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