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### Viewing cable 09SANJOSE138, 2008 SPECIAL 301 REVIEW - COSTA RICA

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09SANJOSE138 | 2009-03-04 15:38 | 2011-03-21 16:30 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy San Jose

`

    VZCZCXYZ0001
    RR RUEHWEB

    DE RUEHSJ #0138/01 0631538
    ZNR UUUUU ZZH
    R 041538Z MAR 09
    FM AMEMBASSY SAN JOSE
    TO RUEHC/SECSTATE WASHDC 0545
    INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

` `

    UNCLAS SAN JOSE 000138

    SENSITIVE
    SIPDIS

    EEB/TPP/IPE FOR TMCGOWAN AND SKEAT
    PLEASE PASS TO USTR FOR JGROVES AND GVETERE

    E.O. 12958: N/A
    TAGS: ETRD ECON KIPR CS
    SUBJECT: 2008 SPECIAL 301 REVIEW - COSTA RICA

    REF:  A) 09 STATE 8410
          B) 06 SAN JOSE 0464
          C) 07 SAN JOSE 0335
          D) 08 SAN JOSE 0155
          E) 08 SAN JOSE 0959

    -------
    SUMMARY
    -------

    ¶1.  (U) Since last year's report (Ref D), the GOCR enacted a number
    of laws related to Intellectual Property Rights (IPR) as required by
    the Central American Free Trade Agreement (CAFTA-DR), but the
    success in passing new IPR legislation highlighted the country's
    failure to enforce existing laws.  Costa Rica's Attorney General
    publicly and repeatedly stated that Costa Rica should use its
    limited investigative and prosecutorial resources to pursue violent
    and drug-related crimes and instructed staff prosecutors to pursue
    IPR cases only if they implied harm to people or the environment.

    ¶2.  (U) Nonetheless, there was IPR progress.  The Costa Rican
    Industrial Registry issued many more patents than in recent years.
    A number of Costa Rican officials received training in IPR
    enforcement, administration, prosecution, and customs from USPTO,
    DHS, WIPO, and others.  The Judicial Branch, through the Judicial
    School, has engaged in IPR training and wants to provide more
    training opportunities for judges and prosecutors.  Due to the
    CAFTA-DR-related legislative gains (which required significant
    political will by the executive branch), and improvements with
    registrations, Post recommends that Costa Rica's ranking not be
    lowered, and that the country remain on the Watch List for the 2009
    Special 301 Report (Ref A).  END SUMMARY.

    ----------------------------
    IPR BACKGROUND IN COSTA RICA
    ----------------------------

    ¶3.  (U) After a difficult and extended implementation review
    process, CAFTA-DR entered into force (EIF) for Costa Rica on January
    1, 2009.  However, entry into force did not quiet CAFTA and IPR
    critics.  Issues related to IPR rose to the forefront of public
    debate during the campaign leading up to the October 7, 2007
    nationwide referendum to ratify the country's participation in
    CAFTA-DR.  Those opposed routinely spoke out against the Agreement's
    requirements to create effective deterrents against IPR infringement
    as well as protections for IPR, politicizing the issues.  Opposition
    leaders asserted that increased penalties for IPR violators would
    "send students to jail for copying textbooks" and increased IPR
    protection would bankrupt the local social security system since it
    would be forced to purchase original, innovative pharmaceuticals
    rather than generics.  The Costa Rican public ultimately rejected
    such arguments and approved CAFTA-DR by a slim margin, but the
    negative campaign created an environment where issues related to IPR
    remain politically controversial.

    --------------------------------------------- --
    NOW CAFTA-DR COMPLIANT. . .WITH AN IPR FOOTNOTE
    --------------------------------------------- --

    ¶4.  (U) After Costa Rica was included in the Priority Watch List in
    2001, the country took the necessary steps to bring into force the
    WIPO Copyright Treaty (WCT) and the WIPO Performance and Phonograms
    Treaty (WPPT) on March 6, 2002 and May 20, 2002, respectively.
    Costa Rica also ratified the Patent Cooperation Treaty (PCT).  Costa
    Rica posted incremental -- but limited -- IPR progress over the past
    several years (Refs B and C).

    ¶5.  (SBU) Since last year's Special 301 Report, Costa Rica made all
    the necessary legislative reforms to comply with CAFTA-DR
    obligations related to IPR.  In recognition of meeting CAFTA
    standards through legislative reforms, the United States Trade
    Representative (USTR) certified Costa Rican CAFTA-DR compliance in
    late 2008, paving the way for EIF a few weeks later.  However, three
    technical corrections remain for legislative action by the Costa
    Rican national assembly.   Packaged into one final piece of
    legislation, the corrections (Ref E) must be passed into law by
    January 1, 2010.  Failure to do so will result in a holdback of
    tariff preferences on a select category of Costa Rican export
    products, most likely sugar.  The Arias Administration is confident
    that the process will be completed in 2009.

    -------------------------------------------
    . . . BUT SADDLED BY ENFORCEMENT CHALLENGES
    -------------------------------------------

    ¶6.  (U) Despite these legislative victories, real challenges remain
    in effectively ensuring that the laws have an impact on the local
    IPR environment.  Throughout 2008, Costa Rica continued to falter in
    enforcing its IPR laws, which criminalize counterfeiting and piracy.
     The country's public prosecutors have consistently demurred from
    prosecuting IPR cases unless they involve potential harm to people
    or the environment.  The prosecution of IPR crimes is handled by
    public prosecutors in the "various crimes" divisions of the branch
    offices of the Attorney General's office (in which an individual was
    appointed with responsibility for IPR prosecution).  Crimes related
    to IPR form only a portion of the portfolio of these prosecutors and
    receive little attention.  Rather, the prosecutors tend to invoke
    "opportunity criteria" (akin to prosecutorial discretion) to avoid
    opening investigations into reported IPR crimes.

    ¶7.  (U) The Attorney General of Costa Rica, Francisco Dall'Anese,
    publicly and privately reiterated that he does not support diverting
    limited resources to the prosecution of IPR crimes.  Rather, he
    maintains that private companies can seek redress in civil courts or
    can initiate a criminal public action through private application.
    By this process, a private party (almost always through an attorney)
    files a complaint and jointly conducts the investigation and
    prosecution of the case with the public prosecutor.  While this
    could be an effective means of prosecuting IPR violators, the
    reality is that the private sector and the prosecutor's office have
    yet to coordinate in a meaningful way.  Likewise, the use of the
    civil courts to pursue private cases against IPR violators is
    hampered by the extreme length of time it takes to receive a civil
    judgment (up to 15 years) and the small monetary damages awarded.

    ¶8.  (SBU) Industry and others have asked Dall'Anese to halt the
    nearly automatic use of opportunity criteria with IPR crimes, but he
    has rebuffed their calls, and is in a position to do so.  The
    position of Attorney General in Costa Rica is entirely independent
    of the Costa Rican Executive and Legislative Branches.
    Constitutionally, the position falls under the Judiciary, but, in
    practice, it is almost completely autonomous.  Dall'Anese was
    reelected to a second four year term as Attorney General in late
    ¶2007.  (COMMENT:  Knowledgeable local contacts tell us that
    Dall'Anese is unlikely to run for a third term in 2011.  END
    COMMENT.)

    ¶9.  (U) The few prosecutions that wound their way through the
    criminal court system over the last two years were originally
    started long before. In February 2008, industry successfully
    concluded a prosecution against a counterfeiter of apparel.  As has
    been the case in previous successful IPR prosecutions, the judge
    immediately paroled the convicted counterfeiter as it was her first
    offense and the sentence was for less than three years. (COMMENT: No
    matter the crime, judges in Costa Rica have the latitude to
    immediately parole first-offenders who have been sentenced to less
    than three years of prison.  Judges generally use this power in all
    criminal cases when it can be applied. END COMMENT.)

    --------------------------------------
    AT THE BORDER:  ARE THE GOODS GENUINE?
    --------------------------------------

    ¶10.  (U) Officers within the FBI-equivalent Judicial Police (OIJ)
    state that most counterfeit goods within Costa Rica are imported
    from elsewhere rather than manufactured in the country.
    Unfortunately, Costa Rica's Customs service continues to face
    difficulties in halting the flow of counterfeit goods into the
    country.  The leadership of Customs is aware of the importance of
    seizing pirated goods, but most customs agents lack the necessary
    training to recognize counterfeits. Local industry has also
    expressed an interest in providing counterfeit recognition training
    to Customs officials.

    ¶11. (U) In addition, the laws regulating the filing of criminal
    cases can impede the seizure of pirated goods at the border.  If a
    customs agent recognizes that a shipment contains pirated goods, the
    agent can order the shipment seized for 48 hours.  If, at the end of
    that period, the holder of the IPR for the product involved has not
    filed a criminal complaint against the importer, the customs agent
    must either release the goods or file a criminal complaint. The
    latter action can open the agent up to personal liability through a
    countersuit by the importer if the criminal complaint is ultimately
    unsuccessful.

    ¶12. (U) Recent changes in the law give the customs agent ten days
    from seizure to file the criminal complaint, but the customs agent
    continues to be personally liable if the complaint is unsuccessful.
    Increased communication between Customs and industry would help
    solve this problem by providing time for the owner of the trademark
    or patent to file the police report.  In such cases, even if the
    prosecutor ultimately invokes opportunity criteria and abandons
    his/her role in the criminal prosecution, the private party could
    continue the action, aided by the fact that the goods have already
    been seized by Customs.

    --------------------------------------------- ---
    COSTA RICAN PATENT OFFICE:  CAPACITY BY CONTRACT
    --------------------------------------------- ---

    ¶13.  (SBU) In 2008 the Costa Rican Industrial Property (IP) Office
    of the National Registry finally began to address severe delays in
    processing patent applications.  Through 2007, patent attorneys in
    Costa Rica related that the office had not yet begun processing
    patent cases first submitted in 2004 and 2005.  The table below
    illustrates progress, although the backlog may take years to erase.

                  Number of Application Approvals
                    Year 2005  2006  2007  2008
    Patent                 13    4    13    53
    Utility Model           0    1     1     2
    Industrial Model        4    3     2    21
    Industrial Design       1    1     -    15
                   TOTAL   18    9    16    91
    Source:  Industrial Property Registry

    The IP Office informs us that in 2008 the office completed the
    review of a total of 140 applications, approving the 91 shown above
    and rejecting 49.  While new patent applications are immediately
    processed, there is still a backlog of about 1,200 patent
    applications waiting for technical review.

    ¶14.  (U) The IP Office believes that it is on the verge of hiring
    five in-house patent examiners with training and experience in
    specific areas of science and technology.  It has taken several
    years to create these positions.  These in-house examiners will not
    be hired within the Civil Service structure and therefore may be
    paid salaries commensurate with their expertise.  To date, the IP
    office has relied heavily on contract relationships with the Costa
    Rican Technical Institute and the Pharmacists Board Association to
    provide experts to serve as outside examiners.  The IP Office will
    continue to use these and other outside examiners to move through
    the backlog of patent applications.

    ¶15.  (U) The World Intellectual Property Organization (WIPO) has
    worked closely with the Costa Rican IP Office to train employees.
    WIPO also offered training to officials in the judiciary that have
    an interest in IPR.  In addition, the U.S. Embassy sent eight Costa
    Rican officials to the USPTO's Global Intellectual Property Academy
    for training.

    --------------------------------------
    USE/PROCUREMENT OF GOVERNMENT SOFTWARE
    --------------------------------------

    ¶16.  (U) The 2002 Executive Decree #30, 151-J, mandated that all
    government ministries use only legally-licensed computer software.
    According to this decree, each ministry was to conduct an internal
    audit and submit a statement of compliance no later than July 31,
    ¶2003.  The government subsequently claimed full certification of all
    ministries, although there had been no independent confirmation.

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    COMMENT
    -------

    ¶17.  (SBU) In general, parts of the Costa Rican government, notably
    the judiciary, do not yet view IPR as a tool to spur innovation.
    The executive branch recognizes the value of IPR enforcement and
    prosecution and the private sector wants judicial action on IPR
    cases.  After making progress in IPR legislation as instituted by
    CAFTA-DR's entry into force, the focus of attention is now on the
    judiciary and how it handles cases in a CAFTA-DR compliant IPR
    regime.

    ¶18. (SBU) Therefore, based on the GOCR's progress to date in
    improving the country's IPR framework -- legislative reforms,
    political will in the executive branch, sharp increase in patent
    application approvals, and receptivity to training opportunities --
    Post recommends that Costa Rica remain on the Watch List.  This is
    the properly-modulated message, in our view.  To lower Costa Rica's
    standing immediately after the GOCR finally completed its CAFTA-DR
    implementation obligations would be too harsh a signal.  Such a move
    would likely be viewed as provocative by the Arias administration,
    which worked very hard to pass the necessary IPR legislation for
    CAFTA-DR EIF.  This would also be counterproductive to our low-key
    but steady efforts to work with the GOCR and the private sector (and
    around the Attorney General, if necessary) to improve IPR
    protection.

    CIANCHETTE

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