SPECIAL 301 REVIEW: MALAYSIA

UNCLAS SECTION 01 OF 03 KUALA LUMPUR 000177

SIPDIS

DEPT FOR EB/TPP/IPE: T McGowan AND EAP/MTS: D Bischof
DEPT PASS USTR FOR B. WEISEL, D. BELL
USDOC FOR ITA/MAC/OIPR
USDOC ALSO FOR USPTO
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: ECON ETRD KIPR MY
SUBJECT: SPECIAL 301 REVIEW: MALAYSIA

REF: STATE 8410

Summary and Recommendation
--------------


1. In 2008 Malaysian IPR enforcement authorities continued to make
progress in fighting IPR piracy. The most promising development of
the year was the continued progress and expansion of the specialized
intellectual property courts. The United States and Malaysia
continued to cooperate closely, in particular through IPR training
programs and ongoing negotiations on IPR issues within the framework
of a free trade agreement. The overall piracy rates remain high for
most types of IP, and the government will need to continue to
strengthen its enforcement and prosecution efforts, and to seek
certain legislative changes to strengthen Malaysian authorities.


2. Recommendation: The Malaysian Government's record in 2008 showed
a commitment to strengthening IPR protection with improvements in
training, prosecution, and IPR courts. Continued training and
negotiations either in the context of the U.S. - Malaysia Free Trade
Agreement (FTA) or other forum will provide a way to discuss best
practices and obtain stronger commitment from GOM especially in
enforcement issues. Despite the many positive trends, however,
industry estimates on current IPR piracy levels indicate that it
remains a serious problem. Piracy will require sustained government
attention in many areas for the foreseeable future, and improved
government attention in some areas that are currently deficient.
Embassy therefore recommends that Malaysia remain on the Special 301
Watch List. End Summary and Recommendation.

Enforcement Slows Down
--------------


3. The new Minister of Domestic Trade and Consumer Affairs (MDTCA)
Shahrir Abdul Samad has instructed the enforcement division to only
act on the basis of right holder complaints. Thus, MDTCA officials
can not proactively conduct raids without a specific request from a
right holder. This is contrary to Trade Marks Act of 1976 and
Copyrights Act of 1987, which allow enforcement officials to act if
the officer suspects the goods to be counterfeit or infringed. As a
result, the number of enforcement actions has reportedly dropped
down significantly during the tenure of the new Minister. According
to industry statistics, the number of cases launched by MDTCA
dropped from 2,333 raids in 2007 to 668 in 2008. The official
number of raids, arrests, and prosecuted cases in 2008 is not
available from MDTCA at this time, but Post will report septel when
the statistics are available.


4. Besides the IPR enforcement unit of MDTCA, the Royal Malaysian
Customs (RMC) also has authority to enforce IPR under ex-officio
capacity under the Trade Marks Act of 1976. RMC detains goods on
suspicion of infringing or counterfeit only if the rights holder
files a complaint with the Register of Trade Marks under MDTCA.
(NOTE: Since the rights holder seldom would have prior knowledge of
infringed goods, RMC usually does not get involved with interception
counterfeit goods at the ports of entry.)

Optical Media
--------------


5. In 2008 Malaysian IPR enforcement officers continued to exert
some pressure on the producers and exporters of counterfeit optical
disc media. While the number of enforcement actions slowed down,
the IPR courts established in 2007 were able to more effectively
hear complex cases involving IPR infringement issues.


6. Statistics compiled by the industry indicate increase in
estimated level of piracy in records and music, but no significant
change in business software. The estimated piracy level of records
and music increased from 45 percent to 60 percent, but the business
software piracy rate was unchanged, at 60 percent.


7. MDTCA works with the Business Software Alliance to target
students, company directors, and employees, and include both
educational efforts as well as targeted enforcement. The program
was launched in 2007 and targets the use of pirated software, with
focus on business software.

Book Publishing
--------------


8. The book publishing industry reports that the situation worsened
in Malaysia in 2008, especially due to commercial, large-scale
illegal photocopying in and around university campuses. Reportedly,
photocopy pirates now also save soft copy scans of books onto

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portable hard drives or computers, and can either transfer the
illegal copy electronically or print directly from the computer.
These new technologies can make detection of infringement more
difficult.


9. Illegal copying of text books is widespread especially in Klang
Valley university campuses, where some lecturers are actively
involved and sometimes provide sample copies of textbooks to
infringers. Pirated books are often delivered by vans directly to
students. Some websites also offer scanned copies of books for
download.

Internet Piracy
--------------


10. Music piracy from the Internet remains the most significant form
of Internet piracy in 2008. Recording Industry Association of
Malaysia (RIM) has claimed a significant increase in demand for
digitized music in Malaysia, which has eroded the sales of compact
discs (including pirated discs). According to industry statistics,
legal compact disc sales dropped 20 to 25 percent in 2008. Much of
the demand is being met by foreign websites offering free music
downloads. Despite industry demands, the Malaysian Communications
and Multimedia Commission (MCMC),Malaysia's regulatory body for
telecommunications, has not blocked internet users from accessing
illegal song download sites.


11. Illegal use of gaming software over the Internet and at Internet
cafes remains a significant problem. Some of the "business models"
used by the infringers are becoming more complex and more difficult
to track down. For example, the game software may be installed on
servers off-site, sometimes off-shore, and used in the caf's
premises or by access codes issued by the infringers.


12. Industry is pushing legislation that would address the liability
of landlords who allow their premises to be used for copyright
infringement. RIM has been pushing Malaysian authorities to take
stronger enforcement action against landlords who allow pirating
operations at their premises. RIM has also taken direct action
against such landlords by filing a number of lawsuits seeking
damages as well as the closure of such operations. RIM has also
sent out warnings of imminent lawsuits to hundreds of landlords,
many of whom have complied with the warning by expelling the
pirates.

Motion Picture Piracy
--------------


13. Malaysian authorities successfully attacked the problem of
pirate recordings in Malaysian cinemas detecting eight illegal
recording cases in 2008. However, camcorder piracy remains a
significant problem, especially with the proliferation of advanced
cell phone technology allowing less detectable recording.


14. Malaysian authorities currently use existing Malaysian statutes
to arrest and prosecute those caught recording movies in cinemas.
However, such arrestees can be charged only with theft, not piracy.
The Motion Picture Association continues to push for the
implementation of standalone anti-camcording legislation, both to
strengthen the authorities' hands (by broadening the scope of
illegal activity and by increasing fines) as well as to promote the
problem among the Malaysian public.


15. The export of pirated discs, in particular those purchased over
the Internet, remains a significant problem, although most industry
sectors report fewer exports of pirated material from Malaysia than
in previous years (with the one exception being the entertainment
software industry). Increased access to broadband Internet may
contribute this trend reduced exports of physical pirated materials.



16. Based on the positive publicity from the seizure assisted by two
sniffer dogs resulting in confiscation of more than 1.6 million
illegal hidden discs in 2007, MDTCA has decided to establish a
permanent canine enforcement unit.

Prosecution Improved
--------------


17. Special intellectual property courts now operate in Kuala
Lumpur, Penang, and Johor Bahru. The first branch was launched in
Kuala Lumpur in July 2007. The plan is to expand the IPR courts to
Malaysia's all 14 states and the administrative capital region of
Putrajaya. Six high courts, holding both civil and appellate
jurisdiction, will be established in Kuala Lumpur, Selangor, Johor,

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Perak, Sabah and Sarawak. The IP courts are organized to operate
independently of the rest of the court system, with both judges and
prosecutors assigned exclusively to the IP courts.


18. The industry associations hope that the new courts will increase
efficiency of the judicial system in processing IPR related cases.
The MDTCA has also taken steps to build capacity of its enforcement
officers to handle complex evidence in order to build strong
criminal cases against IP pirates. Local industry associations
continue providing this training, although they report that number
of training opportunities went down in 2008 due to lack of interest
from MDTCA.


19. According to industry reports, sixteen prosecutors will be
permanently assigned to prosecute IPR cases. The combination of
special prosecutors and IPR courts should lead to a more effective
prosecution of infringers. The combined efforts of investigation
and prosecution should be targeted to detecting the source of the
pirated copies and not just raids to the retail sales outlets.
While retail raids may generate a lot of publicity, the confiscated
goods often are stolen before they are destroyed, and make their way
back to the market.

U.S.-Malaysia IPR Cooperation
--------------


20. In 2008 the U.S. government continued close cooperation with the
Malaysian government to promote increased IPR protection. 23
Malaysian officials attended USG-funded IP training programs that
were offered in 2008 by the U.S Patent and Trademark Office (USPTO).
Among the programs attended by Malaysian officials were USPTO
Global Intellectual Property Academy programs on enforcement,
patents, and trademarks. Malaysian officials were from MyIPO
(Malaysian Intellectual Property Organization),MDTCA, IPR Courts,
Attorney General's office, and Ministry of Science, Technology, and
Innovation (MOSTI).


21. During 2008 U.S. and Malaysian officials continued to negotiate
the IPR chapter of the proposed U.S.-Malaysia Free Trade Agreement.
These negotiations provided an unprecedented opportunity for both
sides to learn the details about each other's enforcement regimes.

Malaysia's International IP Obligations
--------------


22. Malaysia has made progress towards ratifying multilateral IP
treaties. Malaysian government officials hope to secure
parliamentary ratification of Malaysia's accession to the WIPO
Copyright Treaty and the WIPO Performances and Phonograms Treaty by
the end of 2009. The GOM also foresees Malaysian accession to
several other IP treaties, including the Convention Relating to the
Distribution of Program-Carrying Signals Transmitted by Satellite;
the Protocol Relating to the Madrid Agreement Concerning the
International Registration of Marks; the Budapest Treaty on the
International Recognition of the Deposit of Microorganisms for the
Purposes of Patent Procedure; and the Trademark Law Treaty.
Malaysia has not committed yet to joining the International
Convention for the Protection of New Varieties of Plants (aka the
UPOV Convention),preferring to wait until it can evaluate the
effect of its newly-implemented domestic plant protection
legislation.


23. The Ministry of Health announced in 2007 that the government
would implement a legal framework to protect pharmaceutical data in
order to meet the data protection obligations under TRIPS Article
39.3. The announcement indicated that such protection would be
extended for 5 years for new products, and 3 years for new
indications of existing products. The time period in both cases
would begin from the date that such protection was extended in the
product's country of origin. Extensive discussions of the issue
have taken place at each round of the U.S.-Malaysia FTA
negotiations.

RAPSON