BULGARIA 301: RECOMMEND RETAIN ON WATCH LIST, WITH

UNCLAS SECTION 01 OF 03 SOFIA 000231 SIPDIS STATE FOR USTR LMOLNAR, JCHOE-GROVES, FOR EB/IPE JURBAN; SWILSON; JBOGER AND EUR/NCE MNORDBERG COMMERCE FOR SSAVICH SIPDIS E.O. 12958: N/A TAGS: ECON KIPR ETRD BU SUBJECT: BULGARIA 301: RECOMMEND RETAIN ON WATCH LIST, WITH OFF-CYCLE REVIEW Ref: A. 06 Sofia 1622 B. State 07944 C. 05 STATE 183379 ¶1. (SBU) SUMMARY: The Bulgarian government has made tremendous strides over the past 15 months to improve its Intellectual Property Rights (IPR) regime. It has met virtually all of our Action Plan requests (Ref C). With renewed political will, it has adopted strong IPR legislation; established an effective interagency coordinating council; improved communication with industry; and carried out an aggressive, visible, and much discussed campaign to educate the public about the dangers of piracy. It must still make additional progress to achieve effective, sustained enforcement, particularly to stem internet piracy, increase convictions and jail time, and reduce the overall piracy rate. ¶2. (SBU) In recent years, we recommended Bulgaria be placed on the Priority Watch List or Watch List because they were not taking enough serious steps to curb piracy. Now, we judge, they have made clear progress and are taking concrete actions - but not enough time has passed for the results (more convictions, lower piracy rates) to show. Therefore, we recommend this year that Bulgaria be provisionally retained on the Watch List - with an asterisk - namely, that Bulgaria will be subject to an Off-Cycle review in six months. Holding out the prospect of getting off the list, while encouraging and supporting the clear momentum forward we see, will help motivate authorities to achieve more tangible results. This package should contain language commending efforts to date with a robust warning about the need to finish the job. END SUMMARY STRONG LEGISLATION ¶3. (SBU) Ref A lays out GOB activities through late 2006 - a strong effort that reflects the renewed desire at the political level to roll back piracy. In trying to meet EU accession requirements and remove itself from the 301 Watch List, Bulgaria has strengthened its legislation up to - and in some cases above - EU requirements. Laws adopted last year to increase deterrent penalties and criminalize large-scale possession were positive steps. Court magistrates, accustomed to clear-cut legal lines, however, are troubled by what they call "grey areas" in the laws. A combination of increased training and tweaks to the current regime should help. Industry's 301 submissions correctly recommend further efforts to fine-tune laws and regulations, but most observers feel Bulgaria now has a strong framework to protect rights-holders. INDUSTRY AND GOVERNMENT WORK TOGETHER ¶4. (SBU) Industry praises increased access to the government through the interagency Council on Intellectual Property Protection (Council.) For instance, the GOB and copyright industry representatives worked together on legislation and to try and streamline investigation practices. The GOB has also been more responsive to complaints by individual companies. Two parties told us that following an informal government-industry gathering in December their problems have been - or are in the process of being - resolved. This is progress over the previous slow-to-stagnant bureaucratic process. There are still outstanding individual cases, and industry would like further cooperation, such as permission to participate in raids, but this is on the right track. AGENCIES COOPERATE ¶5. (SBU) The Council has also greatly improved cooperation between the ministries. This has allowed timelier sharing of information and coordination on regulatory and law enforcement activities. The Council's work has also created the sense of "one team" fighting piracy that we had envisioned when we suggested it to the government as part of our 2005 "Action Plan". There are still areas that need to be improved here. For instance, cooperation between the Ministries of Culture and Economy and law enforcement folks at Interior is good, but could be regularized. ENFORCEMENT IS SPOTTY ¶6. (SBU) Overall enforcement activities are up in 2006 according to industry and government. The creation of a cyber-crime unit in the Ministry of Interior's Organized Crime Directorate left optical disk and industrial piracy efforts to local police. The cyber-crime group can be very strong and successful in computer crimes - child pornography, phishing and fraud - but due to limited resources has had an erratic year going against internet IP crime. They have taken down a few pirate sites, only to see them re-open soon after and have complained to us privately that the courts are feckless - at best. Sustained commitment to addressing internet IP crime, which is in the 99-100% range for music, is needed. Local police efforts against IPR are ad hoc and should be formalized throughout the country. Cooperation with industry should be improved. There is no evidence of large scale illegal printing of Optical Disk Media SOFIA 00000231 002 OF 003 (ODM) in Bulgaria, but the authorities need to increase pressure against large-scale burning. ¶7. (SBU) Street-level piracy is down in Sofia; partly due to more successful police efforts and legal changes, and partly due to an increase in internet crime. Physical piracy of ODM and luxury goods in the Black Sea and ski resorts remains high. Action against counterfeit spirits has improved, but many whiskies and other American-owned brands are still pirated. In addition, an alcohol inspector and three high-level Ministry of Economy officials were attacked in 2006, most likely because of their actions against producers of fake liquor; no one has been apprehended and the cases never received publicity. PROSECUTORS NOW ON BOARD; BUT MUST GET CRACKING ¶8. (SBU) The prosecutor's office, reinvigorated a year ago with new leadership and a determination to clean out the dead wood, has begun to take IPR crimes more seriously. A Deputy Prosecutor leads IPR efforts with regional prosecutors and is creating a manual to formalize procedures throughout the country. We would like to see at least one IPR expert in each regional prosecutor's office and are working towards that goal with Department of Justice-funded and organized training seminars. Industry reports favorable success in creating allies with prosecutors and police through these seminars, and we are hoping that the arrival of DOJ's regional IPR Coordinator to lead IPR efforts out of Embassy Sofia will be a force multiplier. COURTS REMAIN THE WEAK LINK ¶9. (SBU) The courts are a weak part of the process - not just for IPR cases. The good judges are not fully aware of IPR laws and the bad ones at best don't really care. Deterrent penalties are strong thanks to embassy and industry-pushed changes in the law in 2005-2006, but the courts are not consistently imposing them. USAID has begun training judges, but we could use more USG and industry programs and funds to get this effort out across the country. With stronger efforts by the prosecutor's office we expect the courts to also improve their ability to fairly dole out justice - but this will take time. The government's good efforts will begin to bear fruit in the form of reduced piracy only when serious penalties are imposed. Bulgaria must now increase convictions, fines and jail time in order to send the message to pirates that the government has the will and capacity to stop IP crime. EMBASSY EFFORTS - SUCCESSES THROUGH A TEAM APPROACH ¶10. (SBU) In addition to increased training offered by DOJ and USAID, we have increased cooperation with law enforcement through the Legatt. Persistent lobbying by FCS and PolEc has stretched across the government from the working level to Ministers and the PM's office. Ambassador Beyrle has called for increased efforts to fight piracy - as recently as February 15 in a major address on economic issues - and at the working level we have also spoken to public groups about IPR. Public Affairs has brought in speakers and crafted IV programs to help increase awareness of this issue. FUTURE STEPS: GOB HAS PLANS; WE MUST KEEP THEM HONEST ¶11. (SBU) We have told the GOB we share the EU's concerns that recent progress could be slowed or reversed following EU accession or if Bulgaria is taken off the 301 list. The government has assured us they have plans to continue their efforts, including a second phase of the public awareness campaign in movie theaters; a study in the spring/summer to evaluate the success of their efforts and re-tool if necessary; work with secondary and university students; additional efforts with the prosecutor on methodology; cooperation with the media; and obtaining financing from the Dutch government for IPR programs. They also feel the leg-work they have done this year in the legislative arena and in building relationships between institutions - particularly with the prosecutors - will begin to bear fruit this year. On our side, we must continue our efforts with law enforcement and the courts, and hold the government to its plans. COMMENT ¶12. (SBU) Bulgaria made substantial progress last year. By honestly holding out the prospect that - depending on their near-term actions - they could be removed from the list, we can leverage the good work they have done to date. An off-cycle review, combined with increased engagement from Washington and at the highest levels here, will motivate them to continue efforts especially on the law enforcement side with increased raids, seizures, arrests, convictions and jail time. Our engagement and public message must include praise for hitting most of our action plan goals and laying a strong institutional groundwork. If there were a prize for SOFIA 00000231 003 OF 003 Most-Improved, Bulgaria would certainly win it, but we think some added attention over the next few months is needed to get them over the top. BEYRLE