Special 301 Recommendation for Macau

UNCLAS SECTION 01 OF 02 HONG KONG 000714

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/IPE CLACROSSE, EB/TPP EFELSING, AND EAP/CM
KBENNETT
STATE PLS PASS TO USTR JCHOE-GROVES
COMMERCE FOR JBOGER
COMMERCE PLS PASS TO USPTO JURBAN AND LOC STEPP

E.O. 12958: N/A
TAGS: KIPR ETRD EIND MC
SUBJECT: Special 301 Recommendation for Macau

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Summary and Recommendation for Macau
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1. (SBU) Summary: Post recommends that Macau not be placed on
any Special 301 list in the 2006 cycle due to its consistent
and steady IPR performance. However, Post remains concerned
about the rampant and flagrant TV signal piracy in Macau and
the Government of Macau's (GOM) distinct lack of progress in
addressing this issue. Of secondary concern is end-use piracy
of software. Aside from these issues, however, our assessment
is that the GOM maintained an effective IPR regime in 2005.
The Macau Customs Intellectual Property Department (IPD) was
awarded a Distinguished Service Medal by Macau Chief Executive
(CE) Edmund Ho for its efforts to crack down on optical disk
piracy. End Summary.

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Strong Enforcement Efforts Bearing Fruit?
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2. (SBU) The overall number of counterfeit and pirated items
seized by Macau Customs at SAR borders in 2005 dropped when
compared to 2004 figures. Macau Customs asserts that this
reflects a lower level of infringing activity due to their
previous enforcement efforts. In 2005, Macau Customs seized
4,547 counterfeit items of various types at its borders, a drop
of 46.4 percent from 2004. Most of these goods were brought in
from mainland China.


3. (SBU) Within Macau, however, industry representatives cite
anecdotal evidence that optical disk manufacturers are once
again ramping up operations. GOM figures appear to bolster
this perception. In 2004, Macau Customs seized a total of
15,522 pirated optical disks. In 2005, this number had
increased to 19,816 disks, an increase of 27.7 percent. The
government conducted 15 raids and arrested nine people in
conjunction with optical disk piracy last year. Four of the
nine were convicted and given suspended sentences of up to 21
months in prison and fines of up to 8,000 patacas (USD 1,000),
both of which represent a trend towards stricter sentencing of
optical disk counterfeiters. They were given fines and/or
suspended sentences. The other cases are still being
prosecuted.

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TV Signal Piracy
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4. (SBU) While the GOM has been successful at tackling optical
disk piracy, theft of TV signals continues with virtual
impunity. Macau Cable estimates that pirated signals make up
more than 90 percent of the Macau market, making it one of the
worst places in Asia for TV signal piracy.


5. (SBU) In 2000, Macau Cable began operations after signing a
contract with the GOM for the exclusive right to provide pay TV
cable service in Macau. Almost immediately, ten to twelve
small operators, called "antenna companies," began engaging in
widespread signal piracy, illegally hooking up thousands of
Macau households and businesses to as many as 50 different
channels, including many U.S. providers. These companies can
charge as little as one US dollar per home, because they pay
nothing to the content owners or the GOM (taxes, licenses).


6. (SBU) On August 18, 2005, the GOM's Office for the
Development of Telecommunications and Information Technology
announced that starting on September 12, 2005 it would send
staff to check antenna companies, satellite network operators,
and residential buildings for unlicensed receivers. Offenders
were to be fined between 500 to 20,000 patacas (between 63 -
2,500 USD),with repeat offenders to be fined double those
amounts. However, the GOM received a furious backlash from the
infringing antenna companies when they threatened to cut off
all service, including legitimate broadcasts of Hong Kong and
regional television programs, to the 90 percent of the Macau
households that they service.


7. (SBU) Faced with a growing public uproar about the
enforcement action, CE Edmund Ho declared on September 3, 2005
that the issue was still "open for discussion" and delayed the
enforcement action for two months to give the GOM a chance to
carry out public outreach on the importance of IP protection.
As of late February 2006, the GOM had yet to shift from its
public outreach efforts into actual enforcement actions. Macau

HONG KONG 00000714 002 OF 002


Cable representatives say that the GOM now seems to be
refocusing its efforts on pushing Macau Cable to purchase the
infringing antenna companies. Although Macau Cable is not
against the idea of purchasing the problem broadcasters, the
company remains concerned about the GOM's acquiescence to the
business practices of the antenna companies and the detrimental
effect this action has on the overall IPR protection regime in
Macau.

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End-Use Piracy
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8. (SBU) Of secondary concern is the lack of GOM action on "end-
user" piracy and "channel" piracy (counterfeit software and pre-
loaded unlicensed software on new computers). At the heart of
the matter is Macau's ambiguous copyright law, which has not
yet been used in court to address these forms of piracy.
Software industry representatives have argued that because the
law is vague, law enforcement authorities are not empowered to
file criminal charges. In December 2005, Macau Customs
conducted a software business end-user piracy raid on a small
company and found several unlicensed copies of business
software in use. Although the scale of the action was small,
the GOM is considering using this action as a "test case" for
applying the copyright law to end-user piracy violations.

SAKAUE