VZCZCXYZ0328
OO RUEHWEB

DE RUEHAC #0135/01 0631905
ZNR UUUUU ZZH
O 041905Z MAR 09
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7636
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RUEAWJB/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS ASUNCION 000135 
 
SIPDIS 
 
WHA/BSC MDASHBACH, CCROFT, EEB/IPE TMCGOWAN 
USTR FOR KDUCKWORTH, JGROVES 
COMMERCE ITA FOR SCOOK 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD KIPR PA
SUBJECT: 2009 SPECIAL 301 REVIEW - ASUNCION INPUT 
 
REF: SECSTATE 08410 
 
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SUMMARY 
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¶1. (SBU) SUMMARY: Post recommends Paraguay remain under 
section 306 monitoring. Post encourages the Special 301 
Report to acknowledge, as the industry has, Paraguay's 
positive efforts on enforcement, particularly the work of the 
Intellectual Property Rights (IPR) Specialized Investigative 
Unit (UTE). Post concurs with the International Intellectual 
Property Alliance (IIPA) description of a strong enforcement 
effort by UTE, although piracy and counterfeit volumes remain 
high. Limited inter-agency cooperation and coordination 
reduce the applicability of coercive measures. A new penal 
code that strengthens IPR statutes will go into effect in 
July 2009. However, a weak judiciary continues to undermine 
Paraguay,s capacity to prosecute IPR violations. The 
Ministry of Industry and Commerce (MIC) is restructuring its 
IPR Office to address growing irregularities in the 
registration of patents, trademarks, and copyrights. 
Institutional weaknesses in customs and the Paraguayan 
National Police impair the country's ability to effectively 
control the trade of counterfeit and contraband goods. These 
two institutions are reform targets of President Fernando 
Lugo's six-month-old administration, and part of Paraguay,s 
anti-corruption efforts in the U.S.-funded Millennium 
Challenge Corporation (MCC) Threshold Program Phase II (TP 
II) to begin in early 2009. The U.S. and Paraguay signed in 
April 2008 a two-year IPR Memorandum of Understanding (MOU). 
END SUMMARY. 
 
-------------------- 
Optical Media Piracy 
-------------------- 
 
¶2. (U) The International Intellectual Property Alliance 
(IIPA) noted in its 2009 Special 301 Report that optical 
media piracy remains a serious problem in Paraguay in terms 
of the transshipment and production of blank discs and the 
burning of music, movies and games. Paraguay has five optical 
disc manufacturing plants, four of them established in the 
last three years in Ciudad del Este in the Tri-border Area 
(Paraguay, Brazil, Argentina). The IIPA noted that the output 
from these plants increased from 150 million units in 2006 to 
more than 370 million units in 2008. The amount of optical 
media produced in Paraguay significantly exceeds possible 
local use, and most of the production is exported legally and 
illegally to Brazil. 
 
¶3. (SBU) Post concurs with industry's positive feedback about 
the work of the INL-funded Intellectual Property Right (IPR) 
Specialized Investigative Unit (UTE) in the Ministry of 
Industry and Commerce (MIC). An election year, the first 
three quarters of 2008 were marked by a general slowdown of 
government operations. UTE, however, conducted 64 raids and 
seized over 21 million USD worth of pirated and counterfeited 
goods. Despite limited government funding and reduced 
inter-agency coordination, UTE's strategy continues to 
successfully target high impact, illegal trading schemes. New 
MIC Minister Heisecke has given UTE the lead in his fight 
against piracy and contraband. 
 
¶4. (SBU) Post recognizes that for all of UTE's good work, 
however, the volumes of piracy and counterfeit have not 
significantly declined. Corruption and institutional 
weaknesses in the judicial system, customs, and the 
Paraguayan National Police (PNP) greatly undermine the 
effectiveness of coercive measures to combat piracy. Customs 
and the PNP are plagued with low levels of human capital that 
sustain "rent-seeking" patronage structures. After taking 
office in August 2008, President Lugo replaced the Director 
of Customs and announced a strong anti-corruption campaign to 
"clean-up" the institution. Likewise, President Lugo 
announced anti-corruption efforts to professionalize the PNP. 
Paraguay will target and apply anti-corruption controls in 
customs and PNP through the U.S.-funded Millennium Challenge 
Corporation's (MCC) Threshold Phase II (TP II) to begin in 
early 2009.  The MCC TP II will also include anti-corruption 
measures for the judicial system. 
 
¶5. (SBU) In 2008, Brazil implemented new controls at its 
checkpoint at Foz do Iguazu, and in coordination with 
Paraguay attempted to reduce the flow of "sacoleiros" 
(thousands of individuals smuggling goods to Brazil across 
the Friendship Bridge that connects Brazil and Paraguay). As 
the movement of "sacoleiros" was curtailed, river trafficking 
increased. The overall flow of smuggled goods remains high. 
 
¶6. (U) Decree 603 requires importers of optical media, the 
raw materials associated with optical media, and recording 
devices or equipment used in the manufacture of optical media 
to obtain prior authorization from the MIC. The decree also 
requires that optical media production centers submit to the 
MIC production plans specifying how the output will be sold. 
Importers must submit sworn affidavits before receiving 
import authorization, and the release by Customs of 
merchandize can be prevented if fraud is detected. The MIC 
adequately applied Decree 603, and continued its cooperation 
with industry to share data on importers and shipments of 
optical media. 
 
--------------------------------- 
Legal System Issues Affecting IPR 
--------------------------------- 
 
¶7. (U) Approved in July 2008, the new penal code contained 
significant improvements to the IPR statute. IPR violations 
are designated as a major crime and prison terms increased, 
taking probation away as a preferred sentencing option. A 
minimum and maximum mandatory sentence of no less than two 
but no more than eight years imprisonment now exists for 
manufacturing, importing, and distributing pirated or 
counterfeited goods. The new statute protects against acts of 
piracy involving sound recordings. Copyright violations are 
punishable by imprisonment of up to five years. The new penal 
code will go into effect July 16, 2009, and training for 
prosecutors and judges is critical to its implementation. 
 
¶8. (SBU) Though the new penal code is a positive step, 
weaknesses in the judicial system remain a critical 
constraint to enforce punitive measures for IPR violations. 
Post agrees with industry's characterization of the legal and 
judicial system where lack of independence, corruption, 
patronage and bias are pervasive features. 
 
-------------------------------------- 
Use/Procurement of Government Software 
-------------------------------------- 
 
¶9. (SBU) Paraguay has not audited its government computers to 
assess the legality of installed software. In the past, the 
MIC was unable to reach agreement with the Business Software 
Alliance (BSA) on how to carry out such an audit, which BSA 
believes is Paraguay,s responsibility. Paraguay maintains 
that all new software procurements adhere to international 
standards, and a retroactive audit of mostly obsolete 
computer systems is too costly and counterproductive as the 
government's new operating systems were procured under strict 
guidelines. Procurement rules require that government 
agencies acquire legal software. Paraguay's web-based 
procurement system allows for individuals to question 
procurement awards via the procurement website. The website 
is: http:/www.contratacionesparaguay.gov.py/. Paraguay,s 
Controller General, which performs a function similar to the 
GAO in the U.S., reportedly requests to see software licenses 
when auditing government offices. Government implementation 
of a software legalization decree, as required by the IPR 
MOU, is long overdue. 
 
-------------------------------------------- 
TRIPS Compliance and Other IP-related Issues 
-------------------------------------------- 
 
¶10. (U) Paraguay's patent law provides for the granting of 
pharmaceutical product patents. Congress, however, in 
response to pressure from the local pharmaceutical industry, 
passed in 2005 a bill modifying the patent law in a way that 
local IPR attorneys believe violates Paraguay's TRIPS 
obligations. The modification introduced several requirements 
that would make it very difficult for a patent holder to 
successfully obtain injunctions against infringers, a seeming 
violation of TRIPS provisions requiring real, practical 
access to protections. The modification also applies only to 
pharmaceutical products, a seeming violation of TRIPS 
provisions requiring that rights be non-discriminatory as to 
product type. 
 
¶11. (SBU) MIC officials expressed willingness to seek a 
legislative change to repair the problem. To date, the MIC 
has not drafted or sought to introduce any legislation to 
modify the patent law. Post will continue to work with MIC 
officials in resolving this issue. 
 
¶12. (SBU) MIC is restructuring its IPR Office to address 
growing concerns about irregularities in the registration of 
trademarks, patents, and copyrights. MIC efforts represent a 
positive step in tackling persistent and known problems. The 
restructuring plan will roll out in 2009, and aims to 
streamline the IPR Office's operations, building in practices 
that adhere to international standards. 
 
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Data Protection 
--------------- 
 
¶13. (SBU) Paraguay enacted laws to protect data, including 
law 3283 in 2007 to protect undisclosed pharmaceutical test 
data submitted for the approval of drugs, and law 3519 in 
2008 to protect data for the approval of phyto-sanitary 
products. Three different government agencies deal with 
potentially sensitive data, making a single executive branch 
solution difficult. Paraguay also enacted in 2008 an 
agricultural chemical product data protection law, which 
requires an innovator to make its first regulatory filing in 
Paraguay. There is no legislation related to traditional 
knowledge or genetic resources. 
 
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WIPO Treaties 
------------- 
 
¶14. (U) Paraguay has ratified both the WIPO Copyright Treaty 
and the WIPO Performances and Phonograms Treaty, and both 
Treaties have precedence over national law. 
 
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Training 
-------- 
 
¶15. (U) Post continues to support a working group comprised 
of judges and prosecutors in the drafting of regulations to 
govern the use of expert witnesses.  Though a work in 
progress, the proposed regulations will establish guidelines 
for the qualification of expert witnesses and outline the 
removal and disciplinary process by which expert witnesses 
can be sanctioned when they testify falsely. The expectation 
is to have the expert witness regulations adopted in 2009. 
 
¶16. (U) Post is working with the MIC on an IPR outreach 
campaign to raise awareness about the negative economic 
impact of IPR violations.  The launching of the campaign is 
expected in the second half of 2009, and it will involve the 
active participation of private sector representatives.  Post 
will also held in September 2009 an IPR training course for 
prosecutors and government enforcement officials. 
 
----------------- 
Notorious Markets 
----------------- 
 
¶17. (U) Paraguay's notorious markets remain: Zona Baja area, 
Gallery La Esperanza, and Paseo San Blas in Ciudad del Este; 
Mercado 4 in Asuncion; and, Shopping West Garden in Pedro 
Juan Caballero. 
 
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Internet Piracy 
--------------- 
 
¶18. (U) Although internet piracy is a growing global trend, 
it is not yet a serious concern in Paraguay. Internet 
connectivity in Paraguay is one of the lowest in the region 
at less than 6 percent of the population. Broadband access is 
usually limited and connectivity often below par. In 2008, 
however, IIPA notes that BSA supported criminal actions 
against two big internet sites which offered unauthorized 
software products. 
 
Please visit us at     http://www.state.sgov.gov/p/wha/asuncion 
 
AYALDE