Can Free Trade Agreements overcome the Piracy issues inLatin America?

YVES DERAIN S

Can Free Trade Agreements overcome the Piracy issues in Latin America?

José Antonio Reyes*

I. Introducción The rise in Free Trade Agreements over the past 50 years has generated a strong international protectionist response among Civil Law countries on several key issues. In spite of the trade diversion resulting from protectionism, free-trade agreements can advance the goals of expanding free markets, promoting individual freedom, and fostering peaceful cooperation among nations. In addition to receiving short-term economic benefits, nations pursue free-trade agreements in order to protect common bilateral interests, especially in, but not limited to the area of copyright protection. The Free Trade Agreement (FTAs)1 signed by South and Central American nations and the US are no exception.

FTAs help develop the economic benefits and copyright protections that may motivate nations to sign free-trade agreements.

It is hoped that the economic benefits resulting from the implementation of the FTAs will solidify economic ties between South and Central America and United States, and foster integration among South and Central American economies with the USA. Furthermore, the expected impact of FTAs on trade and financial

* LL.M International Business Law of American University (USA). Master of Law and Bachelor of Laws of Universidad Latina de Costa Rica. Legal Intern of Permanent Court of Arbitration, The Hague, The Netherlands.

E-mail: jreyes@pca-cpa.org.

1 The data presented on this paper refers only to the following countries: Mexico, El Salvador, Honduras, Guatema la, Nicaragua, Panama, Costa Rica, Colombia, Chile, and Peru. The examples use in this paper are from Costa Rica since this nation has not been able to ratify the CAFTA-DR due to political difficulties. This agreement has been under discussion in Costa Rica for four years and still debating while other nations have spent less than a year for the ratification. This should affect futures negotiation of free trade agreements with other nations.

LIMA ARBITRATION N° 3 - 2008 / 2009

321

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

linkages between South and Central America and the United States suggests that South and Central American business cycles will become more synchronized with each other and the U.S. Consequently, the agreements are expected to reduce “informal economies” (piracy) in the region, given the relative stability of the United States. As Mexico found with the North American Free Trade Agreement2, FTAs CAFTA-DR Chile, Peru, Colombia, Panama could further reduce volatility by accelerating the diversification of the export base and fostering intra-industry and vertical trade linkages with the United States. Because these nations have trade deficiencies, the synchronization business cycles will facilitate the coordination of macroeconomic policies in the region, allowing for the adoption of similar policy responses, and contribute to the region's integration efforts. In addition, the adoption of standards, which in some cases mirror those in the United States, will facilitate the harmonization of standards within the region.

This paper will analyze how the FTAs have influenced national law in South and Central American countries specifically on copyright issues. It will examine intellectual property right (IPR) chapter, and how this Chapter requires copyright laws to be reformed, and new copyright laws to the implemented, in addition to other treaties between the South and Central American countries and the United States. Part II of this paper will analyze the root of the region’s piracy problem. Part III explains the general demand to implement international standards in bilateral agreements in the IPR chapter. Part IV studies treaties that have been adapted to the legal systems. In addition, it deals specifically with proposals presented in the FTAs and existing law. Part V demonstrates how those treaties have become part of the judicial systems, why enforcement has not succeeded, and what authorities should do about it. Finally, Part VI concludes that free-trade agreements can positively influence South and Central American countries’ legal regimes on copyright issues.

II. Widespread underground Economy Problem in Latin America (Piracy) Piracy does not only affect companies or people, this problem affects countries as well, since piracy yields taxes. Developing countries in South and Central America lose that loss millions of dollars because of piracy. Some of these countries have very high rates of piracy in the world. It has been expected that after signing treaties

2

NAFTA (2005).

322

LIMA ARBITRATION N° 3 - 2008 / 2009

JOSÉ ANTONIO REYES

such as Chile-USA 2003, CAFTA-DR 2004 (pending in Costa Rica), Colombia -USA 2006 (pending), Peru-USA 2006, Panama-USA 2006, countries will greatly increase their efforts at reducing piracy4. The growth of the national market for copyright-protected materials and the increase in copying-related innovations, have prompted a desire for international copyright legislation. Several companies in the entertainment and multimedia industries are producing and distributing a vast range of copyright-protected materials throughout the region since they are concerned about piracy.

These copyright-protected materials encompass products such as computer software including business and entertainment applications; motion pictures, television programs, videocassettes; music, CDs, and audiocassettes.

Unfortunately, national markets in the region are overflowing with illegal copies of these products, which pose serious threats to the continued growth and sustainable competitiveness of the affected industries. This causes a huge problem for owners who naturally want to be paid for their efforts to develop, produce, and market products. The actual loss due to piracy is estimated in South and Central America to be at least US$ 3 billion each year5, and studies have shown that South and Central America’s underground economies are responsible for a big portion of this 6 loss6.

In 2005, Business Software Alliance published a worldwide study showing that in South and Central America, El Salvador had the highest piracy rate of illegal software in the region; its piracy rate is over 80 %, rating it in 13th position worldwide7. Similarly, Nicaragua is listed in 14th position with a piracy rate over 80%8. Guatemala had a piracy rate over 78 % and it is listed in 17th position9. In 2006, a similar study published in Costa Rica showed that 67% of its software is legal. Peru had a piracy rate of 73% while Colombia, Chile, and Mexico had 55%, 64%, and 65% respectively10. This is just an illustration how much money those countries are losing since they cannot taxes on those items. Latin American piracy rate dropped from 68 percent in 2005 to 66 percent in 2006, and industry losses surpassed $3 billion a year. The worldwide software piracy rate holds steady at 35 percent11.

4

Chile-USA 2003 (Chapter 17), CAFTA-DR 2004 (Chapter 15 pending in Costa Rica), Colombia-USA 2006 (Chapter 16 pending), Peru-USA 2006 (Chapter 16), Panama-USA (Chapter 15).

5 IIPA (2006).

6 Ibidem.

7 Menocal (2005).

8 Ibidem.

9 Business Software Alliance, 2005 available at www.bsa.org/globalstudy 10 Ibidem.

11 Ibidem.

LIMA ARBITRATION N° 3 - 2008 / 2009

323

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

In 2006 a study published by the American Chamber of Commerce in Guatemala concluded that piracy is rampant in Guatemala, because 89 % of the population had purchased illegal copies of software, CDs, DVDs, and other products12. This study showed that Guatemalans spent around $110 million in products, of which $32 million was spent consist of illegal merchandise13. For this reason, some companies have moved their business out of the country.

Recording companies like BMG and Sony Music have moved from Guatemala’s insecure environments to Costa Rica in order to remain competitive and create sustainable and continued growth, even though Costa Rica does have the piracy problem can attract companies14. The U.S. copyright-protected industries therefore try not only to get access to free and open markets, but also to force their trading partners to protect the copyrights on which trade depends. As part of these efforts, the deficiencies of the copyright regimes of countries where U.S.15 copyright-based industries have suffered the most are reported annually16.

Furthermore, the International Intellectual Property Alliance (IIPA) has released studies on countries that continue to have high levels of piracy, showing how they directly affect U.S.17 and Latin American jobs and economic growth. These countries are ranked on the Special 301 lists according to the importance of monitoring their intellectual property practices by the U.S. These studies estimate the that counterfeiting of copyright-protected materials has cost the creative industries at least $50 billion per year worldwide18. Therefore, there is a strong demand to solve the piracy problem in the region. The IPR chapter proposal in the regional free trade agreements has been requiring ratification and implementation of the new law, as well as legal reform to reduce piracy in the region as measures for international protection.

III. Acknowledging International Copyright Standards through Bilateral Trade There are two elements to the protection of copyright. The first element is a legal framework that provides basic rights to copyright owners and establishes

12

AmCham- Guatemala ( 2006).

Ibidem.

14 Ibidem.

15 Hornbeck (2005).

16 US-Trade (2006).

17 Ibidem.

18 IIPA (1998, 1999, 2000, 2001).

19 WIPO (2003).

13

324

LIMA ARBITRATION N° 3 - 2008 / 2009

JOSÉ ANTONIO REYES

provide the opportunity to obtain adequate remedies when those rights are violated as well as the possibility of punitive monetary judgments and, in appropriate cases, imprisonment of the infringer. The second element of copyright protection is the application of these legal rules to ensure that copyright owners have actual, effective protection against infringement of their rights because the system has adequate tools for enforcement20.

A. Implementing Standards In negotiating each free trade agreement in Latin America, it has been difficult to maintain a point of view on the intellectual Property Right chapter21 because the agreements seem to be advantageous for some countries and dreadful for others22.

During the meetings, negotiators spent several hours focusing on copyright issues due to the weak standards in some countries23. In some cases, it took the governments several weeks after they signed the agreement to resolve copyright issues. This delay might be explained by the fact that some countries are relatively in advanced copyright law compared to other countries in the region.

However, the existence of the law does not mean it is working properly, and LatinAmerica received criticism that copyright law has not been adequately enforced. Even thoughcopyright-protection law has been under discussion for a long time, this process is still developing in some countries. However, most of the countries in Latin America have signed almost all treaties and convention related to these issues.

Free trade agreements in Latin America have almost the same obligations for (IPR). They will strengthen the Central and South American Region’s IPR protection program to conform with, and in many areas exceed, WTO norms. FTAs demands would also provide stronger deterrence against piracy and counterfeiting by criminalizing end-user piracy and requiring in the area authorize action of the seizure, forfeiture, and destruction of counterfeit and pirated goods as well as the equipment used to produce them24. The FTAs final draft of the IPR also mandates both statutory and actual damages for copyright and trademark infringement, which would ensure

Ibidem.

NAFTA 1994(Chapter 17), Chile-USA 2003(Chapter 17), CAFTA-DR 2004(Chapter 15 pending in Costa Rica), Colombia-USA 2006(Chapter 16 pending), Peru-USA 2006(Chapter 16), Panama-USA(Chapter 15).

22 Ibidem.

23 Ibidem.

24 NAFTA 1994(Chapter 17), Chile-USA 2003(Chapter 17), CAFTA-DR 2004(Chapter 15 pending in Costa Rica), Colombia-USA 2006(Chapter 16 pending), Peru-USA 2006(Chapter 16), Panama-USA(Chapter 15).

20 21

LIMA ARBITRATION N° 3 - 2008 / 2009

325

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

that monetary damages could be awarded even when it is difficult to assign a monetary value to the violation25.

Several steps have been taken regarding intellectual property. For instance, the U.S.A has made a proposal on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)26, particularly in regarding to Article 27, which has important implications for the debate on the international legal framework for the patentability of software, and on whether software and computer-implemented inventions should be considered a field of technology. TRIPs is binding on all members of the WTO, and has been ratified by several countries in Latin America.

The initiative was proposed by the U.S. in order to ensure international protection of industrial material. This action likely represents the beginning of the development of intellectual property rights law in the international arena27.

However, agreements like TRIPs and organizations like the World Trade Organization (WTO)28 are not sufficient, because these multilateral agreements do not provide adequate protection for U.S. and South and Central American businesses. The U.S. considers legislation in various countries to be insufficient; as a result, the United States has created a policy of negotiating to implement international legal minimums favorable to American interests. The U.S. employs a strategy of regional negotiation, which seeks to persuade countries to adopt commercial policies on intellectual property rights favorable to the U.S. The U.S. believes that regional and bilateral agreements can offer a larger spectrum of protection than multilateral agreements29. A regional negotiation strategy can assure international legislative minimums that can work in conjunction with national laws during the trade-agreement implementation phase.

Consequently, because of this strategy, copyright standards required by treaties could easily be achieved. This can be easily surmised from the intellectual property rights chapter30.

The United States has now enacted the CAFTA-DR, NAFTA, and Chile-USA, Peru-USA, Colombia-USA and is pursuing bilateral Free Trade Agreement (FTAs)31 with Panama and three of the Andean countries. The U.S. pursues comprehensive free trade agreements on a bilateral basis to expand

Ibidem.

WTO (1995).

27 Ibidem.

28 WTO (2004).

29 Ibidem.

30 NAFTA 1994(Chapter 17), Chile-USA 2003(Chapter 17), CAFTA-DR 2004(Chapter 15 pending in Costa Rica), Colombia-USA 2006(Chapter 16 pending), Peru-USA 2006(Chapter 16), Panama-USA(Chapter 15).

31 Whitehouse (2007).

25 26

326

LIMA ARBITRATION N째 3 - 2008 / 2009

JOSÉ ANTONIO REYES

opportunities for American businesses32. In 2004, the U.S. completed free trade agreements with Australia and Morocco, in addition to the CAFTA-DR, deepening U.S. strategic and economic interests in Asia, the Middle East, and Latin America33. The United States Trade Representative (USTR) has formulated a framework for negotiating these FTAs, which relies on similar language for many of the chapters, with detailed market access and other schedules developed for each country34.

This strategy allows for considerable flexibility in addressing sensitive products and disciplines within a comprehensive agreement including such service trade, investment, government procurement, and of course, intellectual property rights. This approach has worked on a bilateral basis. Opinions differ on this last point, but FTAs have already been implemented. So far, the United States has not been able to replicate this approach at the regional level, such as the case of the Andean countries.

It is important that South and Central American countries make progress in copyright-protection; doing so will require modern legislation in intellectual property rights. Consequently, this modernization would provide the capacity to achieve the IPR requirement for free trade agreements, as well as those of other agreements. The imminent dilemma for the developed countries still seeking is to extend international intellectual property rights mechanisms is that beyond a certain point, because the effort will become counterproductive since countries do not have the capacity to enforce laws. Indeed, it may even implode because of the excessive regulation will only remain words.

There are many reasons why certain developed countries are reluctant or unable to appreciate this possibility. The intellectual property system generally, and thecopyright system in particular, is capable of generating great wealth for both developed and developing countries, and playing its own potentially significant role in increasing consumer welfare and maximizing free trade among nations. Nonetheless, this will not happen - and indeed precisely the opposite may happen; if short-term thinking or a lack of sound legal and economic analysis is to prevail. A system arguably an empire built upon maximalist intellectual property principles was constructed in the 1980's mainly by the “Quad” group of the USA, the EU, Japan and Canada35. The main governance instruments of this system are, in chronological order:

35

Drahos and Braithwaitev (2002).

USTR (2004, 2005, 2006).

33 Ibidem.

34 Ibidem.

32

LIMA ARBITRATION N° 3 - 2008 / 2009

327

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

1°) The Canada/USA Free Trade Agreement 1989.

2°) North American Free Trade Agreement (“NAFTA”) (January 1, 1994).

3°) WTO/TRIPS (adopted at Marrakech, April 15, 1994).

4°) 1996 WIPO, WCT, and WPPT treaties.

Various bilateral free trade agreements have been concluded between the USA and countries such as Chile, Singapore, Australia, the CAFTA-DR group, etc. It is important to say that the chapter on intellectual property rights has almost the same approach on copyright issues in all of these agreements. For this reason, South and Central America will have to deal with those issues too.

IV. Dealing with Copyright Issues in IPR Chapter There are several ways to interpret the chapter of Intellectual Property Right. On one hand, some people see it as an imposition by the most powerful country in the world upon small developing country economies. On the other hand, supporters believe it represents a sincere attempt by the United States to help developing countries expand and advance their regulations on copyright issues. The chapter should be executed in each nation according to national priorities and circumstances. It is uncertain whether the norm written down in the treaty can be universally applied or whether the negotiation itself will even materialize. Consequently, a specific recommendation has been proposed by the U.S to adapt national legislation to the demands of the free trade agreements requirements36.

Latin American Free Trade Agreements in Intellectual Property Right contain general dispositions dealing with copyright policy application of issues related to commerce. During the negotiation, parties agreed they would be able to adapt their legislation to protect intellectual property nationwide to fulfill FTAs demands37.

Even though this topic is very controversial in the region, the parties have accepted the necessity of dealing with it.

A. Adaptation of copyright law Intellectual property right in Latin America is controversial not only because it requires everal implementations and reforms in domestic laws, but because IPR

36 NAFTA 1994(Chapter 17), Chile-USA 2003(Chapter 17), CAFTA-DR 2004(Chapter 15 pending in Costa Rica), Colombia-USA 2006(Chapter 16 pending), Peru-USA 2006(Chapter 16), Panama-USA(Chapter 15).

37 Ibidem.

328

LIMA ARBITRATION N° 3 - 2008 / 2009

JOSÉ ANTONIO REYES

requires national legislators to ratify several treaties without the time and opportunity to analyze their content, in certain cases38. As a result, when legislators ratify FTAs, they are effectively giving other treaties “domino effect” ratification without having studied them. Consequently, if FTAs are ratified, governments will also be accepting the terms of several additional treaties that will become national laws under their constitutions. When FTAs go into effect, countries generally will also become members of the following treaties: the WIPO Copyright Treaty (1996), the WIPO Performances and Phonograms Treaty (1996)39, the Patent Cooperation Treaty, as revised and amended (1970), the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure (1980), the Patent Law Treaty (2000), the Hague Agreement Concerning the International Registration of Industrial Designs (1999), the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (1989), the Convention Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite (1974), and The Trademark Law Treaty (1994)40.

However, the International Convention for the Protection of New Varieties of Plants (1991) (UPOV Convention 1991) which is still being debated41. There are some legislative bodies that have handled ratification accurately, but this is not the case with Costa Rica because the legislative body is still trying to figure out how all of CAFTA-DR’s demands will be fulfilled. It is expected the agreement will be ratified at some point in 2008. It is necessary to ratify the CAFTA-DR agreement in order to implement all the requirements in IPR Chapter.

B. Copyright Issues Countries must solve several issues in order to ratify Intellectual Property Right.

Although, this chapter puts a unified regional policy, it is extremely difficult to standardize the legal regimes of South and Central American countries and the United States. Some countries are apprehensive since some IPR does not clarify whether copyright reproduction could be permanent and whether the copy could be an electronic file42. Consequently, treaties of this kind create ambiguities that may

38

NAFTA 1994(Chapter 17), Chile-USA 2003(Chapter 17), CAFTA-DR 2004(Chapter 15 pending in Costa Rica), Colombia-USA 2006(Chapter 16 pending), Peru-USA 2006(Chapter 16), Panama-USA(Chapter 15).

39 Costa Rican Law N° 6000, 6683(2000).

40 Paul Goldstein (2006).

41 Ibidem.

42 NAFTA 1994(Chapter 17), Chile-USA 2003(Chapter 17.6), CAFTA-DR 2004(Chapter 15.7 pending in Costa Rica), Colombia-USA 2006(Chapter 16.6 pending), Peru-USA 2006(Chapter 16.6), Panama-USA(Chapter 15.5).

LIMA ARBITRATION N° 3 - 2008 / 2009

329

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

leave open windows, and result in action that is illegal but not punishable43. It is clear that this doctrine has created need for a new hierarchy for copyright law. This hierarchy would give clarity to developing copyright law and the judicial system.

There are several changes required by any FTA; however, some of them have already been completed by some countries. Several countries have conformed to the FTA terms, when its national laws were updated, as mandated by the TRIPs Agreement44. In the case of Costa Rica, it will have to include all requirements related to technology in its national laws because they were omitted in its original national legislation. IPR Chapter demanded including sanctions when there is an unauthorized elusion45. IPR makes some stipulations about technological measures that protect access to copyrighted work. In some cases, IPR makes exceptions to copyright, but authorizing access by libraries, archives, public broadcasting, and educational institutions.

Additionally, IPR Chapter allowed the parties to determine how they apply technological measures46. Countries can establish two exceptions by means of technological measures. One is a limitation of user access or limitation of the exclusive rights of the author. The other allows electronic observation of illicit disposition of the material through personal protection to users. The last exception is subtlety stated in IPR chapter47.

Observation will play an important role during the implementation of IPR Chapter, because the consequence of legal reform is punishment for whoever evading the technological measurement indicated by the agreement48. This will provide judges a framework to enforce the law against whoever infringes upon it.

Consequently, enforcement is the major worry of U.S. judges, lawyers, and those involved with copyright issues. For that reason, they just want an effective application of copyright law throughout the region. Indeed, the agreement could provide the needed legal framework, but the agreement is replete with exceptions49.

43

See supra note 43.

Copyright Law Colombia 44, Chile (Law No. 17.33o, 1970, as amended) Costa Rica (Law No. 6000-6683, 2000), PanamĂĄ (Law No. 15, 1994), Peru (Decree Legislative 822, 1996).

45 Chile-USA 2003(Chapter 17.6), CAFTA-DR 2004(Chapter 15.5.7 pending in Costa Rica), Colombia-USA 2006(Chapter 16.6 pending), Peru-USA 2006(Chapter 16.6), Panama- USA(Chapter 15.5). CAFTA-DR 2004 (Chapter 15.7).

46 ID. 47 NAFTA 1994(chapter 17), Chile-USA 2003(Chapter 17.6), CAFTA-DR 2004(Chapter 15.7 pending in Costa Rica), Colombia-USA 2006(Chapter 16.6 pending), Peru-USA 2006(Chapter 16.6), Panama- USA(Chapter 15.5). CAFTA-DR 2004 (Chapter 15.7).

48 Ibidem.

49 Ibidem.

44

330

LIMA ARBITRATION N° 3 - 2008 / 2009

JOSÉ ANTONIO REYES

In Latin America the IPR chapter implicitly recognizes the use of information by libraries, archives, and educational institutions without a business purpose. This confirms the right to free access for education and information. It is commonly believed these exceptions may be too broad because there can be almost unlimited interpretation of the terms. There are no rules to stop the parties when they attempt to use this right for their convenience.

It is important to point out that this legislation requires that the governments use original computer programs effectively permitting it to control the use of licensed computer programs50. As a result, the legislation prevents the reproduction of illegitimate copies of computer programs51. However, the State cannot always decide what kind of software will be used in its administration52. There were no big changes after the agreement was signed because the software sector retained the same protection that it had prior to the trade agreement going into effect53. As a result, the government has implemented policies to provide consumers incentives to buy original licenses in order to reduce piracy.

Copyright issues in FTAs have been incorporated in IPR Chapter, so it includes an update of judicial security terms. This requires legal ratification from the regions, and it must then be incorporated into the national judicial systems54. However, countries have also subscribed to other agreements that have the same terms. For instance, these agreements are in the WIPO Performances and Phonograms Treaty (WPPT)55.

There are numerous requirements to fulfill in order to implement FTAs. Once an FTAs is ratified by the legislative bodies, Senates, or both, there will be several changes of existing legislation. For instance, the agreement prohibits the temporally filing of any document protected by copyright law. This includes all electronic documents; nonetheless, there are exceptions are such as written in the Berne Convention.

50

Countries Report, Costa Rica 24-28, (2008), Panama p. 477(2006), Colombia p. 243 (2008), Peru p. 88 (2008).

Ibidem.

52 NAFTA 1994 (Chapter 17), Chile-USA 2003 (Chapter 17.6), CAFTA-DR 2004 (Chapter 15.7 pending in Costa Rica), Colombia-USA 2006 (Chapter 16.6 pending), Peru-USA 2006 (Chapter 16.6), Panama- USA (Chapter 15.5), CAFTA-DR 2004 (Chapter 15.7).

53 Ibidem.

54 Costa Rican Executive Decree (1995, 1998, 2000), Peruvian Executive Decree (2004), Panamanian Decree N° 273, (2000).

55 WIPO (1996).

56 Costa Rican Law N° 6000, 6683(2000).

51

LIMA ARBITRATION N° 3 - 2008 / 2009

331

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

V. Requirements in IPR Chapter Once the agreement has been implemented, countries must abide by its higher standards of copyright obligations and enforcement measures.

A. Countries Internal Regulation Countries will have to make additional reforms to theirs copyright and enforcement-related laws in order to fully comply with FTA (CAFTA-DR does contain transitional periods). Ideally, the country will undertake a comprehensive initiative to integrate the enforcement provisions in the bill57. Although, comprehensive provisions to defend technological protection measures and rights management information would be advisable, it is not known whether the current legislative environment would support these measures58. Specifically, it is important to increase the minimum penalty of three years for all piracy crimes in order to ensure deterrence. Several countries have developed legislation to implement the IPR provisions of the agreement59. These legislations were presented to their Congress or legislatives bodies60, and then processed by the Legal Affairs Committee, and it is scheduled to be forwarded to the full Congress; however, in the case of Costa Rica is still in discussion.

Specifically, this bill would amend the Laws to strength their enforcement against piracy and reduce it. One very positive amendment addresses the method to quantify civil damages in the absence of an expert study, and this would definitely aid civil enforcement efforts61. The bill also contains proposals affecting liability and sanctions for the circumvention of technological protection measures (TPMs) and rights management information, and the reception and distribution of program-carrying satellite signals. However, there are several troubling points in this bill62.

First, the provisions on technological protection measures fail to rise to the standards in some FTA’ such as CAFTA-DR in many respects. For instance, CAFTA does not contain coverage of services, provisions for access controls, coverage of components; it has overly broad exceptions to criminal liability, no means of enforcement civil liability, and definitions for TPMs. Second, while the

57

Asamblea Legislative Bill 15076 (2000), Panamanian Law No 35, (1996), Peruvian Law No 29013, (2007).

Ibidem.

59 Ibidem.

60 NAFTA 1994 (Chapter 17), Chile-USA 2003 (Chapter 17), CAFTA-DR 2004 (Chapter 15 pending in Costa Rica), Colombia-USA 2006 (Chapter 16 pending), Peru-USA 2006 (Chapter 16), Panama-USA (Chapter 15).

61 CAFTA-DR (2004).

62 Ibidem.

58

332

LIMA ARBITRATION N° 3 - 2008 / 2009

JOSÉ ANTONIO REYES

bill would add statutory damages, they are too low to be a deterrent. For instance, the bill offers 1-50 times the minimum monthly wage of unskilled workers (one-person wage is about US$195, so the range would be US$195-$9,750) in the case of Costa Rica63. Third, proposed criminal penalties are too low to be a deterrent; the bill proposes only a minimum one-year penalty, which makes it impossible to imprison defendants. For many years, industries have advocated a minimum penalty of three years to ensure jail time in criminal cases64. Fourth, another provision makes a general (and disturbing) statement about ISP liability, with reference to regulations, which apparently have not been developed.

Therefore, countries are permitted a transition period to implement the ISP liability provision; if the government decides to implement it now, then the legislation must follow the IPR chapter requirements.

B. Legislation This section gives a broad picture of the actual copyright laws: these laws have been enacted at different times, and has been revised and reformed. The law identifies the author as title-holder of a literary or artistic work, which includes computer programs. Generally, the work protected under law must be original in its expression; however, the idea may or may not be original65.

One of the controversies between Costa Rica and the U.S.A is that this law grants exclusive rights for using the work in reproduction, translation, graphic edition, adaptation, public communication, and distribution, among others66. This represents a difference between the U.S. and Costa Rica, because Costa Rican law protects patrimonial and moral rights among others, while U.S. law does not. Moral rights in Costa Rica are personal, irrevocable, and perpetual. Therefore, only patrimonial rights can be transferred67. Copyright law can grant protection if the work has been registered. However, if the work has not been registered, it would be necessary to prove its authorship in a judicial process68.

The copyright is permanent throughout the author’s life, and for 70 years after the author’s death. This protection would not apply if the work was not previously registered69. Consequently, there are different bases to determine

63

See supra note 39.

Countries Report, 2008 Special 301, Costa Rica p. 24, Panama p. 478, Peru p. 93, Colombia p. 249, 65 Ibidem.

66 Costa Rican Law (2000).

67 Ibidem.

68 Ibidem.

69 Ibidem.

64

LIMA ARBITRATION N° 3 - 2008 / 2009

333

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

protection after death. First, there are seventy-year protections from the first year of publication or transfer of the work70. Second, if the work is not published, copyright will protect it for seventy years from the creation of the work71. This period commences from the first year in which the work was presented to the public, and the work was used with the author’s consent. Finally, even if there is no publication, presentation to the public, or consent of the author, copyright will still protect the work for seventy years starting from its creation72.

Although there was a lot of discussion about Costa Rican copyright law during the negotiation of CAFTA-DR, the U.S. negotiator could not persuade Costa Rica to change moral rights and their protection. The U.S. was more focused on the common law than the civil law approach, since the United Sates is not a supporter of moral rights or at least not to the same extent as civil law countries.

There are many strategies to demonstrate FTAs benefits to countries’ legislators. First, it will be necessary to convince them that copyright-protection is crucial to efficient international commerce. In this respect, one of FTA’ critical points concerns the copyright of software. This subject will be relatively new in some legislation, possibly due to some countries unawareness of its own capacity to produce software. It is important to point out when Costa Rica negotiated a free trade agreement with Mexico, Canada, Chile, and other countries, the issue of copyrighted software was not addressed by the parties as strongly as it is in FTAs with the USA. C. Enforceability of the Law on Priority Action Copyright enforcement is a serious concern and there are several priorities. First, the Attorney General must urgently instruct his prosecutors to process and expedite copyright violation cases, and promptly take action on the dozens of cases already submitted to his prosecutors.

Second, it will be necessary to create a specialized prosecutor’s office with nationwide jurisdiction for copyright violations. The copyright industries have urged this step for years as a way to expedite IPR criminal cases. Given the significant delays and lack of proficiency noted by prosecutors, judges and the respective institutions73, the creation of this office in case like Costa Rica remains a

Ibidem.

Ibidem.

72 Ibidem.

73 Countries Report, Special 301, Costa Rica p. 23(2008), Panama p. 478(2006), Peru p. 89(2008), Colombia p. 243 (2008).

70 71

334

LIMA ARBITRATION N° 3 - 2008 / 2009

JOSÉ ANTONIO REYES

priority. In addition, the copyright industries continue to support the need for these “link” prosecutors. There are countries like Panama, Guatemala among others that have signed treaties, where they promise to detain any illegal merchandise crossing their border74.

In 2002, the Costa Rican General Prosecutor announced that 12 specialized “link” prosecutors, one for each public prosecutor’s office in the country, would be appointed to handle intellectual property cases “with priority”75. Unfortunately, such specialized IP prosecutors were not appointed, and existing prosecutors were given IP duties. Even the recording industry still lobbyies for and supports the creation of a specialized prosecutor’s office, because action is urgently needed to correct the current unacceptable situation with prosecutors76. This project failed because of lack of funds.

In spite of significant efforts to improve copyright law, numerous problems interfere with effective copyright enforcement in South and Central America. As a result, enforcement remains very difficult. Some problems have been entrenched in the system for years without resolution, and others have appeared within the past year. Simply said, enforcement of copyright infringement cases has declined in both quantity and in quality. In general, a lack of adequate resources to conduct an effective anti-piracy campaign and prosecutors’ negative attitudes are the two main causes of the country’s disastrous IPR enforcement record77.

Major prosecutions have not been conducted or convictions issued in the last several years mainly because prosecutors who apply the “non-significant-case” provision in the current Law on Enforcement have not pursued cases. In addition, prosecutions remain weak because many pending cases were dropped by local prosecutors, as directed by the Attorney General in early 2005 in the Central America cases. Because of this decision, several major music piracy cases were dropped by prosecution and all raids were conducted with the “voluntary” cooperation of the municipal police. The business software industry has also reported increasing problems with enforcement due to the extremely low priority placed on copyright enforcement by the Attorney General’s office.

Ibidem., 243(2008).

Asamblea Legislative Bill 15 076(2000).

76 Asamblea Legislative 15076(2000).

77 Countries Report, Special 301, Costa Rica p. 23 (2008), Panama p. 478 (2006), Peru p. 89 (2008), Colombia p. 243 (2008).

74 75

LIMA ARBITRATION N° 3 - 2008 / 2009

335

CAN FREE AGREEMENTS OVERCOME THE PIRACY ISSUES IN LATIN AMERICA?

VI. Conclusion South and Central America is well positioned to benefit from further regional or bilateral integration. FTAs are expected to provide a further boost to this integration process, both in relation to the United States and within the region.

Nevertheless, to ensure the greatest possible benefit while minimizing the risks of increased vulnerabilities, the integration process calls for enhanced policy coordination and harmonization, especially in the area of copyright issues. Some critics have even questioned whether developing countries will benefit from intellectual property, or if IPR will be detrimental. The premise is that intellectual property is trade related. Therefore, there are consequences of incorporating intellectual property chapters into bilateral, regional, and multilateral / nonpreferential trade agreements.

The recent surge of concern over FTAs comes from the belief that once the agreement is ratified, IPR chapter will be enforced in the region. The immediate action needed to solve the region’s informal economic problems, which includes their overall failure to adequately and effectively enforce the current copyright laws against piracy. It is important to keep in mind domestic copyright law reform is not sufficient in and of itself. IPR must meet the standards of current bilateral trade programs as well as their FTA obligations. How these countries act to enforce their laws against piracy is a critical benchmark for foreign investors, and such enforcement can, and should, happen now.

The scope of criminal penalties and civil remedies are comprehensive with respect to FTAs requirements on copyright enforcement. Actions must be taken ex officio in both the criminal and customs areas. Automatic authorizations should be added and broadened to speed up copyright infringement proceedings.

Enforcement measures have been strengthened to cope with online infringement, including creating clear standards of secondary liability for online service providers, accompanied by certain limitations on infringement remedies ensuring cooperation between service providers and rights holders. A strong and expeditious notice and takedown system is a key feature of this enforcement.

Therefore, criminal and civil remedies are extended to cover circumvention and rights management information violations. Finally, there is one concern remaining in the transition provisions accepted by these countries, particularly with respect to several enforcement-related elements. As we have already stated, these FTA nations have signed bilateral obligations to provide adequate and effective copyright enforcement, and it is expected such efforts will not only continue, but also improve, as the time for congressional consideration of FTAs draws closer.

336

LIMA ARBITRATION N° 3 - 2008 / 2009