IPR CONCERNS CONTINUE TO WORRY HCMC BUSINESSES

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000681 SIPDIS SIPDIS STATE FOR EAP/MLS AND EB/TPP/IPE JBOGER STATE ALSO PASS USTR DBISBEE AND RBAE STATE ALSO PASS USPTO FOR JURBAN USDOC FOR 4430/MAC/AP/OPB/VLC/HPPHO AMEMBASSY BANGKOK FOR USPTO JNESS E.O. 12958: N/A TAGS: ETRD ECON KIPR BEXP PGOV VM SUBJECT: IPR CONCERNS CONTINUE TO WORRY HCMC BUSINESSES HO CHI MIN 00000681 001.2 OF 002 ¶1. (SBU) Summary: HCMC-based business representatives and lawyers told visiting USTR Director for Intellectual Property and Innovation Rachel Bae and USPTO Regional IP Officer Jennie Ness that local authorities are not sufficiently proactive in investigating and prosecuting copyright and trademark infringement cases, usually taking action only when provided with specific information by the companies about violators. The lack of enforcement is compounded by confusion among GVN agencies as to who takes the lead on investigation and infringement determination. Our contacts say that the GVN is not completely fulfilling its WTO obligations on IPR enforcement, namely in the confiscation of pirated and counterfeit goods, increased fines for infringers, and the revocation of business licenses from violators. That said, there have been some positive experiences by companies that have invested time and resources in developing relationships with enforcement agencies. End Summary. ¶2. (SBU) In June 18 meetings with HCMC-based business representatives and lawyers, USTR Director for Intellectual Property and Innovation Rachel Bae and USPTO Regional IP Attachi Jennie Ness discussed the current state of IPR enforcement in Vietnam. Our contacts expressed frustration that authorities are unwilling to investigate and take action against IP violators without precise intelligence provided by IP owners. Representatives from Diageo -- liquor distributor of several international brands including Johnnie Walker, Smirnoff, and Guinness -- told us they have to expend "tremendous resources" to investigate suspected violators themselves and then to press authorities to act. In one case, Diageo had to investigate and provide local police with the location, participants and exact times of counterfeit whiskey production before they would conduct a raid. Phan Minh Nhut, Nike Vietnam's Brand Protection Specialist, reported that while Nike has seen the IPR environment improve over the last seven years, authorities still will only act when prompted by brand holders. Alycia Draper, Director for Policy and External Affairs at Merck Sharp and 
Dohme, added that the investigative burden on Western pharmaceutical companies is huge, particularly those with minimal staff on the ground. In part due to market access restrictions, most brand and copyright holders whose goods are present on the Vietnamese market do not have the presence and in-country resources to devote to this level of brand violation investigation. ¶3. (SBU) Currently, five GVN agencies in HCMC can investigate and fine IP infringers, including the People's Committee, Customs, The Market Management Board (MMB),the Department of Science and Technology (the parent agency of the National Office of Intellectual Property) and the Economic Police. Nike representatives reported that agencies are often confused over which has the authority and obligation to take the lead on IP investigations. Chris Mcnabb of Diageo told us that even when authorities go on raids, they are often reluctant to define seized goods as counterfeit items, declaring the merchandise to be copyright infringements, which carry less harsh penalties. The GVN defines counterfeiting narrowly and is thus unwilling to declare items that are confusingly similar to trademarked goods but have minor changes made (subtle changes in font type on package labeling, for example) as counterfeit. There is also confusion over which government agency has the authority to make infringement determinations. Before the new Intellectual Property Code took effect, the NOIP or DOST would assist other agencies in determining whether a particular good was infringing. Under the new IP Code, a body of specialized IP agents should play this role. However, our contacts told us that this new group has yet to be formed. In the case of a criminal raid, police send the confiscated merchandise to a criminal assessment division that determines if the goods in question are in fact IPR violations. Rightsholders in HCMC told us that, under current practices, the aggrieved company has no input into a determination of infringement. Last year, law enforcement authorities investigated four cases of counterfeit Nike products, all of which were thrown out, even though Nike believes it had provided clear and convincing evidence of IPR violations. ¶4. (SBU) In cases of civil lawsuits brought by trademark owners, local courts are often unwilling to rule against local Vietnamese on behalf of a foreign plaintiff. Even in successful rulings, damages awarded are often low and do not cover the legal and investigative costs a company has to incur. Nike HO CHI MIN 00000681 002.2 OF 002 representatives reported that even successful court cases did not lead to post-ruling enforcement of trademark infringement. Moreover, our contacts told of several instances of counterfeit goods being returned to the violating enterprise, even following administrative fines. ¶5. (SBU) Vietnam's new IPR law sets the maximum penalty for the production of counterfeit or pirated goods at five times the market value of the infringing goods. While these fines are much higher than the previous maximum fine of 100 million dong (6,250 USD),implementing decrees and circulars have yet to be promulgated to bring this law fully into force. Circulars for Decree 106, which contains IPR violation penalty guidelines, are currently being developed, according to Tran Thi Thanh Ha, an IP lawyer a Baker & McKenzie in HCMC. In the interim, GVN authorities are operating under administrative circulars from the old IPR laws, which limit fines to 20 million dong (1,250 USD) for most IP agencies and 100 million dong for the Chairman of the local People's Committee. USTR Director Bae pointed out that the use of old circulars contradicts pledges made by Vietnamese WTO negotiators that following accession, a completely new IPR enforcement regime would come into effect. This included a pledge to revoke the business licenses of IP violators, an action that local business representatives told us has yet to occur. ¶6. (SBU) Tran Thi Thanh Ha from Baker & McKenzie believes that, even with new circulars for Decree 106, Vietnamese authorities will be unable to impose higher penalties for IP violations. Ms. Ha explained that, under Vietnamese law, the GVN cannot amend the Vietnamese Criminal Code through the issuance of a judicial circular, even though Vietnamese negotiators made such a claim during WTO negotiations. Ultimately, the National Assembly will have to pass changes to the Criminal Code to criminalize IPR violations, she said. Ms. Ha also believes that the IPR Law is subject to interpretation of various GVN agencies, raising the possibility that inconsistencies in old IP legislation will continue. ¶7. (SBU) In separate meetings with the Market Management Board and Department of Science and Technology, local authorities agreed that there was room for improvement in HCMC's IPR enforcement track record. Authorities cited incomplete legal reform and lack of training for enforcement officials as the primary reasons for this less than ideal situation. Market Management Board officials were fast to point out the successful cooperation they have had in investigating IP cases along side large multinational companies such as Nike, Triumph, Honda and Cisco. They added that right holders who are not very active in Vietnam and work through law firms are not helpful. USTR Director Bae responded to Market Management Board officials that not just companies with a presence in HCMC have to be protected. It is the duty of GVN IPR enforcement agencies to protect all rights holders, regardless of whether they have a corporate presence in HCMC. Science and Technology Department officials appeared to be forward leaning, noting that they had developed an action plan which they were happy to share with USG and welcomed USG comments. ¶8. (SBU) Comment: While the new IPR Law was supposed to simplify enforcement and provide greater protection to rights holders, there has been no real change on the ground in HCMC. In fact, delays in the releases of administrative circulars has further compounded official confusion over what actions can be taken, resulting in reluctance to investigate and enforce IPR violations. Inexperience in the field of IPR exacerbates this situation. However, there have been some successes, although small, and interest on the part of Vietnamese officials to do more provides an opening for improvement. ¶9. (U) USTR Director for Intellectual Property and Innovation Rachel Bae and USPTO Regional IP Attachi Jennie Ness cleared on this cable. WINNICK