INDONESIA: 2006 SPECIAL 301 SUBMISSION

UNCLAS SECTION 01 OF 03 JAKARTA 002531

SIPDIS

SIPDIS
SENSITIVE

FOR EAP/MTS AND EB/IPE/EAP
COMMERCE PLEASE PASS USPTO FOR JOELLEN URBAN
DEPT PASS TO USTR FOR KATZ AND GROVES

E.O. 12598: N/A
TAGS: ETRD KIPR PGOV ID
SUBJECT: INDONESIA: 2006 SPECIAL 301 SUBMISSION

REF: A) State 14937; B) 05 Jakarta 16289


1. (SBU) Summary: Local IPR industry representatives now
tell us that the IPR enforcement landscape has changed
considerably since they made their Special 310 out-of-cycle
review (OCR) submissions in December 2005. They now see a
more credible and sustained enforcement effort backed up by
signals of high-level political will, including President
Yudhoyono's personal involvement in a MOU with Microsoft to
legalize government software and Police Chief Sutanto's
strong directive against piracy. There is clear evidence
the U.S. decision to maintain Indonesia on the priority
watch list (PWL) during the recent out of cycle review has
demoralized key IPR officials at the Ministries of Trade and
Justice. We urge Washington agencies to upgrade Indonesia
to Watch List status during the 2006 regular Special 301
review. End Summary.

Enforcement Actions
--------------


2. (SBU) In early January, Indonesia's new and no-nonsense
National Police Chief General Sutanto issued a directive to
all of Indonesia's 33 regional police chiefs instructing
them to step-up enforcement activities in all areas
pertaining to optical disc piracy, including retail sales
and factory production. The result has been a dramatic
increase in police raids across the country, and
particularly in major urban centers. In Jakarta, the
metropolitan police, working closely with the local Motion
Pictures Association (MPA) representative, made good on
their promise to conduct regular monthly raids following the
successful November 2005 raids against some of Jakarta's
most notorious malls (Ratu Plaza, Mangga Dua and Harko
Glodok). Since November, they have conducted repeat raids
at those same centers as well as new raids in other areas.
In February 2006, they raided 65 shops and, with
contributions from earlier raids, have collected over 6 tons
of pirated optical discs that now await destruction at an
appropriate high-level event. A local Business Software
Alliance (BSA) representative claims that overall piracy is
down by as much as 10 percent in Jakarta and 50 percent in
Surabaya.


3. (SBU) The police have also conducted recent factory
raids. On February 9 and 10, with MPA support, police
raided 2 factories in Tanggerang where they seized three CD
and four DVD production lines and roughly 18,000 pirated
optical discs. The local MPA representative says his
organization and the police plan to raid an additional 8
malls and a major factory by the end of March. According to
the MPA representative, the police said that following
General Sutanto's directive, they no longer require MPA
support (usually for transportation and meals) to organize
and conduct raids. Sutanto has now turned his attention
towards creating an anti-piracy film in collaboration with a
local recording industry association and Indonesia Customs.


4. (SBU) On a February 22 visit to Jakarta, a Singapore MPA
representative told us the recent GOI actions on IPR are
"the most remarkable developments in the past six years."
He also expressed concern that the recent decision to keep
Indonesia on the PWL had been based on dated information
that does not accurately reflect what he described as a new,
credible and sustained enforcement campaign, supported by
political will from the very top. He also expressed fear
that the OCR decision would dampen current momentum, and
said he would recommend to MPA and the IIPA that they revise
earlier recommendations and support upgrading Indonesia to
Watch List during the upcoming regular Special 301 review.
Local BSA and IFPI reps say they support this view and will
also press for an upgrade to the Watch List.

Optical Disc Regulations (ODR)
--------------


5. (SBU) Local IPR industry reps tell us they now believe
that the list of roughly 22 optical disc factories in the
GOI's database accounts for most of the factories known to
exist. They note that earlier estimates of as many as 50-60
factories were based largely on rough estimates, and some
suspected factories may have closed or moved. The
interagency ODR monitoring team continues to build capacity
through its participation in USAID funded trainings and
awareness campaigns. It is also making steady progress
towards registering factories (17 of 22 are now registered),
supplying SID codes (the 17 registered factories now have

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SID codes),and conducting regular inspections. The
monitoring group's head, Tony Tanduk, recently told us that
his team is having better success in entering factories with
greater police support following General Sutanto's
directive. Still, the monitoring team consists of an ad hoc
group of officials who take time-off from other
responsibilities to work on ODR implementation and rely
heavily on industry support. Moving forward, it will be
important to encourage the GOI to provide the team with a
regular budget and staff.

Arrests, Prosecutions and Convictions
--------------


6. (SBU) In early February, Jakarta courts convicted six
pirate software vendors to jail terms of roughly 1 year
each. Police raids on vendors in February alone resulted in
some 50 arrests, and police netted another 17 during the
recent factory raids, including one major distributor. MPA
estimates that the Attorney General's Office now has some
220 IPR cases pending. In general, prosecutions and
convictions still remain weak, a reflection of the very low
capacity of Indonesia's judicial system. MPA tells us that,
with the police now making more concerted efforts, the next
focus of effort should be on the Attorney General's Office,
which is responsible for prosecuting IPR cases.

Other Developments
--------------


7. (SBU) On January 13, the Ministry of Information and
Communications Technology and Microsoft signed an MOU on
legalizing all GOI Microsoft software. President Yudhoyono,
on his own initiative, personally led the effort to sign the
MOU, following his 2005 meeting with Microsoft Chairman Bill
Gates. It is estimated that 90 percent of GOI computers use
pirated versions of Microsoft operating systems and
software.


8. (SBU) A Presidential Decree to establish a National Task
Force is finalized and still awaits President Yudhoyono's
signature. Bureaucracy, higher priorities, and a logjam of
pending Presidential decisions seem to be the main
impediments to its passage. While the Task Force should
facilitate greater interagency cooperation, strong signals
from the top, such as the Microsoft MOU and Sutanto's
directive, are equally important. The regional MPA
representative recently told us that the Task Force was not
the highest priority, and credible enforcement and
reductions in the availability of pirated products was more
important.


9. (SBU) Finally, as reported in ref b, we continue to hear
reports from a number of IPR attorneys that Indonesia's
Commercial Court continues to perform well on a healthy
volume of civil IPR cases (mostly related to trademark
disputes). Again, we should consider this a significant
achievement given the overall weak state of Indonesia's
judiciary.

Comment and Recommendation
--------------


10. (SBU) The IPR enforcement landscape has changed since we
transmitted Ref B and engaged the GOI in a digital video
conference on January 17. Industry representatives, who a
few months back doubted the motives behind raids, now see a
more credible and sustained effort and positive momentum.
Enforcement has been the weak link in Indonesia's IPR
efforts for years, and coupled with other positive
developments, we continue to believe there is ample progress
to warrant an upgrade to Watch List status.


11. (SBU) From a longer-term perspective, the last two
Indonesian administrations have made unmistakable progress
on OD piracy issues since USTR placed it the PWL in May
2001:

--Parliament passed a strengthened Copyright Law in July
2002 that went into force in July 2003.

--Former President Megawati Sukarnoputri signed a Government
Regulation on Optical Discs in October 2004. In terms of
legal hierarchy, Government Regulations are the highest form
of GOI regulation commonly used.

--The former Minister of Trade and Industry issued

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complementing Ministerial Regulations on optical discs, also
in October 2004.

--With assistance from the U.S., the Ministry of Industry
formed and trained OD monitoring teams in 2005. Although
there is room for more progress, these teams have registered
more than three quarters of the OD factories known to exist
in Indonesia, and are actively enforcing the ODRs.

--As noted above, the National Police Chief issued a
directive in January 2006 to Indonesia's 33 regional police
chiefs instructing them to step-up enforcement activities in
all areas pertaining to optical disc piracy.

--Also as noted above, police in Jakarta and other major
Indonesian cities have dramatically increased the number of
raids against OD vendors and factories since November 2005.


12. (SBU) Although they would admit that Indonesia still
has a way to go, Indonesian IPR officials believe adamantly
that they have made impressive progress over the last few
years towards improving Indonesia's IPR climate, and we
agree. In particular, the IPR enforcement progress over the
past four months has come in the face of competing law
enforcement priorities and financial and political
opposition from illegal OD producers and vendors. For these
reasons, the recent USG decision to retain Indonesia on the
PWL stunned and demoralized our GOI IPR contacts. Several
of our close GOI interlocutors have told us flatly that
"they feel like giving up" following the OCR decision. The
Ministry of Justice Director General for IPR, upon hearing
of our decision, cancelled his planned February 16 meeting
with USTR Director for Southeast Asia David Katz. We are
frankly concerned that the downturn in our IPR relationship
could reduce the effectiveness of the USG-funded senior IPR
technical advisors we are placing with the ODR monitoring
team and police.


13. (SBU) The bottom line is that the proponents of IPR
protection within the GOI and Indonesian society are a small
and embattled group, and they face off daily against many
strong enemies and competing law enforcement priorities. As
we argued in Ref B, one of the most effective ways we can
support this group is by upgrading Indonesia to Watch List
status, and we believe this remains our most effective
policy choice moving forward.

PASCOE