INDONESIA IPR - EMBASSY SPECIAL 301 OUT OF CYCLE

UNCLAS JAKARTA 011588

SIPDIS

SIPDIS
SENSITIVE

DEPT PASS TO USTR DKATZ, JGROVES, RBAE, CCOLLEY
FOR EAP/MTS; EB/TPP/IPE JBOGER
COMMERCE FOR BERLINGUETTE/4430, CATHERINE PETERS
COMMERCE PASS USPTO FOR JOELLEN URBAN



E.O. 12958: N/A
TAGS: ECON ETRD KIPR ID
SUBJECT: INDONESIA IPR - EMBASSY SPECIAL 301 OUT OF CYCLE
REVIEW SUBMISSION

REF: A) SECSTATE 149667 B) JAKARTA 10444
C) JAKARTA 10200 D) JAKARTA 8114


1. (SBU) Summary: Embassy Jakarta strongly urges that the
Special 301 Committee upgrade Indonesia to Watch List status
in its upcoming Special 301 Out-of-Cycle Review (OCR). With
a sound legal and regulatory structure in place, the
Government of Indonesia (GOI) is demonstrating a growing
commitment to improving intellectual property rights (IPR)
enforcement and addressing our specific concerns. The newly
established National IPR Task Force has held several
ministerial and working-level strategy sessions and is
focusing on improving public awareness, interagency
cooperation and information sharing. The Ministry of
Industry (MOI) optical disk (OD) factory monitoring team
recently completed initial unannounced visits to all 26
registered OD factories and sent out warning letters
ordering non-compliant factories to address their
deficiencies. Police across the archipelago have conducted
numerous pirate OD vendor and factory raids in recent
months, seized and destroyed hundreds of burners and over 4
million pirated ODs, arrested hundreds of suspects, and
referred as many as a hundred cases to prosecutors.
Although data on prosecutions are sketchy and hard to obtain
(for all types of crime, not just IPR),the OD monitoring
team has reported that Indonesia courts sentenced a manager
of a pirate OD factory to two years prison and an
owner/partner of another to 2 months imprisonment.
Indonesia's Commercial Courts continue to perform relatively
well, although a recent trademark ruling against Intel is a
setback. Indonesia Customs continues to press Parliament to
accept ex-officio authority contained in a new draft Customs
Law and accompanying implementing regulations. With the
arrival of two Department of State-funded senior IPR
technical advisors and a Resident Legal Advisor with
considerable IPR experience, the Mission is extremely well-
positioned to push the GOI on IPR enforcement in the coming
year. End Summary.


2. (U) This cable supplements Embassy's earlier OCR
reporting (refs b, c and d) with further updates on the
GOI's enforcement activities, particularly in key areas
mentioned in the USG's proposed OCR plan of action. It also
identifies key areas of continuing weakness and how a Watch
List decision would fit into our strategy for addressing
them and maintaining the GOI's forward momentum on IPR
enforcement. We have reviewed recent OCR submissions from
the International Intellectual Property Alliance (IIPA) and
the Government of Indonesia (GOI) and agree with their
general findings and upbeat portrayal of recent GOI IPR
enforcement efforts. In our view, the IIPA's recommendation
to upgrade Indonesia to Watch List status would
appropriately recognize the GOI's recent accomplishments and
give senior level GOI officials an incentive to build upon
Indonesia's more robust IPR enforcement.

National IPR Task Force Ramping Up
--------------


3. (SBU) In the past few months, the newly formed National
IPR Task Force has held one ministerial and several working
level meetings led by either Minister of Law and Human
Rights Hamid Awaluddin, Minister of Trade Mari Pangestu or
Director General of IPR Abdul Bari Azed. Task Force working-
level members tell us that most of their initial work has
focused on establishing national IPR short and medium term
plans of action, facilitating better interagency cooperation
and information sharing, and raising public awareness about
IPR. They note that, with the Task Force in place,
coordinating GOI efforts to respond to our current OCR has
been much easier than last year. Looking forward, we will
encourage the GOI to provide the Task Force with its own
budget (currently it relies on contributions from member
ministries). We will also encourage the establishment of
formal or informal channels of communication between the
Task Force and key stakeholders, including domestic and
foreign industry bodies, foreign governments, and non-
governmental organizations (NGOs).

OD Monitoring Team Begin Unannounced Visit
--------------


4. (SBU) The Ministry of Industry reports that over the past
few weeks, its OD factory monitoring team completed an
initial round of unannounced visits to all 26 OD factories
registered in Indonesia and sent out warning letters

ordering non-compliant factories to address their
deficiencies. Reports from those visits are mixed, with
some factories reportedly inactive and empty, a few failing
to use source identification codes (SIDs),and others in
apparent compliance. The local expatriate recording
industry association (IFPI) representative told us that
inactive and empty factories may be a sign that OD factory
monitoring and police raids are paying off or,
alternatively, that some factories may have been tipped off
in advance of the visits.


5. (SBU) In general, the OD monitoring team's reports still
lack detailed data needed to effectively monitor factories'
operations over time. The Mission's new senior technical
advisor from the Department of Justice International
Criminal Investigative Training and Assistance Program (DOJ-
ICITAP) has worked closely with the MOI on a training
program and a blitz of unannounced factory visits scheduled
for November. The local IFPI representative has agreed to
support these training sessioins and join the monitoring
team during the November factory visits to ensure proper
data collection. Those visits will also provide IFPI with
an opportunity to collect sample disks from all registered
OD production lines in Indonesia to add to IFPI's worldwide
database for tracking pirate ODs back to their source
factories. Looking forward, one challenge for our police
and MOI senior technical advisors will be to encourage
closer cooperation between the OD monitoring team and police
on factory visits and raids.

Police Enforcement Campaign Continues
--------------


6. (SBU) By all accounts, the police continue to conduct
raids of pirate OD vendors and factories. The Jakarta and
Surabaya police have been most active, and industry
representatives tell us that retail piracy rates have
dropped in both cities, particularly in some of the most
notorious malls, like Jakarta's Ratu Plaza. As on other
crime issues, the police have yet to establish a central
system for collecting standardized data on IPR enforcement
actions. Still, the Jakarta Police Special Crimes Unit
continues to eagerly provide us, on an ad hoc basis, with
summaries of their own enforcement actions.


7. (SBU) Most recently, Jakarta police provided us with a
report detailing raids since June 20 on ten home industry
burner factories, two licensed factories, and one unlicensed
factory. During these raids they seized over 250 burners
and hundreds of thousands of blank and recorded ODs, sealed
at least one replicating machine, and arrested at least 16
suspects. Jakarta police also provided us with another
report indicating that they have referred at least 44 IPR
criminal cases to prosecutors since April 2006, and another
32 earlier in 2006.


8. (SBU) It is not clear what happens to most cases after
they are referred to the Attorney General's Office (AGO).
Jakarta Police complain that rivalries, suspicions and
corruption make it difficult for the police to obtain follow-
up information on cases from the AGO. AGO officials
complain that police cases are often incomplete. While
Jakarta police tell us they suspect prosecutors are cutting
deals with suspects, they also insist that there have been a
significant number of convictions, perhaps as many as 20.
The OD monitoring team has reported that Indonesia courts
sentenced a manager of a pirate OD factory to two years
prison and an owner/partner of another to 2 months
imprisonment. We have repeatedly implored the police and DG
for IPR to press the AGO to provide such data, if it exists,
but so far none has emerged. The Mission's police senior
IPR technical advisor and Resident Legal Advisor will
jointly press for closer collaboration between the police
and AGO on IPR cases.


9. (SBU) The Jakarta police continue to work closely with
local MPA and IFPI representatives on some raids, but
investigators now also conduct raids on their own. One
Special Crimes Unit officer explained that five
investigative teams each had standing orders to conduct at
least one major IPR raid a week. This is a significant
advancement from a year ago, when the Indonesian police
party line was that its investigators could not legally
conduct IPR raids without formal complaints from rights
holders.

Customs Ex Officio Authority
--------------


10. (SBU) Indonesia Customs continues to press Parliament
to accept ex-officio authority contained in a new draft
Customs Law and accompanying implementing regulations.
Parliament, however, has been sluggish in moving this and
other important legislation forward. One Customs official
recently told us that Parliament has reviewed and accepted
80 percent of 600 items under discussion in the new law.
Unfortunately, any one of the remaining unresolved issues
could cause significant delay or be a deal breaker. We also
note that the Indonesian private sector has already voiced
strong opposition to elements of the draft Customs Law which
would appear to provide greater enforcement authority to
Customs, without requiring a corresponding improvement in
governance among Customs officials. Despite these
obstacles, Indonesia Customs has been working around these
constraints, particularly when rights holders provide
specific information on infringing goods coming into
Indonesia. One major U.S. cigarette manufacturer praised
Customs for its close cooperation on seizing containers for
counterfeit cigarettes originating from China.

Courts Botch Intel Case
--------------


11. (SBU) Over the course of the last year, local
expatriate IPR lawyers have informed us that Indonesia's
five Commercial Courts, which have jurisdiction over civil
IPR cases, are making fair rulings about 90 percent of the
time. Unfortunately, that was not the case in last week's
Jakarta Commercial Court ruling against Intel Corporation.
Intel lost a protracted legal battle in 2001 when the
Indonesian Supreme Court upheld a lower court decision that
"Intel" was not a well known mark and, therefore, local
electronics producer PT Panggung had the right to register
the Intel mark in Indonesia.


12. (SBU) Intel subsequently filed six separate complaints
with the Jakarta Commercial Court, noting PT Panggung had
never used its registered Intel mark in five instances, and
had not used it for at least three years in a sixth
instance. Under Indonesia law, failure to use the mark for
three years is grounds for its deletion. Last week the
Jakarta Commercial Court ruled that while Intel proved that
PT Panggung was failing to use its mark in all six
instances, Intel had not sufficiently established from what
past date PT Panggung stopped using the Intel mark,
including the five instances in which PT Panggung had never
used it. Intel is appealing the case to the Supreme Court.

Other Notable Developments
--------------


13. (SBU) In recent months, the Ministry of Trade and
Ministry of Justice Directorate General for IPR have
collaborated with the EU, Japan and us in hosting a variety
of IPR public awareness and training sessions for GOI
officials and the broader IP community. The GOI lists many
of these seminars, workshops and events in annex 10 of its
OCR submission. The Ministry of Justice also recently
appointed a new Director of Copyrights Ansori Sinungan who
is well informed, articulate and a good English speaker.
Previously, he was head of DG IPR's district office in
Surabaya, and he deserves partial credit for helping
organize the Surabaya police's recent impressive crackdown
on OD piracy.

Comment: Time is Right for Watch List
--------------


14. (SBU) We have leveraged significant progress on IPR
enforcement in 2006 through two OCRs and the regular Special
301 review, and IIPA and its member organizations are
pleased with recent GOI efforts. While the GOI has not
fully satisfied all our OCR proposals, in some areas it has
far exceeded our requests, particularly on police
enforcement activities. This shows increasing GOI ownership
over the IPR issue, a development that is strongly in our
interests. It would be unfortunate to fail to reward this
ownership and lose current momentum, especially when the
Mission, with assistance from USPTO, is poised to assist the
GOI in the coming year on difficult issues such as effective
factory monitoring and prosecutions. Another consideration
is that our GOI IPR contacts, who are doing a difficult job

well, badly need the success of an upgrade to show their
efforts are producing positive results. Given these
factors, our strong view is that a Watch List decision would
be the most effective way forward.

HEFFERN