VIETNAM'S IPR ENFORCEMENT: MICROSOFT STRIKES BACK

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001123

SIPDIS

SENSITIVE

STATE PLS PASS TO USTR EBRYAN AND KALVAREZ

E.O. 12958: N/A
TAGS: VM ECON ETRD KIPR IPROP
SUBJECT: VIETNAM'S IPR ENFORCEMENT: MICROSOFT STRIKES BACK
UNCLASSIFIED


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1. (SBU) SUMMARY: INTELLECTUAL PROPERTY RIGHTS (IPR) ENFORCEMENT
AUTHORITIES IN HO CHI MINH CITY, VIETNAM RAIDED LOCAL COMPUTER
SHOPS ON OCTOBER 17, SEIZING APPROXIMATELY 7000 PIRATED DISKS.
THIS ACTION MARKS THE FIRST ILLEGAL SOFTWARE RAID IN VIETNAM.
ALTHOUGH MICROSOFT CLAIMED VICTORY, THE RAID IN FACT HAD LIMITED
SUCCESS DUE TO INADEQUATE TRAINING AND MICROSOFT'S OWN INTERNAL
DILEMMA - WHETHER TO PUSH FOR STRONG IPR ENFORCEMENT OR GOOD
RELATIONS WITH RETAIL DISTRIBUTORS. END SUMMARY.


2. (SBU) MICROSOFT ESTABLISHED A REPRESENTATIVE OFFICE IN HANOI IN
1996 AND A BRANCH IN HCMC TWO MONTHS AGO. IT IS THE FIRST
SOFTWARE COMPANY TO TRY TO ENFORCE THE 1997 U.S-VIETNAM COPYRIGHT
AGREEMENT. WHEN MICROSOFT'S CHIEF REPRESENTATIVE IN VIETNAM, MR.
NGO P
HUC CUONG, OPENED THE HCMC OFFICE, HE TOLD CONSUL GENERAL AND
ECONOFF THAT MICROSOFT PLANNED TO RAID ILLEGAL SOFTWARE SHOPS AND
CRACK DOWN ON VIETNAM'S RAMPANT PIRACY RATE. MR. CUONG ESTIMATED
THIS RATE AT 94 PERCENT, DOWN FROM THE PREVIOUS YEAR'S 97 PERCENT.


3. (SBU) PLANNING FOR THE ACTUAL RAID REACHED HIGH LEVELS OF
INTRIGUE, AND ILLUSTRATES WHY IPR ENFORCEMENT IS SO DIFFICULT IN
VIETNAM. MICROSOFT CHOSE TO USE ITS SINGAPORE LEGAL OFFICE AS THE
"BAD COP" IN ORDER TO KEEP MR. CUONG OUT OF THE LIMELIGHT AND
PRESERVE HIS "GOOD COP" ROLE WITH LOCAL COMPANIES. THE SINGAPORE
REPRESENTATIVE WORKED CLOSELY WITH AN EXPATRIATE LAW FIRM IN HCMC,
AS WELL AS MR. HUYNH TAN PHONG, THE HEAD OF THE MARKET MANAGEMENT
BOARD (MMB). (NOTE: SOURCES SAY THAT MICROSOFT'S DECISION TO USE
ITS SINGAPORE OFFICE MAY HAVE BACKFIRED. THE SINGAPORE OFFICE,
FAMILIAR WITH THAILAND AND INDIA, FAILED TO APPRECIATE THE
DIFFICULTY OF WORKING IN A COMMUNIST COUNTRY WHERE IPR ENFORCEMENT
UNCLASSIFIED

PAGE 03 HO CHI 01123 01 OF 02 060451Z
IS A BRAND-NEW AND SUSPECT CONCEPT. MISUNDERSTANDINGS AND MUTUAL
FRUSTRATION WERE FREQUENT. CONGEN NOMINATED MR. PHONG FOR AN IPR
INTERNATIONAL VISITORS GRANT LAST SUMMER AND WILL CONTINUE TO
FOCUS ON BUILDING IPR ENFORCEMENT CAPACITY AS PART OF THE
MISSIONWIDE STRATEGY. END NOTE.)


4. (SBU) THE MMB IS THE RELEVANT IPR INSPECTION AUTHORITY ON
SOFTWARE PIRACY. MICROSOFT HELD A ONE-DAY TRAINING FOR 40 MMB
INSPECTORS ON HOW TO IDENTIFY COUNTERFEIT DISKS, WHICH ARE EASILY
DISTINGUISHABLE FROM GENUINE PRODUCTS. HOWEVER, MR. PHONG WAS
RELUCTANT TO PROCEED WITHOUT SPECIFIC AUTHORITY FROM THE HCMC
PEOPLE'S COMMITTEE. MICROSOFT ACCORDINGLY SOUGHT AND OBTAINED
STRONG ENDORSEMENT FOR THE RAID FROM DR. NGUYEN THIEN NHAN, THE
COMMITTEE'S FIRST VICE CHAIRMAN AND AN ACTIVE IT SUPPORTER. BUT
AT THE LAST MINUTE, MR. PHONG POSTPONED THE RAID - WITHOUT
EXPLANATION - POSSIBLY TO ASSERT HIS INDEPENDENCE.


5. (U) ON THE APPOINTED DAY, MMB INSPECTION TEAMS, WITH
REPRESENTATIVES FROM MICROSOFT AND THE EXPAT LAW FIRM IN TOW,
SIMULTANEOUSLY RAIDED SEVEN RETAIL OUTLETS AND SEIZED
APPROXIMATELY 7000 DISKS. THE STORES RANGED FROM SMALL "MOM AND
POP" SHOPS TO LARGE SOPHISTICATED OPERATIONS. ONE STORE WAS EVEN
SELLING PIRATED SOFTWARE ON ITS WEBSITE, WWW.PCLEHOAN.COM. MMB
TEAMS CONFISCATED THE DISKS AND WILL EVENTUALLY DESTROY THEM.
SOME OF THE SHOP OWNERS COMPLAINED, "HOW CAN YOU DO THIS WHEN THE
GOVERNMENT ITSELF IS USING OUR (COUNTERFEIT) STUFF?" THE MMB,
ALSO RESPONSIBLE FOR SETTING THE FINES, HAS NOT YET ANNOUNCED THE
CHARGES OR THE AMOUNTS. FINES COULD REACH VND 20-40 MILLION
(USD1300-2600) FOR THE FIRST VIOLATION AND VND 50-70 MILLION
(USD3300-4600) FOR EACH ADDITIONAL VIOLATION. EACH PIRATED DISK
COULD BE CONSIDERED A SEPARATE VIOLATION.
UNCLASSIFIED

PAGE 04 HO CHI 01123 01 OF 02 060451Z


6. (SBU) THE EXPATRIATE LAWYER WORKING WITH MICROSOFT CALLED THE
RAID A SUCCESS, BUT POINTED OUT VARIOUS WEAKNESSES IN THE
ENFORCEMENT CHAIN. FIRST, THE MMB TEAMS FOCUSED ONLY ON THE
MICROSOFT TRADEMARK VIOLATION. TEAMS SEIZED MICROSOFT SOFTWARE
AND LEFT BEHIND BLANK DISKS OR BLATANTLY PIRATED SOFTWARE OF NON-
MICROSOFT ORIGIN. SECOND, EACH MMB TEAM HAD A DIFFERENT APPROACH.
SOME TEAMS LEFT BEHIND DISKS LABELED ONLY AS "MS WORD," WHILE
OTHERS SEIZED ANY MICROSOFT PRODUCT, REGARDLESS OF LABELING.
THIRD, THE TEAMS SEIZED ONLY A SMALL NUMBER OF DISKS, ALTHOUGH
MICROSOFT'S PRE-RAID SURVEY SHOWED THAT EACH STORE STOCKED 5000-
10,000 PIRATED DISKS. THE LAW FIRM REPRESENTATIVE WHO ACCOMPANIED
MMB ON THE RAID URGED MICROSOFT TO INSTRUCT MMB TO SEIZE GREATER
QUANTITIES OF PIRATED MATERIAL, BUT THE MICROSOFT REPRESENTATIVE
BACKED DOWN IN THE FACE OF ANGRY PROTESTS FROM SHOP OWNERS.
FINALLY, THE TEAMS SEIZED A DISPROPORTIONATE AMOUNT OF DISKS FROM
SMALL OPERATORS, WHOSE SALES HAVE LITTLE IMPACT ON THE MARKET.
THE MMB SEIZED ONLY APPROXIMATELY 500 DISKS FROM EACH OF THE BIG
OPERATORS, AND LESS THAN 100 FROM THE STORE SELLING PIRATED
SOFTWARE ON THE INTERNET (AFTER SHOP MANAGERS AGAIN DISPUTED
MICROSOFT'S RIGHT TO SEIZE NON-MICROSOFT PRODUCT). THE TEAM
SEIZED ONLY 40 DISKS FROM THE BIGGEST KNOWN COMMERCIAL DEALER.


7. (SBU) MICROSOFT ANNOUNCED ITS SATISFACTION WITH THE RAID AND
PLANS TO CONDUCT MORE IN COMING MONTHS. MR. CUONG WANTS FUTURE
RAIDS TO FOCUS ON THE REAL PROBLEMS IN VIETNAM: COMPUTER STORES
LOADING SOFTWARE DIRECTLY ONTO HARD DRIVES AND MULTIPLE COPIES
DISTRIBUTED THROUGH AN ORGANIZATION WITH ONLY ONE LICENSED DISK.

UNCLASSIFIED

UNCLASSIFIED PTQ0096

PAGE 01 HO CHI 01123 02 OF 02 060451Z
ACTION STR-00

INFO LOG-00 AGRE-00 AID-00 AMAD-00 CEA-01 CIAE-00 COME-00
CTME-00 DINT-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 EAP-00
EB-00 EXME-00 E-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 LOC-01 L-00 VCE-00
AC-01 NSAE-00 NSCE-00 OES-00 OMB-01 OPIC-01 PA-00
PRS-00 ACE-00 SP-00 SSO-00 SS-00 TEST-00 TRSE-00
USIE-00 DRL-02 G-00 NFAT-00 SAS-00 /010W
-------------- 040D60 060552Z /38
R 060441Z NOV 02
FM AMCONSUL HO CHI MINH CITY
TO SECSTATE WASHDC 7038
INFO AMEMBASSY HANOI
AMEMBASSY BANGKOK
AMEMBASSY BEIJING
AMEMBASSY SINGAPORE

UNCLAS SECTION 02 OF 02 HO CHI MINH CITY 001123

SIPDIS

SENSITIVE

STATE PLS PASS TO USTR EBRYAN AND KALVAREZ


THE LAW FIRM, HOWEVER, BELIEVES MMB FEELS IT HAS DONE ENOUGH FOR
MICROSOFT THIS YEAR AND WILL BE RELUCTANT TO EMBARK UPON ANOTHER
RAID SOON.


8. (SBU) COMMENT: MICROSOFT'S ENFORCEMENT EFFORT DEMONSTRATES SOME
OF THE COMPLEXITY IN TRYING TO DEFEND IPR RIGHTS IN VIETNAM'S
OVERWHELMINGLY COUNTERFEIT SOFTWARE MARKET. POST HAS LEARNED THAT
AS MANY AS HALF OF THE SEIZED DISKS WILL BE RETURNED TO THE SHOPS
BECAUSE THEY ARE BLANK OR CONTAIN NON-MICROSOFT SOFTWARE. WITHOUT
ADEQUATE TRAINING AND CLEAR UNDERSTANDING OF TRADEMARK AND
COPYRIGHT LAW, THESE RAIDS CAN ONLY BE HALF-MEASURES. MICROSOFT
REPRESENTATIVES EXPRESSED FRUSTRATION THAT OTHER SOFTWARE
COMPANIES ARE NOT ACTIVELY ENFORCING THEIR IPR RIGHTS IN VIETNAM.
THESE OTHER COMPANIES ARE CONTENT TO LET MICROSOFT CARRY THE WATER
-- AND ALSO INCUR THE WRATH OF POTENTIAL RETAIL DISTRIBUTORS.
WHILE THE CONFLICT BETWEEN STRONG IPR ENFORCEMENT AND GOOD RETAIL
RELATIONS REFLECTS THE ALMOST TOTAL LACK OF PURE, LEGITIMATE
DISTRIBUTORS IN VIETNAM, MICROSOFT AND OTHER COMPANIES WILL HAVE
TO ADDRESS THESE COMPETING GOALS MORE EFFECTIVELY BEFORE THEY CAN
EXPECT STRONG ENFORCEMENT OR SALES. MEANWHILE, IPR ISSUES WILL
CONTINUE TO UNDERMINE VIETNAM'S OWN AMBITIONS TO BECOME AN IT
CENTER. YAMAUCHI

UNCLASSIFIED