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October 29, 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:Public Comment on the Notice of Review of Country Practices Petitions in the 1995 Annual GSP Review, 61 Fed. Reg. 52078

(October 4, 1996)

To the Subcommittee:

The International Intellectual Property Alliance (IIPA) submits the following comments in response to the public notice regarding the initiation of the country practice reviews against Paraguay and Panama in the 1995 Annual GSP Review.  IIPA supports the initiation of these two intellectual property rights (IPR) cases.  We also request the opportunity to make an oral presentation at the November 13-14, 1996 public hearings.


The IIPA is a coalition of eight trade associations (listed below) that collectively represent the U.S. copyright-based industries -- the motion picture, music and recording, business and entertainment software, and book publishing industries.  These industries represent the leading edge of the world's high technology, entertainment and publishing industries and are among the fastest growing and largest segments of our economy.

This letter describes our industries' major problems in Paraguay and Panama.  We will keep the Subcommittee informed of any developments involving piracy, legislation and other market access barriers throughout the GSP Review Process.   


Paraguay clearly fails to meet the GSP program standard of providing "adequate and effective means ... to secure, to exercise, and to enforce exclusive rights in intellectual property, ... including copyrights."  Section 502(c)(5) of the Trade Act of 1974, as amended (codified at 19 U.S.C. 2462(c)(5)).  IIPA and our members have been involved in legislative developments as well as antipiracy efforts in Paraguay since at least 1992.  Attached is the excerpt on Paraguay from our February 20, 1996 Special 301 submission to the U.S. Trade Representative.  We agree with Ambassador Barshefsky's statement in her April 30, 1996 Special 301 press release that "Paraguay increasingly has become a piracy center in South America, particularly in production of [pirate] sound recordings and entertainment software." Customs enforcement  is virtually non-existent, and new copyright legislation is urgently needed.  On October 2, 1996, Ambassador Barshefsky kept Paraguay on the Special 301 "watch list" and specifically added that "the Government of Paraguay must take strong, coordinated, government-wide action to institute effective enforcement systems."

PIRACY:  Since IIPA's February 1996 submission to USTR, several enforcement and legislative developments have occurred in Paraguay.  Unfortunately, the results are mixed at best.  While a few major raids have occurred, they have been done almost completely by private industry, not governmental initiative.  the raided factories, initially closed, have now re-opened and appear to be operating at full capacity again.

In IIPA's 1996 Special 301 submission, we reported an estimated $30 million in annual trade losses (excluding estimated business software piracy losses which were not available).  Given the growing level of piracy afflicting the recording industry, RIAA has revised its estimated annual losses in Paraguay to $100 million.  This means that the U.S. copyright industries suffer at least $130 million in estimated annual losses due to piracy.

In August 1996, two raids were conducted on an audio duplication facility in Ciudad del Este, the center of pirate manufacturing and distribution in Paraguay.  While the cooperation and involvement of the Paraguayan authorities in these private sector-led cases was laudable, there remains much to be done before it can be said that piracy is brought under control and the Paraguayan enforcement system works effectively.  Customs has been non-responsive in addressing the serious problems at Paraguay's porous borders.

Another industry-led raid was conducted on a videogame facility, and a large seizure of one videogame producer's pirated materials was completed.  However, the police left behind a large amount of pirate and counterfeit materials (including cartridge housings, PC boards, chips, and other components specific to the entertainment software industry) of another videogame producer.  Furthermore, the judge's order to close this plant was overturned a short time later by another judge who ruled that workers' rights to work were violated.  We understand that this facility has been reopened and is back in full operation.

The motion picture industry faces a serious problem in that 85% of the home video market is pirate, the majority of which is due to illegal back-to-back copying.  However, major duplication centers also exist, and some pirate duplication labs operates as regional centers which supply pirate product for Paraguay and other countries.  Paraguay has become a center for the illegal duplication and subsequent exportation of audiovisual works (including both pirate and gray-market copies) to South America and the center for the transshipment of copies of audiovisual works from Asia to South America.  Ciudad del Este is one of the largest pirate trading centers in the world, including video duplication and counterfeiting of labels, packaging and security stickers.  Satellite signal theft and unauthorized cable retransmissions of protected works are increasing.

On September 30, 1996, President Wasmosy issued a decree creating the National Anti-piracy Council which will be responsible for developing and executing an national anti-piracy campaign.  It remains to be seen what actions this interagency council will take and how effective they will be in fighting piracy.

LEGISLATION:  The draft copyright law was submitted to the Paraguayan Parliament this summer, but reports indicate that due to other legislative priorities, consideration by the Senate Education Committee may not occur until January 1997.  While the draft is an improvement over the current copyright law, several amendments will be necessary to ensure that it is compatible with international standards:  that computer programs are protected as literary works' that the rental provisions for computer software meet TRIPS Article 11 obligations; that civil and criminal ex parte  searches are expressly provided; that there clearly is a right of parallel importation; that the definition of public communication is expanded; that civil remedies and criminal penalties for the unauthorized retransmission of audiovisual works are included; and that at least minimum fines and/or minimum terms of imprisonment are provided.  We hope that additional drafting issues raised by the U.S. Government, IIPA and IIPA members will be considered during the drafting of this new legislation.  Importantly, customs authorities must have the authority to search, on their own initiative, all persons, objects and vehicles that enter or leave Paraguay and detain persons in possession of infringing goods.

SUMMARY on PARAGUAY:  There is much to be done in Paraguay, and the following summary should be viewed as illustrative, not exhaustive.

---Paraguayan enforcement officials must initiate anti-piracy actions;

---Customs authorities must clamp down on both the import and export of pirated and counterfeited copyrighted products;

---Effective judicial procedures must be adopted to expedite copyright cases through the legal system;

---The draft copyright law must be passed, including several amendments necessary to ensure that it provides "adequate and effective" copyright protection in conformance with GSP criteria.

Several Alliance members (RIAA, IDSA, MPAA, BSA) and their local representatives have traveled (and are also traveling in the near future) to  Paraguay to meet with key legislators as well as conduct anti-piracy trainings for law enforcement personnel.


Alliance members have experienced ongoing problems in Panama over the years, including the continuation of inadequate legislation and ineffective enforcement.  We are disappointed in several respects:  that significant deficiencies remain in the new copyright law; that a recent Supreme Court decision radically undercuts the authority of the Copyright Office to conduct searches and seizures, which has interrupted drastically slowed anti-piracy actions; and that the Canal Free Zone (CFZ) continues to be a source of transshipment of pirated goods.  Panama is in the process of acceding to the World Trade Organization; it is imperative that the Administration not permit Panama to take advantage of the transition periods permitted under TRIPS, in accordance with U.S. Congressional mandate.

PIRACY.  The copyright industries continue to face high levels of piracy and the absence of effective enforcement in Panama.  In its April 30, 1996 press release, USTR cited Panama as becoming "a major transhipment and assembly point for pirated and counterfeited products".  For example, the IDSA reports the easy availability of counterfeit videogame products for sale in the CFZ and for shipment around the world.  Factories in Panama assemble counterfeit Nintendo videogame products from components shipped from Taiwan. Over the past few years, Nintendo. and IDSA member, has conducted numerous raids which have resulted in the seizure of large quantities of infringing products, and yet piracy remains a major problem.

The motion picture industry faces a severe video piracy problem; 95% of the home video market is pirate.  Often these pirate video are copied from masters made from screeners of current releases, original videos, and copies from pay-per-view systems in the U.S.  These masters are subtitled, copied in at least two major duplicating facilities, and supplied to local stores in Panama, as well as to other countries in Central and South American and the Caribbean.  Unofficial estimates place the number of video clubs at 350 throughout Panama. Videos still in theatrical release in the U.S. can be rented in Panama for US$1.50 for a week or purchased for US$5 to $8 each.

The film industry also faces the problem of unauthorized interception and retransmission of satellite signals, with an estimated 20% of the pay TV subscribers illegally receiving U.S. domestic signals using parabolic antennas and grey market decoders.  Three cable operators in Panamanian interior are engaged in piracy and many hotels (about 75% of the non-luxury ones) retransmit programming without authorization.  Estimated trade losses due to video and cable and satellite piracy in Panama amount to $14 million annually.

The recording industry continues to be plagued by large shipments of blank audiocassettes are being shipped through the CFZ, suggesting that Panama is acting as a transshipment point to supply raw product for the entire region.  The U.S. book publishing industry estimates approximately $2 million in annual trade losses due to piracy in Panama, due to unauthorized photocopying as well as the historical problem involving transhipment of pirated books from the Dominican Republic.

LEGISLATION:  After years of effort, in 1994 Panama passed a new copyright law which entered into effect on January 1. 1995.  While it represented a significant improvement over the prior law, this law nevertheless contains several key deficiencies:  There is no rental right for sound recordings (as required by TRIPS Article 14.4); there is no express protection for pre-1974 sound recordings (as required by TRIPS Article 14.6); and clarification is need whether ex parte civil searches are available under the Judicial Code, among other deficiencies.  The law requires that criminal proceeding shall be instituted at the request of the interested party; however, the legislative history reflects that the State may be considered an interested party.  It must be clarified that the law should not require a private penal action, but instead the Panamanian authorities have the ability to initiate criminal actions on their own initiative.

After the law was passed, a constitutional challenge was immediately raised by Panamanian radio broadcasters.  In January 1996, the Supreme Court ruled that the challenged articles were constitutional, with the exception that the word "exclusive" was removed the list of "exclusive rights" afforded to producers of sound recordings (this is cause for concern because the rights afforded to producers of sound recordings in the challenged article must be considered exclusive rights).  Another legal challenge to the law was made after the Copyright office raided a video club in June 1996.  The defendants challenged the legality of the raid, arguing that the implementing  regulations permitting the Copyright Office to conduct ex officio seizures of pirated works was not authorized under the law.

In July 1996, the Supreme Court, moving quite rapidly, suspended the operation of this regulation (Article 75, specifically) on the grounds that the Copyright Law provided exclusive jurisdiction to the courts for such actions.  As a result, while court orders can still be obtained, the Copyright Office, which had been conducting raids, no longer can perform such actions.  In addition, we have learned that the President Ballardes has ordered amendments to the copyright law to improve its enforcement standards.  IIPA does not have any information regarding the text of these amendments but have heard that the proposal did not make significant changes to the law; review of this proposed legislation is imperative.

SUMMARY on PANAMA:  Panama clearly fails to meet the "adequate and effective" IPR protection standards of the GSP Program.  To remedy the deficiencies noted, the Panamanian government must take several actions to being to address these enforcement and legislative problems, including, for example:

---amend the copyright law so that it at least meets TRIPS standards and provides "adequate and effective" copyright protection and enforcement.

---significantly improve enforcement, including:

-- restoring the authority of the Copyright Office to conduct raids and seizures of pirated materials;

-- increasing the level of administrative penalties which can be issued by the Copyright Office; and

---improve border measures (both in terms of legislation and in particular enforcement);


We fully support USTR's initiation of these GSP country practice reviews against Paraguay and Panama.  The GSP Program must continue to be aggressively used in bilateral settings where countries fail to provide adequate and effective copyright protection and enforcement.


Respectfully submitted,



Maria Strong

Vice President and Associate General Counsel IIPA