THAILAND 2007 SPECIAL 301 SUBMISSION

UNCLAS BANGKOK 001035 SIPDIS SIPDIS STATE FOR EB/TPP/IPE JENNIFER BOGER STATE PASS USTR FOR JENNIFER CHOE GROVES USDOC FOR CASSIE PETERS E.O. 12958:N/A TAGS: ECON ETRD KIPR TH SUBJECT: THAILAND 2007 SPECIAL 301 SUBMISSION ¶1. Summary and Recommendation: Rights holders are in general agreement that protection of IP in Thailand has made little progress in the past year and in some areas has declined. Many of the problems they cite are long-standing, but some have worsened over the past year. The number of raids and seizures has steadily increased year by year, but courts are not handing down deterrent sentences, and becoming less generous with search warrants. Although the level of cooperation with police and other government agencies remains acceptable, little political will exists in the current government to seriously tackle enforcement. RTG initiatives in 2006 to better coordinate enforcement were largely unsuccessful. Political instability prevented passage of improved IP legislation for much of 2006, though some long-awaited legislation and regulations are now filtering their way to the cabinet and National Legislative Assembly for approval. ¶2. Although the IP situation in Thailand appears to have stagnated over the past year, we consider the political instability to be a key reason. Thailand's previous and current governments have been distracted by political crisis and the measures necessary to reform the political system, and have not focused attention on IP. Enforcement agencies continue their day-to-day work, but high-level interest necessary for sustained progress is unlikely for the coming year. However, we remain cautiously optimistic that a new government by the end of the year may be able to put Thailand back on track. Embassy recommends continuing Thailand in its position on the Watch List. End Summary and Recommendation. ¶3. 2006 contained minimal positive news to buoy the spirits of IP rights holders in Thailand. Although enforcement actions continued throughout the year, political instability reduced intellectual property right protection to some degree. Progress under the previous government had been slow, but was steadily advancing. However, in April, under political pressure then-Prime Minister Thaksin dissolved the government and Thailand began preparations for new elections scheduled for October. IP legislation in the works was put on hold pending a newly elected government, and the administration's attention was diverted to keeping itself intact and preparing for the upcoming elections. However, before elections could be held a military coup swept the civilian government from power in mid-September. Despite the law and order positions of the new government, rights holders see the new leadership as having little political will to actively pursue IP activities. The current government is temporary and has a short-term outlook, and IPR protection has not been a priority. An elected government expected toward the end of the year would likely have a more balanced view of IPR protection and its importance to investment and the overall economic picture. Raids and seizures up, but so are piracy rates -------------- - ¶4. The Department of Intellectual Property (DIP) recorded record numbers of seizures and arrests in 2006. DIP reported 9,575 arrests in 2006, up from 7,689 the previous year, and seizures of 2,823,588 infringing items, up from 2,261,567 in 2005. However, rights holders say the uptick in statistics is negated by the lack of deterrent sentences handed down from courts. One right holder claimed that in 9 out of 10 cases in which he was involved the suspect was convicted but did not receive so much as a fine. A typical punishment is community service such as sweeping temples for a few days, but rights holders suspect even these light sentences are often not fulfilled. Several years ago fines were typically higher and more prevalent. A reduction in penalties has made enforcement actions to be even more just another cost of doing business for IP pirates. There has been no noticeable reduction in the amount of infringing material sold on the streets and retail establishments and no decline in the number of places where infringing material is available for sale. ¶5. Although rights holders reported a drop off in availability of police to execute raids immediately after the coup, cooperation with enforcement agencies remains acceptable and enforcement activities have returned to normal. Police respond quickly to right holders complaints and make sizable seizures. But police rarely follow up raids with investigations into suppliers and networks of infringing material. For their part, police claim that Section 66 of the Copyright Act restricts them from undertaking ex officio enforcement actions. Police are unable to take action without a complaint from a right holder. They also claim shortages of available officers, in part because increasing violence by IP pirates against officers necessitates larger raiding teams. Indeed, rights holders say violence is on the upswing and two private IP investigators were killed in the last six months. ¶6. The Department of Special Investigations (DSI),formed as an FBI-like agency to focus on large-scale crime, significantly increased their IPR investigations in 2006 as hoped. In early 2006, DSI's threshold for undertaking IPR investigations was lowered from five million Baht (USD 125,000) worth of counterfeit merchandise down to 500,000 baht (USD 12,500),allowing DSI to take on more cases. In addition, the value thresholds were set at the value of genuine product, rather than the street value of the pirated goods. DSI took on 53 investigations in 2006, up from seven in 2005, and seized 513,017 infringing goods through November, 2006. Rights holders are generally happy with DSI's performance, noting that they are able to pursue the "bigger fish" and are better at controlling evidence than are the police. ¶7. In recent years rights holders have viewed Thai Customs as one of the few bright lights compared to otherwise lackluster performance by other enforcement agencies. Customs regularly undertakes ex officio investigations and in 2006 opened 373 cases that resulted in seizures of 1,646,272 infringing items. Customs admits, however, that the vast majority of their seizures are on inbound, rather than outbound shipments, despite the substantial amount of material being exported or transshipped through Thailand. Customs believes much of the infringing material believed to be sourced from Thailand is actually transshipped from China, but Thai law is unclear on inspecting transshipments and Customs refrains from doing so. Customs also has no authority to refer cases directly to prosecutors and laments that many cases they refer to the police are not acted on. Customs' Director General said he had not seen a criminal case on IP in ten years resulting from a Customs seizure. Customs utilizes X-ray equipment to inspect cargo shipments coming through major ports, but inspection is more haphazard at porous border crossings with Burma, Laos and Cambodia. ¶8. Thailand has long had a well-regarded IP court with judges specifically trained in how to handle IP cases. However, an unending stream of low-level cases has left many judges jaded. Non-deterrent sentences have become the norm. Judges are also displeased by rights holders (typically local rather than international rights holders) who use the search warrants the judges issue to shake down retail sellers of infringing material rather than making arrests. Rights holders report warrants are harder to obtain and often have strict restrictions on time and place that an enforcement action can be taken. A shot at enforcement bounces off the rim -------------- ¶9. The RTG attempted a couple high profile enforcement efforts in 2006, to little effect. In June the RTG announced that in honor of the King's 60th anniversary on the throne, for two months the streets would be swept clean of infringing goods in a concerted effort by all relative branches of the government. Little of the sort happened. During one week of royal celebrations, police kept major thoroughfares clear of street sellers and hawkers, including but not exclusively sellers of pirated goods. After the celebrations ended, merchandise returned in full force with no apparent impact on sales. ¶10. In August the RTG signed a MOU along with rights holders and retail shopping centers that set out responsibilities for IPR owners, law enforcement, local authorities and the DIP and for the first time owners of noted retail establishments where pirated products are sold. The inclusion of mall owners was notable, bringing this group for the first time into cooperation on IP protection. The MOU requires mall owners to terminate leases of stores that have been convicted of selling infringing material. However, little action has been taken under the MOU and piracy remains rampant at the usual malls. Malls party to the agreement included Tawanna Plaza, Nom Chit Store, Zeer Rangsit, The Mall Department Store, Pratunam Center, Panthip Plaza, Future Park Rangsit, Fortune Town, Seri Center and Seacon Square. MBK was a notable absence but has reportedly recently asked to be included on the list of MOU signatories. ¶11. In August, 2005, the RTG finally entered into force a long-awaited optical disc law that promised improved oversight of optical disc plants and production lines. DIP has used its powers under the OD law to regularly inspect the 38 registered OD plants and collect exemplars from each manufacturing line. To support enforcement actions against OD plants, Embassy purchased an optical disc forensics microscope in August 2006 and installed it in police headquarters. Using the microscope, forensics police can match seized infringing material to the exemplars from the original manufacturing plant as evidence for prosecution of pirate plant owners. However, we are not aware police or DIP have used the improved enforcement capacity with the OD Law to undertake any enforcement actions or permanently shutter any OD plant. Legislation slow, but in the works -------------- ¶12. DIP had expected to see approval of long-awaited amendments to the Copyright Act in 2006, but political instability served to delay that process. The amendments are still under review by the Council of State which reviews all legislation. However, DIP is optimistic that the National Legislative Assembly will be able to review and approve the amendments before it begins full-time consideration of a new constitution in July. Amendments to the Patent and Trademark Act are with the Cabinet and may reach the NLA by July as well. ¶13. The RTG has made progress on ratifying the Patent Cooperation Treaty and the Paris Convention. DIP plans to send the proposal to the Cabinet soon and later to the Council of State for review. If approved, the Minister of Commerce will sign the ministerial regulations on the PCT and enter it into force. ¶14. On January 30, the Ministry of Public Health issued implementing regulations for the 2002 Trade Secrets Act. The regulations restrict the government from releasing protected data for a period of five years, but do not provide data exclusivity that would prevent unfair commercial use. DIP is planning a review of the entire Trade Secrets Act for 2007 to determine if any further changes are necessary, and will be reviewing laws regarding protection of traditional knowledge as well. ¶15. Thailand's 1999 Plant Variety Protection Act has finally seen registrations of new plant varieties. Since September 2006, 14 new varieties of orchids have been registered. Two more orchid varieties and another two or three new varieties of rice should be approved within the next few months. Compulsory licenses -------------- ¶16. At the end of November 2006, the RTG announced a compulsory license on efavirenz, a patented antiretroviral distributed by the local subsidiary of U.S.-based pharmaceutical Merck & Co. The RTG claimed its action was compatible with Thai law and WTO rules as the license would be taken under "public non-commercial use". However, the RTG faced criticism for failing to attempt negotiations with Merck beforehand. In January, 2007, the RTG announced compulsory licenses on two more drugs: Kaletra, another antiretroviral distributed by Abbott Labs, and Plavix, an anti-platelet agent patented by Sanofi-Aventis. The Ministry again declined to attempt to discuss the issue with industry or negotiate a reduction in prices before issuing the licenses. The activist Minister of Public Health has pledged to continue issuing compulsory licenses on medicines it deems essential if drug companies do not substantially reduce their prices. Post recommendation: Watch List -------------- ¶17. Last year's lack of measurable gains in IPR enforcement was discouraging after recent years of slow but steady improvements in IP enforcement and legislation. The continuing political uncertainty has been a substantial factor and will likely remain so for the remainder of 2007 as the government drafts a new constitution and prepares for new elections. A sustained enforcement effort would require high-level interest and pressure that is simply not among their priorities given the other matters of great political import that face the current government. Stronger IP enforcement for the remainder of the year is unlikely. ¶18. Embassy recommends maintaining Thailand on the Watch List. Although Embassy gave strong consideration to downgrading Thailand to the Priority Watch List, we do not believe that designation would produce desired results. At best, the designation may be ignored; at worst, it could provoke a nationalist reaction that could set IP efforts back. The current military-installed government has consistently staked out controversial economic positions that favor the Thai nation over what it considers foreign interests, including IP protection. After the recent controversy over the issuance of compulsory licenses on three pharmaceutical products, placement on the Priority Watch List would be widely seen as retribution for that decision, and the message on the necessity to improve enforcement efforts and move IP legislation forward would be lost. RTG leadership may even consider PWL a badge of honor, proof that the government has put Thai interests ahead of those of foreigners. The current government is temporary. We expect elections toward the end of the year and are cautiously optimistic that a new government will have a stronger sense of Thailand's economic situation, a longer term view, and a more favorable outlook toward IP protection. BOYCE