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Re: Request for Review of the Intellectual Property Rights Practices of the Dominican Republic in the 1999 Annual GSP Country Eligibility Practices Review, 64 Fed. Reg. 20046 (April 23, 1999)

The Trade Policy Staff Committee (TPSC) of the Office of the United States Trade Representative (USTR) published in the April 23, 1999, Federal Register a notice announcing the 1999 Annual Generalized System of Preferences (GSP) Product and Country Eligibility Practices Review. USTR indicated that interested parties "may submit petitions to have the GSP status of any eligible beneficiary developing country reviewed with respect to any of the designation criteria listed in subsections 502(b) or 502(c) of the 1974 Act (19 U.S.C. 2462(b) and (c))." See 64 Fed. Reg. 20047.

The International Intellectual Property Alliance (IIPA) hereby submits its request that the eligibility of the Dominican Republic as a GSP beneficiary developing country be reviewed, and that its GSP benefits be suspended or withdrawn, in whole or in part, if requisite improvements are not made by the Dominican Republic to remedy the deficiencies (outlined below) which adversely affect U.S. copyright owners. In 1998, the Dominican Republic exported goods valued at $44.4 million to the U.S. which received preferential duty-free treatment under the GSP Program, which represented approximately 2.81% of its total exports to the U.S., according to U.S. government statistics. Last year, Congress reauthorized the GSP program through June 30, 1999. Currently there are several bills pending before Congress which would extend the GSP program.

In addition, IIPA requests that the eligibility of the Dominican Republic as a beneficiary developing country under the Caribbean Basin Economic Recovery Act (CBERA) be reviewed, and that its CBERA benefits be suspended or withdrawn, in whole or in part, if improvements are not made by the Dominican Republic to remedy the deficiencies (outlined below) which adversely affect U.S. copyright owners. Also in 1998, the Dominican Republic exported goods valued at $1.29 billion to the U.S. which received preferential duty-free treatment under CBERA, which represented about 81.9% of total exports to the U.S.

Petitioner and its Interest: The International Intellectual Property Alliance

IIPA is a coalition of seven trade associations that collectively represent the U.S. copyright-based industries -- the motion picture, music and recording, business and entertainment software, and book publishing industries. IIPA’s member associations are the Association of American Publishers (AAP), AFMA (formerly the American Film Marketing Association), the Business Software Alliance (BSA), the Interactive Digital Software Association (IDSA), the Motion Picture Association of America (MPAA), the National Music Publishers’ Association (NMPA) and the Recording Industry Association of America (RIAA).

These member associations represent over 1,350 U.S. companies producing and distributing works protected by copyright laws throughout the world -- all types of computer software including business software and entertainment software (such as videogame CDs and cartridges, personal computer CDs and multimedia products); motion pictures, television programs, home videocassettes and DVDs; music, records, CDs and audiocassettes; and textbooks, tradebooks, reference and professional publications and journals (in both electronic and print media).

These U.S. copyright-based industries represent the leading edge of the world's high technology, entertainment and publishing industries. According to the most recent edition of the report, Copyright Industries in the U.S. Economy: The 1998 Report, prepared for IIPA by Economists, Inc., these core copyright industries accounted for $278.4 billion in value added to the U.S. economy, or approximately 3.65% of the Gross Domestic Product (GDP) in 1996 (the last year for which complete data is available). The total copyright industries accounted in 1996 for $433.9 billion in value added, or approximately 5.68% of GDP. The core copyright industries’ share of the GDP grew more than twice as fast as the remainder of the U.S. economy between 1977 and 1996 (5.5% vs. 2.6%). Employment in the core copyright industries grew at close to three times the employment growth in the economy as a whole between 1977 and 1996 (4.0% vs. 1.6%). More than 6.5 million workers were employed by the total copyright industries, about 5.15% of the total U.S. work force, in 1996. The core copyright industries accounted for an estimated $60.15 billion in foreign sales and exports in 1996, a 13% gain over the $53.25 billion generated in 1995. This report has been made widely available to officials working on country and IPR issues at USTR, and throughout other agencies, including the State Department, the Commerce Department, the U.S. Patent and Trademark Office, and the U.S. Copyright Office. IIPA’s press release on the issuance of this report is available on IIPA’s website, at http://www.iipa.com/html/pr_05071998.html.

The U.S. creative industries represent one of the few sectors of the U.S. economy that regularly contributes to a positive balance of trade. It is essential to the continued growth and future competitiveness of these industries that our trading partners provide free and open markets and high levels of protection to the copyrights on which this trade depends. Inexpensive and accessible reproduction technologies make it possible for U.S. copyrighted works to be pirated -- stolen -- in other countries, and including specifically for the purposes of this petition, the Dominican Republic. However, the copyright industries represented in IIPA lose an estimated $20-22 billion annually due to piracy outside the United States. These staggering losses, if not halted, could reverse this path of growth in these sectors, threaten the high wage employment that these industries bring to the U.S. economy, and damage U.S. competitiveness. In addition to the worldwide problem of piracy, several foreign countries have erected market access barriers to U.S. copyright products. To combat these dual problems in developing countries, the U.S. copyright-based industries joined with the Administration and Congress to fashion new legislation and negotiating tools. IIPA and its members have supported various trade tools with IPR provisions over the years, including the GSP Program, Special 301, Section 301, the Caribbean Basin Economic Recovery Act, and the Andean Trade Preferences Act.

Pursuant to the Trade Act of 1974, as amended (19 U.S.C. 2461 et seq.), IIPA, on behalf of its seven trade association members, hereby petitions the President to review the eligibility of the Dominican Republic as a GSP and CBERA beneficiary developing country, and if requisite improvements are not made by the Dominican Republic, then IIPA requests the President to suspend or withdraw GSP and/or CBERA benefits of the Dominican Republic, in whole or in part, for its failure to provide adequate and effective copyright protection for U.S. copyright owners and its failure to provide equitable and reasonable access to its markets.

Legal Authority for this Petition and Discussion of the IPR Criteria in the GSP and CBERA Statutes

Provisions tying intellectual property protection to trade benefits were first added to the Trade and Tariff Act of 1984 [hereinafter "TTA 1984"]. Title V of the TTA 1984, known as the GSP Renewal Act of 1984, renewed the GSP Program which had been introduced in the Trade Act of 1974 [hereinafter "TA 1974"], and specifically required the President to consider intellectual property protection in determining whether to designate a developing country as eligible for GSP benefits. The GSP Program provides unilateral, non-reciprocal duty-free tariff treatment to over 4,400 articles imported from more than 140 countries and territories designated beneficiary countries and territories (these are less developing countries) to aid their economic development through preferential market access. An additional 1,700 articles are eligible for GSP treatment for specified least developing countries. While there has been a minor change in the statutory language between the GSP Renewal Act of 1984 and the GSP Renewal Act of 1996, the Act remains essentially the same as in 1984. The legislative history of the 1984 Renewal Act is particularly instructive on the important link between GSP benefits and strong IPR protection.

In the GSP Renewal Act of 1984, Congress specified conditions that GSP beneficiary countries must meet in order to gain and maintain their preferential trading status. In particular, one of these express conditions (which Congress also delineated as one "purpose" of the GSP Program) was to encourage developing countries "to provide effective means under which foreign nationals may secure, exercise, and enforce exclusive intellectual property rights."

The legislation required the President to apply mandatory and discretionary criteria with respect to IPR protection as a condition to a country achieving "beneficiary" status under the GSP Program. The mandatory criterion prohibited the designation of a country from becoming a "beneficiary developing country" if, for example, "such country has nationalized, expropriated, or otherwise seized ownership or control of property, including patents, trademarks, or copyrights, owned by a United States citizen or by a corporation, partnership, or association which is 50 percent or more beneficially owned by United States citizens." See Section 503(b)(4) of the GSP Renewal Act of 1984, now codified at 19 U.S.C. 2462(b)(2)(D).

The GSP Renewal Act of 1984 added as a discretionary criterion, in determining whether to designate a developing country as eligible to receive GSP duty-free trade treatment, that

the President shall take into account ... the extent to which [each] country is providing adequate and effective means under its laws for foreign nations to secure, to exercise, and to enforce exclusive rights in intellectual property, including patents, trademarks, and copyrights.

Section 503(c)(5) of the GSP Renewal Act of 1984, codified at 19 U.S.C. 2462(c)(5). The Senate Finance Committee Report explained that:

To determine whether a country provides "adequate and effective means," the President should consider the extent of statutory protection for intellectual property (including the scope and duration of such protection), the remedies available to aggrieved parties, the willingness and ability of the government to enforce intellectual property rights on behalf of foreign nationals, the ability of foreign nationals effectively to enforce their intellectual property rights on their own behalf and whether the country’s system of law imposes formalities or similar requirements that, in practice, are an obstacle to meaningful protection.

S. Rep. No.98-485, 98^th Cong., 2d Sess. At 11 (1984). The Senate Report also noted:

In delegating this discretionary authority to the President, it is the intent of the Committee that the President will vigorously exercise the authority to withdraw, to suspend or to limit GSP eligibility for non-complying countries ....

Where valid and reasonable complaints are raised by U.S. firms concerning a beneficiary country’s market access policy or protection of intellectual property rights, for example, it is expected that such interests will be given prominent attention by the President in deciding whether to modify duty-free treatment for that country.

Id. at 12-13 (emphasis added). The House Ways and Means Committee stated that "countries wishing to reap the benefits of preferential duty-free access to the U.S. market must fulfill international responsibilities" in the intellectual property area. House Rep. No. 98-1090, 98^th Cong., 2d Sess. at 12 (1984).

The IPR criteria are a condition, not only for obtaining GSP benefits in the first place, but also for retaining them. The 1984 Act authorized the President to "withdraw, suspend, or limit the application of the duty-free treatment accorded under Section 501 of this title with respect to any article or any country" and requires the President, when taking any such action, to "consider the factors set forth in Sections 501 and 502(c)." TTA 1984 Section 505(a)(1); TA 1974 Section 504(a)(1), as amended; 19 U.S.C. 2464(a)(1) (emphasis added). The Act also created a system of "general reviews" to ensure that these statutory criteria are met. TTA 1984 Section 505(b); TA 1974 Section 504(c)(2)(A), as amended; 19 U.S.C. 2464(c)(2)(A); see also 15 C.F.R. 2007.3.

This GSP Subcommittee is asked to follow the explicit intent of Congress, and advise the President to "vigorously exercise" his authority to withdraw, suspend or limit GSP eligibility of the Dominican Republic for its non-compliance with the statutory criterion on IPR in the GSP Program.

Over the years, retaining GSP benefits has figured prominently in the decisions of a number of countries to improve their IPR protection. In the 1980s, such leverage was used to encourage Singapore, Indonesia and Malaysia to adopt new copyright legislation. IIPA has filed petitions against several countries for their failure to provide adequate and effective copyright protection. IIPA petitions which have been accepted by USTR over the past ten years (1989-1998) include: Indonesia, Thailand, Cyprus, Egypt, El Salvador, Turkey and Poland. IIPA has participated in GSP IPR reviews involving Malta, Guatemala, the Dominican Republic, Honduras, Panama, and Paraguay (all of which were initiated by other petitioners or by USTR). IIPA also filed petitions in 1995 against the Russian Federation, the Philippines, Bolivia and Peru which, we learned in October 1996, were not accepted by USTR for the 1995 GSP Annual Review. A GSP petition which IIPA filed against Turkey in June 1993 remains under investigation.

When the GSP Program was reauthorized in August 1996, the language of the IPR discretionary criterion for GSP eligibility in Section 502(c)(5) was simplified slightly and now requires the President to "take into account the extent to which such country is providing adequate and effective protection of intellectual property rights." The expired law specified (as discussed above) that each beneficiary country provide "adequate and effective means under its laws for foreign nationals to secure, to exercise and to enforce exclusive rights in intellectual property, including patents, trademarks, and copyrights." Otherwise, the GSP Renewal Act contains identical IPR provisions, including "mandatory" criteria denying GSP status to countries that directly or indirectly expropriate U.S. property (including intellectual property), and authorizing the President to withdraw, suspend or limit GSP privileges based on failure to meet the IPR criteria.

In addition to GSP benefits, the Dominican Republic also receives a very significant amount of additional trade benefits under the Caribbean Basin Economic Recovery Act (CBERA).The enactment in 1983 of this Act was a key point in the use of U.S. trade policy to promote exports of products and services protected by copyright because, for the first time, Congress explicitly linked trade benefits to intellectual property protection by beneficiary countries. Under the CBI program, countries can only receive trade preferences if they satisfy statutory criteria; these include intellectual property rights (IPR) standards. In submitting the Second Report on the Operation of the Caribbean Basin Economic Recovery Act to Congress, President Clinton acknowledged that intellectual property rights concerns remain in the region, and the possibility of losing CBI benefits "serves as an incentive to encourage countries to work toward enforcing adequate intellectual property rights...."

The Dominican Republic Fails to Provide "Adequate and Effective Protection" of U.S. Copyrights

To the best of petitioner’s knowledge, much of the information describing the deficiencies in the Domincan Republic’s legal and enforcement regime has been presented previously to members of various U.S. governmental interagency groups, including the Special 301 interagency group, several members of the GSP Subcommittee, as well as the Trade Policy Staff Committee, in the context of USTR’s Annual Special 301 Review. On February 16, 1999, IIPA presented its annual Special 301 submission to Assistant USTR for Services, Investment and Intellectual Property Joseph Papovich; this submission was widely distributed among the interagency for its internal consideration in the 1999 Special 301 Annual Review. IIPA’s entire report is available on our website.

In fact, USTR itself has highlighted both copyright and patent deficiencies in the Dominican Republic’s IPR regime. When she elevated the Dominican Republic to the Special 301 Priority Watch List six weeks ago, Ambassador Charlene Barshefsky said, "The Dominican Republic must bring its legal regime into conformity with TRIPS by January 1, 2000. As a major beneficiary of the Caribbean Basin Economic Recovery Act (CBERA) and the Generalized System of Preferences (GSP), it is incumbent upon the Government of the Dominican Republic to provide adequate and effective protection for intellectual property."

1. The Copyright Law and the Telecommunications Law in the Dominican Republic Contains Deficiencies Which Render Legal Protection Inadequate and Ineffective

The Dominican Republic needs to revise its current copyright law in order to meet its TRIPS obligations, as well as its bilateral trade obligations. Copyright protection in the Dominican Republic is based on its 1986 Copyright Law, No. 32-86 of July 4, 1998, and related regulations. The Dominican Republic acceded to the Berne Convention, effective December 24, 1997, and is also a member of the Universal Copyright Convention (since 1983). It is not a member of the Geneva Phonograms Convention (1971).

The 1986 Copyright Law contains several provisions which do not comply with the Dominican Republic’s international and bilateral copyright obligations, and requires clarification in several key areas, in several areas. Below is an illustrative, not exhaustive, list:

o Terms of protection, particularly for cinematographic works and photographs (under Articles 27 and 26), must be extended to meet at least satisfy the TRIPS standards. For cinematographic works, the law presently provides a term of only 30 years after first publication or exhibition; this should be extended to track the term established under U.S. law, which is 95 years after publication.

o Missing from the law are procedures for copyright owners to obtain and conduct civil ex parte searches (surprise civil searches conducted without notice to the suspect), which is required by TRIPS Article 50.

o Computer programs should be expressly protected as "literary works," as required by TRIPS.

o The exceptions to protection should be limited by the TRIPS Article 13 tri-partite test. The broad, personal use exception in Article 36 should not be applied to computer programs. Furthermore, the translation and compulsory reproduction licenses for foreign works do not track the terms of the Appendix of the Berne Convention (1971).

o Full protection for pre-existing works, sound recordings and performances must be ensured, in accordance with TRIPS Articles 9.1 and 14.6 It is imperative to recapture protection for those foreign works, sound recordings and performances which have not fallen into the public domain in their country of origin.

o Remedies for copyright infringement are not sufficient to provide adequate and effective protection, nor to deter piracy. Article 164 of the 1986 law states that copyright infringers are subject to a criminal fine of only 1,000 to 10,000 pesos (about US$65 to US$650).

Reports indicate that comprehensive legislation known as the Market Order Bill ("Proyecto de Codigo de Ordenamiento de Mercado") was submitted to the Senate in October 1998. This bill includes new laws on copyright, industrial property, antitrust, and consumer protection. Local counsel indicates that the bill includes specific provisions for administrative and customs actions, civil ex parte actions, and a section on criminal procedures. The Senate continues to study the bill, and no schedule for action is known to IIPA. IIPA has been informed that the local Dominican industry groups, particularly those representing industrial property interests, have voiced objections to many of the substantive provisions in the sections on industrial property and administration measures in the Market Order Bill. Yesterday IIPA obtained the Spanish text of this bill and will begin to review its copyright and other key provisions in more detail, and reserves the right to provide additional comments on this bill.

In addition to the deficiencies in the 1986 Copyright Law, a 1998 telecommunications law also contains deficiencies which have stymied the enforcement of cable piracy. The Dominican Republic promulgated the General Telecommunications Law No. 153-98 which improves the regulation of television programming. A new agency, INDOTEL (the Dominican Republic Telecommunications Institute) is now empowered to regulate and control telecom issues, including the granting and revocation of operating licenses, inspecting business and equipment, and applying sanctions for non-compliance. The Motion Picture Association, an IIPA member, reports its understanding that INDOTEL will be taking actions to enforce against cable piracy and satellite signal theft.

However, the new telecommunications law revoked Decree 84-93 (1993) which had applied the copyright law to the retransmission of television programming by cable. In effect, there is less protection now for television programming and such audiovisual works than there was before the 1998 law was enacted. Presently there is a gap in protection, and this gap must be closed. INDOTEL must have the authority to require cable operators to comply with the copyright law and be subject to sanctions for failure to do so.

2. Enforcement Efforts Against Piracy in the Dominican Republic Are Inadequate and Ineffective

A. An overview of TRIPS Agreement enforcement obligations which will afford guidance in the evaluation of the Dominican government’s efforts on enforcement

Critical to our discussion of the Dominican Republic’s is its performance toward complying with the GSP statutory standard of "providing adequate and effective protection of intellectual property rights." For the purpose of this GSP review, IIPA suggests that the GSP Subcommittee should look to the enforcement provisions found in Part III of the TRIPS Agreement to evaluate the effectiveness of the Dominican Republic’s copyright enforcement efforts. Because the GSP statute itself does not define this standard, IIPA asserts that any standard of "adequate and effective" in the enforcement realm should, at the very least, meet the obligations outlined in the TRIPS Agreement. And because IIPA’s analysis of the Dominican Republic’s performance of its copyright enforcement efforts fall short of the TRIPS standard, we also conclude that the Dominican Republic fails to meet its statutory obligations under the GSP Program to provide "adequate and effective protection." The U.S. Government should not be subsidizing, through its award of unilateral preferential trade benefits, the theft of U.S. copyrighted materials in the Dominican Republic, which fails to meet its already existing obligations under GSP to protect intellectual property, including copyrights.

The purpose of this discussion below is to provide the GSP Subcommittee with tangible guidance on the key elements of an effective copyright enforcement regime under TRIPS. As the minimum standard of copyright protection in a multilateral world, TRIPS copyright obligations enter fully into force for developing countries (LDCs) on January 1, 2000 (see TRIPS Article 65). These LDCs must bring their statutory laws and, most importantly, their enforcement systems into compliance with these standards.

The TRIPS enforcement obligations were developed in recognition of the critical importance of enforcement to any effective IP regime. In the area of copyright enforcement, there are three articles in the TRIPS enforcement text that are the most relevant. These are Articles 41 (general obligations), 50 (provisional measures in civil cases) and 61 (criminal remedies), and are attached hereto as Appendix 1. In virtually every country in the world, most of the copyright industries deal with piracy through criminal enforcement. Years of experience have led these industries and virtually every country to conclude that civil remedies are simply not sufficient to deter commercial piracy. The one exception, viable in some countries with mature civil remedies, involves enforcement against corporate and other commercial end-users of business software. With this type of software piracy, the infringers are otherwise legitimate businesses who cannot afford to have their reputations sullied by allegations of illegal conduct.

Article 41 sets out the general obligations of each WTO member, including the Dominican Republic. These obligations apply to all areas of enforcement --- civil, administrative, criminal and enforcement at the border. First, the requirement that enforcement procedures permit "effective action" speaks to all possible remedies, including civil, administrative and criminal procedures, as well as border measures, customs, tax and communications procedures. Further, and most importantly, procedures that meet the test of effective action can only be tested in actual practice. They must result in the reduction of the level of piracy in that country. If not, they are not "effective." Second, "available" remedies does not mean that remedies only appear in the statutory law. Even if a country’s copyright law is amended to include criminal remedies for copyright infringement, for example, those amendments will not make the criminal remedy "available" unless they are actually used in practice. Third, remedies that are "available" must be "expeditious". The ex parte civil search order required under Article 50 of TRIPS (discussed below) must also be available without overly burdensome documentary or evidentiary requirements, and must be available at a reasonable cost (see TRIPS Article 41.2). The same applies to search warrants and seizure orders issued by a criminal court. For example, criminal cases that take three to four years to reach judgement simply do not meet the test of "expeditious." Finally, and perhaps most importantly, these remedies must constitute a "deterrent to further infringements." This phrase is key to the TRIPS enforcement text. To determine whether a country has satisfied this requirement, the results of the enforcement system must be objectively analyzed. There are several indicia that may provide needed evidence to determine whether a remedy is "deterrent." One of the most clear-cut tests is the change over time of the piracy level. In the Dominican Republic, the levels of piracy in at least three industries are over 70%.

Under Article 61 of TRIPS, effective criminal enforcement has two major elements: (a) effective searches and seizures of pirate product by the police without notice to the infringer (raids), and (b) the existence in statutory law of deterrent criminal penalties and, in combination with Article 41, their imposition by judges in practice.

Specifically, Article 61 obliges countries to "provide for" criminal procedures and penalties "at least in cases of willful trademark counterfeiting or copyright piracy." Imprisonment and fines must be "sufficient to provide a deterrent." Article 41 combined with Article 61 (which should be understood as subsumed within the requirements of Article 41), requires countries to "provide for" or make "available" remedies not just in the law, but in practice as well. This obligation cannot be satisfied if no significant fines or imprisonment have been meted out against commercial pirates, or if sentences are regularly suspended or are commuted to low fines.

Article 61 also provides that seizure, forfeiture and destruction of the infringing goods and any "materials and implements the predominant use of which has been in the commission of the offense" must be available. This means all three actions (seizure, forfeiture and destruction of goods); simply seizing goods and leaving them to gather dust in a warehouse will not suffice (particularly if the pirate walks away unpunished and continues to remain in business). It cannot be underestimated how important the seizure, forfeiture and destruction of "materials and implements the predominant use of which has been in the commission of the offense" is in fighting piracy. Even where VCRs, computers and other machines have been seized, returning them to the pirates is extremely damaging and only encourages pirates to continue piratical activities. If fines are too low, or equipment and pirate goods are not seized, forfeited and destroyed, enforcement will not meet the test of "deterrence"; it will constitute simply a cost of doing business for the pirate.

Article 50 of TRIPS provides for provisional (or injunctive) relief in cases where the alleged infringer is present in court to defend against the rightholders request to stop the infringing conduct or to preserve evidence. But Article 50 also applies to cases where it is imperative that the rightholder search the defendant’s premises and seize infringing product and other evidence without notice to the alleged infringer. This is an essential remedy in civil cases since it is so easy to destroy the evidence of infringement in many cases, such as where a company has made unauthorized copies of software by loading them on the hard disks of all computers in a business network. Again, it is not sufficient that this remedy be merely in the law. Article 50 (and Article 41) provide that these procedure be "expeditious." This requirement cannot be judged by mere reference to the law; it compliance must be judged by its "effective" use in practice. The Dominican Republic’s law fails to afford any civil ex parte remedy, and this omission must be fixed.

In addition to the insufficient criminal penalties for copyright infringement in the 1986 Copyright Law (as discussed above), Dominican courts generally have not imposed these penalties in practice. However, BSA did obtain a significant default judgment against a software piracy three months, as described further below.

The copyright law does not allow civil ex parte investigations and inspections, and its provisions for criminal ex parte investigations and inspections are undermined by inconsistent and antiquated criminal procedure requirements. As a WTO member, the Dominican Republic is obligated to meet both its substantive copyright obligations as well as the enforcement text (civil, administrative and provisional measures, and criminal penalties and remedies) as of January 1, 2000.

The Dominican government’s response to piracy has been disappointing in other ways. In March 1997, it announced the formation of an interagency anti-piracy group (COPAL) to process complaints against all forms of piracy through the public prosecutor’s office, and to seize illegal material and close businesses involved in piratical activity. However, COPAL has yet to be legally established and become operational. In July 1998, the government established a new Intellectual Property Department within the District Attorney's Office for Santo Domingo, but it did not perform up to expectations. A new staff hire in March 1999 has resulted in some positive change, with the business software industry reporting improved cooperation in the last few months.

BSA reports continuing difficulties with the judiciary, and some very recent improvement regarding on-the-ground cooperation with the prosecutors. A very serious problem affecting the business software industry is the high cost of bonds required in criminal cases. Over the past 17 months, BSA members have been required by Dominican courts to pay over US$580,000 in bonds in six criminal cases as a condition to litigating copyright infringement cases in these courts. In these cases, BSA members' filed claims totalling $1.3 million dollars; the bonds alone cost over one-third of the requested relief. The most egregious example is a case involving the defendant T&L Software. Last summer, BSA members filed an action requesting relief in the amount of $12,500; on August 27, 1998, the court imposed a bond of $195,000, over 15 times the amount of the claim requested.

The imposition of these onerous bonds makes judicial enforcement of BSA members' copyrights virtually impossible. Almost every defendant today petitions a Dominican court to impose these bonds on BSA members. Furthermore, under the Dominican civil code, only non-Dominicans are required to pay bonds for instituting suits in Dominican courts. The magnitude and discriminatory nature of these bonds appears to violate the Dominican Republic’s current TRIPS national treatment obligation, which is not subject to transition (TRIPS Article 3 provided that "Each Member shall accord to the nationals of other Members treatment no less favorable than it accords to its own nationals with regard to the protection of intellectual property . . . ."). Clearly this discriminatory treatment will also conflict with the government’s upcoming TRIPS Article 41(2) obligation require that procedures concerning the enforcement of intellectual property rights be "fair and equitable," nor "unnecessarily complicated or costly."

Amidst these judicial problems confronting BSA members, there has been some good news on the enforcement side. In March 1999, BSA obtained its first-ever verdict against a pirate in a case brought under the copyright law. The defendant in this case was the Santo Domingo software reseller Serecom-Raessa. This verdict requires the defendant to pay $25,000 to the two BSA member companies named in the case, and also requires the president of Serecom-Raessa to serve three months in jail. The verdict was rendered under a procedure akin to a default judgement, because the defendant did not appear in court. The defendant is appealing the verdict.

Turning from judicial issues toward on-the-ground enforcement issues, BSA does note some very recent improvement with the prosecutors. As mentioned above, the government established a new Intellectual Property Department within the District Attorney's Office for Santo Domingo in July 1998. However, this Department's anti-piracy activities were disappointing during 1998 and into the early part of 1999. For example, in August 1998, the Department refused to inspect fully an end-user which claimed (falsely) to be "negotiating" with the BSA to legalize its software use. In November 1998, the Department aborted an inspection against a company owned by a prominent Dominican family. Upon being denied admission to the premises of this company, the head of the D.A.'s Intellectual Property Department merely walked away, without invoking her legal authority to enter and inspect the premises for pirated works. In December 1998, the Department raided a Santo Domingo reseller before the BSA test purchase from this reseller was available for inspection (The BSA had told the Department the date this test purchase would be available). After the BSA requested that the Department reinspect the reseller's premises on the date the test purchase was scheduled for pick-up by BSA investigators, the head of the Department replied that she would not go on a "witch hunt" against pirates. BSA representatives had much greater success last year in coordinating anti-piracy efforts with prosecutors outside Santo Domingo.

Software copyright enforcement in Santo Domingo has improved greatly since March 1999. This change coincides with the March hiring of a new assistant district attorney heading the Intellectual Property Department of the Santo Domingo D.A.'s Office. This D.A. has demonstrated in several actions/raids his willingness to invoke Dominican law against software pirates. BSA is hopeful that this anti-piracy initiative reflects a new long-term policy for copyright protection in Santo Domingo. After such a promising start, it would be a great disappointment if this new copyright enforcement initiative proves to be a short-lived phenomenon.

These successful anti-piracy actions/raids were initiated in spite of several problems with the Dominican Republic’s copyright law which provides for criminal but not civil ex parte inspections. However, even this criminal authority is ineffective due to inconsistent and antiquated criminal procedures. Because of these flaws with the copyright law and criminal procedures, software owners have been forced to rely on the Dominican Trademark Law to initiate these actions. The trademark law authorizes a private party to request a criminal, but not a civil, ex parte investigation of potential counterfeiting. Unfortunately, the trademark law provides inadequate remedies for infringements (100 pesos, or about US$8), and thus is not an adequate anti-piracy measure.

BSA estimates that the level of business software piracy in the Dominican Republic was 73% in 1998. The estimated losses to U.S. business software publishers due to this piracy were $7.4 million last year.

In May 1998, a copyright seminar for judges and District Attorneys was hosted by ONDA and co-sponsored by BSA. BSA has hosted or co-sponsored several other such seminars in the past. Similar copyright seminars and training sessions are planned for the future. The Business Software Alliance (BSA) works with PROSOFT Dominicana, the local business software anti-piracy association.

Piracy of sound recordings and music in the Dominican Republic is rampant. Although the problem is primarily in the form of pirate cassettes, piratical CDs and CD-Rs are beginning to appear. Street vendors selling these cassettes crowd the sidewalks in the commercial centers in Santo Domingo and throughout the island. The average price of a pirate audiocassette on the streets is approximately US$2.00. Significantly, the street vendors are supplied by wholesale distributors at fixed locations which openly sell this product at an average price of US$1.00 per cassette. The situation is so out-of-control that piratical product can even be purchased at the Santo Domingo airport. Because the distribution channels for illicit sound recordings are well developed, the music industry fears that as CD hardware becomes more and more accessible to the population, CD piracy will eventually replace cassette piracy.

A statistical survey of sound recording piracy in the Dominican Republic is not available at this time. However, based on cursory surveys conducted earlier this year, the recording industry estimates piracy rates to be in the neighborhood of 80% for cassettes and 15% for CDs, resulting in trade losses between US$2 million and US$3 million.

There are a number of factors that contribute to the piracy problem in the Dominican Republic. Two of the most critical: First, in the view of the recording industry, there is no clear commitment or directive from the government in the area of intellectual property protection, and consequently, there is no enforcement of existing laws to protect against record and music piracy.

Second, inordinately high import duties and excise taxes tariffs of 33% serve to shield domestic producers of piratical product by making legitimate imported product disproportionately more expensive. The imposition of these tariffs and taxes also result in the denial of "equitable and reasonable access to the markets and basic commodity resources" of the Dominican Republic; this is part of the discretionary criteria of the GSP Program found in Section 502 (c)(4) of the Trade Act. It is the recording industry’s understanding that imported sound recordings are subject to a 30% import tariff on the CIF value of the goods. An excise tax of 15% is also levied on the aggregate of the CIF value plus the 30% import tariff. Finally, a value added tax (referred to as the ITBIS) of 8% is imposed on the aggregate of the CIF value, plus the 30% import tariff, plus the 15% excise tax. The combined effect of the import tariff, excise tax and value added tax is the imposition of a 61% tax on imported sound recordings. This hardly constitutes reasonable and equitable market access for U.S. goods.

Piracy problems in the Dominican Republic primarily involve illegal photocopying of English as a Second Language (ESL) textbooks. New book distributors continue to open stores in the country.

3. Because of Inadequate and Ineffective Copyright Protection and Enforcement in the Dominican Republic, U.S. Copyright Owners Suffer Economic Harm

Estimated losses due to the piracy of U.S. copyrighted products in the Dominican Republic for 1998 were at least $12.4 million:

INDUSTRY	1998		1997		1996		1995
	Loss	Level	Loss	Level	Loss	Level	Loss	Level
Computer Programs: Business Applications	7.4	73%	NA	NA	NA	NA	NA	NA
Sound Recordings/Musical Compositions	2.0	80%	NA	NA	NA	NA	NA	NA
Books	1.0	NA	1.0	NA	1.0	NA	1.5	n/a
Motion Pictures	2.0	90%	2.0	100%	2.0	100%	NA	100%
Computer Programs: Entertainment Software	NA	NA	NA	NA	NA	NA	NA	NA
TOTALS	12.4		3.0		3.0		1.5

Attached as Appendix 2 is the methodology used by IIPA members to calculate estimated losses due to copyright piracy. This methodology was also submitted to USTR in IIPA’s 1999 Special 301 submission.

For the reasons stated in this submission, IIPA requests that the TPSC initiate a review the GSP and CBERA country eligibility of the Dominican Republic for its failure to provide adequate and effective copyright protection for U.S. copyright owners and its failure to provide equitable and reasonable market access. If requisite improvements are not made in the Dominican Republic to remedy these deficiencies, then IIPA requests that the U.S. suspend its eligibility or withdraw GSP and/or CBERA benefits of the Dominican Republic, in whole or in part.