BULGARIA STEPS UP IPR PROTECTION, BUT STILL HAS

UNCLAS SECTION 01 OF 03 SOFIA 000983 SIPDIS DEPT FOR EB/IPE JURBAN; SWILSON DEPT PLEASE PASS USTR LERRION DOC FOR SSAVICH SIPDIS E.O. 12958: N/A TAGS: ECON ETRD KIPR BU SUBJECT: BULGARIA STEPS UP IPR PROTECTION, BUT STILL HAS ROOM TO IMPROVE SOFIA 00000983 001.2 OF 003 Ref.: (A) SOFIA 462; (B) SOFIA 251 ¶1. SUMMARY: The GOB has greatly increased its efforts to improve protection of intellectual property rights (IPR) over the last few months. Interagency cooperation has measurably improved - including relations with the new prosecutor - and there are plans to increase public awareness efforts this fall. Bulgarian enforcement agencies have carried out additional raids, including action against internet pirates, but enforcement and prosecution of IPR violations remain insufficient and non-deterrent. Also, industry remains concerned that the GOB has not resolved critical legislative deficiencies in IP protection, but is concerned that attempts to change the laws could make them worse. Cooperation between the Government of Bulgaria and industry is better than before, but a more aggressive approach is still needed. End Summary. REFINING THE 2005 ODM LAW? -------------- ¶2. The GOB's efforts to address the deficiencies of the new Optical Disk Media (ODM) law have fallen short of responding to industry's concerns. Pursuant to the GOB's IPR Action Plan and the recommendation of the European Commission, the Ministry of Economy and Energy conducted a post- implementation review of the new law. The review revealed that compared to the previous regulatory framework, the new ODM Law makes considerable headway in clearly defining the rules and procedures for getting a software license/certificate. ¶3. Industry believes, however, that the review did not go far enough. In an ideal world, they would seek amendments leading to stricter ODM legislation; however they fear manufacturers would succeed in diluting the current legislation, so will likely stand pat for now. The review also failed to solicit the opinion of some of the leading industry organizations. For instance, two major industry associations, the International Federation of Phonographic Industry (IFPI) and the Business Software Alliance (BSA), were either not contacted or were not properly advised how and when to comment. ¶4. According to industry contacts, Bulgarian law should: --allow the right holders' organizations to participate in or assist the regulatory bodies in conducting oversight of ODM production and to take part in inspections; --strengthen inspection procedures to allow regulatory bodies to inspect manufacturing facilities and seize documents, samples of the ready product, raw material, manufacturing equipment, matrices; and --introduce administrative liability where license applicants submit forged documents. ¶5. An additional problem has arisen during the first reading of the new Penal Code, which decriminalizes possession of pirated goods. The draft language calls for criminal penalties only in cases of storage for "commercial purposes" - a phrasing that is difficult to prove under Bulgarian jurisprudence - and also conflicts with the copyright law. SIGNS OF INCREASED COOPERATION -------------- ¶6. The GOB has improved inter-agency-coordination and its responsiveness to industry concerns, but still has room to do better. For example, Deputy Minister of Economy and Energy Lachezar Borisov chaired on June 7th a well represented inter-agency discussion with the Distilled Spirits Council of the U.S. (DISCUS) and local NGOs. Recent GOB activities include: -- proposed amendments to the Law on Wine and Alcoholic Beverages to align it with the EU legislation; -- a new Ordinance for Control and Coordination of Wines, Spirits, Distillates and Spirit Drinks; and -- a plan to update the Ordinance of definitions of the types of alcohol beverages, the regulations for the manufacture of such drinks, the permitted additives and the conditions for use. ¶7. DISCUS agreed that positive steps have been made, but voiced concerns about the definition of synthetic spirits and the effectiveness of fighting counterfeiters. DISCUS said it was encouraging to see inspections in bars and clubs in May when a total of 22 establishments were visited, and SOFIA 00000983 002.2 OF 003 encouraged the Bulgarian officials to be aggressive as counterfeiters are becoming more sophisticated. In particular, DISCUS would like the Penal Procedure Code to outlaw refilling bottles with counterfeit spirits, and encouraged the GOB to more effectively prosecute counterfeiters. In response, the GOB and the Bulgarian Wine and Spirits Institute requested technical assistance and closer cooperation with American industry. ¶8. ODM industry representatives participate in interagency meetings and have been consulted on anti-piracy efforts such as the impending public awareness campaign. But the GOB and industry have yet to reach agreement on the overall piracy- to-authentic goods rate - which is key to determining Bulgaria's overall effectiveness in this area. MORE ACTIONS ON THE GROUND NEEDED -------------- ¶9. Bulgarian enforcement officials have carried out an increased number of raids lately, including a bold action against internet pirates. The Ministry of Culture reported enforcement agencies conducted 35 inspections between April- June, 2006 seizing over 13,000 pirate discs, 6,000 printed covers and 33 computer systems. The GOB still must step up its efforts against illegal internet uploading. ¶10. In three recent raids: --The General Directorate for Combating Organized Crime (GDCOC) carried out on May 5 its first enforcement action against individuals infringing on peer-to-peer (P2P) networks, using a cutting edge file sharing technology known as Torrent. The police raided the premises of three of the leading members of a sophisticated P2P network known as "Arenabg," who facilitated the illegal distribution of 22 terabytes of copyrighted products, including software, music and movies, causing damages of tens of millions of U.S. dollars in lost revenues. The three pirates detained and charged under Article 172-a of the Penal Code, however, were later released on bail. This group of illegal file- sharers is getting ready to form an official association -- Association for the Protection of Internet Users -- with the idea of registering a political party copying the Swedish "Pirate Bay" model. --The Ministry of Interior announced June 24 a major enforcement action against a syndicate responsible for distribution of pirate ODM. The raid was designed to disrupt and dismantle a major vendor who distributes and trades in pirate software, movies, music and games in downtown Sofia's Slaveykov Square. The Police raided three residences located near the notorious ODM pirate spot believed to be supplying the street merchants with illegal ODM, and seized more than 10,000 counterfeit discs. The Ministry of Interior reported the arrest of two vendors behind the pirate distribution operation who have been charged. The action was done in cooperation with the local representative of the Motion Picture Association--BullAct. --On July 12, the National Police Service along with the specialized anti-piracy unit of the General Directorate for Combating Organized Crime executed a search on the premises of Bulgaria's major newspaper printing house -- Rodina. The raid resulted in the seizure of 22,000 illegal DVDs of "Tom and Jerry part IV", with a potential street value of 350,000 Bulgarian leva ($230,000). The pirate copies were destined for the Bulgarian market to be distributed with the "Kukurigu Life" newspaper. In an effort to mislead the enforcement authorities, the pirates imprinted on the discs identification numbers that were originally issued by the Ministry of Culture for other copyrighted material. The source identification number (SID code) reveals that all the seized DVDs were produced in Bulgaria at the licensed production line factory of Crystalton Ltd based in Sofia. Reportedly, this production line is owned by one of Buglaria's top pirates -- Dragomir Ganev. ¶11. On the negative side, however, a trademark infringement case involving the U.S. company DuPont underscores the failure of Bulgaria's enforcement agencies and the judiciary to recognize internationally well-known trademarks. For more than two years, Solae, a joint venture between DuPont and the U.S. agribusiness firm Bunge, has been trying unsuccessfully to secure trademark protection for its "Supro" trademark and logo through the proper channels. One of its former local distributors obtained a registration from the Bulgarian Patent Office for an identical product with a similar name and logo ("Soypro".) Solae has SOFIA 00000983 003.2 OF 003 initiated legal proceedings disputing the registration. While the court has not issued a final ruling yet, the Bulgarian company recently secured through the prosecutor's office a court injunction allowing the police to seize the Solae products on Bulgarian territory, causing serious disruptions to the legitimate trademark owner. PUBLIC AWARENESS GEARED TO THE EU -------------- ¶12. In May, the GOB launched a national public awareness campaign as part of its EU commitment to educate the Bulgarian public on IPR protection. The Ministry of Culture coordinated a week-long PR campaign called "Ruse, City of Intellectual Property Rights," which included seminars, concerts, presentations and discussions. This program seemed geared mainly toward decision makers in the EU who are evaluating Bulgaria's commitment to IPR protection in light of the accession process. The GOB is planning another series of public relations activities in September to include TV, radio, press advertisement, etc., which will be aimed more at the street-level consumer. We will actively participate in the planning and are preparing some events of our own for this campaign. MORE TRAINING NEEDED -------------- ¶13. The Department of Justice has recently carried out two successful training programs for prosecutors and police officers. A three-day program June 5-7 was aimed at 40 prosecutors, focusing on the legal challenges of IPR violations; and a program for police officers and special services personnel on enforcement/investigation of IPR and copyright infringement was held on June 27-29. Through DOJ, USAID and PA's Democracy Commission grants, we plan to continue to provide training to judges and additional police and prosecutors on IPR. We would appreciate information in reference to our requests for training funds (ref. A, B) as recently offered programs underlined the need for additional training. ¶14. COMMENT: Over the last year, Embassy Sofia and the Bulgarian government have engaged in extensive efforts to bridge differences on key IP issues. We have seen a palpable improvement in the political will of the government to address the issue. While progress was made in some areas, largely due to Bulgaria's EU accession process, legislative deficiencies, malicious trademark registration practices and lack of public awareness remain. The recent actions are obviously a positive step which we hope will continue. LEVINE