VZCZCXYZ0001
RR RUEHWEB

DE RUEHMD #0293/01 0711220
ZNR UUUUU ZZH
R 111220Z MAR 08
FM AMEMBASSY MADRID
TO SECSTATE WASHDC 4454

UNCLAS MADRID 000293 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EEB/IP (BOLGER, URBAN) 
STATE PASS USTR (CWILSON) 
STATE PASS COMMERCE (DCALVERT) 
STATE PASS USPTO (MSHAPIRO) 
STATE PASS U.S. COPYRIGHT OFFICE (MSKELTON) 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR SP
SUBJECT: EMBASSY COMMENTS ON GOS SPECIAL 301 OBSERVATIONS 
 
REF: A. A. FEBRUARY 25 
 
     ¶B. 2008 GOS OBSERVATIONS B. MADRID 00211 
 
¶1. Summary: The Embassy offers the following review of the 
Spanish government's observations (ref A) on the 
International Intellectual Property Alliance's (IIPA) Special 
301 recommendation for Spain.  Our review is keyed to the 
Spanish document. Our assessment (ref B) of Spain's 
copyright-related Intellectual Property Rights (IPR) 
performance has not changed.  We continue to believe that it 
would best serve U.S. interests to consider a delay in 
possible Watch List placement for Spain until the new 
officials that we expect will take over the IPR portfolio 
have had six months to improve copyright protection.  As an 
alternative, we ask Washington agencies to consider placing 
Spain in the Special Mention category that IIPA recommends 
for Germany.  End Summary 
 
Degree of Piracy 
---------------- 
 
¶2. The GOS says that its data show music piracy in 2006-2007 
to be 13.1%, as opposed to the 20% reported by IIPA.  We do 
not know whether the GOS data is more or less reliable than 
the data cited by the IIPA.  We do know, however, that the 
Spanish Society of Authors and Editors (SGAE - Spain's 
premier collection society - it is truly a Spanish 
organization representing mostly Spanish creators and Spanish 
interests) has said publicly that Spain is a world leader in 
downloads of pirated songs.  The SGAE relies on data compiled 
by the European Association of Interactive Publicity (EIAA). 
We think the SGAE data, coupled with anecdotal evidence from 
the Motion Picture Association of America, suggests the Spain 
truly does have a high rate of internet music and movie 
piracy. 
 
¶3. With respect to entertainment software piracy, the GOS 
cites a PriceWaterhouse Coopers study showing entertainment 
software sales increasing from USD 577 million in 2006 to USD 
665 million in 2007 in Spain.  We have discussed the matter 
with the head of the Federacion Antipirateria (FAP), a major 
industry anti-piracy organization with ties to the Motion 
Picture Association of America and the Electronic Arts 
Council.  He says that, yes, sales of self-contained 
electronic games have increased in Spain because piracy is 
not physically possible with these games.  However, the FAP 
claims that in 2007, sales of game software used in personal 
computers declined by 15%, and the FAP attributes a large 
share of the decline to downloads of pirated software. 
 
¶4. The Spanish government says that the IIPA asserts, without 
backing up with data, that piracy has reached "endemic 
levels" in Spain.  The GOS notes that the Business Software 
Alliance (BSA) does not state that Spain has higher piracy 
levels than other countries.  The BSA has not recommended 
Watch List placement for Spain.  This is a significant mark 
in Spain's favor.  Computer software companies appear to 
think that they are getting the cooperation they need from 
the government to reduce software piracy. 
 
¶5. The Spanish government says that the IIPA numbers show 
that music piracy in Spain decreased by 2% in Spain between 
2006 and 2007. That may or may not be true.  The more telling 
numbers for the music sector are that in 2007, physical music 
sales were euros 257 million, down from euros 346 million in 
2006, i.e. sales were down by almost 26%.  It is of course 
possible that some of this drop is attributable to the 
industry's offering less desirable product.  And the reality 
is that the music business is suffering in many markets.  But 
piracy must explain a significant percentage of this decline. 
 The legitimate internet download market was euros 3.5 
million in 2006 and euros 5 million in 2007, i.e. it barely 
made a dent in the decline of physical music products.  The 
head of the local music association, Promusicae, notes that 
in 2007, the legitimate cellphone download market was euros 
22 million, i.e. it was more than four times as large as the 
legitimate internet music download market.  His conclusion is 
that if consumers face a desirable format for listening to 
music and piracy is not possible, they will pay for the 
product.  If the internet is not adequately controlled, 
consumers will download for free.  This seems to us to be a 
compelling argument that the GOS should do more to regulate 
the internet. 
 
¶6. The Spanish government does not comment on movie piracy, 
which is one of the areas hightlighted by the IIPA and one of 
our major concerns. 
2006 Circular from the Office of the Prosecutor-General 
--------------------------------------------- ---------- 
 
 
¶7. The GOS says that the Circular does not "depenalize" 
peer-to-peer file sharing.  We believe the government's 
argument is probably legally correct.  We believe that the 
problem is that the message the Circular sends to Spanish 
society is that peer-to-peer file sharing is acceptable as 
long as there is no commercial profit motive.  Most 
Spaniards, including future judges and prosectors, to the 
extent they have heard or read about the Circular, believe 
that this document legitimizes individual downloads of movies 
or music.  The issue is further conflated with Spanish law's 
right to a private copy.  Creators are compensated in Spain 
for private copies through copyright levies.  In the public 
imagination, a movie or music download is often considered 
equivalent to making a private copy.  As the private copy is 
compensated through copyright levies, many Spaniards do not 
see any moral, let alone legal, problem with individual 
downloads of pirated music or movies.  Spanish government 
officials are fully aware that this is not a legally correct 
interpretation of the law.  In fact, in connection with the 
November 6/7, 2007 Madrid IPR conference, a senior Spanish 
official stated publicly that the copyright levy system does 
not compensate creators for music or movie downloads because 
the private copy has to be made from a legally acquired 
product.  By definition, downloads of pirated products are 
not legally acquired products.  The Spanish government has 
not done enough to undo the harm unleashed, albeit probably 
not by design, by the Circular.  We would like to see the 
Circular amended in a public way so as to educate Spanish 
society that peer-to-peer file sharing is not legal. 
 
Legislative reform 
------------------ 
 
¶8. The Spanish government notes that the IIPA criticizes the 
absence of a notice and takedown provision in the Information 
Society Law (LSSI).  The government says that it tried to get 
such a provision passed through Article 17bis, but that the 
Council of State censured it because interested stakeholders 
had not been given an opportunity to comment on the article. 
However, Article 17 bis, or a variant thereof, has been 
discussed in a GOS-stakholder working group since 2005.  The 
Spanish government is in effect saying that it committed a 
procedural mistake that explains the lack of results in this 
area. 
 
¶9. Like last year, the Spanish government notes that the 
Commission has not initiated proceedings against Spain for 
inadequate transposition of the EU's Directives on 
enforcement and electronic commerce.  This is an argument 
that has some merit to it.  The GOS claims, in addition, that 
the Promusicae vs. Telefonica case confirms that "Spanish law 
is "fully compatible with Community law as concerns 
enforcement and the right to information."  That case states 
that there needs to be a balance between the right to privacy 
and the need to protect copyright.  We can credibly claim 
that Spain has not done enough in this regard. 
 
¶10. The Spanish government claims that Spanish law does 
protect technological protection measures (TPMs), contrary to 
what IIPA says.  It says that Article 139(1) g) of the 
consolidated text of the Intellectual Property Act and 
Article 270(3) of the Criminal Code provide for TPM 
protection.  We cannot evaluate this assertion, but we think 
the IIPA should be made aware of these specific legal 
provisions cited by the Spanish government. 
 
Mediation between stakeholders; Government leadership 
--------------------------------------------- -------- 
 
¶11. The Spanish government notes that it created a working 
group comprised of content owners and Internet Service 
Providers (ISPs) to encourage self-regulation.  This is true, 
but this group has been meeting since early 2005 with no 
results.  The GOS says that it is its "intention to 
strengthen its role with a view to facilitating negotiations 
and overcoming inflexible stands taken by the parties."  We 
welcome this objective, but during the past three years, the 
music and movie industries have seen revenues decline, while 
ISPs have seen their revenues increase, and the government 
has not succeeded in getting the ISPs to be more cooperative 
with content providers. 
 
¶12. The 1/30/08 Ministry of Culture-Spanish Federation of 
Hotels and Restaurants agreement to conduct training and 
awareness-raising with a view to eliminating illegal sales in 
bars and restaurants is a positive step.  However, at this 
stage we cannot evaluate when it might actually reduce the 
"mochilero" problem in Spain. 
 
Activities undertaken by the Government to fight piracy 
--------------------------------------------- ---------- 
 
¶13. We tend to accept the Spanish government's views 
regarding the degree of coordination and cooperation in the 
fight against piracy, although there are clearly weaknesses 
with respect to the internet. 
 
¶14. The Public opinion and social reality poll is a useful 
tool, but so far it has not prompted effective anti-piracy 
action. 
 
¶15. The Ministry of Culture runs awareness programs, but so 
far they have not had a discernible impact on, for instance, 
the public's views with respect to internet downloads. 
 
¶16.  The training programs the Spanish government talks about 
are valuable, particularly the programs directed at the 
police and the judiciary. 
 
Police intervention and legal judgments 
--------------------------------------- 
 
¶17. We accept the Spanish government's view that the good 
police work highlighted by the IIPA does receive high-level 
political support.  We note also that some webpages 
trafficking in pirated copyrighted materials have been closed 
down.  On March 3, 2008 a Barcelona judge ordered blocking 
access to a website trafficking in counterfeited goods from 
China.  There are frequent law enforcement actions against 
pirates.  However, the GOS has never appointed a 
political-level person to be the public face of the "National 
Anti-piracy Plan" referred to in the Spanish government's 
comments.  There is no political-level inter-ministerial 
coordinator for the plan.  Without a single coordinator, 
accountability is dispersed, particularly with respect to 
shaping views on the all-important issue of protecting 
copyrighted materials on the internet. 
 
COMMENT 
------- 
 
¶18. The Embassy does not underestimate the political 
challenge facing the policy-level officials in charge of IPR 
issues (some of whom are likely to be new even though the 
socialist government was reelected on March 9).  Public 
opinions about the internet and copyright are, frankly, 
hopelessly muddled.  Our sense though is that we may be able 
to use the momentum generated by France and the UK moving 
against internet piracy more effectively without Spain's 
being placed on the Watch List, at least not immediately.  On 
balance, therefore, we think that for now our IPR agenda in 
Spain would be served more effectively without Spanish 
placement on the Watch List, at least not immediately.  For 
instance we know that USEU and Washington agencies are 
working to put together a "road show" which would come to 
Spain in the spring or early summer.  The road show would 
include French and British experts (ideally Denis Olivennes 
among others) on internet piracy.  We think the Spaniards 
would be more receptive to hearing what France and the UK are 
doing without a Watch List designation.  Alternatively, a 
Special Mention for Spain might be worth considering given 
that, according to IIPA, internet piracy is a very serious 
problem there.  Judging from the IIPA submission, there are 
many similarities between the German and Spanish internet 
piracy situations.  In any event, the first year of this 
newly reelected governemnt's mandate will be crucial in 
making progress on internet piracy in Spain.        l 
 
AGUIRRE