BULGARIA: NEW GOVERNMENT SENDING POSTIVE SIGNALS ON IPR

UNCLAS SECTION 01 OF 02 SOFIA 000603

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TAGS: KIPR ECON PGOV BU
SUBJECT: BULGARIA: NEW GOVERNMENT SENDING POSTIVE SIGNALS ON IPR

Ref: A. SOFIA 0318, B. SOFIA 0086, C. SOFIA 0037

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1. (SBU) SUMMARY: With July elections and government formation
behind it, the new government is now focusing on intellectual
property rights (IPR) issues. The new Deputy Minister of Culture in
charge of IPR is highly regarded by industry experts. His
reorganized intergovernmental IPR Council, which includes industry
as full members, will meet for the first time in late October. The
government's IPR agenda will focus on the implementation of a new
royalty collection management system, improvement of prosecutorial
consistency, harmonization of local law with EU directives, and
modification of the tax code to strengthen enforcement and
deterrence. While the new government appears to have the political
will to strengthen the IPR regime, progress will likely be slow
given the weak administrative capacity and flawed judicial system it
inherited. END SUMMARY.

New Government Seeks Industry Cooperation
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2. (SBU) After taking office July 27, the new government says it is
now ready to focus on IPR. New Deputy Minister of Culture in charge
of IPR issues Dimitar Dereliev, a board member of the American
company NU Image Boyana Film Studios and Director of Bulgaria's
National Film Center, says he is committed to forging a cooperative
relationship with industry and the U.S. government to address IPR
concerns. Dereliev and the Culture Ministry's Copyright Directorate
have reestablished the intergovernmental Council for Intellectual
Property Protection (CIPP). Under Dereliev's chairmanship, the CIPP
will likely consist of five deputy ministers, one Sofia City Court
judge, industry representatives, and other interested persons from
civil society. The first CIPP meeting under the new government is
scheduled for October 30. Dereliev told us that his agenda will
follow an IPR Action Plan that is supported by industry and is
consistent with the USG's Special 301 Action Plan for Bulgaria
(Reftel A). Embassy Sofia will continue to monitor the IPR Council
meetings as an observer.
Industry Reps Hopeful
--------------


3. (SBU) Industry representatives, who had a stormy relationship
with the previous government's IPR head, are optimistic about the
new government's IPR plan. Ina Kileva, Executive Director of the
Bulgarian Association of Music Producers (BAMP),told us that Deputy
Minister Dereliev met with her immediately after taking office, and
left a good first impression. Bulgarian Software Alliance (BSA)
representative Velizar Sokolov also welcomed Dereliev's appointment,
describing his background as "brilliant." Both BAMP and BSA agree
that the government's IPR Action Plan is the best way forward.


4. (SBU) BAMP's priorities include amending existing laws,
implementing a better royalty collection management system,
improving Bulgaria's administrative enforcement capacity, raising
public awareness, and strengthening communication between
prosecution and courts. At the first CIPP meeting, Kileva will
propose draft legislation which would seek to harmonize Article 251
of Bulgaria's Electronic Communications Act with the EU Data
Retention Directive, which would apply the ISP storage requirement
to crimes that carry a penalty of one year or more, a standard
reportedly in line with the majority of EU members (Reftel B). BAMP
will also push the government to implement Articles 12 and 16 of the
EU's E-commerce Directive, which require ISPs to cooperate with
police investigations.


5. (SBU) BSA Bulgaria will advocate for more prosecutorial
consistency. At an industry-sponsored workshop in June 2009,
Bulgarian prosecutors were provided with a manual on specialized IPR
guidance and best practices from the region. However, the Chief
Prosecutor has yet to formally endorse these guidelines. In
addition, Sokolov may propose the creation of an executive
institution similar to the Commission on Protection of Competition
which has broad quasi-judicial authority to conduct inspections and
impose fines for infringement. Both BAMP and BSA are also likely to
propose tax code modifications that would require companies to
report legitimate software purchases on their corporate tax returns.
Under the proposal, the National Revenue Agency would be granted
enforcement authority to conduct on-site inspections and impose
fines.

Cyber Crime Unit Making the Most of Limited Resources
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6. (SBU) The police Cyber Crime Unit's (CCU) institutional role
within the Interior Ministry has not changed under the new
government. CCU Chief Yavor Kolev will use his voice on the CIPP to
create more flexibility in criminal procedures, stiffen criminal
penalties, and add more resources for his team. Although three new
staff have been added to the CCU, bringing the total from 12 to 15,
the unit's computer equipment is surprisingly inadequate given its

SOFIA 00000603 002.2 OF 002


mission. Two of the new staff members work without computers. And
the remaining staff rely on donated computer equipment that is five
to ten years old, or use their own laptops.


7. (SBU) In spite of these challenges, CCU continues to play an
active role in enforcing IP laws. In first nine months of the year,
they seized almost 6500 counterfeit optical discs; 109 computers and
18 servers loaded with pirate works; and over 850 counterfeit
bottles of liquor.

Torrent Tracker Cases Drag On
--------------


8. (SBU) Sofia-based prosecutors are currently pursuing one
prosecution and two investigations of the two largest pirate sites
in Bulgaria, arenabg.com and zamunda.net (Reftel B). Both sites use
a technology called BitTorrent to enable fast downloads of illegal
copyrighted works such as movies, music, software, electronic games,
and the like. As a result, the sites are among the most popular in
Bulgaria, together receiving over 800,000 page views every day.


9. (SBU) Arenabg.com and zamunda.net have been responsible for
literally millions of illegal downloads, a significant percentage of
which involve the copyrighted works of U.S. right holders.
According to police sources, each site generates an estimated US $
75,000-150,000 a month in illegal income from advertising alone.


10. (SBU) Currently in the pre-trial phase, the prosecution
involving arenabg.com is proceeding under a new indictment that
focuses on the defendants' illegal reproduction of copyrighted
material. Still in the investigative phase are a second case
involving arenabg.com and a case involving zamunda.net. Both of
those investigations have stalled because a company in the
Netherlands hosts the two pirate sites, and Dutch authorities have
not yet responded to letters rogatory filed many months ago
requesting electronic evidence.

Political Opposition to IPR Brewing
--------------


11. (SBU) A Bulgarian Green Party leader and two other Bulgarian
activists have started a petition to establish a Bulgarian "Pirate
Party" which advocates for free downloading of copyrighted materials
among other things. Under Bulgarian law, 5,000 signatures are
required for a political party to be formally established. Given
the fact that Bulgaria's Green Party has generally attracted less
than one percent of the vote in national and EU elections, it is
unlikely that the fledgling Pirate Party would surpass the four
percent voting threshold needed to win a seat in Parliament.
Nonetheless, if this new party begins to win support from the
general public, IPR enforcement and legislation could face political
obstacles in Parliament in the future.

Comment
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12. (SBU) We raised IPR issues throughout the government formation
process. While saying all the right things, and appointing what
seem to be qualified, serious-minded officials to key positions, the
new government has taken its time to act. Now the government must
show tangible results, by which its seriousness on IPR issues will
ultimately be judged.

ORDWAY