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December 11, 1996

Chairman of the GSP Subcommittee

of the Trade Policy Staff Committee

Office of the U.S. Trade Representative

600 17th Street NW, Room 517

Washington, DC 20506

Re:Post-hearing Comments on the Review of Panama’s Eligibility as a GSP Beneficiary Developing Country (61 Fed. Reg. 52078, October 4, 1996)

Case: Panama: 012-CP-95

To the Subcommittee:

The International Intellectual Property Alliance (IIPA) submits the following comments to update the Subcommittee on events surrounding intellectual property rights protection and enforcement in Panama since the filing of our October 29, 1996 comments and our November 13  presentation before the Subcommittee at the GSP public hearings. 

The Panamanian Government acknowledges that its system for protecting intellectual property (IP) has not been fully implemented.  Even though the copyright law has been on the books for almost two years, effective enforcement is lacking.   The Government has very recently proposed several amendments to its intellectual property laws and is still in the process of creating various task forces and specialized courts to address IP problems.  While the system may be in the process of being fixed, it is not now providing adequate and effective IP protection.  

PIRACY and ENFORCEMENT

On November 22, 1996, legal counsel for the Motion Picture Association (MPA) along with two experts from the Panamanian Copyright Office and the Copyright Institute conducted a copyright seminar attended by the Superior Public Prosecutor, two public prosecutors specializing in intellectual property, the Chief of Investigations of the Judicial Technical  Police, field detectives and personnel in the Judicial Prosecutors office. 

As reported at the hearings, the recording industry continues to be plagued by large shipments of blank audiocassettes through the Colon Free Zone (CFZ).   Panama appears to be the transshipment point and staging ground for supplying raw materials for piracy in the Central American region.  We reported that 36 million blank tapes from Korea alone are being shipped to Panama annually.  The size of the legitimate audiotape market in Panama does not exceed 1 million units.  

LEVELS OF PIRACY:  At the November 13 hearing, a Subcommittee member asked what levels of piracy in Panama would our industries find “acceptable.”  As indicated in our oral testimony, we are reluctant to suggest a single number by  which all anti-piracy actions should be measured.   Other factors must be addressed when evaluating whether copyright enforcement is effective in any particular country at any particular time. 

At the hearing, we indicated that a reduction in levels of piracy to 50% in a year would be a very good start (this means that one out of every two copies of copyrighted material is infringing; 90% levels of piracy means 9 out of 10 copies are infringing).  We continue to believe that this would represent an ambitious enforcement and public education effort by the Panamanian Government toward protecting intellectual property.  Reducing piracy levels will take  consistent efforts by the Panamanian government and its enforcement agencies (police, prosecutors, customs, judges) to address the piracy problem.  We believe significant reductions in piracy are unlikely to happen unless deterrent penalties (including jail terms) are imposed on copyright infringers.

SPECIALIZED IPR COURTS: The new Antitrust Law (which entered into effect in May 1996) created specialized civil courts for IPR cases.  We understand that because there are no budgets for these courts, they are not yet operating.   Ordinary civil courts continue to have competence over IPR cases.   Delays in obtaining judgments in civil cases are common because of the heavy backlog of cases .

SPECIALIZED PROSECUTORS and POLICE: The Government of Panama reports that the Prosecutor General has accepted the idea of designating a specific office for the investigation of IPR cases.  We do not have any information whether this office has been designated and established.  We do know that two public prosecutors have been assigned to the police department (specifically, the Judicial Technical Police) to handle IPR cases. However, this means that the Department of Offenses against Property (the police department which handles IPR enforcement and many other crimes) is left to its own devices regarding IPR investigations, without any direction from the Prosecutor’s Office. The Government should consider assigning a deputy prosecutor to this department for IPR enforcement.  Creating a special IPR division in the police department should also be a priority.        

LEGISLATION

COPYRIGHT LAW:  The proposed amendments to the Copyright Law (Draft Law No. 049-96) have already been approved by the Cabinet Council and we understand that they have been sent to the Legislative Assembly as part of a package of “urgent” laws.  It is unlikely however, that the bill will be enacted before the end of the year.  We note that the pirates in Panama appear to be worried about passage of these amendments and  have started a press campaign urging their defeat.    

It is important to keep in mind that these amendments revise only a few provisions of the copyright law, primarily the ones which affect the ability of the Copyright Office to order, ex officio or upon request of the copyright owners, provisional remedies such as the seizure of infringing products and equipment.  The maximum administrative fines would also be increased (from  $20,000 to $50,000).  While these are important amendments, especially for the purposes of anti-piracy enforcement, the amendments do not take into account other long-standing deficiencies in the copyright law (especially those affecting the sound recording industry). 

INDUSTRIAL PROPERTY LAW:  This law (Law No. 35 of May 10, 1996) entered into effect on November 19, 1996, and allows Customs and CFZ officials to impose administrative sanctions and seize pirated and counterfeited products.  While we are encouraged that such legislation -- which apparently will also apply to copyrights, not just patents and trademarks -- is in place, we believe it is imperative to evaluate its operation on-the-ground.   We do not have any specific reports at this time.

 Panama’s October 29 brief reports that Law No. 35 establishes the border enforcement system applicable within the CFZ (page 4).   Reportedly,  the draft Regulations for the Customs Directorate which provide the authority to inspect and retain suspected counterfeit or infringing merchandise, is limited to goods entering the national territory. Goods in transit would not be subject to inspection and seizure.  If these reports are correct, these regulations must be modified to include transhipped goods, which are a key feature of the business of copyright piracy in Panama. 

 Panama’s brief also states that the CFZ authorities have the ability to  temporarily or permanently suspend operation permits of companies infringing intellectual property rights (page 5).  We understand that the CFZ authorities can do this only after a court decrees the suspension of the operation permit.   Furthermore, if the decree is issued before the conclusion of a judicial proceeding, the suspension itself can be stopped if the suspected counterfeiter or infringer company posts a bond.  As we understand it, the ex officio power of the CFZ Administration to suspend these operation permits has been eliminated.  Official clarification from the Panamanian Government on this point is needed.

INTERINSTITUTIONAL TASK FORCE:  A draft law creating such a interagency IP enforcement task force is ready for submission to the Cabinet Council.  While this appears to be welcome news, unanswered questions remain about when the creation of this task force will receive final approval and what actions it will take. 

CONCLUSION

The Government of Panama, acknowledging that its copyright law has not been enforced, points to several reasons -- laws not entering into force, time needed to adapted to legislation, and lack of resources.  We understand the need for a short grace period to implement the copyright law.  However, almost two years have passed since the law entered into force in January 1995, and implementation remains severely deficient.

To remedy these deficiencies, the Panamanian government must take several actions to begin to address these enforcement and legislative problems:

(1) Amend the copyright law so that it at least meets TRIPS standards and provides "adequate and effective" copyright protection and enforcement authority.

(2)Swiftly enact the draft amendments to the Copyright Law, thus restoring the authority to the Copyright Office to conduct raids and seizures of pirated materials, and increasing the level of administrative penalties which can be issued by the Copyright Office.

(3)Significantly improve enforcement in practice, including:

--aggressively using the restored raiding authority and increased fine authority of the Copyright Office, as soon as the amendments to the law are passed;

--- improving border measures, including stopping the transhipment of pirated and counterfeit product through the CFZ and revoking the operational permits of businesses engaged in infringing activities.

(4)Disclose customs information on the volume of certain materials (including blank audio and video tape and certain trademarked goods such as entertainment software) entering and exiting Panama.  This  would aid the industries’ fight against piracy and counterfeiting not only in Panama but also in other countries in the region.

(5)Improve jurisdictional coordination among administrative, criminal and judicial authorities through mechanisms such as the Interinstitutional Task Force.  

The Panamanian Government has begun to take steps in the right direction, but concrete evidence of effective implementation is necessary. 

We appreciate this opportunity to respond to the Subcommittee.

Respectfully submitted,

Maria Strong

Vice President and Associate General Counsel

IIPA