Oct 242014

Reference ID Created Released Classification Origin
2008-02-28 05:35
2011-08-30 01:44
Embassy Manila

DE RUEHML #0497/01 0590535
O 280535Z FEB 08




E.O. 12958: N/A
SUBJECT: Philippines: 2008 Special 301 Report

REF: A. State 9475
¶B. 07 Manila 552

¶1. (SBU) Summary. Embassy recommends retaining the Philippines on
the Special 301 Watch List. The GRP increased its IPR enforcement
actions during 2007, especially against optical disk piracy. The
number and value of seizures in 2007 rose significantly. There
remain issues of serious concern, especially the lack of convictions
of IPR violators and the need for further coordination of IPR
enforcement agencies. Retention on the Special 301 Watch List will
signal our recognition of the GRP’s progress and also will maintain
the leverage which has been responsible in some part for this
progress. End summary.

¶2. (U) This report is divided into three sections: Part I on the
GRP’s progress on IPR protection, Part II on areas that warrant GRP
attention, and Part III on our recommendation.

Part I: GRP Progress on IPR Protection

¶3. (U) In February, 2006, USTR lowered the Philippines from the
Special 301 Priority Watch List to the Watch List. At that time,
USTR issued a Special 301 Action Plan for the Philippines. Over the
past two years, the GRP has stepped up its efforts to protect
intellectual property, focusing on seizures of counterfeit goods,
especially optical media disks. The GRP has actively engaged the
USG on intellectual property protection, meeting regularly with
Embassy and USTR representatives, and seeking training opportunities
with the USPTO. Around 30 GRP officials received training at
USPTO’s Global Intellectual Property Academy in Virginia in 2007,
and two IPO officials completed the six-month Foreign Examiners in
Residence program. Three other officials participated in an
International Visitor Leadership Program on IPR. Enforcement
actions against IPR violations were more numerous and widespread in
¶2007. While serious deficiencies remain, the GRP has taken positive
steps over the past year to improve its IPR protection regime.

Committed Leaders on IPR within GRP Ranks

¶4. (SBU) Among Philippine champions of IPR, we would highlight in
particular Adrian Cristobal, the Director General of the
Intellectual Property Office, Peter Favila, the Secretary of Trade
and Industry, Eduardo Manzano, Chairman of the Optical Media Board,
and Dennis Gonzalez, Chairman of the National Book Development
Board. These officials have worked hard to raise the profile of IPR
protection within the GRP, and they have been behind the increased
public attention that President Arroyo now pays to intellectual
property issues.

The Intellectual Property Office

¶5. (U) The Intellectual Property Office (IPO), by statute, is the
coordinating body for IPR enforcement in the Philippines. It has
functions equivalent to the USPTO, and also coordinates the
interagency National Committee on Intellectual Property Rights,
hosting its biweekly meetings. Its Director General, Adrian
Cristobal, reports to the President through the Secretary of Trade
and Industry. Industry representatives praise Cristobal’s efforts,
describing him as dedicated and energetic.

¶6. (U) In addition to its coordinating role, the IPO also organizes
campaigns to enhance the public profile of IPR protection. Over
2007, it continued to organize an average of one public lecture or
workshop per week, holding events throughout the country. It held
events for government agencies, both national and local, for private
business, and conducted seminars at five universities. Cristobal
remarked to Post officers that as the IPO does not have primary
jurisdiction over enforcement of IPR law, he views public education
as his office’s most important responsibility.

¶7. (U) The IPO maintains an online database of intellectual property
cases intended to permit real-time verification of the status of
intellectual property criminal cases. Six agencies have now
contributed information to the database. However, the IPO has
companied that the legal representatives of some intellectual
property owners have not provided information on cases that are

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still before the courts. In January 2007, the IPO signed a
Memorandum of Understanding with the United States Patent and
Trademark Office that aims to improve the intellectual property
protection system through information sharing and capacity building.
The MOU has not been implemented by the IPO, and the IPO has yet to
submit the implementation work plan it is responsible for under the

The Optical Media Board

¶8. (U) The GRP created the Optical Media Board (OMB) in early 2004,
and over the past three years the OMB has asserted its role as the
regulatory authority for the licensing of replicating machines and
equipment and the materials used for making optical disks. The OMB
has been fully operational over the past year, and now carries out
raids on a fairly continuous basis. The chairman of the OMB,
popular film actor Eduardo Manzano, has leveraged his public persona
into media attention for the OMB and its work. Manzano appears
frequently in the local media, both in interviews and in staged
events such as the destruction of seized pirated DVD’s.

¶9. (U) The OMB estimates that most pirated optical media purchased
in the Philippines is imported, principally from China, Indonesia,
and Malaysia. However, based on increased seizures of replicating
machines and mass burners, it believes that the share of pirated
media produced in country is growing. The OMB seized over 4.8
million optical discs in 2007 valued at USD 28 million, compared to
1.6 million disks in 2006. It carried out 2,504 inspections over
the course of 2007 compared to 942 inspections the previous year.

¶10. (SBU) Manzano’s public profile also makes him a lightning rod
for criticism. He is often accused of using the OMB as a tool for
obtaining publicity for his television projects. Manzano’s critics
accuse him of spending less time and putting less effort into his
duties at the OMB than into his show biz career. As we noted in ref
B, the OMB remains understaffed by perhaps half and its budget is
grossly inadequate. Manzano reportedly has paid some of the costs
of undertaking raids out of his own pocket. Manzano’s rocky
relationship with many in Congress has not helped the budget
situation. After Manzano did not show up to testify personally in
budget hearings, the Senate initially granted the OMB a budget of
one peso (2.5 U.S. cents) for 2008, though it finally relented and
straight-lined the agency from 2007.

¶11. (SBU) The OMB has had mixed success with its search warrants,
many of which have been quashed on appeal, an apparent result of its
weak legal office. The work of the OMB needs to be better integrated
with that of the Philippine National Police and the National Bureau
of Investigation. The Optical Media Act of 2004 gives OMB the lead
in all matters involving pirated optical discs, but in practice
large raids and seizures typically require the assistance of law
enforcement officers. Interagency coordination remains poor.

¶12. (SBU) Manzano told Post that he plans to spend the coming year
fighting not only for more resources, but for improvements to the
Optical Media Act that enumerates the Board’s powers. Manzano hopes
that the OMB’s jurisdiction will be expanded to include Internet
piracy–which will be a more significant problem in the Philippines
as home broadband access becomes more common–in addition to optical
disks. Manzano is also calling for legislation that will make it
easier to prosecute “camcording” of movies in theaters, reportedly a
growing problem.

Philippine National Police and National Bureau of Investigation

¶13. (U) Within the Philippine National Police, intellectual property
cases come under the jurisdiction of the Anti-Fraud and Commercial
Crimes Division, led by Colonel Rene Ong, who replaced Noel delos
Reyes in the middle of 2007. In 2007, the Division served 241
search warrants and made 59 arrests, filed 28 cases, and made
seizures worth more than USD 9 million. During the past year, the
Division stepped up its enforcement actions on trademark
infringements, conducting several raids against warehouses that
stored counterfeit products. Police carried out enforcement actions
against internet cafes in Metro Manila, Cebu. and Davao City,
cracking down on the use of illegal software, and on the downloading
of copyrighted files in the cafes.

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¶14. (U) The Intellectual Property Rights Division of the National
Bureau of Investigation, led by Elfren Meneses, served 310 search
warrants, filed 423 cases and seized goods worth nearly USD 6
million during the year. The Bureau conducted raids against
retailers, call centers, internet cafes, construction and
engineering design firms, as well as business establishments that
use illegal copies of computer software. These high-profile raids
were conducted in Metro Manila, Nueva Ecija Province, Cavite
Province, Cebu and Laguna Province in 2007.

Bureau of Customs

¶15. (U) While the Intellectual Property Unit at the Bureau of
Customs remains a small ad-hoc group, it had many important seizures
of trademark-infringing goods from China during the year. In
January 2007 it assisted in seizing four DVD replicating machines
being smuggled into the country, other items seized included pirated
DVDs, counterfeit cellphone accessories, bags, shoes & apparel, and
cigarettes. Overall, the Unit made 34 seizures worth about USD 22
million in 2007.

National Book Development Board

¶16. (U) Over the past two years, the GRP has increased the amount of
attention it pays to copyright piracy. Book piracy in the
Philippines focuses on academic textbooks. The National Book
Development Board (NBDB), a policy making body created by an act of
the Philippine Congress, works with the Philippine Reproduction
Rights Organization to monitor book sellers and copy shops.

¶17. (SBU) The Philippine government is considering methods for
licensing the photocopying of copyrighted materials. While the
absence of a licensing scheme may be contributing to the widespread
unauthorized photocopying of textbooks, U.S. publishers have
expressed concerns about this proposal, given that early versions of
it suggested that publishers would be compelled to participate,
royalties would be low, and payments would go mainly to Philippine

The “Cheaper Medicines” Bill

¶18. (U) For the second straight year, the highest profile IPR issue
in the Philippines was the Congressional proposal for a “Cheaper
Medicines Act” to reduce the prices of prescription drugs, the
highest in Asia after Japan, by regulating drug prices, loosening
patent protection for pharmaceuticals, and permitting parallel

¶19. (SBU) After the May 2007 elections, legislators introduced 25
different versions of the bill, though over the following months
consolidated House and Senate versions emerged. We remain concerned
that both the House and Senate bills bar the issuance of new use
patents and have provisions on compulsory licensing that are not
fully consistent with TRIPS. The legislation is expected to pass
congress in 2008.

Part II: Areas of Particular Concern

¶20. (SBU) Despite the progress that the GRP made in enhancing IPR
protection during the year, there are still issues that warrant the
continuation of the Philippines on the Special 301 Watch List. The
most important areas of concern remain the institutionalization of
IPR protection, and the inability of GRP authorities to translate
raids into convictions of IPR infringers.

The Department of Justice (DOJ) and Prosecutions

¶21. (SBU) The lack of prosecutions and convictions of IPR violators
continued to be the biggest weakness in IPR enforcement this year.
A year that saw 468 search warrants issued and USD 73 million in
seizures produced no convictions.

¶22. (SBU) In late 2005, the Department of Justice reconstituted its

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Task Force on anti-Intellectual Property Piracy. Despite its name,
the 10 prosecutors on the task force spend only around 10% of their
time on IPR. DOJ’s backlog of unresolved IPR cases may soon reach
1,000 cases. However, Senior Prosecutor Aileen Marie Gutierrez has
distinguished herself in pressing forward with the criminal
prosecution of notorious Cotabato City cable pirate Estrellita
Tamano despite Tamano’s political influence locally and in Manila.

¶23. (SBU) The failure of the Department of Justice to prosecute IPR
cases is just one aspect of a weak criminal justice system in the
Philippines. Only seven percent of all trials result in
convictions. Procedural rules on appeals afford defendants many
opportunities to delay the progress of cases, and judges across the
system lack what one local attorney calls “a sense of judicial
urgency.” Progress on a host of issues that interest the USG are
contingent on improvements in the judicial system, and significant
USG resources are being invested in efforts to help the Philippines
improve its judicial system.

Institutionalization and Financing of Enforcement

¶24. (SBU) Progress needs to be made in the development of
enforcement institutions, and funding for enforcement needs to be
set aside. A reorganization of the Bureau of Customs, which would
make the IPR unit permanent, has been pending for several years
without action. The annual enforcement budget of the OMB has been
PHP 1 million (about USD 25,000) for the past three years, a level
that would permit only a few actions per year without outside

WIPO Internet Treaties

¶25. (U) The Philippine Congress has yet to pass legislation amending
the Intellectual Property Code to incorporate the provisions of the
WIPO Copyright Treaty and the WIPO Performances and Phonograms
Treaty. When the new Congress assembled after the May 2007
elections, Sen. Edgardo Angara reintroduced Senate Bill 880 to
implement the Treaties. The International Intellectual Property
Association has said that the bill, if enacted, would establish
“world class copyright legislation.”

Cable Piracy

¶26. (SBU) The illegal retransmission of pay-TV signals continues to
be a problem in the Philippines, especially outside Manila. In
rural areas, some smaller regional companies take broadcast signals,
often using illegal decoders, and redistribute them to customers
without payment to rights-holders. The National Telecommunications
Commission renews the licenses of these companies without regard to
whether they engage in signal theft.

Notorious Markets

¶27. (SBU) There remain many places in Manila where pirated and
counterfeit merchandise is openly sold. The most notorious are in
street stalls the neighborhoods of Quiapo and Binondo. Several
shopping malls openly sell counterfeit goods, including Makati
Cinema Square, 168 Mall, and Greenhills Shopping Center. Executive
Order of November 17, 2006 establishes landlord liability for
tenants who sell pirated merchandise.

Part III: Post Recommends Retention on the Special 301 Watch List

¶28. (SBU) The Embassy recommends retaining the Philippines on the
Special 301 Watch List this year. Years of pressure have raised GRP
awareness of the importance of IPR protection, and the government
has begun to take action as documented above. GRP officials are
sensitive to the country’s 301 status. If the Philippines were to
be raised back to the Priority Watch List, we believe it would
undermine those in the GRP who are working to promote intellectual
property protection. Far from increasing GRP efforts to combat IPR
violations, elevation to the Priority Watch List could reduce the
influence of our allies and discourage them. We believe our
continued engagement and sustained efforts will bring about more

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progress in 2008.




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