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

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(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

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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