SPECIAL 301 KUALA LUMPUR INPUT

UNCLAS SECTION 01 OF 04 KUALA LUMPUR 000130 SIPDIS DEPT FOR EB/TPP/IPE: T McGowan AND EAP/MTS: D Bischof DEPT PASS USTR FOR J. GROVES and K. EHLERS 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 KUALA LUMPUR INPUT REF: STATE 3361 Sensitive but Unclassified. Not for Internet distribution. Summary and Recommendation -------------- ¶1. (SBU) In 2009 Malaysian IPR enforcement authorities continued to make significant progress in fighting IPR piracy as compared to the previous year. Malaysia also continued its legislative efforts to modernize its copyright laws and come into compliance with various trade commitments, including the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. The United States and Malaysia continued to cooperate closely, in particular through Malaysia's participation in our IPR training programs. Nevertheless, as the overall piracy rates in Malaysia remain high for most types of IP, there is substantial room for the Malaysian government to continue to improve prosecution efforts and the efficiency of its IPR courts, to include seeking certain legislative reforms to strengthen the Malaysian authorities and IPR protection. ¶2. (SBU) Recommendation: The Malaysian Government's record in 2009 showed a significant commitment to strengthening IPR protection with substantial improvements in enforcement activities and training, as well as improvements in prosecutions, and action in its IPR courts. Despite these many positive trends, however, industry estimates on current IPR piracy levels indicate that piracy remains a serious problem. Malaysia also needs to move from the drafting process to actually introducing into parliament proposed amendments intended to strengthen its copyright act. Embassy Kuala Lumpur therefore recommends that Malaysia remain on the Special 301 Watch List. End Summary and Recommendation. Enforcement Efforts Improved -------------- ¶3. (SBU) Immediately upon assuming office in March 2009, the new Minister of Domestic Trade, Co-operatives and Consumerism (MDTCC) Ismail Sabri Yaakob made it clear that he would make IPR enforcement a priority again. He instructed Ministry officials to improve co-operation with private sector stakeholders and told his enforcement division to make IPR enforcement a high priority. He also revived the previously defunct Special Anti-Piracy Taskforce (SAPTF) which includes government officials, rightholders, and �00A;industry associations. According to international law firms and industry rightholder's associations in Kuala Lumpur, these Malaysian government initiatives have resulted in better and faster enforcement action throughout the country. ¶4. (SBU) Some rightholders complain that subordinating local MDTCC enforcement officers to the Malaysian Administrative and Diplomatic Services (MADS) in state level offices unnecessarily slows down enforcement. In 2009, MDTCC launched a new web-based system for submitting IPR violation complaints and raid requests. Despite this, some industry groups, especially those filing large number of requests, still complain that many of the requests don't even receive a response. ¶5. (SBU) The official number of raids, arrests, and prosecuted cases in 2009 is not available from MDTCC at this time, but Post will report septel when the official statistics are available, usually during the month of March. According to Malaysian industry organization statistics, the number of criminal raids was significantly down, with total number of raids reported at 291, as compared to 668 raids in 2008. However, several industry associations report that thanks to better co-operation between rightholders and MDTCC, the government raids are better targeted and more productive, and they result in higher-value prosecutions. ¶6. (SBU) While there has been some recent improvement in MDTCC investigations, industry sources say those enforcement efforts are often restricted to the downstream retail facilities. Industry hopes that MDTCC will conduct more full fleged investigations that lead to the source of distribution or the manufacturing facility for pirated products in Malaysia. ¶7. (U) Besides the IPR enforcement unit of MDTCC, the Royal Malaysian Customs (RMC) also has authority to enforce IPR under its ex-officio capacity under the Trade Marks Act of 1976. The RMC has been reluctant to get involved in IPR enforcement, and detains goods on suspicion of infringing or counterfeit only if the rights holder files a complaint with the Register of Trade Marks under MDTCC. (NOTE: Since the rights holder seldom would have prior knowledge of infringed goods shipments, RMC usually does not get involved with the interception of counterfeit goods at the ports of entry.) KUALA LUMP 00000130 002 OF 004 Optical Media -------------- ¶8. (U) In 2009 Malaysian IPR enforcement officers continued to exert increasing pressure on the producers and exporters of counterfeit optical disc media products. While the number of enforcement actions slowed down, the IPR courts established in 2007 were able to more effectively hear complex cases involving optical media infringement issues. Local and international industry associations report that Malaysia has addressed its export piracy problem in most sectors, but they assert that the export of pirated entertainment software remains a problem. ¶9. (U) Statistics compiled by the industry indicate an increase in the estimated level of piracy in records and music, but no significant change in piracy of business software. The estimated piracy level of records and music remained unchanged at 60 percent, while the business software piracy rate remained unchanged at 60 percent. ¶10. (SBU) MDTCC works with the Business Software Alliance to target students, company directors, and employees, and includes both educational efforts as well as targeted enforcement. The program was launched in 2007 and targets the use of pirated software, with a focus on business software. The KL Business Software Alliance representative said that the program was effective. Based on the improvements from this program and general responsiveness of Malaysian authorities, it recommends that Malaysia should be removed from the Special 301 watchlist. Book Publishing -------------- ¶11. (SBU) The book publishing industry reports that the book piracy situation remained a significant problem in Malaysia in 2009, especially due to commercial, large-scale illegal photocopying of textbooks in and around university campuses. Reportedly, photocopy pirates save soft copy scans of books onto portable hard drives or computers, and can either transfer the illegal copy electronically or print directly from the computer. These new technologies make detection of infringement more difficult. ¶12. (SBU) The illegal copying of text books reportedly 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. ¶13. (SBU) Local law firms complain that there is no uniform approach to the pre-requisites for conducting raids. Reportedly, some MDTCC officers require publishers to submit declarations as proof of ownership in advance for each title in a given raid. Prosecutions against illegal copy shops remain slow and often problematic because of lack of preparation by prosecutors and officials handling the cases. While these enforcement efforts are lacking, Malaysia is addressing the widespread illegal copying on college campuses through targeted awareness programs, such as the "IP Mobile Clinic" which was launched in 2009 and visits key college campuses throughout Malaysia. Internet Piracy -------------- ¶14. (U) According to industry representatives, internet piracy increased in 2009 mostly due to greater internet and broadband penetration. Malaysia had 66 percent internet penetration as of the end of 2009, with almost 17 million internet users. Broadband penetration increased by about 200,000 to 1.4 million subscribers. ¶15. (U) Music piracy from the internet remains the most significant form of internet piracy in 2009, but motion picture piracy is also increasing. The 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). RIM estimates that 25 percent of losses due to music piracy are internet-based, and that 99 percent of music on the internet in Malaysia is infringing copies. RIM also complained about Malaysian piraters using websites to advertise the sale of physical pirated goods. ¶16. (SBU) Online piracy is also an increasing problem for the entertainment software industry. Illegal use of gaming software KUALA LUMP 00000130 003 OF 004 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 cafe's premises or by access codes issued by the infringers. ¶17. (SBU) Industry is pushing legislation that would address the liability of landlords and shopping mall owners who allow their premises to be used for copyright infringement. Malaysia is conducting a comprehensive review of its institutional arrangements and enforcement regime. MDTCC has indicated in discussions with Malaysian industry associations that the amendments to the copyright laws would allow criminal action to be taken against the owners of business premises who willingly allow their tenants to carry out infringing activities. This review and expected amendments to the copyright laws will be subject to full cabinet and parliament reviews and approval, and the law is expected to be tabled at the parliament during 2010. Motion Picture Piracy -------------- ¶18. (U) Despite success of voluntary industry efforts to curb camcording in movie theaters, camcorder piracy remains a significant problem, especially with the proliferation of advanced cell phone technology which facilitates less detectable recording. ¶19. (SBU) 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 stand-alone 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 greater understanding of this piracy problem among the Malaysian public. ¶20. (SBU) The export of pirated discs has been significantly reduced by good cooperation between rightholders, MDTCC officials stationed at major international airports, and the Royal Malaysian Customs. The increased access to broadband internet, however, may also have contributed to this trend in reduced exports of physical pirated materials. Courts and Prosecution Improved -------------- ¶21. (U) Special intellectual property courts now operate in Kuala Lumpur, Penang, Terengganu, Kelantan, and Pahang. The first branch was launched in Kuala Lumpur in July 2007. The plan is to expand the IPR courts to all of Malaysia's 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, 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. ¶22. (SBU) MDTCC has created 25 Deputy Public Prosecutor positions specialized in handling the prosecution of criminal IP cases. Currently, 22 of the positions are filled. The combination of special prosecutors and IPR courts should lead to a more effective prosecution of infringers. Industry groups argue that 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. ¶23. (U) The various IP industry associations in Malaysia hope that the new courts will increase the efficiency of the judicial system in processing IPR related cases. The MDTCC has also taken steps together with Malaysian and international industry associations and interested international governments, including the U.S., E.U. and Sweden, to build the capacity of its enforcement officers to handle complex evidence in order to build stronger criminal cases against IP pirates. MDTCC and Royal Malaysian Police investigation officers participated in 35 training sessions conducted on copyright investigations and prosecutions by the Motion Picture Association of America's local representatives. Recording Industry Association trained 100 MDTCC officers on the role of ISPs and on internet and forensic investigations. Local industry associations and bar association continue to provide this training. KUALA LUMP 00000130 004 OF 004 U.S.-Malaysia IPR Cooperation -------------- ¶24. (SBU) In 2009 the U.S. government continued close cooperation with the Malaysian government to promote increased IPR protection. Several Malaysian officials attended USG-funded IP training programs that were offered in 2009 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 attending this training were from MyIPO (Malaysian Intellectual Property Organization),MDTCC, IPR Courts, and Attorney General's office. The International Law Enforcement Academy (ILEA) in Bangkok also provides IPR enforcement training and has made slots available for Malaysian enforcement officials. Malaysia's International IP Obligations -------------- ¶22. (SBU) 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 after the amendments of the respective domestic acts are passed by the Parliament. MDTCC and MyIPO officials estimate that the legislative process could be completed by the end of 2010. 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. (SBU) The Ministry of Health announced in 2007 that the government would implement a legal framework called "Test Data Protection Directive" 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. Ministry of Health indicates that they have finalized the directive, and that the directive would be implemented before the end of 2010. KEITH