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By Dave L. Llorito, Research Head and
Kristine R. Payuan, Researcher
2nd of 3 parts
For law enforcers in the Philippines, fighting
intellectual property rights infringements — particularly the
piracy of optical discs — can be as frustrating as cleaning the
proverbial Augean stables.
After every raid, vendors whose goods have been
confiscated are back in the business the following day with a
vengeance. Visit Tutuban, Baclaran, and the streets of Caloocan or
the malls and you will see that the illegal business stays
a-blooming. Or Greenhills and even Makati. No — you won’t find
the stalls openly selling the stuff anymore. But wander around the
shops and you’ll likely encounter someone holding a printed list
of CD titles whispering “Sir, CD?” as you pass by.
“From January 2001 to the present, the
National Bureau of Investigation was able to seize pirated and
counterfeit goods with a total value of P2 billion. We were able to
confiscate 16 replicating machines, each worth P50 million,”
claims Rafael Ragos, head of NBI’s intellectual property rights
division. “As far as the NBI is concerned, we have been able to
respond to all IPR cases referred to us.”
The VRB has also confiscated about five million
pirated copies of movies in more than a hundred raids and
confiscated more than 60 stampers.
“Since Chairman Bong Revilla got into VRB in
July, we have been conducting four to five raids per day each week.
We have so far confiscated 16 replicating machines,” says the VRB
official.
Ambivalent attitude
For law enforcers, what makes IPR enforcement
doubly frustrating is the fact that the public seems to have
ambivalent attitudes toward its outcome. The public — they feel
— seems to have no appreciation of their efforts to combat the
problem, thus making their work a lot harder.
“The reality is that too few people understand
intellectual property,” stresses Ragos. “(What the) people
understand is the microeconomics. When translated to pesos, they
understand that buying pirated discs saves them money — P50
against P450. What a bargain! There is still money left for other
things. But what they do not see is the larger economics of it —
jobs, progress, development, among other things.”
“We are doing all our best to address the
problem of intellectual property rights violations, particularly
piracy of optical disks,” says Carmen Peralta, director of the
documentation, information, and technology transfer bureau of the
country’s Intellectual Property Office. “Yet there is this
tendency for people to look at the problem alone and not at how far
we have gone to address it given our very limited resources. … Of
course, every institution in the government does not have enough
financial resources.”
Economic costs to society
Yet they are also aware that that they must make
greater headway against IPR violators. Letting IPR infringements go
unchecked means that millions of incomes for artists and
distributors, taxes that should accrue to government coffers, as
well as thousands of jobs are being lost each day.
IIPA data, for instance, would show that in the
last five years total trade losses suffered by the copyright
industries operating in the Philippines consisting of motion
pictures, music and sound recordings, business software,
entertainment and books have ranged from P6 billion to P9 billion
each year (See Table and graph). These numbers are at best
indicative as they are estimates based on displaced sales and do not
include tax losses and the potential revenue of legitimate
distributors. There are also no estimates resulting from trademark
infringements.
Nevertheless, according to VRB officials, the
case of the local movie industry is indicative as to the devastating
effects of piracy in the country.
“Before, we use to produce 300 films per year.
Now, it’s good if we can have 50 films a year,” laments one
official of the VRB who requested anonymity. “That means so many
people in the film industry are affected: stuntmen, production
artists … Sales of movie tickets and albums have also gone down.
That means many families are getting hungry.”
He adds: “There are now fewer producers
because they are afraid they would not get the return on
investments. Before local artists could easily get the gold album;
now it is so hard to achieve it. And of course, if there are fewer
gains in these sectors, it will have negative macroeconomic effects
as well.”
US backlash
These days, what bothers government officials
most is that the failure of enforcement agencies to make impressive
gains against IPR infringers could cause a possible backlash from
the United States, the country’s biggest trading partner, that
would affect about US$700-million worth of Philippine exports. This
has something to do with the US “Special 301” legislation
requiring the US trade representative (USTR) “to identify
countries that deny adequate protection for intellectual property
rights or that deny fair and equitable market access for US persons
who rely on IPR.” Countries where IPR infringements are flagrant
could be hit with trade sanctions.
In April 30 this year, USTR had placed the
country on the “priority watch list” under its Special 301
legislation, stressing that “the Philippines has the potential of
becoming a center of pirate optical media production in Asia.”
This was after the IIPA forwarded a report to the USTR pointing out
the “increased pirate production and cross-border distribution.”
Countries under the priority watch list are the
focus of the US’ “bilateral attention.” They may conduct
“out-of-cycle review” of the country concerned, the results of
which could be used as basis for decision whether or not said
country could be removed from the list or elevated into the
“priority foreign country” category.
Countries that are on the “priority foreign
country” list are those “that have the most egregious acts,
policies, or practices, or whose acts, policies or practices have
the greatest adverse impact (actual or potential) on relevant US
products and are not engaged in good faith negotiations to address
these problems …” Those countries could face bilateral trade
sanctions such as the removal of trade preferences under the US
Generalized Systems of Preferences. Goods with GSP preferences enjoy
privileges including lower or free tariffs in the US markets.
Last Oct. 30, the IIPA released its
“out-of-cycle review” findings on the Philippines, highlighting
the following complaints:
1. Intellectual piracy in the Philippines has
“exploded” due (a) to the entry of criminal syndicates that
established production facilities of pirated optical discs for local
and export markets; (b) the smuggling in of pirated software,
audio-visual materials, sound recordings, and books; and (d)
continuing end-user piracy because of weak border controls.
2. Failure of the Philippines to pass the
“optical disc law” which aims to ensure licensing and control
over optical media production, including controls of production and
equipment, and raw materials.
3. Failure of the Philippines to amend the
Intellectual Property Code to incorporate measures against on-line
piracy.
4. Failure to reform the Philippine judicial
system to make it more effective in dealing with IPR cases.
The report also expressed displeasure over the
country’s law enforcement actions consisting mainly of raids
against suspected distributors and producers of pirated optical
media.
“These [referring to the raids] are not
impressive results, and it will require much greater governmental
will … to achieve any level of deterrence,” says the IIPA
report.
Its recommendations include the passage of the
optical disc law; “modernization” of the copyright system
through amendments to the IP Code; deterrent enforcement against
piracy through improved coordination among agencies involved in IPR;
improved judicial enforcement by developing a cadre of experts on
IPR within the judicial system; and better border enforcement by the
Bureau of Customs.
The report also highlights the fact that
Philippines exports, amounting to about $700 million, enjoys GSP
privileges in the US market and urges the USTR to reconsider this
trade benefit for the country.
“In order to qualify for such unilaterally
granted trade preferences, USTR must be satisfied that the
(Philippines) meets certain discretionary criteria including whether
it provides adequate and effective protection for intellectual
property rights,” says the IIPA Report. “The Philippines failure
to address effectively its copyright problems creates serious
questions about whether it meets this criterion for continuing
favorable treatment under the GSP program.”
It’s a decision that USTR will have to decide
in March or April next year. If it decides to elevate the
Philippines to the “priority foreign country” list, the
consequences for the country’s exports will certainly be severe.
If it chooses to let the Philippines stay on the “priority watch
list,” the Philippines will continue to bear the reputation of
being an exporter and importer of pirate and counterfeit products
that could turn off investors in knowledge-intensive industries.
Continued tomorrow
Part 1
| Conclusion
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