MISSION RECOMMENDS THAT VIETNAM REMAIN ON THE 2007 SPECIAL

UNCLAS SECTION 01 OF 06 HANOI 000309 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/MLS AND EB/TPP/IPE JBOGER STATE ALSO PASS USTR JCHOE-GROVES AND DBISBEE STATE ALSO PASS USPTO FOR JURBAN STATE ALSO PASS LIBRARY OF CONGRESS FOR TEPP AMEMBASSY BANGKOK FOR USPTO JNESS USDA FOR FAS/FAA/AO HUETE USDOC FOR ITA/MAC/OIPR CPETERS AND 4430/MAC/AP/OPB/VLC/HPPHO E.O. 12958: N/A TAGS: ETRD ECON KIPR VM SUBJECT: MISSION RECOMMENDS THAT VIETNAM REMAIN ON THE 2007 SPECIAL 301 WATCH LIST - PART 2 OF 2 REF: (A) STATE 007944 (B) 06 HANOI 000427 (U) SENSITIVE BUT UNCLASSIFIED, DO NOT POST ON THE INTERNET Implementation of the New Law on Intellectual Property -------------- -------------- ¶14. (U) In January 2006, six months before the IP Law officially entered into force, the Ministry of Culture and Information (MOCI), Ministry of Science and Technology (MOST),Ministry of Agriculture and Rural Development (MARD),Ministry of Finance (MOF),Ministry of Trade (MOT),and Ministry of Public Security (MPS) jointly signed a "Plan of Action on Cooperation in Preventing and Fighting against IPR Violation during the period of 2006-2010," commonly referred to as Program 168. The program has helped to correct one of Vietnam's glaring shortfalls -- poor coordination among the country's varied enforcement agencies. Agencies in Ho Chi Minh City report they are using Program 168 to facilitate inter-agency cooperation at the city level. ¶15. (U) Some key highlights of Program 168 include: -- Information dissemination: Under MOCI's lead, the participating ministries, in coordination with local People's Committees, are responsible for developing a concrete plan to disseminate information on Vietnam's IPR commitments, legislation and enforcement activities. This information is to form the basis of an annual report to the Prime Minister on nationwide IPR enforcement. -- Strengthened Enforcement: The ministries shall provide guidelines on IPR enforcement to their functional departments and local People's Committees. Inspection, supervision and sanctions shall be strictly implemented at the national level by GVN ministries and by the People's Committees at the local level. -- Capacity building for enforcement officials: The ministries shall provide more training to officials of enforcement agencies, with a special focus on international cooperation. Notably, the ministries will coordinate with the Ministry of Education and Training to develop a specialized curriculum on IPR for undergraduate and graduate students. ¶16. (U) Other legal and regulatory IPR-related reforms in 2006: -- Decree No. 56 of June 2006 stipulates administrative offenses in the culture and information field. Decree 56 introduces various new copyright offenses and provides for higher fines (in most cases) on copyright infringements committed for commercial purposes, such as copying TV or radio programs, film, tapes or discs; trading in pirated software (new offense); or importing/exporting pirated films, tapes, discs, TV or radio programs, written works, computer software and fine art (new offense). -- Decree No. 100 of September 2006, details the copyright provisions of the Civil Code and the IP law. Decree 100 governs author's rights and related rights held by performers, sound/video recording producers, and broadcasting organizations. Foreign individuals and organizations whose works are covered by copyright and related rights protection may directly file applications for copyright and related rights registration at the Copyright Office of Vietnam (COV) or provincial Culture and Information Services where they are based. This Decree further clarifies terms related to copyright and related rights, specifies provisions of copyright protection term, copyright and related rights registration procedures and certificates, and settlement of copyright-related complaints and disputes. -- Decree No. 103 of September 2006 on industrial property contains general provisions on the establishment and scope of IPR, including patents, trademarks, industrial designs, integrated circuit layouts, well-known marks, business secrets and trade names. Key provisions on appeal procedures, required documents and regulations on ownership assignment and IP rights licensing are also clearly regulated; -- Decree No. 105 of September 2006 provides details on IPR enforcement and state administration of IPR. Decree 105 governs all IP enforcement matters (civil, criminal and administrative remedies, import-export controls and unfair competition). This includes copyright infringement and infringements of IP subject matter such as trademarks and patents. Other key provisions govern the determination of infringing acts, damages for compensation, and the HANOI 00000309 002 OF 006 procedures and required documents for the enforcement of IP rights. Infringement tests, provisions on calculating damages, the disposal of infringing goods and border enforcement measures are set out. Notably, Vietnam asserts jurisdiction over cyber crimes occurring abroad that are directed at consumers or information users in Vietnam. -- Decree No. 106 of September 2006 on administrative sanctions in industrial property details administrative authority competence and procedures for handling administrative breaches of industrial property (IP) rights. Beyond the penalties of warnings and fines defined in previous regulations, Decree 106 provides penalties such as confiscation of evidence, suspension of an infringer's business activities and compulsory remedial measures including removal of infringing elements from the infringing goods, destruction or distribution for non commercial purposes of infringing goods and publication of corrective notices. For the first time, this Decree permits penalties to be calculated based on the actual value of infringing goods. Fine levels of up to five times the value of infringing goods may be imposed. A fine of USD 625 to USD 940 may be imposed if a trademark is placed on business instruments, and infringes trademark rights. -- On December 25, 2006, the National Assembly passed the Law on Cinematography, which came into effect as of January 1, 2007. The law provides protection for all cinematographic works under the Civil Code and IP Law. The law contains various provisions related to copyright, such as requiring that proper copyright be evidenced for imported films. Film producers and television stations may import and export films, but the quantity of films imported may not exceed the quantity of films they produce annually by a ratio of more than 2:1. Implementing Regulations to be adopted in 2007 -------------- - ¶17. (U) Relevant GVN agencies continue to draft circulars to guide implementation of these new IPR decrees. The National Office of Intellectual Property (NOIP) is responsible for drafting implementing regulations concerning industrial property. Those regulations include: -- A joint circular on settling IP violations, drafted by the Supreme People's Court (SPC) and Supreme People's Procuracy (SPP); -- A joint circular guiding the trial of IP related criminal cases, drafted with SPC, SPP, MPS and Ministry of Justice (MOJ); -- A circular guiding implementation of Decree 103 on industrial property, drafted by MOST; -- A circular on IP expert witnesses drafted by MOST; and -- Guidelines for examiners processing applications on all IP subjects. ¶18. (U) The following copyright regulations are expected to be issued in 2007: -- Decree on administrative fines in the copyright field drafted by MOCI; -- Prime Minister's Instructions on software protection drafted by MOCI; -- Decree on protection of optical disks drafted by COV; and -- Joint Circular on settling copyright infringement in the court drafted by PSC, PSP, MOJ and MOCI. ¶19. (U) MARD is responsible for drafting guiding regulations on plant varieties in 2007, specifically: -- A Decision on collection of charges and fees on protection of plant varieties (to be issued by MOF); -- Decree to amend Decree 57/2002 on sanctioning administrative violations in the plant varieties field; and -- Decisions on supplementing the types of protected plant varieties. International Agreements -------------- ¶20. (SBU) Apart from the international IPR agreements that Vietnam is required to accede to under the BTA, NOIP contacts report that the GVN is finalizing procedures to accede to the Hague Agreement Concerning the International Registration of Industrial Designs. Vietnam expects to join this agreement in 2007. In 2006, Vietnam officially completed its procedures to join the Rome Convention for HANOI 00000309 003 OF 006 the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (effective March 1, 2007),the International Union for the Protection of New Varieties of Plants (UPOV) (December 24, 2006),the Madrid Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (July 11, 2006) and the Brussels Convention relating to Distribution of Program-Carrying Signals Transmitted by Satellite (January 12, 2006). COV claims that the new IPR Law adopted most provisions of the 1996 WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT). The GVN does not currently plan to accede to the WCT and the WPPT, but officials told the Embassy that the GVN may consider doing so eventually. Enforcement Mechanisms Remain Weak -------------- ¶21. (U) According to the new Decree 105, the current organizational structure for state administration of IPR will remain in place. This structure is overly complicated and bureaucratic, with no less than five ministries involved. Multiple agencies are tasked with overlapping functions, but there are also gaps in coverage. ¶22. (SBU) Institutional experience on IPR enforcement is extremely limited, and local law enforcement personnel remain uninformed on Vietnam's IP laws and procedures. Government IPR agencies rely heavily on "administrative" enforcement of IPR laws and typically only issue administrative findings or warnings either by letter or orally to small retailers of pirated material. The lack of experience with IP issues among Vietnam's judges is another concern. Recently, Vietnam's Chief Justice admitted before the National Assembly that the court system is facing a shortage of judges, so the GVN's plan to develop a specialized IPR court seems unlikely in the near term. Under the new IPR regulations, to provide impartiality, experts at NOIP, MOST and the provincial Departments of Science and Technology (DOST) no longer have the ability to assist enforcement agencies in pursing trademark and other infringements. Removing this body of expertise from the process will likely delay dispute resolution. ¶23. (U) In addition to the inter-agency coordination mechanisms set up under Program 168 (paras 14-15),the GVN will establish a special task force empowered with the right to use police or military force to fight IPR violations. Under the direction of the Ministry of Trade's (MOT) Market Management Bureau (MMB),the task force will include representatives from the Economic Police, Ministry of Defense, Customs, the MOST inspectorate, the MOCI inspectorate and the Ministry of Health. Enforcement Efforts in 2006 -------------- ¶24. (U) MOCI: According to national data, MOCI officials inspected 20,414 businesses in 2006. (Note: While Hanoi agencies say their numbers are nationwide, it is difficult to determine if they are comprehensive. HCMC numbers are also included in paras 24-29, where possible, to give perspective. End Note.) MOCI inspectors collected fines of 11 billion Vietnamese Dong (VND) (USD 680,000) in 2006 (down from 12 billion in 2005) and forwarded documents for criminal prosecution in nine cases (down from 22 cases in 2005). Last year, cultural inspectors issued warnings to 519 business (down from 1,001 businesses in 2005),suspended the operations of 289 businesses (up from 116 businesses in 2005),and revoked the business licenses of 160 businesses (up from 25 businesses in 2005). They also confiscated more than 930,000 pirated optical disks. Cultural inspectors also participated in several software raids (see paragraph 10). ¶25. (U) MOST/NOIP: MOST issued fines in 88 IP infringement cases (up from 51 in 2005) and three unfair competition cases, with a monetary penalty of VND 170.2 million (about USD 10,640)(compared to a fine of VND 115 million or USD 7,100 in 2005). NOIP assisted in addressing 601 industrial property violations and 31 unfair competition cases related to IP. ¶26. (U) Market Management Bureau (MMB): According to incomplete figures on IPR enforcement efforts of the MMB in 2006, the agency handled a total of 2,172 cases and imposed fines of VND 4.387 billion (USD 287,000),of which there were 448 industrial design violations, 1,715 trademark infringements, 2 commercial names violations, 1 patent infringement and 6 unfair competition cases. The MMB also seized 30,000 pirated disks, imposing fines of USD HANOI 00000309 004 OF 006 1,750. In HCMC, the city's MMB reported it handled 87 IPR-related cases in 2006, most of which were settled with administrative fines and confiscation or destruction of products determined to be fake or an infringement on trademarks. A handful of cases were forwarded to the police for prosecution. The cases involved products from such companies as Nike, Adidas, Honda, Toyota, Yamaha, Hewlett Packard, Rolex and Omega. ¶27. (U) Customs: In 2006, Customs acted on a number of trademark and origin infringements. Most IPR violations included electronic products, mobile phone accessories and other consumer commodities. For example, Haiphong Customs seized and destroyed counterfeit Nokia cell phone accessories and fake Casio calculators. Customs also discovered a shipment of cigarettes that was in violation of "Camel Filters" trademark. The national Customs Department worked closely with local customs officials to implement the new IPR regulations and monitor counterfeit goods notified by the rights holders. The HCMC Customs department reported it handled 20 IPR complaints in ¶2006. Fourteen of those complaints were determined to be legitimate; Customs found in the remaining six cases that the complainants could not prove they were the authorized representatives of the rights-holders. In only two of the 14 cases were violations discovered; in the remaining 12 cases, Customs officials reportedly have yet to identify any shipments that could be considered violations. The cases include leather goods, Wilson tennis racquets, Winston cigarettes and Louis Vuitton products. HCMC Customs told ConGen EconOff that Customs officials can only take action against products where the rights-holder has filed a complaint. Customs officials are not authorized to stop shipments they suspect to be in violation of IPR laws and regulations. ¶28. (U) Courts: According to data provided by NOIP, the court system settled 11 of the 14 civil IPR-related cases it received. In the 51 criminal cases submitted to the courts (involving a total of 110 defendants),41 cases were brought to trial. Of the 91 defendants in these trials, 47 were given jail terms. The head of HCMC's Economic Court told us the court heard 10 to 15 IPR cases in 2006, out of a total of 1,200 cases that came before the Economic Court last year. Violators in most of these cases were required to pay administrative fines. ¶29. (U) Economic Police: In 2006, MPS reports discovering and investigating 156 IPR violations, 12 more cases than 2005. The most commonly infringed products were foodstuffs, clothing, cosmetics, medicine, software and electronic accessories. For instance, on December 7, the economic police halted an alcohol-making ring in Hoang Mai district of Hanoi. The police seized 500 counterfeit liquor bottles with fake labels, empty bottles and production machinery. The case was prosecuted under the criminal law and three defendants were sent to prison. Several other cases were handled through civil penalties. Recently, Ho Chi Minh City police raided an establishment that produced counterfeit perfume. The police seized and destroyed 3,790 perfume bottles with imitation trademarks of Hugo Boss, Valentino, and Gucci. The offender was convicted under the criminal law. Growing Costs of IPR Infringement -------------- ¶30. (U) Despite Vietnam's relatively low average per capita GDP of around 713 dollars (2006),incomes across the country are rising, particularly in the larger cities. With these rising incomes, a culture of consumerism is increasingly taking hold - increasing the losses to U.S. firms from piracy and counterfeiting. Industry estimates show that the cost of signal piracy in the television sector alone was USD 37 million. Although the dollar value remains a fraction of losses faced by U.S. IPR-related companies in other parts of the region, damages from IPR infringement are rising steadily. In addition, some items deemed "cultural products" (i.e., music, movies, books) are still subject to censorship and control regulations that impede market access. Public Awareness -------------- ¶31. (U) Public and private awareness of the value of IPR protection is low but continues to grow. According to COV, Vietnamese media carried over 1,000 news articles on copyright, more than double the 2005 figure of 450. Vietnamese IPR agencies organized a number of workshops, panels and public forums to help increase public HANOI 00000309 005 OF 006 awareness of IPR. The COV website regularly updates information on copyright legislation and news, as well as provides a database on copyright registration. ¶32. (U) With growing awareness of their rights, individuals and businesses are becoming increasingly active in self-protection. COV issued 3,147 copyright certificates in 2006, a 55 percent increase over 2005. NOIP received more than 2,400 applications for registration of inventions (11 percent higher than 2005),1,600 applications for registration of industrial designs (12 percent higher than 2005),over 23,000 applications for registration of trademarks (13 percent higher than 2005),five applications for registration of geographical indications and one application for registration of layout designs of integrated circuits. In November 2006, MMB organized an exhibition on "Authentic vs. Counterfeiting Goods" in Ho Chi Minh City with the display of more than 450 goods, including Nike, in order to help consumers identify fake goods. ¶33. (U) Copyright associations continue to expand their operations. The Vietnam Literature Copyright Centre (VLCC) increased its membership to 500 from 350 in 2005. Total royalties of VLCC members in 2006 were VND 200 million (USD 12,500). The Vietnam Center for Protection of Music Copyright (VCPMC) has also grown; it now represents 1,000 members (up from 700 last year). The total revenues of association members reached VND 3 billion (USD 187,500) in 2006, up 35 percent from 2005. The Vietnam Anti-Counterfeit and Intellectual Property Protection Association (VACIP),which represents companies with foreign investment, continues to actively promote IPR protection and hold public discussions. Technical Assistance helps Build Enforcement Capacity -------------- -------------- ¶34. (U) In 2006, Vietnam continued to receive considerable IPR-related technical assistance from a number of foreign donors and NGOs as well as multiple USG agencies, such as USAID, Customs, ILEA, USPTO and USDOJ. This assistance included conferences, seminars, training and review of draft pieces of legislation. For example, the USG provided IPR training in Hong Kong, Bangkok and Washington for 27 GVN officials from NOIP, COV, the SPC, MMB, Customs and the Police. ¶35. (U) Some examples of IPR technical assistance conducted in 2006 include: -- COV organized a workshop on "Management of Copyright and Related Right" with assistance from the EC-ASEAN Intellectual Property Rights Cooperation Program (ECAP II) -- HCMC Department of Science and Technology conducted 10 seminars to educate government officials on the new IP Law. -- COV, in cooperation with the Business Software Alliance and Microsoft organized a workshop on "Copyright for software" in Hanoi and Ho Chi Minh City -- PSC in coordination with STAR, USPTO and DANIDA's Business Sector Programme Support (BSPS) hosted 5 training courses for 349 judges -- NOIP received assistance from US, EU, Switzerland, Japan and WIPO for training activities -- Customs worked with ECAPII and French Embassy on providing training for its officials -- Police cooperated with French Police, Australian Police, Microsoft, British American Tobacco company, and Pfizer Pharmaceutical Company Training needs -------------- ¶36. (U) In 2007, the GVN will continue to require detailed legal consultations and technical assistance as it finishes drafting implementing regulations for the new IP Law. Training for the various enforcement agencies will be essential to take advantage of Vietnam's strengthened enforcement provisions. Many of these agencies are concerned that they often have difficulty finding English-speaking IPR officials to send to training programs. Vietnam would greatly benefit from increased in-country training activities conducted in Vietnamese. HANOI 00000309 006 OF 006 -------------- Conclusion and Recommendation -------------- ¶37. (SBU) IPR violations in Vietnam will continue to be a concern for the foreseeable future. While the GVN has demonstrated more resolve to uphold its IPR obligations on several fronts, it will take time to educate government officials and the public and to instill a more widespread respect for intellectual property rights. Vietnam's commitments under the BTA and WTO accession provide us with strong tools for engaging the GVN on IPR enforcement. Vietnam has also expressed interest in being considered for the U.S. Generalized System of Preferences (GSP) program and seems favorably disposed to the U.S. proposal to enter into a Trade and Investment Framework Agreement (TIFA). Vietnam's GSP aspirations provide additional incentive for improved IPR enforcement, while a TIFA presents a mechanism to engage the GVN on specific steps to fulfill its IPR-related BTA and WTO commitments. The USG should continue to provide funding for technical assistance on IPR, particularly building the capacity of Vietnam's law enforcement and judicial agencies. At the same time, the Mission will continue to press GVN officials at every level to address IPR piracy and counterfeiting problems throughout Vietnam. Recommendation -------------- ¶38. (SBU): Because of the remaining IPR issues noted above, the USG will have to continue to push Vietnam to protect IPR effectively. Therefore, we recommend USTR maintain Vietnam on the Special 301 Watch List in 2007. ALOISI