VZCZCXYZ0037
OO RUEHWEB

DE RUEHQT #0161/01 0521715
ZNR UUUUU ZZH
O 211715Z FEB 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8489
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 7333
RUEHCV/AMEMBASSY CARACAS PRIORITY 2877
RUEHLP/AMEMBASSY LA PAZ FEB 0904
RUEHPE/AMEMBASSY LIMA PRIORITY 2378
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 3300
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS QUITO 000161 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USTR FOR JENNIFER CHOE GROVES 
STATE FOR EB/TPP/IPE JENNIFER BOGER 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON EC
 
SUBJECT:  ECUADOR 2008 SPECIAL 301 REPORT 
 
REF: State 9475 
 
¶1.  (SBU) Summary and recommendation.  Post concurs with PhRMA 
recommendation that Ecuador remain on the Special 301 Watch List for 
¶2008.  Overall protection for IPR goods has not changed 
significantly over the past year, although the Ecuadorian 
Intellectual Property Institute (IEPI) has new, more assertive 
leadership and has made better use of available resources and 
improved its effectiveness.  Despite increased enforcement 
activities on the part of IEPI and the Ecuadorian Customs, overall 
enforcement of IPR remains a key problem, resulting in high piracy 
levels in the software, publishing, recording, and film industries. 
Data exclusivity and protection continue to be a problem.  Ecuador's 
health code permits granting marketing approvals without regard to 
whether or not a medication is patented.   End summary and 
recommendation. 
 
¶3.  (U) Ecuador's comprehensive Intellectual Property law enacted in 
May 1998 was a step forward for IPR protection, covering copyright, 
trademark, patent, and semiconductor chip protection.  It also 
addressed preliminary enforcement measures and other procedures, and 
required the creation of specialized IP courts.  In addition, it 
created the Ecuadorian Intellectual Property Institute (IEPI). 
 
IEPI 
---- 
 
¶3.  (SBU) The Ecuadorian Intellectual Property Institute (IEPI) is 
responsible for patent and trademark Registration, and is also the 
lead GOE agency to coordinate IPR enforcement.  A new IEPI 
President, Alfredo Corral, was appointed in May 2007.  According to 
Corral, IEPI has developed initiatives to reduce the backlog of 
trademark and patent registrations, hire additional personnel, and 
buy computers to provide a better service and push for stronger IPR 
enforcement.  These efforts are supported by assistance from USAID 
and other donors.  According to PhRMA, the backlog of pending patent 
cases within IEPI decreased in 2007 and patent examination 
productivity increased by 300 percent.  Corral reported that IEPI is 
developing a national campaign to raise awareness of the importance 
of respecting intellectual property rights. 
 
Enforcement 
----------- 
 
¶4.  (SBU) Lack of enforcement remains a key problem for Ecuador. 
Production of pirate CDs is reaching large-scale levels.  The 
recording industry estimates that more than 80 million CD-Rs and 
DVD-Rs legally enter Ecuador every year and a similar amount enters 
as contraband, with most destined for piracy.  This year, the 
International Intellectual Property Alliance (IIPA) did not take a 
position on Ecuador for the Special 301 process.  However, in 
earlier reports, IIPA estimated that pirated products accounted for 
98% of the domestic record and music industry in Ecuador in 2006, 
with estimated damage due to music piracy of USD 33 million.  In 
contrast, the official market for recordings in Ecuador amounted to 
a mere 400,000 units in 2006, per IIPA, a 21 percent drop from 2005. 
 
 
¶5.  (SBU) The motion picture and gaming industries suffer equally 
from widespread CD and DVD copying.  Business software piracy, both 
end-user piracy and pre-installed unlicensed software in new 
computers, continues to be a problem.  Pervasive commercial 
photocopying piracy victimizes the book publishing industry, 
including for educational textbooks. 
 
¶6.  (SBU) Corral reported that IEPI and the Ecuadorian Customs have 
increased enforcement actions in their areas of competence, 
administrative sanctions imposed by IEPI or interception of 
counterfeit goods by Customs, when they can act without a formal 
complaint by the right-holder.  According to IEPI the number of 
these enforcement actions increased from 3,826 operational cases in 
September 2006 to April 2007, to 11,260 cases in May to December 
¶2007.  However, criminal enforcement actions must be initiated by a 
prosecutor's office and enforced by the police.  We do not have any 
indication that there was any appreciable change in criminal 
enforcement efforts in 2007, although without information from a 
centralized data collection point such as IIPA, that perspective is 
difficult to verify. 
 
Legal Environment 
-------------------- 
¶7.  (SBU) The Law on Intellectual Property of 1998 required the 
creation of specialized intellectual property courts, which to date 
have not been established.  According to officials from the Ministry 
of Justice, the courts might not be created in 2008, because 
National Judiciary Council is waiting for the new National 
Constitution before making any significant reforms.  This 
long-awaited action, if it comes to be, would improve IPR 
enforcement since Ecuador's judiciary in the past has largely been 
ineffective in enforcing the IP law.  Post will provide more 
information when available. 
 
¶8.  (SBU) Reflecting potential positive change in the legal IPR 
environment in Ecuador, a court decision in 2006 that characterized 
efforts by a patent holder to remove illegal copies from the market 
as an illegal competitive practice was overturned on appeal.  The 
court ruled in favor of the patent holder in October 2007. 
 
TRIPS Compliance 
---------------- 
 
¶9.  (SBU) While the Ecuadorian Intellectual Property Law does 
provide for data exclusivity, as does TRIPS Article 39.3, marketing 
approval for copy products has been routinely granted based on data 
produced by research companies for the original drug.  In addition, 
Instituto Izquieta Perez, the health authority, routinely provides 
sanitary registrations to copy products of patented drugs. 
According to PhRMA, the sanitary authorities have approved copies 
for all innovative pharmaceutical products covered by patents in 
Ecuador.  A modification to Ecuador's health code in late 2006 
permits sanitary registrations without regard to whether or not a 
medication is patented, which could further facilitate the marketing 
of patent-infringing pharmaceutical products.  Ecuador, citing legal 
opinions from the Andean Court of Justice, has failed to provide 
patents for second uses. 
 
Comment and Areas for Further Action 
------------------------------------ 
 
¶10.  (SBU) The Correa administration, which took office in January 
2007, has rarely spoken on IPR matters.  It has given IEPI the 
autonomy to move forward with a moderately aggressive modernization 
effort, but otherwise has not shown a strong interest in increasing 
IPR enforcement.  Likewise, it has not shown indications that it 
wants to reduce the current level of IPR protection or modify the 
current IPR law.  However, some observers are concerned that a 
competition law that is currently being drafted might have some 
provisions affecting IPR protection.  Corral reported that a 
proposal to combine IEPI into a new competition agency has been 
dropped.  The law is being drafted in a very closed process, but 
post will monitor the status of the competition law. 
 
¶12.  (SBU) Judges, local law enforcement and customs officials need 
training on intellectual property rights protection and enforcement. 
 U.S. Patent and Trademark Office training in IP protection and 
enforcement is a useful tool. 
 
¶13.  (SBU) Ecuador should correct contradictions between its Health 
Code and its Intellectual Property Law, to prevent issuance of 
sanitary registrations to products that violate registered patents 
or to products whose applications are based on confidential data 
submitted by another company. 
 
JEWELL