CROATIA IPR UPDATE

UNCLAS SECTION 01 OF 02 ZAGREB 000719 SIPDIS SENSITIVE SIPDIS STATE FOR EB/TPP/IPE URBAN E.O. 12958: N/A TAGS: ECON ETRD KIPR HR SUBJECT: CROATIA IPR UPDATE ZAGREB 00000719 001.2 OF 002 SENSITIVE BUT UNCLASSIFIED ¶1. (SBU) Summary: Although it remains on the Special 301 list for insufficient protection of pharmaceutical patents, the legal framework for the protection of IPR in Croatia is relatively strong. IPR infringements have been criminalized in Croatia since 1994 and the Ministry of Interior maintains a special IPR enforcement unit for these crimes. Seizures and the number of criminal cases brought for IP crimes have risen steadily in recent years. Software piracy rates have fallen from 92 percent to 57 percent over the last ten years and continue to decline. However, problems remain. Geography poses Croatia's greatest challenge in securing IPR, as its long coast and land borders with Bosnia and Serbia make it a major transit route. Also, despite regular police seizures of pirated and counterfeit goods, Croatia's court system has not developed as far in its ability to tackle this problem, frequently releasing violators with little more than a verbal warning and forfeiture of goods seized. End Summary. Police Enforce IPR Laws -------------- ¶2. (SBU) Croatia criminalized IPR violations in ¶1994. Enforcement, with the exception of Customs, is the province of the national police, under the Ministry of Interior. Data shared with Econ Off by Mirjana Vukovic of the Interior Ministry's Department for Economic Crime and Corruption shows steady growth both in seizures of pirated goods (mostly CDs and DVDs) and overall cases opened for IP violations, including the sale of counterfeit brand-name consumer products. In 2005, the Croatian police referred 1090 cases to the State Prosecutor's Office for IPR-related crimes, 16.5 percent more than in 2004. Most of these (640) were for copyright violations, including those stemming from police seizures of over sixty-six thousand pirated CDs, DVDs and cassettes. However, neither Vukovic nor the head of the Economic Crime Department, Ante Orlovic, could say if rising numbers reflect better enforcement or simply growth in the problem. They suspect that it is a combination of the two. Destination and Transit Country, Not Producer -------------- ¶3. (SBU) Croatia is not an important producer of pirated and counterfeit goods. Vukovic said that most of the pirated goods made in Croatia that have been seized by police are of very poor quality with no effort made to pass them off as originals. Croatia, however, is a destination country for counterfeit consumer goods produced elsewhere (mostly in China, according to Vukovic) and also an important transit country for goods headed for neighboring Bosnia and Serbia. In the case of Bosnia, Vukovic said that many counterfeit goods eventually find their way back to Croatia, either purchased by consumers on trips across the border or for resale. The summer season poses a particular challenge as tourists swell the population of Croatia's coast and islands, creating a larger market for counterfeit goods. At the same time, police numbers are spread thin, effectively relaxing enforcement when the problem is greatest. Courts Not Backing IPR Laws Sufficiently -------------- ¶4. (SBU) A common theme both from the Ministry of Interior and from Mladen Vukmir, Zagreb IPR attorney and Business Software Alliance representative, is that Croatia's courts are not up to the task of enforcing the country's IPR laws. According to Mirjana Vukovic, many of the cases that the police bring for IP crimes result in little more than a reprimand for the perpetrators, as well as the forfeiture of any contraband seized. Given the economics of counterfeits, this is an acceptable risk to most of these merchants who, much to the frustration of the police, are usually back in business and fully stocked within a few weeks. ¶5. (SBU) All of our interlocutors agree that the courts are the weakest link in Croatia's IPR protection regime, particularly at the municipal ZAGREB 00000719 002.2 OF 002 level. The Ministry of Interior organizes periodic seminars for judges on IPR, but lacks resources to carry this out in a comprehensive way. Nevertheless, Vukovic related the story of a judge in Slavonia who, after hearing how counterfeit consumer products can endanger public health, began to issue much tougher sentences. Vukmir concurred with the view that training of judges and the establishment of IPR as a specialty in Croatia's law schools would go a long way toward strengthening IPR enforcement. Software Piracy Declining -------------- ¶6. (SBU) Vukmir said that software piracy has declined substantially in Croatia over the last decade. In 1996 it was estimated that nearly 92 percent of all computer software used was illegal. Now that figure has been reduced to 57 percent, which Vukmir said was about the same as in Greece, but higher than neighboring Slovenia, where he said it was estimated that 50 percent of software in use was illegal. Vukmir attributed the decline in software piracy both to better enforcement and also to the increasing practice of bundling software as original equipment on new PCs, particularly notebooks. FRANK