VZCZCXRO4049
PP RUEHIK
DE RUEHMD #0179/01 0470709
ZNR UUUUU ZZH
P 160709Z FEB 10
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 1938
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4364
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 04 MADRID 000179

SENSITIVE
SIPDIS

STATE FOR EUR/WE, EUR/ERA, AND EEB/TPP/IPE
STATE PASS USTR FOR DAVID WEINER AND JENNIFER GROVES
STATE PASS ALSO U.S. COPYRIGHT OFFICE FOR M.WOODS and M.PALLANTE
COMMERCE FOR 4212/DON CALVERT
COMMERCE ALSO FOR USPTO

E.O. 12958: N/A
TAGS: KIPR ETRD EUN SP
SUBJECT: SPAIN IPR: AUSTR WILSON'S MEETINGS WITH GOS, OPPOSITION,
AND PRIVATE SECTOR

REF: 09 MADRID 1161 AND PREVIOUS

MADRID 00000179 001.3 OF 004


SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY

SUMMARY

¶1. (SBU) During a February 4-5 visit to Madrid, Assistant USTR for
Europe met with government officials, private sector
representatives, and an opposition politician to discuss USG
concerns over Internet piracy in Spain and the government's
legislative proposal. Content industry representatives described in
some detail how piracy is hurting their business. They support the
government's proposal as a step in the right direction but are
unanimous that further action is required. The rights-holders are
very concerned that the opposition Popular Party (PP) may defeat or
hold up the legislation for political gain, and urged the USG to
continue to reach out to the PP on this issue. On the government
side, State Secretary Ros and DG Corral underscored the government's
commitment to get the legislation passed but asked for USG help not
only with the PP but with two smaller parties whose votes could
affect the outcome. PP Deputy Alvaro Nadal told AUSTR Wilson that
his party might be able to support the anti-piracy provisions with
amendments to give the judiciary a more prominent in the process of
shutting down websites, but noted that the politics of the issue
were complicated and that the PP vigorously opposes other provisions
of the Law for a Sustainable Economy (LES). AUSTR Wilson also met
with Trade and Foreign Ministry officials to discuss EU Presidency
trade issues and WTO/Doha Round negotiations. He also gave an
interview for a major newspaper's Sunday economic supplement. End
Summary.

THE COALITION

¶2. (SBU) At a lunch hosted by the Coalition of Creators and Content
Industries, AUSTR outlined the USG approach to promoting worldwide
intellectual property protection and the Special 301 process.
Representatives of the film, music, electronic and video games, and
book publishing industries attended, as well as officials
representing major copyright management entities (collecting
societies). Coalition president Aldo Olcese explained how the
Coalition had come up with the "Spanish model" to combat piracy,
which involves targeting commercial-scale pirate websites instead of
individual users. Cultural industries, he said, do not want to make
enemies of millions of Internet users by threatening them with
punishment. Depriving them of unauthorized content by shutting down
or blocking websites is a more practical method, in his view.

¶3. (SBU) Not all Coalition members agree fully with this approach.
Antonio Guisasola of the Music Producers of Spain (Promusicae) and
James Armstrong of Sony Computers (on behalf of the digital games
industry) expressed concern that the government's initiative would
leave much peer-to-peer (P2P) activity undisturbed. The "Spanish
model" is essentially a watered-down version of an earlier proposal
by the Coalition in negotiations with Internet Service Providers'
(ISP) association, Redtel. Those negotiations were suspended in
April 2009 and most Coalition members now believe that Redtel never
had any intention of entering into an agreement. Now that the
government has submitted its legislative proposal, Redtel is no
longer interested in negotiating. Guisasola confirmed that Spain's
music industry favors moving Spain to the Priority Watch List in
this year's Special 301 review. Armstrong indicated that the
computer games industry is of similar mind.

¶4. (SBU) Like the GOS itself, industry representatives are concerned
about prospects for the legislation's passage. On January 20, a
collection of small blocs in Congress held a press conference
demanding that the government withdraw its proposal and threatening
to boycott deliberations in the subcommittee on culture. At the
last minute the main opposition Popular Party (PP) disassociated
itself from this initiative, as did the smaller Catalan party,
Convergencia i Unio (CiU). Nevertheless, government and
rights-holders remain concerned that the PP will defeat or stall the
legislative proposal. Aldo Olcese noted that the PP has advocated
for an entirely judicial proceeding, as opposed to the government's
mixed administrative-judicial proceeding, to shut down or block
websites. While in principle this seems not unreasonable, in light
of experience with Spain's judiciary it would likely be
unsustainably slow and cumbersome. Coalition members urged AUSTR
Wilson and the Embassy to remind PP legislators of their ideological
interest in protecting private property and their strong bond with
the United States.

OPPOSITION MEMBER OF CONGRESS

MADRID 00000179 002.3 OF 004



¶5. (SBU) Assistant USTR Wilson met February 5 with Alvaro Nadal, a
PP Deputy who is one of his party's experts on economic issues.
Wilson outlined the purpose of his visit and the concerns of U.S.
government and private industry about the IPR situation in Spain.
He characterized the government's proposal as encouraging while
noting that it won't entirely solve the piracy problem. He also
acknowledged that the relationship between the Internet and IPR
protection is controversial in the United States; in that context,
the vocal opposition of the Internet users' community in Spain to
the government's proposal is not so surprising. Wilson recognized
that the PP will be influential in the legislative process and asked
for Nadal's views on how the bill will fare and how the USG can be
most constructive.

¶6. (SBU) Nadal divided the issue into two parts: policy and
politics. With respect to policy, he said the PP is not far from
the government on the website shut-down provisions in the draft
Sustainable Economy Law (LES). The PP supports strong IP protection
and agrees that something must be done about pirate websites. It
makes sense to deter and punish illicit activity. But the
government proposes a mixed administrative-judicial process, whereas
the PP wants a 100 percent judicial process, which Nadal said the
Constitution and Spanish legal tradition require. He argued that an
administrative body - in this case an Intellectual Property
Commission affiliated with the Culture Ministry - cannot play a
decisive role in an enforcement action that touches on fundamental
rights such as communications and freedom of expression. The PP's
objection is purely legal, and this is its only area of contention
with the proposal.

¶7. (SBU) Politically, however, there are other issues. The PP led
the opposition in 2006 to the "digital canon," under which
computers, blank disks, and other media are taxed with to compensate
rights-holders with a "private copy levy." (Note: The canon is an
entirely separate issue from P2P and piracy concerns, though they
are often confused and conflated in the public mind.) As a result,
the PP is close to the Internet technology and service provider
community. On the other hand, relations between the PP and Spain's
cultural establishment and elites are not good. From the PP's
perspective, movie stars, directors, prominent authors, and other
cultural icons always work on behalf of the ruling PSOE and against
the PP. Thus, some voices in the party want to oppose the content
providers by holding up the bill which so many artists and
entertainers - the same ones who campaigned for President Zapatero -
are lobbying for. Some also believe that the legislation would
mainly benefit foreign industry. The PP, which hopes to return to
power in the near future, has to be accountable to its voters.

¶8. (SBU) A complicating factor is that many other provisions of the
draft LES are anathema to the PP, which believes they represent a
philosophically misguided approach to restructuring the economy.
Even if the party can support the anti-Internet piracy provisions,
it will not easily swallow the law as a whole. However, Nadal said,
the PP strongly supports fair trade, open business relations, the
free market, and protection of private property. It also cherishes
strong its ties to the U.S. and close affinity with the United
States, regardless of which party is in power there. Nadal
suggested the USG not overtly or publicly express support for the
law, since so many of its advocates are leftists and some are even
anti-American in their orientation. In the end, he intimated, the
government may round up enough votes from small parties to pass the
legislation without PP support.

GOVERNMENT OFFICIALS

¶9. (SBU) AUSTR Wilson also met February 5 with State Secretary for
Telecommunications and the Information Society Francisco Ros, whom
he had seen two weeks earlier during Ros's visit to Washington. Ros
reiterated that the GOS is strongly committed to passing the
legislation but noted that public and industry reaction had not been
entirely positive. The previous day, content providers, service
providers, consumer groups, and labor unions met with the Advisory
Committee on Telecommunications and the Information Society (CATSI),
one of the many consultative committees that must weigh in on the
bill before Congress can begin debating it. The Coalition expressed
support for the government's proposal, but most other participants
called for its withdrawal. According to press reports, Internet
users' groups ("Internautas") presented a petition signed by 22,000
citizens opposing the measures.

¶10. (SBU) Ros stressed the importance of digital content to all
European countries and said that in his EU Presidency-related

MADRID 00000179 003.3 OF 004


meetings in Brussels, he has called on other EU Member States to
coordinate and develop a common approach to Internet piracy, because
no one country can succeed on its own in this battle. He said that
as more economic activity moves online, there will be a "very
difficult" 5-10-year transition period. New business models are
needed to take advantage of the Internet's potential. With respect
to piracy, the important thing is to decide on a course of action
that can be implemented, he emphasized; putting in place ineffective
or inappropriate measures would be counter-productive.

¶11. (SBU) Ros said his meetings in Washington had gone very well.
Within the International intellectual Property Alliance (IIPA),
which is preparing its recommendations for the USG's Special 301
review, he identified several different opinions. The Motion
Picture Association of America (MPAA), he said, is very pleased with
the government's proposal. (Comment: This may be a slight
overstatement of the MPAA's position.) The Business Software
Alliance (BSA) is satisfied with the GOS, with whom its members
partner on a "legal software" campaign that has been effective. The
computer games industry, he acknowledged, is "not happy," a
circumstance that surprised Ros. And the biggest problem is the
music industry, which he said "doesn't give any value to [the GOS's]
decision and commitment," or to the political realities that
complicate the government's task.

¶12. (SBU) Ros expressed disappointment that private sector groups
have not given Spain credit for its efforts. The music industry
suffers the most from digital piracy, he acknowledged, and is ahead
of the other industries in offering legal content online, but there
still isn't enough legal content available. The government can
encourage, support, and even help fund portals for legitimate
content, he said, but industry has to take the lead. Wilson cited
industry arguments that services offering legal content haven't
prospered in Spain due to competition from free downloads. Both
dissuasive measures and legal offer need to move forward together.

¶13. (SBU) AUSTR Wilson assured State Secretary Ros that the USG
does not pick models and does not favor any one specific approach to
combating piracy. Our concern is that Spain implement measures that
will be effective. Spain is under the spotlight in this years'
Special 301 review, he said. Some industry associations may want
Spain moved to the Priority Watch List, though others may believe it
would be a mistake to increase pressure on Spain when it has begun
to act. The USG's decision will be informed by industry's
recommendation, but will also consider the full range of views
within the U.S. Government. Understanding the sensitivities, the
USG will be careful about how it announces the ultimate result.
Stressing that the USG's Special 301 review process is only just
under way and without prejudging outcomes, Wilson sought to downplay
any expectation of Spain being removed from the Watch List in 2010
given the size of the problem and the fact that the legislation will
not have passed by late April.

¶14. (SBU) AUSTR Wilson described briefly to Ros his meeting with PP
Deputy Nadal. He asked whether the PP-proposed 100 percent judicial
process could be problematic given constraints on judicial
resources. Ros noted that the purpose of a mixed
administrative-judicial process is to speed things up. Judges take
a long time to investigate and decide. A panel of independent
experts will not be biased and will work faster. Ros stressed that
the GOS cannot do any more than it is doing, changing the law to
make the system work better. He closed by saying that Spain's
highest Internet priorities for its EU Presidency are IPR protection
and cyber-security.

¶15. (SBU) At a lunch hosted by the Foreign Ministry (see paragraph
20), AUSTR Wilson spoke with Guillermo Corral, Ministry of Culture
Director General for Cultural Policy and Industries, who accompanied
State Secretary Ros on his Washington visit in late January. Corral
indicated that the ruling Spanish Socialist Workers Party (PSOE) is
having trouble with some of its own Deputies and regional party
officials over the proposed legislation. In light of perceptions
that the GOS is being pressured by the USG to toughen its
anti-piracy regime, Corral thought it would probably be
counter-productive for the Embassy to approach PSOE opponents of the
initiative. He did, however, suggest that the Embassy talk to
Deputies from the regional Convergencia i Unio (CiU - Cataluna) and
Basque National Party (PNV - Basque Country) about the legislation.
(Note: The PNV joined the January 20 call for the government to
withdraw the legislation; CiU did not. Post will follow up. End
Note.) Corral also expressed concern that the upcoming Special 301
decision might affect the legislative debate; AUSTR Wilson said he
understood this concern and said USG wanted the Special 301 review

MADRID 00000179 004.3 OF 004


for Spain to be constructive.

¶16. (U) In a follow-up conversation with Econoff, Corral sought to
clarify his comments in Washington on how the GOS legislative
proposal might affect some P2P activity. He acknowledged that many
music files are transferred from one individual Internet account to
another without passing through a website that can be blocked, but
said that some other P2P traffic passes through sites, and there are
indexation and linking pages, which he characterized as "P2P
crossroads." Judges in Spain have declined to sanction owners or
managers of such sites due to lack of a clearly defined profit
motive as required by the Penal Code and the Prosecutor General's
2006 Circular, but if an administrative body were to order them
blocked, he believes judges would probably authorize it. Corral
also commented that there is a trend for more music to be downloaded
from streaming sites, which would be subject to shut-down or
blocking under the proposed legislation.

TRADE AND THE EU PRESIDENCY

¶17. (SBU) AUSTR Wilson also discussed a range of trade issues,
especially related to Spain's EU Presidency, with Secretary General
for Trade Alfredo Bonet, and again at a lunch hosted by MFA Director
General for EU Affairs Alfonso Diez Torres. Bonet commented on some
of the challenges of implementing the Lisbon Treaty, especially the
European Parliament's (EP) role in approving legislation and
international agreements. The EP, he said, is not happy that the
European Council can apply new agreements provisionally while
waiting for the EP to approve them. There are a number of issues
that need to be deconflicted of the EP is to approve the Free Trade
Agreement with South Korea and other important legislation.

¶18. (SBU) AUSTR Wilson praised the very positive and helpful role
Spanish officials played in recent negotiations in Guadalajara,
Mexico towards an Anti-Counterfeiting Trade Agreement (ACTA).
Thanks to Spain's leadership, negotiators made progress on the
Agreement's criminal enforcement chapter. Bonet cited ACTA as
another area where the EP is skeptical, criticizing a lack of
transparency.
¶19. (SBU) On Doha Round negotiations, AUSTR Wilson cited a difficult
trade policy environment in the U.S., but noted President Obama's
reference to Doha and FTAs in the State of the Union address as a
positive sign. Priority FTAs include Panama, Colombia, and South
Korea. Bonet said Spain as EU Council President would keep pressing
on Doha. Bonet noted the EU also has issues to be resolved with
Colombia. FTA negotiations with Peru, Colombia, and now Ecuador
remain difficult. He also discussed briefly implementation of the
banana agreement and FTA negotiations with Central America, which
have been suspended since July. On the Transatlantic Economic
Council (TEC), Bonet said that even though there will be no U.S.-EU
Summit in May as Spain had hoped, the GOS still wanted a TEC meeting
during its Presidency, though definition of objectives, schedule,
and other details remain to be worked out. AUSTR Wilson noted that
NSC and the European Commission are discussing what to do about the
TEC.

¶20. (SBU) MFA DG Diez Torres covered some of the same issues in his
February 5 lunch with AUSTR Wilson. He said he would soon accompany
MFA State Secretary for Latin American de Laiglesia on a trip to the
region to try to progress on the FTAs. He noted also that during a
recent visit to the U.S., a European Commission DG had sensed
reduced interest on the part of USG officials in engaging with the
EU on trade issues, even before the announcement that President
Obama would not attend a proposed U.S.-EU Summit. Wilson responded
by noting that the U.S. regards the U.S.-EU trade relationship as
uniquely mature and well-functioning, and suggested that European
trade officials should have greater confidence in existing channels
for dialogue and communication on trade issues.

COMMENT

¶21. (SBU) The GOS remains committed to getting its legislative
proposal on Internet piracy through Congress, but at this time the
outlook is uncertain. Post will escalate its engagement with
government, opposition, and other stakeholders throughout the
Special 301 process and beyond. End Comment.

¶22. (U) Assistant USTR Wilson cleared this cable.