Reference ID: 07LIMA523
Created: 2007-02-22 18:37
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED
Origin: Embassy Lima


DE RUEHPE #0523/01 0531837
P 221837Z FEB 07

    UNCLAS LIMA 000523




E.O. 12958: N/A

REF: A. STATE 7944
B. 06 LIMA 2529
C. 06 LIMA 1718


1. Post concurs with industry recommendations that Peru remain on
USTR's Special 301 Watch List for 2007. Peru saw improvements in
IPR protection that resulted in a slightly higher market share for
certain copyrighted and patented products. The GOP's IP agency used
preliminary injunctions to halt the sale of suspected illegal copies
of pharmaceuticals, clothing and other items pending final rulings.
In December 2006 and January 2007, the GOP for the first time
assigned IPR duties to several national courts of first instance and
one appeals court, and increased the number of prosecutorial offices
with IP responsibilities. Due care should be taken in the public
announcement of Peru's standing in the Special 301 review to
acknowledge these positive developments.

2. Still, Peru continues to face high levels of patent, copyright
and trademark infringements in all sectors, including media, toys,
and apparel. Challenges include strengthening enforcement and
border controls, combating public acceptance of pirated and
counterfeit goods, enacting deterrent sentences, and further
reducing government use of unlicensed software. The USG and GOP
signed the U.S.-Peru Trade Promotion Agreement (PTPA) in April 2006,
and the Peruvian Congress passed the agreement in June 2006. If
passed by the U.S. Congress and properly implemented, the PTPA will
help improve the protection of IP in Peru. End Summary.

Laws and Regulations: PTPA Would Help

3. Peru's IP laws are generally adequate and TRIPS compliant. The
pending U.S.-Peru Trade Promotion Agreement (PTPA) would correct
shortcomings and increase some protections beyond TRIPS
requirements. For example, the PTPA includes provisions that
enhance trademark protections, provide copyright protection related
to the Internet, mandate government use of legal software, protect
confidential pharmaceutical and agrochemical test data and trade

secrets, and increase penalties for IP violations.


Overall Infringement Levels: Very High

4. According to the International Intellectual Property Alliance's
(IIPA) 2006 estimates, 98% of sound recordings (same level as in
2005) and 70% of business software (down from 73% in 2005) in Peru
were pirated, representing a loss of $80.5 million (down from $109
million in 2005). According to the Business Software Alliance, Peru
is in the middle of the pack among Latin American countries in terms
of software piracy. The audiovisual industry estimates a 75% piracy
rate, which was a major factor in the closure of all of
Blockbuster's stores in Peru. The Pharmaceutical Research and
Manufacturers of America (PhRMA) estimates that patent and data
protection damages totaled 23.2% of sales in Peru. Pirated CDs and
DVDs, illegal copies of books, and counterfeit clothing and toys can
be found throughout the country. Some markets are known for selling
illegal goods, which can also be bought on many of Lima's street

GOP Efforts and...

5. The GOP has made some effort to combat IP violations, and has
committed itself to further improvements by approving the PTPA. In
May 2006, the GOP issued Supreme Decree 009-2006-PRODUCE, declaring
the fight against IPR violations to be of national interest and
bolstering the activities of relevant agencies. Indecopi's (the
GOP's IP administrative agency) trademark, patent and copyright
offices do good work with limited staff and funding. The patent,
trademark, and copyright registration processes have been
burdensome, especially for small businesses. Indecopi has made
significant headway in reducing the time it takes for these
registrations, which should help improve the IP climate. Indecopi
officials and public ministry prosecutors have ex oficio powers,
allowing them to conduct investigations and seizures, and file
charges, without an industry complaint.

...Public Indifference

6. In a national survey on corruption and crime conducted in
September 2006, only 17% of Peruvians objected to the purchase of
pirated products, making IPR violations the most tolerated crime in
the survey by far. Other crimes included in the survey included
nepotism, not paying transportation fares, bribing police to avoid a
ticket, not requesting a receipt to avoid the VAT, and giving a gift
or money to accelerate judicial or municipal transactions. Changing
the public's perception is perhaps one of the more difficult
challenges facing those who want to improve IPR protection in Peru.

7. April 23-27 was "Intellectual Property Week" in Peru (Ref C),
celebrated with book giveaways and massive destructions of seized
products. Indecopi commemorated its second annual Destruction Day,
destroying more than 300,000 confiscated pirated CDs and DVDs, and
educating the public about how IPR violations hurt the overall
well-being of Peruvians. Indecopi also highlighted the need to
protect copyrighted printed material and held a two-day seminar for
local government officials, bringing in speakers from the
audiovisual, music and book industries to explain how IPR violations
directly affect Peruvians. The Peruvian Book Association sponsored
special sales on books on April 22 in more than 50 locations
throughout Peru in an effort to promote the sale of legitimate

...Patents: U.S. Pharmaceuticals Winning

8. U.S. pharmaceutical companies said they began to note a positive
shift of the burden of proof from the patent holder to the accused
copier in Indecopi's proceedings. Indecopi often issued preliminary
injunctions against presumably illegal copies. U.S. pharmaceutical
companies also won several important patent infringement court cases
in 2006 (see Ref B for an example). Confidential test data
submitted for the marketing approval of pharmaceutical and
agrochemical products remains unprotected, though the PTPA should
resolve this once implemented.

...Trademarks: Fines Increasing

9. Indecopi's Trademark Office opened 477 infringement cases in
2006 (67 of them ex oficio), and conducted 423 inspections (30 of
them outside of Lima). During the year, the Trademarks Office found
that 224 charges were founded, issuing 174 fines (totaling almost
$500,000) and 44 cautions. The fines issued by the Trademark Office
in the three previous years totaled $314,000 (2005), $158,000
(2004), and $124,000 (2003). Most of the Trademark Office cases
involve clothing and branded items from companies like Disney,
Marvel, and Warner Brothers.

...Copyrights: Ubiquitous Optical Discs

10. Indecopi continued its "Anti-Piracy Crusade," which began in
2002. In July, the Anti-Piracy Crusade presented an advanced
screening of "Superman Returns" in an effort to increase public
awareness about IPR. Indecopi's Copyrights Office conducted 51
inspections of businesses alleged to use illegal software in 2006,
presenting 28 formal cases, and issuing 22 fines. In all, the
Copyrights Office conducted 270 inspections in 2006, 155 of which
involved music CDs.

Government Software: Some Improvements

11. In 2003, the GOP passed a decree mandating that all government
agencies use legally procured software by March 31, 2005. This
deadline was extended to December 31, 2006, and, regrettably, again
to July 31, 2008. The E-Government Office in the Prime Minister's
Office has the lead in implementing this project. Enrique Saldivar,
the new Director of the E-Government Office, told us that the
percentage of central government computers carrying pirated software
had decreased from over 73% in 2005 to 41% in the last quarter of
2006. Implementing the measure within the police and military has
been particularly difficult because of the decentralized nature of
their IT offices. Cleaning up government computers, especially in
law enforcement, would provide a positive example to the public.
The GOP is making an effort to meet its targets before the new
deadline, and committed to resolve this problem in the PTPA.

Law Enforcement: More Raids and Seizures Needed
--------------------------------------------- --

12. In 2006, Indecopi led 65 operations resulting in $2.5 million
worth of seizures of clothing, accessories, CDs, DVDs, toys, etc.
The Peruvian National Police's (PNP) Department of IPR
Investigations conducted 64 raids from January-August 2006,
detaining 1,175 people and seizing over $6 million of pirated or
counterfeit items. From January-May 2006, the Peruvian National
Police's elite "Green Squad" seized 1,955 bags of pirated CDs, DVDs
and VHS tapes; compared with only 318 bags in all of 2005. Peru's
Customs office also sporadically seized counterfeit goods entering
Peru's land borders from Chile, Bolivia and Ecuador, as well as the
primary seaport of Callao. The Customs Special Operations unit gave
excellent cooperation in interdicting a container of pirated NIKE
products, advancing the information to Chilean Customs, who seized
the goods and began to work with U.S. law enforcement to dispose of
the goods and track down the shipper. Given the magnitude of the IP
problems in Peru, additional law enforcement resources should be
used in a concerted campaign.

Judicial Process: Few Convictions, New Courts Give Hope
--------------------------------------------- ----------

13. Despite the numerous raids and seizures over the years, the
number of penal convictions and deterrent sentences are close to
zero. According to an IP prosecutor, there are over 1,000
IP-related cases pending judicial action. For years, industry,
Indecopi and post had been emphasizing the need for specialized IP
courts, so that judges could develop an IP knowledge base.

14. The January 2007 implementation of the late 2006 decisions to
assign IP responsibilities to specific courts and to increase the
number of IP prosecutors should finally help to improve this lack of
judicial enforcement. These reforms assigned IP duties to four
national penal courts of first instance (with one judge and one
assistant each) and a national penal appeals court (with 16 judges,
including a president of the court). The appeals court used to be
focused on terrorism and corruption cases, and is respected for its
independence and competency.

15. Before January 2007, Peru had two prosecutors' offices
dedicated to IP, with three prosecutors in each office. There are
now three prosecutors' offices (with three prosecutors each) in the
city of Lima, plus two district prosecutors' offices (in Lima Norte
and in Callao, which includes Peru's main seaport and airport), with
IP responsibilities. These offices were given additional preventive
and investigative duties.

16. In addition to the regular training Indecopi and Customs
provide law enforcement officials, these entities have developed
extensive training for the new judges and prosecutors. Given the
importance that these judicial officials are able to do their jobs
well, post plans on organizing a judicial IPR enforcement seminar in
the latter part of 2007. Indecopi and the American Chamber of
Commerce in Peru have already indicated a willingness to
collaborate. Thanks to USPTO, post has already been able to send
the president of the new IP appeals court and one of the new lead
prosecutors to enforcement training in Alexandria.

Treaties: Peru Signed Nearly All of Them

17. Peru is a member of the World Intellectual Property
Organization (WIPO). It is also a member of the Paris Convention,
Berne Convention, Rome Convention, Geneva Phonograms Convention,
Brussels Satellites Convention, Universal Copyright Convention, the
WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms
Treaty (WPPT). Peru joined the WCT in July 2001 and the WPPT in
February 2002. The U.S. does not have a bilateral investment treaty
with Peru, but the pending U.S.-Peru Trade Promotion Agreement
(PTPA) contains a state-of-the-art IPR chapter.

Other Post Efforts: Toolkit, AmCham, Training

18. Post launched a comprehensive IPR Toolkit, available on FCS'
website ( Post welcomed the
assignment of a Department of Commerce regional IP attache' to Sao
Paulo in 2006, and he has already visited Peru. Post again helped
to organize AmCham's successful annual IPR conference, which had 203
attendees plus two industry-specific workshops in 2006. Post
participates in AmCham Peru's very active IP Committee, which meets
regularly. The Committee established three subcommittees in 2007 --
enforcement, FTA implementation, and making IPR protection a state
priority -- to further bolster IPR efforts. Post sent at least 14
Peruvians to USPTO and USDOJ IPR training courses in 2006. Post met
with numerous U.S. companies throughout the year on IP issues, and
has successfully advocated on their behalf when appropriate.

Comment: Recommend No Change in Status

19. Post recommends that Peru remain on USTR's Special 301 Watch
List due to the continued high levels of copyright and trademark
infringements, the lack of protection for confidential test data
submitted for the marketing approval of pharmaceutical and
agrochemical products, and the need for increased enforcement
efforts, particularly the application of strong penalties for IPR
violators necessary for deterrence. Post applauds the efforts of
Indecopi and the designation of new IP-focused courts and
prosecutors, which, together with implementation of the PTPA, will
lead to improvements in Peru's IP environment. Post requests that
the public announcement of Peru's standing in the Special 301 review
acknowledge the country's positive achievements.