Piracy: In Brazil, If It Can Be Copied It Will Be

Rio street vendor involved with pirated productsBrazil has always been the target of pirates, starting in the 16th century, when English corsairs – under concealed protection from the British Crown – pillaged cities and seized shipments.

The French and the Dutch thought to be theirs the right to establish colonies in Brazil; in fact, under Dutch occupation, the northeastern region of the country experienced one of its best quarters of century, beginning in 1630.

Four centuries have passed, but pirates are still in action. They have changed methods and objectives, which are now commercial, and hurt legally established businesses that can’t compete with their prices.

It also should be mentioned that buyers of pirated goods are put at risk due to the fact that clandestine products ignore quality, hygiene and health standards.

For example, batteries produced in Asian countries, with mercury, cadmium and lead content above Brazilian standards, are endlessly sold by camelôs (street peddlers) in Rio de Janeiro. Low prices are the bait.

In São Paulo’s downtown, at Praça da Sé (Sé Square), there are 32,000  street vendors against 1200 legal businesses. São Paulo’s city government launched the “Pop Centros” (Popular Centers) program, a sort of shopping center for street peddlers committed to selling only legal merchandise; the program has not yet produced visible results.

International Pressure

Modern piracy, according to the dictionary definition, consists of “copying or reproducing books, prints, audio or sound recordings, brands or patents, software, etc., without legal authorization from copyrights owners, deliberately infringing on the rights of the author.”

Today, few products escape such “predatory action.” From toys, shirts, watches, to airplane parts, orthopedic prosthesises, CDs, medicines, and computer programs, piracy is not “bound by formalities.”

According to the Parliamentary Commission of Inquiry (PCI) conducted by Brazil’s House of Representatives, from March 2003 thru July 2004, in order to investigate the matter, countries that rank among top consumers of pirated goods are China, Russia, Paraguay and Brazil.

The “field” of piracy has been open for so long that Brazil is at risk of suffering commercial sanctions, now pressured by the United States and the European Union to crack down on law breakers.

According to the International Intellectual Property Alliance, a lobbyist group that represents 1.3 thousand North American companies, piracy in Brazil adds US$ 800 million to total annual losses and, through their lobbying, the United States government threatened to exclude Brazilian products from the General System of Preference  (GSP)–which reduces import tariffs–a measure Brasília considers discriminatory and will question at the World Trade Organization (WTO).

Through prolonged and, still, unfruitful negotiations with Mercosur (the economic common market comprised of Brazil, Argentina, Paraguay and Uruguay), the EU has demanded from the Latin American block to severely repress intellectual rights piracy, attributing itself the right to punish the country accused of infractions via increased tariffs.

Within the scope of the World Intellectual Property Organization (WIPO), Japan, USA and the EU defend new treaties to improve the protection of patent holders,  targets of modern pirates.

Brazil, leading a group made up by Argentina, Cuba, Bolivia, Venezuela, Iran and others, presented the broadest proposal, immediately rejected by richer nations: the most efficient way to combat bootlegging in the Third World would be to accelerate the transfer of technological know-how and advancements in scientific research by way of North-South investments.

This reaction from rich nations seems to indicate that piracy is exclusive to poor countries. It is not true. The movie makers of Shrek 2, for example, had the displeasure of seeing China flood the world with pirated copies of their movie three months prior to its release.

The controversy erupted with a pirated book of Gabriel García Marquez, “Memories of My Sad Prostitutes,” appearing on the market with an ending different from the author’s creation, and prior to the original print’s release date, another curious fact.

Damages and Losses

A research conducted in August by the State of São Paulo Industries Federation (FIESP), in alliance with 64 labor unions, indicates that piracy and bootlegging harms 80% of the industrial sectors represented by the entity by way of unfair competition.

A survey conducted by the Brazil-US Business Council, agency promoter of bilateral investments and commerce, shows that commerce of pirated goods causes annual losses of US$ 1,6 billion in sales and the elimination of 1,5 million jobs in the formal market place.

The National Union of the Internal Revenue Service Officers (Sindireceita) estimates that the government loses R$ 30 billion (approximately US$ 12 billion) a year in non-declared sales in the country.

These numbers are only estimates, given the informality of the market. Reported losses are more easily identified in sectors better organized – among them motion pictures, computers, and tobacco industries.

According to the Brazil-US Business Council, 61% of software, 34% of cigarettes, 52% of Cds and 30% of DVDs sold in Brazil are illegal, pirated or irregular.

Modern Piracy also goes beyond, from production to service: in Rio de Janeiro, an interesting clandestine TV operator, managed by informal businesses, prospers reaching a clientele of an estimated 600 thousand subscribers, dwellers of areas not served by legal cable TV operators, who choose to do so because of either lack of interest or technical difficulties.

A similar case takes place in the recording industry: dozens of organizations linked to the Brazilian Association of Record Producers created a Piracy Combating Union. The ease at which people can download music contents from the internet has led both, big and independent recorders, to fight hand in hand for their interests.

In face of the domestic and international encircling, the Brazilian Government has taken more solid measures against the advancement of piracy, measures that went into effect in the second half of 2004. It is still too early to know if such actions will be efficient, but adopting them already shows improvement.

In October, the Public Transparency and Corruption Fighting Council was installed – recommended by the anti Piracy Commission – with the obligation of debating and suggesting measures of improvement in methods of controlling and incrementing clarity in public administration and strategies against corruption practices and impunity.

The agency will replace an Inter-ministerial piracy fighting committee, created in march 2001, mainly dedicated to educating consumers. The new council hopes to go straight at the so-called “Great Mafia of Piracy,” therefore, indirectly repressing camelôs and encouraging consumers to buy legal goods.

Projects

In August 2004, the Piracy Commission concluded its work, begun in May 2003, denouncing more that one hundred individuals – cops, judges, entrepreneurs and politicians among others – for involvement with gangs connected to piracy, smuggling and tax evasion, and indicted fifty others. The Justice Ministry decided to open the case in order to expel all foreigners cited in the report.

The PCI also presented five bill proposals, one of which modifies the punishment for smuggling and participation, including the loss of sales permits and incarceration (meaning that vendors of illegal products lose their rights to sell and carriers of smuggled goods lose the vehicle used in the commission of the crime). The Judiciary is considering the creation of courts specialized in piracy and smuggling trials.

Still in August, Brazil signed agreements with Paraguay – source of 90% of bootlegged products in Brazil – to cut down this criminal activity. The Brazilian government has also initiated contacts with China, another big supplier, with the same intention.

Since October, the Brazil’s Ports Authority (InFraero) and the Internal Revenue Service began studying joint actions to modernize luggage and passenger inspection services at international airports around the country. For example, they hope to make intensive use of the X-ray machines and computerized baggage claim services.

Backfire

In reaction to the pressure from the US, the Brazilian government has reembarked on bilateral talks and has welcomed United States trade representatives (USTR).

The government prepared a detailed document of actions recently put into effect, with the objective of proposing bilateral agreements to combat piracy.

By doing so, Brazil hopes to avoid being excluded from the General System of Preferences (GSP) which has allowed US$ 2.5 billion dollars worth of annual Brazilian exports exempt from tariffs.

In this big dog fight, Brazil manages to punch back, and the document shows that the move to repress piracy may backfire on the US: almost a third out of the US$ 2.5 billion dollars worth of products exported through GSP are exports from American subsidiaries to their headquarters. If the US removes Brazil from the GSP, American importers will be taxed around US$ 100 million per year.

Pressure against piracy has also started to build up in the domestic market, despite the skepticism as to prospective results.

In the industrial sector, for example, only 22% of the 64 labor unions that reported to FIESP about losses resulting from street peddlers have taken legal action against piracy.

This lack of legal action occurs because of inefficient Brazilian laws: there is not a single record of an Intellectual Property Rights violation case in which the accused was sentenced to prison, says the president of the Brazilian Association of Intellectual Property(BAIP), Gustavo Leonardos, to whom the situation will only change if the government decides to step up the repression, create a plan to educate potential consumers and encourage more flexible fiscal obligations on legally established businesses.

The country’s legislature lacks, besides punishment to transgressors, incentives to protect copyrights, according to Carlos de Souza, professor of the Getúlio Vargas Foundation’s São Paulo School of Law, who also suggests changes in the recording industry’s strategy to better exploit the negotiation of music via the Internet.

By the way, it is in the music industry that modern piracy finds one of the most vulnerable fields. The Phonographic Intellectual Rights Protectorate Association of Brazil (PIRPA) estimates that legal businesses lost R$ 1 billion (approx. US$ 380 million) and were forced to eliminate 56 thousand jobs in five years.

Between January 2003 and August 2004, Internal Revenue agents apprehended 25 million CDs, either pirated or blank. In order to, at least partially, stop the flow of pirated CDs, Brazil included in its Piracy Fight accord with Paraguay a ban on blank Brazilian CDs destined to other countries.

Pirate Programs

The computer software market is fertile ground for modern piracy, in Brazil and abroad.

According to the Business Software Alliance (BSA), agency that examines the operational system and software movement in the world, out of a total of US$ 80 billion worth of programs, US$ 29 billion were pirated products while US$ 51 billions were legal products.

The software sector has a piracy average of 36%. The country with the lowest level of software piracy is the USA (22%) and China and Vietnam have the highest (92%). Brazil has a rate of 61% of pirated software and the sales of illegal programs total US$ 520 million, reports the BSA.

Controlling software piracy in Brazil has gotten efficient. The number of accusations of illegal use of programs doubles every three months, estimates the Brazilian Association of Software Enterprises (Abes), which acts in partnership with BSA.

Cable TV is another target of piracy: besides clandestine cable TV, there are 300 thousand domestic pirated hookups that make operators to lose R$ 200 million a year worth in revenues.

Piracy does not discriminate: from computers to the cigarette lighters, everything is possible. 34% of 145 billion cigarettes smoked in Brazil are bootlegged.

The illegal trade of cigarette lighters – copies of brands or models – is equivalent to more or less 20% of the market, meaning 24 million units each year.

A group of businesses – Bic Brasil, Henkel Loctite, Souza Cruz, Philip Morris, Nike of Brasil and Louis Vuitton – developed an anti-falsification program and have conducted seminars in key-cities such as Paranaguá and Foz do Iguaçu (PR), Santos (SP), Ponta Porã (MS), Porto Alegre, Recife e Fortaleza.

More than 1.5 thousand federal and state agents from the Internal Revenue Service and police forces have already been trained.

According to the Brazil-US Business Council, piracy in the USA affects 12% of the toy market (1.5 million Barbie dolls are bootlegged per year), 40% of the CD market, and 70% of the eyewear. Losses in copyrights reach US$ 800 million, out of which US$ 14 million are from the book sector.

Piracy Crimes

The term piracy is defined by brand or product counterfeit and unfair competition, besides intellectual property violations – a concept whose definition is discussed at the World Organization of Intellectual Property, the forum where strategies to protect international commercial relations is debated.

According to Brazilian laws, piracy is punishable by 3 to 12 months in prison, in addition to fines. A bill proposal is being submitted to Brazil’s Congress, introducing steeper punishment of detention time, from 24 to 28 months, and fines up to 3 thousand times the value of the pirated work.

Patent protection is in the Federal Constitution, Industrial Property Law (9.279/96), in the Consumer Defense Code, and in the Civil Code. By the Penal Code, article 184, copyrights violation results in 3 to 12 months of imprisonment or fines. The time behind bars goes from 12 to 48 months if the bootlegger intends to profit.

Globally, piracy is condemned by the Paris Convention of 1883 and by the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), of which Brazil is a signatory.

Fighting piracy is not an easy task for Brazilian businesses and requires unique strategies. For example, it is not rare for a company to pick a counterfeiter and allow him to continue counterfeiting, as long as this practice brings in return accusations against others involved in this criminal act.

This article was originally published by Problemas Brasileiros magazine. – www.sescsp.org.br/sesc/revistas.

Translated by Aldo de Paula Jansel. He is a Brazilian student in Florida, USA, deeply interested in Brazilian politics. You may reach him at rednose431@hotmail.com.

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