development pharmaceutical industry and 
colleagues from the European Commission's Mission in Mexico, 
has pressed Mexican health, trade, and IPR officials to 
consider including clear and NAFTA-consistent data protection 
rules in amendments to Mexico's food and drug regulations. 
Mexican officials have requested that industry first 
 
MEXICO 00000512  004 OF 005 
 
 
demonstrate the current system is not working by presenting 
cases in which test data used for drug registration has 
subsequently been used by unauthorized third parties within 
the five-year term of data protection provided by NAFTA.  We 
are waiting for industry representatives to provide concrete 
examples to this effect. 
 
¶F. Production, Import and Export of Counterfeit Goods: As 
mentioned in sub-paragraph B above, a huge volume of blank 
optical discs enters Mexico each year, the vast majority of 
which is used to burn pirated copies of movies, music, or 
software.  The GoM has created more refined tariff lines to 
better differentiate and track these incoming shipments. 
Industry and government experts suspect that a large 
percentage of the imported discs enter Mexico without paying 
the appropriate import tariffs due to either 
mis-classification (i.e., declaring higher-value DVDs to be 
lower-value CDs) or claiming a false country of origin (i.e., 
claiming to be U.S. products that owe no tariffs due to NAFTA 
when in fact they are products of Asian countries).  Mission 
Mexico (led by CBP and ICE) is working with its GoM 
counterparts to train customs officials to distinguish among 
the various types of optical discs and to coordinate efforts 
to combat contraband trade that falsely claims U.S. origin to 
avoid paying Mexican tariffs.  With regard to the import of 
pirated or counterfeit goods, customs officials can hold 
suspect shipments for a very limited time (usually 48 hours) 
on their own authority.  After that they need to receive an 
order from either PGR or IMPI to seize the merchandise in 
question.  PGR and IMPI, in turn, would need to obtain a 
formal complaint from the aggrieved right-holder before 
issuing such an order.  As mentioned in para 4 above, Mission 
trainings of Mexican customs officials have led to better 
coordination among Mexican customs, PGR, IMPI, and 
right-holders, though greater latitude for customs to act on 
its own authority would be helpful. 
 
¶G. Enforcement: The number of raids, arrests, indictments, 
and convictions of pirates and counterfeiters rose from 2006 
to 2007, reflecting the efforts of PGR and IMPI to strengthen 
enforcement.  Criminal indictments by PGR's specialized IPR 
unit went from 158 to 166 in that period.  Even so, only five 
persons were convicted in penal courts in 2007 -- better than 
the two convicted in 2006 (last year we mistakenly reported 
four convictions) but still far too few to deter this sort of 
criminal behavior.  On seizures, PGR actually saw its total 
quantity of confiscated articles drop, but argues that it 
began to concentrate more on quality than quantity last year, 
pointing out that the almost 8,000 disc burners and sixteen 
buildings seized in 2007 were record highs that translated 
into significant economic blows against commercial-scale 
infringers.  PGR has yet to utilize its authority to apply 
much tougher organized crime penalties on pirates.  This 
issue was raised at the 2007 Senior Law Enforcement Plenary 
between PGR, the Department of Justice, and other U.S. law 
enforcement agencies.  Likewise, IMPI has stepped up its 
administrative enforcement actions but also remains hampered 
by low maximum fines it can impose and a legal process that 
allows infringers to file repeated injunctions that stave off 
penalties for months or even years.  A number of legislative 
reforms that would promote more effective criminal and 
administrative enforcement include: ex officio authority for 
law enforcement; removing IMPI's administrative enforcement 
regime from under the jurisdiction of the Federal Law of 
Administrative Procedures (which slows down the 
administrative enforcement process); increasing maximum 
penalties; outlawing cam-corders in theaters; and outlawing 
all trade in devices for circumventing technological 
protection measures. 
 
¶H. Treaties: Mexico's National Copyright Institute (INDAUTOR) 
is conducting a review of whether Mexican law is in 
compliance with the WIPO Internet Treaties it has ratified. 
INDAUTOR has not set a timeline for completion of its review. 
 
 
¶I. Internet Piracy: The Internet is fast becoming a major 
threat to owners of intellectual property rights in Mexico. 
PGR's specialized IPR unit has issued one indictment against 
a man who was selling infringing movies via the Internet, and 
has requested training from Department of Justice cyber-crime 
experts to refine its ability to detect and prosecute this 
 
MEXICO 00000512  005 OF 005 
 
 
kind of piracy.  IMPI has made over 500 inspection visits to 
cyber-cafes suspected of abetting Internet piracy in 
conjunction with the Mexican music industry to warn owners of 
potential legal liability and to provide mechanisms for 
blocking access to problem sites.  The industry has begun to 
file civil suits against Internet users who have been 
egregious downloaders or uploaders of songs last year -- the 
results of these legal actions remain to be seen.  Mexican 
law does not mandate ISP responsibility, but a number of 
industry groups are lobbying the Mexican Congress to pass 
legislation to address this gap.  Three Mexican legislators 
who visited Washington in February 2008 expressed great 
interest in the way the U.S. Digital Millenium Copyright Act 
handles this issue. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
GARZA