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

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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

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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