SPECIAL 301 2008: BULGARIA MAINTAINS IPR MOMENTUM BUT

UNCLAS SECTION 01 OF 03 SOFIA 000111

SIPDIS

STATE FOR USTR LMOLNAR, JCHOE-GROVES, FOR EEB/TPP/IPE JURBAN,
SWILSON and JBOGER; EUR/NCE MTURNER
COMMERCE FOR SSAVICH and ITA/MAC/OIPR CPETERS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON KIPR ETRD BU
SUBJECT: SPECIAL 301 2008: BULGARIA MAINTAINS IPR MOMENTUM BUT
SIGNIFICANT WORK STILL AHEAD

Ref: A. 07 Sofia 1365 B. State 9475


1. (SBU) Summary: The year after being taken off the Special 301
list, the Government of Bulgaria continued to make impressive
strides on IPR. The GOB's model intergovernmental working group
continues to meet under new leadership and is taking steps to become
even more inclusive. The Ministry of Culture increased its
copyright inspections five-fold. With EU accession, Customs
tightened border measures resulting in a 600 percent increase in
seizures of pirated products. In response to the rise in internet
piracy, the Cyber Crime Unit notched up its raids on torrent sites,
Internet Service Providers and end users by 60 percent. Prosecutors
show an increased willingness to take on IPR cases, although judges
still have little experience dealing with IPR cases, and convictions
still usually carry only administrative fines.


2. (SBU) Given the sustained GOB commitment to improving IPR --
shown clearly in the statistics above -- we agree with industry that
Bulgaria should not be placed on the Special 301 Watch List.
Embassy efforts, including outreach, training and advocacy, are
focused on what we consider to be the weakest link in Bulgaria's IPR
regime - the prosecutors and courts. When announcing the results of
the 2008 Special 301 process, we recommend that our message commend
progress made, while stressing the need to increase convictions,
fines and jail time to show pirates the GOB has zero tolerance for
IP crimes. End Summary.

INTERAGENCY COORDINATION
--------------


3. (SBU) Bulgaria's well-regarded intergovernmental IPR council
continues to operate effectively under its new chair, Deputy
Minister of Culture Yavor Milushev. Milushev, a former actor and
Member of Parliament with experience in crafting IPR legislation,
came to office in fall 2007, with a stated personal commitment to
improve Bulgaria's IPR regime. While Milushev's direct personal
style has some industry groups taking a "wait and see" attitude
toward the changes he has proposed so far, they do not deny that the
council continues to take effective action under his direction.


4. (SBU) Milushev has included Embassy representatives as
non-voting members on the IPR council. He has created a new working
group (scheduled to meet for the first time in February 2008)
designed to give industry representatives more of a say in the
country's IPR plan. Milushev has also increased five-fold his
Ministry's copyright inspections in retail establishments and
computer halls and has expanded these inspections to include
restaurants, hotels and entertainment facilities. The
intergovernmental IPR council's action plan for 2008 includes
outreach to journalists and Bulgarian youth; improving communication
with Internet Service Providers (ISPs); and enforcing fee payment
for use of copyrighted art, especially by cable tv operators.
Milushev told us February 19 that improving relations with industry
representatives will be a key priority for the IPR council in 2008.

INTERNET PIRACY
--------------


5. (SBU) Despite concerted efforts to combat it, internet piracy
in Bulgaria continues to grow. Local industry estimates that almost
all downloaded music in Bulgaria is illegal, while 80-90 percent of
downloaded movies are pirated. The police Cyber Crime Unit launched
a total of 80 operations against large torrent sites, ISPs, and end
users in 2007, up from 50 operations in 2006 - a 60 percent
increase. On February 13, 2008, the Cyber Crime Unit, along with
special police forces, conducted their biggest raid ever in the
northeast town of Dobrich. They seized 12 ftp servers equal to 25
terabytes of illegal content from the local ISP "Bergon-Internet."
The police continue to investigate the case under the supervision of
the Dobrich prosecutor's office.


6. (SBU) While the Cyber Crime Unit wins kudos from industry and
post for its dedication, we are all watching closely the progress of
the Dobrich case along with the results of a highly-publicized March
2007 raid in which the Cyber Crime Unit shut down four major torrent
sites -- Arenabg.com, zamunda.net, Data.bg, and bol.bg -- to judge
whether the prosecution side of Bulgaria's IPR regime is improving.
Arenabg.com, which temporarily moved to Texas, is in operation again
in Bulgaria, but with less stored volume. The prosecution is
drafting an indictment and plans to file it in court in early March.
Zamunda.net moved its server outside Sofia, and the Cyber Crime
Unit is actively trying to determine whether it is operating from
Bulgaria. No indictment has been filed. Data.bg shut down its
torrent tracker and turned itself into a legal "free server" called
4storing.com. The Cyber Crime Unit continues to monitor it for
illegal activity. No indictment has been filed. Bol.bg shut down

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its torrent site, and the pre-court investigation against the group
has been dropped, for as-yet unexplained reasons.

OPTICAL MEDIA PIRACY
--------------


7. (SBU) Street-level piracy has been reduced visibly in Sofia,
partly due to sound enforcement and partly due to the rise in
internet piracy. Street sales of pirated optical disks take place
notably in the summer and winter resort areas. Home burning of
copyrighted materials on compact discs (CDs) and DVDRs is
widespread, according to industry. Local recording industry
representatives estimate optical disc (OD) piracy between 40-45
percent, compared to 75 percent in 2006. The drop is attributed to
improved legislation, increased inspections and the rise in internet
piracy. Illegal movie content in 2007 was estimated at 60 percent
in 2007 (no change from 2006.)


8. (SBU) Local IFPI representatives tell us that three of nine
operating CD/DVD production facilities continue to refuse industry
representatives voluntary access to their plants. According to
current legislation, industry representatives are not allowed to
accompany Ministry of Economy (MOEE) officials on their inspections
of these plants. Our MOEE interlocutors continue to inspect these
plants regularly and have reported no illegal production.

BORDER MEASURES IMPROVE
--------------


9. (SBU) Bulgarian Customs reported significant progress in the
seizure of counterfeit goods in 2007. Last year Customs reported
1823 seizures totaling 6,776,976 pirated items - a 600 percent
increase over the 263 seizures totaling 173,326 pirated goods in

2006. Custom's enhanced performance is attributed to tightened
border controls demanded by EU membership, increased inspections of
transit goods, and improved cooperation with industry, notably
pharmaceutical companies.

PROGRESS ON DRUG/PATENT PROTECTIONS
--------------


10. (SBU) In April 2007, a new drugs law was enacted which
eliminated the direct relationship between data exclusivity and the
term of patent protection, allowing pharmaceutical companies to take
advantage of their full patent terms. This law also extended the
term of patent protection on pharmaceuticals to eight years from the
patent date plus two years for market exclusivity and an additional
one year for "significant, new use" drugs. Post is unaware of any
pending IPR-related U.S. pharmaceutical cases in Bulgaria.

BUSINESS SOFTWARE
--------------


11. (SBU) Data on the use of pirated software was not available
for 2007. In 2006 the Business Software Alliance reported illegal
business software use was at 69 percent, down from 71 percent in

2005. The Government of Bulgaria is taking the use of business
software seriously. In December 2007 it announced Microsoft had won
a tender worth 84.9 Bulgarian leva (USD 60 million) for
government-use software. With this tender, the GOB is now buying
business software rather than paying subscription fees for its use.

PROSECUTORS MAKE PARTIAL PROGRESS
--------------


12. (SBU) Our industry and local contacts tell us cooperation
between police, investigators, and prosecutors continues to improve
and the prosecutor's office demonstrates an increased willingness to
take IPR offenses seriously. In the first nine months of 2007,
prosecutors formed 254 pre-trial, IPR-related proceedings, compared
to 158 in the first nine months of 2006. Problems remain.
Prosecutors still often lack familiarity with IPR cases and as a
result at times are unable to see these pre-trial cases though the
court phase. Many cases languish in the pre-trial process, only to
be dropped at a later date.


13. (SBU) Prosecutors are developing their IPR expertise. The
Bulgarian Association of Prosecutors, in cooperation with the U.S.
Department of Justice, organized training sessions on IPR crime
prosecution in January and April 2007 in three appellate regions,
training 47 prosecutors. The training module was approved by the
National Institute of Justice and is incorporated in this
institute's training program. The program boasts a broad trainer
base including representatives of the private sector. As a direct
result, the lecturers developed a manual which was approved by the
Prosecutor General as the official prosecutorial guidebook on IPR

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cases. The publication of the guidebook was developed with U.S.
Department of Justice expert and financial support.

THE COURTS - BULGARIA'S ACHILLES' HEEL
--------------


14. (SBU) The courts remain the weakest link in Bulgaria's IPR
regime. According to the Supreme Cassation Prosecutor, in the first
nine months of 2007, only 71 IPR cases ended up in court. As a
result of these cases, 62 people were sanctioned. Convictions
usually carry only administrative fines. No one was sent to prison.
Under Bulgarian law repeat offenders receive higher sentences, but
to date not even repeat offenders have received jail time. As noted
above, we continue to watch the criminal proceedings initiated
against the owners of the four major Internet torrent sites raided
in 2007, as well as the 2008 Dobrich case, but none of these cases
have yet reached the courts.


EMBASSY EFFORTS
--------------


15. (SBU) The Embassy continued to stress IPR in its 2007
workplan. Outreach efforts by the Commercial Service, and the
Departments of State, Agriculture and Justice extended across
government ranks from the working level to the Prime Minister. In
2007 the Embassy sent nine GOB officials to USPTO training in
Washington, compared with five in 2006. In 2007, we sent a
proactive supreme cassation prosecutor on an IPR-focused
International Visitor Program. In October 2007 the U. S. Department
of Justice initiated a joint training program on Cyber Crime between
the National Institute of Justice and the Police Academy. The
program also covered IPR crimes over the internet. In November
2007, the U.S. Department of Justice Intellectual Property Law
Enforcement Coordinator for Eastern Europe took up residence at
Embassy Sofia. In December, he provided training to judges from
Bulgaria, Macedonia, Serbia and Romania on investigating,
prosecuting, and adjudicating online piracy cases at a conference
held in Plovdiv, Bulgaria.

COMMENT
--------------


16. (SBU) Bulgaria's impressive IPR performance over the past year
allays our earlier concerns that being removed from the Watch List
in 2006 would slow or reverse the progress that had been achieved
over the past several years. Clearly, the GOB has institutionalized
its seriousness on IPR. Still, much work lies ahead, especially on
the enforcement side. In our future communications with the GOB on
IPR, we should commend progress made, but also stress the need to
continue to work closely and collaboratively with industry; keep
highly-motivated elements of Bulgaria's IPR team well-funded, and,
especially, to take the steps needed to improve the record of IPR
cases in court.

BEYRLE