UNCLAS SECTION 01 OF 03 SOFIA 001622

SIPDIS

DEPT PLEASE PASS TO USTR LMOLNAR; JCHOE-GROVES
DEPT FOR EB/IPE JURBAN; SWILSON; JBOGER
DOC FOR SSAVICH

SIPDIS

E.O. 12958: N/A
TAGS: ECON KIPR ETRD BU
SUBJECT: SPECIAL 301 UPDATE - BULGARIA MAKING PROGRESS

REF: (A) Sofia 0983 (B) Sofia 0462 (C) State 183379


1. (SBU) SUMMARY: The GOB has made strong progress this year towards
improving its Intellectual Property Rights (IPR) Regime. The
inter-ministerial council, which we urged them to create, has been
instrumental in implementing much of our IPR Action Plan, pushing
through legislative changes and improving cooperation between
enforcement bodies. Although the government has increased
enforcement - and done a decent job of cleaning up one notorious
piracy area of Sofia - it needs to be more consistent and spread its
effort to the resort areas. Insufficient government resources and
internet piracy remain weak spots. The government's provocative
public awareness campaign has attracted attention, but it still must
better explain to the general public the value of intellectual
products for the economy and the individual. END SUMMARY

DEMARCHE DELIVERED ENCOURAGING FURTHER ACTION
--------------


2. (SBU) We delivered ref C demarche on November 21 and 22 to the
Deputy Minister of Economy, Lachezar Borisov, and Deputy Minister of
Culture, Ina Kileva, who lead the GOB's IPR efforts. We described
again the 301 review process, thanked the GOB for its very strong
efforts in the past 12 months, and urged them to step up their
work.


3. (SBU) Borisov described his Ministry's major successes in IPR
enforcement, many of which were contained in a joint report with the
Ministry of Culture, e-mailed separately to DOC, USTR, and State's
Economic Bureau and the Bulgaria desk. In order to strengthen
control over optical disc (ODs) production, the government conducted
15 unannounced inspections of the licensed OD manufacturing
facilities since the new OD Media Law entered into force in
September 2005. Twenty licenses for OD Media production were issued
in accordance with the new law, and a database register for imported
polycarbonates and equipment for OD production was updated. Borisov
asked to meet again soon to discuss specific points we raised; he
will then follow up with a meeting with industry association

representatives.


4. (SBU) Kileva, probably the most active and effective IPR player
for GOB, told us that in the inter-agency Council's 11 meetings this
year it has drafted and modified laws and regulations, including the
Law on Marks and Geographical Indications, and the Law on Industrial
Design and the Penal Code, whose texts were reviewed by the
industry's legal experts. As a result of the increased enforcement
measures, there is no counterfeit production from licensed
manufacturers at present, Kileva said. Kileva was also happy to see
the Sofia City Court more actively involved in the work of the IPR
Council. We urged her to convey our desire that the Court actively
pursue its cases and not be shy about handing out severe penalties
to IP violators. We note that USAID training of judges in IPR cases
will expand next year.

GOB ACTION
--------------


5. (SBU) In addition to the steps listed above, Kileva told us about
the Culture and Interior Ministries' joint enforcement efforts,
which have succeeded in reducing the level of street-level piracy.
From January to October, the enforcement record includes:

--51,750 audio and video discs, 300 audio cassettes, 3,708 video
cassettes seized; 22,000 DVDs "Tom and Jerry" confiscated in July
2006;
--582 computer systems seized;
--800 computer games seized;
--61 operational systems erased;
--19 servers seized;
--20 administrative acts for infringements;
--5,738 certificates of rights registrations issued.

The Ministry of Interior's enforcement record includes:

--760 special police operations conducted;
--1,880 market places inspected;
--51,750 ODs and over 216,072 paper covers seized;
--105 computer configurations seized;
--6 investigations initiated;
--458 trade centers and bazaars inspected;
--58,000 counterfeit goods of various types seized;

The Bulgarian Patent Office has issued 61 penal injunctions and
sanctions in the amount of 7,500 leva (USD 4,800). The Customs
Agency has seized 51,782 counterfeit goods. The Sofia City Court
initiated 87 magistrate cases, issued 10 convictions, reported 3
in-court and 18 out of court settlements.


SOFIA 00001622 002 OF 003


PHYSICAL PIRACY MAY BE DOWN, BUT INTERNET PIRACY GOES UP
-------------- --------------


6. (SBU) Internet piracy, as in most countries, is a serious problem
for Bulgarian law enforcement authorities. For instance, both the
GOB and industry estimate the internet music piracy rate at almost
100 percent. The Ministry of Culture estimates annual losses to
domestic industry from pirated music in the amount of 4.5 million
leva (USD 3 million), with a total of 300 jobs lost each year. U.S.
industry numbers are much higher. The government suffers from a
lack of resources and qualified experts to pursue Internet crimes.

The Ministry of Interior's record so far includes:
--74 Raids with 7,319 PC Games seized;
--36 Raids with 8,770 Sony Play Stations seized;
--34 Raids on Internet Downloadable Media.

NEW LEGISLATION STRENGTHENS IPR PROTECTION
--------------


7. (U) The Bulgarian Parliament passed amendments to the Penal Code
in August 2006, for which the USG and industry had energetically
lobbied. The amendments criminalize the storage of protected
material in commercial quantities, and increase the penalties for
industrial property offences. The amendments also provide for the
destruction and forfeiture to the state of the infringing material
regardless of whose property it is.


8. (SBU) Parliament passed in July 2006 amendments to the Law on
Patents and Utility Models, which aims to strengthen the
administrative process of patent infringement. According to
industry, however, the revised Patent Law is not compliant with EU
principles, as it withdraws the "transitional patent protection" for
pharmaceutical products. The result will be that companies will not
receive five years of extended protection for drugs granted under
the old law - and hence, will invest less in the local industry. We
are lobbying to get this changed.


9. (U) In August 2006, Parliament passed amendments to the Law on
Marks and Geographical Indications and the Law on Industrial Design.
The two laws aim to introduce local regulation of community marks
and community designs; synchronize with WIPO recommendations on
well-known marks; and eliminate certain shortcomings and
inconsistencies impeding the efficiency of IPR enforcement. The new
legislation, however, must be strengthened with greater
harmonization of border measures for IPR protection; i.e., through
the introduction of an effective export-import inspection regime
with more active involvement of border authorities.

NEW PROSECUTOR - A PROMISING START
--------------


10. (SBU) The Prosecutor General and the Supreme Cassation
Prosecutor's Office are receptive to our concerns and ready to
improve IPR enforcement. Through the Department of Justice, we have
trained prosecutors and police to increase their skills in IPR
protection. We are working to ensure that the Prosecutor General's
forward-thinking will be seen as a model for other prosecutors and
the legal system in general to pursue vigorously IPR infringement
cases.

EXPOSING A PROBLEM: NATIONAL PUBLIC AWARENESS CAMPAIGN
-------------- --------------


11. (U) The Bulgarian government responded well to our suggestions
to launch a public awareness campaign on IPR. They kicked it off in
August 2006 in cooperation with industry and the major electronic
and printed media, aimed at raising respect for IPR among the
public. The ongoing campaign includes TV, radio and press
advertisements, posters, flyers, and photo exhibitions,
demonstrating the importance of IPR protection. A TV spot was aired
on ten of the leading channels in September-November 2006, to be
followed by another one in November-December featuring well-known
national artists and intellectuals. To capture attention, the
artists, who discuss the need to protect intellectual property by
saying "piracy robs", are naked -with strategically-placed banners.
(Samples were emailed separately to DOC, USTR and State's Economic
Bureau and the Bulgaria desk.)


12. (SBU) The GOB's campaign will continue on the Internet involving
the biggest Bulgarian Internet portals such as Netinfo, Dir.BG,
Investor.BG, Avtora.com. The banners are being developed and will
be presented in December and January. The Ministry of Culture
together with the Ministry of Education and Science plans a
follow-up (re-designed) campaign targeting schools.

USG INVOLVEMENT
--------------

SOFIA 00001622 003 OF 003




13. (U) In addition to committing itself to an extensive public
awareness campaign, the GOB wants to continue to receive adequate
training and technical assistance. Resource-poor, Bulgarian
authorities depend on U.S. aid to supplement its own coffers. To
sustain and increase momentum, the Embassy IPR team recommends
increased USG engagement with the government, and more assistance
and funding.

Initiatives/Programs concluded to date include:
--A sequence of five training modules organized by the Association
of Prosecutors in Bulgaria as part of a U.S. Embassy Democracy
Commission grant to assist regional prosecutors in their IPR work
continues until May 2007. US DoJ was invited as a co-organizer and
contributed a U.S. expert who lectured and participated in the Q and
A session of the first seminar;

--Through USAID, we developed, piloted and delivered to the National
Institute of Justice (the organization that trains magistrates) a
training module on the criminal law aspects of IPR in mid-October.
The course is now a sustainable part of the NIJ's continuing legal
education curriculum and complements their civil law IPR training
module developed with EU assistance. In addition, USAID provided
assistance to courts in the regions to deliver IPR training.

--We nominated two Bulgarian Patent Office officials for the USPTO's
Academy on the Enforcement of Intellectual Property Rights in
January 2007. We also nominated two Ministry of Culture officials
for the USPTO's Academy on Copyright in the Digital Environment in
January 2007;

--High-level Washington visitors from State, Commerce and USTR have
included IPR issues in their meetings with Bulgarian leaders. We
are preparing a letter from the Ambassador to the Minister of
Culture urging resolution of specific IPR cases.


14. (SBU) We also recommend holding regional workshops to include
Bulgaria, Greece, Turkey, Romania, Serbia and Macedonia to address
cross-border sales of pirated goods, and to examine how Bulgaria's
and Romania's entry into the EU will help or hinder law enforcement
efforts. We thank Washington agencies, especially DOJ, for funding
a position to work with prosecutors to address IP issues.

COMMENT
--------------


15. (SBU) The Bulgarian government is taking its IPR
responsibilities seriously. Political will and coordinated efforts
have yielded positive results in some IPR enforcement areas. We
believe that law enforcement efforts need to be regularized, as
relatively few violators have been successfully convicted, fined or
imprisoned to date. Bulgaria's piracy rates are still well above
Western levels, but the government is working harder than it has in
years to change this. We will continue to press the GOB to move
faster in making Bulgaria an IP-friendly country, which is
especially important given its 2007 EU membership.

BEYRLE