VZCZCXRO7273
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0601/01 0612307
ZNR UUUUU ZZH
P 022307Z MAR 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 5401
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RHMFIUU/HQ USNORTHCOM
RHMFISS/CDR USSOUTHCOM MIAMI FL
RHEHAAA/NSC WASHINGTON DC

UNCLAS SECTION 01 OF 05 MEXICO 000601 
 
SENSITIVE, SIPDIS 
 
STATE FOR EB/TPP/MTA/IPE/KEAT/URBAN 
STATE FOR WHA/MEX/WOLFSON 
STATE PASS TO USTR FOR MELLE/MCCOY/SHIGETOMI/VETERE/CHOE- 
GROVES 
STATE PASS TO JUSTICE FOR CCIPS/MERRIAM,KOUAME AND 
OPDAT/TRUEBELL AND RAMOS 
STATE PASS TO COMMERCE FOR ITA/MAC/ONAFTA/WORD 
STATE PASS TO COMMERCE FOR ITA/MAC/IPR/WILSON 
COMMERCE PASS TO USPTO FOR RODRIGUEZ/BERDUT/MORALES 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD MX
SUBJECT: MISSION INPUT ON 2009 SPECIAL 301 REVIEW - MEXICO 
 
REF: SECSTATE 8410 
 
¶1. (SBU) Summary: The US Embassy recommends that Mexico remain 
on the Special 301 Watch List for 2009.  The Mexican 
government continues to make significant advances in areas of 
concern highlighted in last year's report, but this is offset 
by little or no progress on others.  The Calderon 
administration has escalated its cooperation and actions 
within the interagency, with the US Embassy, and with the 
industry, but it is fighting a desperate battle against 
widespread commercial piracy and counterfeiting, with ties to 
organized crime, that plagues the Mexican market.  The 
inclusion of Mexico on the Watch List would clearly 
demonstrate the gravity of the situation.  At the same time, 
not elevating Mexico to the Priority Watch List would 
recognize the sustained efforts that Mexico is making to 
better protect and enforce intellectual property rights (IPR). 
The US Embassy and constituent posts will continue to monitor, 
encourage, and assist Mexican efforts to strengthen 
enforcement and safeguard the interests of right-holders.  We 
expect our robust cooperation with Mexico on IPR issues in the 
regional and multilateral arenas will continue, and see this 
cooperation as a positive influence on domestic IPR protection 
and enforcement efforts.  End summary. 
 
Overall Assessment of IPR Climate 
--------------------------------- 
 
¶2. (SBU) Mexico continues to suffer from widespread and 
largely undeterred commercial IPR infringement that causes 
huge losses to Mexican, U.S., and third country IP right- 
holders.  This past year, the federal government and a small 
number of states have ramped up their IPR protection and 
enforcement efforts and intra-governmental coordination. 
Cooperation between government agencies and with the industry 
has greatly improved, but links to organized crime, 
legislative loopholes, a cumbersome judiciary process, and a 
widespread cultural acceptance of illegal commerce continue to 
hinder effective deterrence of piracy and counterfeiting. 
 
¶3. (U) Mexico continues to play a positive role in the 
international community.  In the last year, Mexico: 
-- Was the first Latin American country to host the APEC Life 
Sciences Innovation Forum on Anti-Counterfeiting Medical 
Products; 
-- Was the first developing country to join the Anti- 
Counterfeiting Trade Agreement 
-- Was a key partner in the Heilingedamm Process dialogue on 
the promotion and protection of IP and innovation in the runup 
to the 2009 G8 Italian Summit, and; 
-- Actively supported the IPR Working Group under the 
trilateral Security and Prosperity Partnership of North 
America (SPP).  At their April 2008 meeting in New Orleans, 
President Bush and the leaders of Mexico and Canada renewed 
their commitment to protect inventors, innovators, and right- 
holders by advancing the Intellectual Property Action 
Strategy.  The strategy has three broad categories of 
activity: detection and deterrence; public education and 
outreach; and measuring piracy.  The three governments are 
jointly pursuing specific action items under all three of 
these broad categories. 
 
Scorecard on Areas of Concern from 2008 
--------------------------------------- 
 
¶4. (SBU) In last year's report, a number of areas were 
identified where Mexico was encouraged to take action.  Here 
is a synopsis of Mexico's 2008 performance in these areas: 
 
-- Mexico continues to build its record of aggressive 
prosecutions and deterrent-level penalties.  The number of 
raids, arrests, indictments, and convictions rose yet again in 
¶2008.  The Prosecutor General of the Republic (PGR - rough 
equivalent of the Department of Justice) conducted 4,912 raids 
in 2008, confiscating 152.4 million pirated or counterfeit 
 
MEXICO 00000601  002 OF 005 
 
 
articles.  The specialized IP Unit in PGR served 163 criminal 
indictments.  12 individuals were convicted of IP violations 
in MexicoQs penal system, significantly up from 5 in 2007 and 
2 in 2006.  Penalties include some of the largest prison 
sentences imposed in Latin America - two for four years in 
prison and one for six and 1/2 years in prison as well as 
$40,000 in fines (see para 5E below).  To assist PGR in its 
enforcement efforts, curb potential corruption and speed up 
the process, PGR can now obtain a search warrant 
electronically.  The process from submitting the documentation 
and evidence to the issuing of the warrant takes less than 12 
hours and the judges remain unknown to the parties; therefore 
they are less exposed to external influence. 
 
-- Although the State of Mexico and the Municipality of Toluca 
signed agreements with Mexico's federal government and right- 
holders to cooperate in combating piracy and promoting 
legitimate commerce in 2007, similar cooperation efforts 
between federal, state, and local authorities were not 
forthcoming in 2008.  Nevertheless, exploratory dialogue 
continues with the States of Morelos and Puebla.  The 
government of Mexico City has also not signed such an 
agreement, but continues to work closely with federal law 
enforcement officials in attacking all forms of illegal 
commerce in the city center. 
 
-- The Mexican customs authority launched an anti-piracy 
initiative in 2008, and has increased its cooperation and its 
efforts to deter IP violations.  Customs enforcement efforts 
almost doubled, growing from 66 seizures the previous year to 
115 in 2008.  11.9 tons, or 36.4 million counterfeit and 
pirated goods, were seized by the Mexican customs authority in 
2008 Q up from 10.4 tons in 2007.  To more effectively detect, 
detain, and deter the importation of pirated and counterfeit 
goods, the customs authority increased the number of training 
programs to 14 in 2008, three of which were in cooperation 
with the US Embassy and the Department of Justice (Manzanillo 
in April, Mazatlan in August, and Pantaco in Mexico City in 
November).  One out of 10 Mexican customs officials have now 
participated in USG-sponsored training programs.  These 
programs have emphasized the development of essential customs 
techniques and practices, the importance of interagency 
cooperation, and the value of collaboration with the private 
sector.  Customs is also implementing a system to measure 
piracy detection and deterrence at all ports of entry.  The 
development of a trademark database, which will help officials 
to contact right holders, is still in its early stages, but a 
pilot program is expected in 2009. 
 
-- A bill to grant ex officio powers to law enforcement 
officials to pursue IPR crimes was passed by acclamation in 
the Chamber of Deputies in April 2008.  It continues to 
languish in the Senate, where despite enjoying strong support, 
due to some individual discord it cannot be wrested from the 
Finance Committee for a full floor vote.  We continue to lobby 
on behalf of this legislation. 
 
-- Camcording is a major concern in Mexico.  The MPAA 
identified 32 major film releases that were illegally recorded 
in Mexico's movie theaters in 2008.  Legislation calling for 
the criminalization of theatrical camcording was introduced 
into the Mexican Congress several years ago, but has gone 
nowhere.  PGR, in cooperation with representatives of the 
motion picture industry, has worked within the current 
confines of the law to arrest six individuals and dismantle 
one of Mexico's four major camcording distributors.  These 
cooperative criminal enforcement efforts are ongoing.  IMPI 
also worked with the motion picture industry on an anti- 
camcording campaign, including signs distributed to all 
theaters throughout Mexico warning that camcording is a crime. 
 
-- The publication of the annexes of the WIPO Internet Treaty 
in the Mexican national register, initially promised by the 
end of 2008, has been delayed.  INDAUTOR (the Mexican 
copyright office) reports they will be published early 2009. 
 
MEXICO 00000601  003 OF 005 
 
 
With this, the GOM will assure the general and international 
public that Mexico understands and respects the 
internationally-accepted interpretation of the treaty. 
 
-- The rules that either define or mandate data protection are 
still absent from Mexican law and relevant health regulations. 
However, Mexican officials appear to have shifted from their 
previous position that NAFTA 1711 (Trade Secrets) is self- 
executing, and now see a need for further legislative or 
regulatory action to protect against unfair commercial use for 
test or other data generated to obtain marketing approval for 
pharmaceutical products.  Mexican health, trade, and IPR 
officials have convened an interagency commission to draw up 
the data exclusivity regulations for Mexico.  The US Embassy, 
working with the research-and-development pharmaceutical 
industry and colleagues from the European Commission's Mission 
in Mexico, will continue to encourage the development of 
clear, NAFTA-consistent data protection rules in a transparent 
manner. 
 
-- As mentioned in para 3 above, Mexico recently hosted the 
APEC Life Sciences Innovation Forum on Anti-Counterfeiting 
Medical Products.  Mexican officials have stated that only 0.5 
percent of the pharmaceuticals in Mexico have been determined 
to be counterfeit, a figure which appears to be 
unrealistically low.  However, they are interested in 
expanding the scope of their investigation to measure in more 
exact terms the problem of counterfeit pharmaceuticals in 
Mexico. 
 
Other Specific Areas of Concern 
------------------------------- 
 
¶5. (SBU) This section addresses the specific areas of concern 
as listed in reftel: 
 
¶A. 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 above) standing out as a possible exception. 
With regard to implementation of its own laws, one could argue 
that the application of deterrent penalties as required under 
TRIPS Article 61 and NAFTA 1717 are the exception rather than 
the rule. 
 
¶B. Data Protection: Some minimal steps have been taken by the 
Mexican government to protect test and other data submitted by 
pharmaceutical companies (see above).  In line with the 
Calderon Administration's efforts to promote effective 
competitiveness, investment, and innovation, Mexican health, 
trade, and IPR officials acknowledge there must be a clear set 
of rules that ensure data protection.  With the opening of an 
FDA office in Mexico City this year, the US Embassy looks 
forward to engaging the Mexican government on this issue. 
 
¶C. Enforcement: As stated above, the number of raids, seizures 
of counterfeit or pirated goods, arrests, indictments and 
convictions of pirates and counterfeiters has risen.  The 
desire to work collaboratively with the USG has also 
dramatically increased as well.  Last year, DHS/ICE conducted 
its first-ever joint operation with PGR and Customs involving 
a controlled delivery of counterfeit cellular phone 
merchandise from Hong Kong, through Anchorage, Alaska, to 
Guadalajara, Mexico.  Two individuals were arrested for 
violations of Mexican Customs laws.  The special IPR unit in 
the PGR has improved its intelligence targeting of pirating 
networks; however, it still has not made use of organized 
crime authorities to seek stiffer penalties on commercial 
infringers.  IMPI (Mexico's Patent and Trademark Office) has 
stepped up its administrative enforcement actions, but 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.  In an 
effort to expedite the judicial process, in December the GOM 
established a specialized IPR Court of three judges to handle 
 
MEXICO 00000601  004 OF 005 
 
 
all IP-related civil cases throughout Mexico. 
 
¶D. 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. 
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. 
In November, a daylight raid of roughly 150 PGR and police 
officers on San Juan de Dios was met by almost 300 armed 
miscreants, and forced the enforcement officials to abandon 
the raid and flee the area.  A tactic that has proven 
effective is for other enforcement agencies (IMPI, COFEPRIS, 
and the tax administration) to accompany PGR on these raids, 
as they can add charges of IPR infringement, safety 
violations, or tax evasion to the criminal charges brought by 
PGR.  PGR has launched a pilot program in Pericoapa to assist 
stall owners in making the shift to selling name-brand goods 
rather than counterfeit products. 
 
¶E. Internet Piracy: PGR's specialized IPR unit secured the 
conviction of one man who sold infringing movies, music, and 
TV series via the Internet, for which he was sentenced to 6 
1/2 years and made to pay a fine of almost $40,000.  PGR has 
requested training from Department of Justice cyber-crime 
experts to refine its ability to detect and prosecute this 
kind of piracy.  IMPI made over 80 inspection visits per month 
in 2008 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 Mexican government has 
also launched a working group with the ISP community to 
develop a policy to encourage respect by users for copyrighted 
work and to punish repeat copyright infringers. 
 
¶F. Production, Import and Export of Counterfeit Goods: Customs 
officials can hold suspect shipments for a very limited time 
(usually 48 hours) on their own authority, although there is a 
bill currently under congressional consideration that would 
expand this time to five days.  After that, customs must 
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.  USG training programs for 
Mexican customs officials (see above) 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. 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 $900 million in 2008, 
down from the $1.3 billion reported loss in 2007.  MPAA 
estimates that its member companies lost $800 million last 
year in Mexico, almost double the estimated $480 million lost 
in 2007.  An estimated 9 out of every 10 movies sold in Mexico 
are pirated.  Mexico continues to import hundreds of millions 
of blank optical media units in excess of its legitimate 
demand.  However, Mexican authorities have increased their 
efforts in this area.  In late 2008, PGR arrested the main 
importer of optical discs to Mexico on charges of contraband, 
tax evasion and fraud, and forging of documents.  PGR also 
dismantled 253 audio-visual recording labs last year, and 
seized almost 9,000 computers and other reproduction 
equipment, 15.6 million DVDs, 27.5 million CDs, and an 
incalculable number of blank optical discs.  Also in late 
2008, the US enforcement officials apprehended a man in San 
Antonio, Texas who was the main distributor of optical media 
 
MEXICO 00000601  005 OF 005 
 
 
units in the notorious Tepito market.  The price of blank 
media disks in the pirate markets of Mexico is now double what 
it was in 2007. 
 
¶H. Use/Procurement of Government Software: The federal 
government generally purchases and uses legitimate software. 
The Business Software Alliance (BSA), IMPI, and the government 
of the State of Jalisco launched an initiative in 2007 to 
"Clean House" by ensuring that all software used in state 
government offices was licensed.  Similar initiatives in other 
state and city governments are still in development.  The BSA, 
CEMPRO (the Mexican book editors association) and IMPI are 
also negotiating an agreement between them and Mexico's public 
universities to protect right-holders from the unauthorized 
reproduction of their materials. 
 
¶I. 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. 
 
Training 
-------- 
 
¶6.  (U) A final note Q The US Embassy and the USG has had 
considerable success in collaborating with our Mexican 
counterparts to conduct several training and exchange 
programs.  In addition to the three DOJ-sponsored customs 
training events mentioned above, the US Embassy and USPTO 
sponsored a training program in October for 150 IMPI officials 
in civil and criminal enforcement.  DHS/CBP and ICE have 
actively participated in these programs.  Two IMPI officials 
participated in the APEC-IPEG supply-chain integrity workshop 
in Hong Kong, also sponsored by USPTO.  In Cancun in February 
2008, Mexican judges, prosecutors, right-holders, and IPR 
officials convened an international conference for judges from 
around the world covering the whole range of legal issues 
related to copyrights, trademarks, patents and data 
protection, and enforcement.  Two U.S. federal district court 
judges and experts from the U.S. Copyright Office, USPTO, and 
the Department of Commerce participated.  Preparations are 
underway to build from this success with an even larger second 
annual conference in Monterrey in March 2009.  Five Mexican 
federal judges (both administrative and penal), seven PGR 
public prosecutors, 11 IMPI and one INDAUTOR official 
participated in USPTO's Global IP Academy training courses in 
¶2008.  This has not only deepened Mexico's understanding of 
the importance of IPR protection and enforcement, but has also 
created an unprecedented dialogue with enforcement officials, 
judges, and right-holders in Mexico that is identifying the 
key obstacles to countering IP violations and is helping to 
build political pressure to eliminate them.  Post appreciates 
the past and continued support by the USG interagency for 
these training programs. 
 
BASSETT