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Vietnam: VIETNAM SHOULD REMAIN ON THE 2009 SPECIAL 301 WATCH LIST

     
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Reference ID: 09HANOI184
Created: 2009-03-02 09:50
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Origin: Embassy Hanoi

VZCZCXRO6450
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0184/01 0610950
ZNR UUUUU ZZH
R 020950Z MAR 09
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 9227
INFO RUEHHM/AMCONSUL HO CHI MINH 5632
RUCNASE/ASEAN MEMBER COLLECTIVE
RHHMUNA/USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 05 HANOI 000184
 
SENSITIVE
SIPDIS
 
STATE FOR EAP/MLS AND EEB/TPP/IPE JURBAN
STATE FOR EEB/TPP/IPE FOR HALLOCK, WATTS, AND KEAT
STATE ALSO PASS USTR DBISBEE AND RBAE
4430/MAC/AP/OPB/VLC/HPPHO
 
E.O. 12958: N/A
TAGS: ETRD KIPR ECON VM
SUBJECT: VIETNAM SHOULD REMAIN ON THE 2009 SPECIAL 301 WATCH LIST
 
REF: (A) STATE 8410 (B) HANOI 032
 
HANOI 00000184  001.2 OF 005
 
 
1. (SBU) Summary:  The Government of Vietnam (GVN) has continued to
take significant steps to implement an effective legal regime to
protect intellectual property rights (IPR), reduce IPR violations
and raise awareness.  However, enforcement remains weak, piracy and
counterfeiting  are rampant and several key obligations remain
unfilled.  Vietnam's goals of participating in the Generalized
System of Preferences (GSP) program and attracting continued high
levels of foreign direct investment should motivate the GVN to
continue to improve its IPR enforcement record.  In the meantime,
Post recommends Vietnam's continued placement on the Special 301
Watch List.  End Summary.
 
IPR PROGRESS
------------
 
2. (U) Two years after joining the WTO, Vietnam has continued
efforts to develop a modern IPR legal regime and meet its
obligations under the U.S.-Vietnam Bilateral Trade Agreement (BTA)
and WTO Trade-related Aspects of Intellectual Property Rights
(TRIPs).  Since the Mission's 2008 Special 301 submission, Vietnam
has continued to strengthen its IPR legal framework, modestly
improved IPR enforcement, formed a partnership to protect software
copyrights and launched a Department of State-funded outreach
program to raise public awareness of IP in Vietnam.  Stakeholders
report that Vietnam's overall IPR situation is the same, if slightly
improved, from 2008.
 
3. (U) Vietnam has undertaken significant efforts in recent years to
promulgate a legal framework for protection of IP rights.  In 2009,
the GVN is expected to amend the 2005 Law on Intellectual Property,
updating areas related to copyrights, trademarks, manufacture and
distribution of optical discs, and border control measures related
to infringing goods.  Yet, critical legal documents remain
outstanding - notably the long-awaited revision to Vietnam's
criminal code to update its IPR provisions.  In February 2008, the
GVN issued a stopgap measure, Joint Circular 01, which declares that
IP infringement merits criminal prosecution if pursued on a
"commercial scale and for commercial purposes."  The circular moved
Vietnam a step closer to meeting its TRIPs obligations.
 
4. (U) The National Assembly was expected to ratify the criminal
code revision in May 2009, codifying in Vietnamese law criminal
penalties for commercial-scale IP infringement.  The Embassy
recently learned, however, that the date for ratification could
slide to late 2009, leaving promulgation for 2010.  While the new
law would fill an important gap in Vietnam's IPR legal foundation,
industry observers have expressed concern that the law's proposed
fines and penalties, revealed in several drafts in 2008, are still
too weak to deter committed IP infringers.
 
5. (U) In December 2008, Prime Minister Nguyen Tan Dung issued a
promising new directive (No. 36/2008/CT-TTg) instructing ministers
and provincial department heads to draft detailed plans to increase
copyright protection in Vietnam's business and service sectors,
prevent the import and export of items that violate copyright laws,
particularly optical discs, and introduce "strict punishment" for
organizations and individuals that circulate pirated goods.  The
directive also orders all Vietnamese universities and professional
schools to introduce lectures on intellectual property rights, which
  could prove particularly useful in helping to raise IPR awareness
in Vietnam.
 
6. (U) In August 2008, in an effort to combat software piracy, the
Ministry of Culture, Sports and Tourism (MOCST) and the Vietnam
Software Association (VINASA) joined forces with the Business
Software Alliance (BSA) to create the "Partnership in Protection of
Software Copyrights."  The collaboration aims to decrease software
piracy through public awareness campaigns, inspections and stricter
penalties for violations.  The Partnership has been running public
service announcements in several of Vietnam's largest print and
online newspapers warning against software piracy, and authorities
backed up the campaign with a crackdown on several high-profile
infringers.
 
7. (U) In December 2008, the Drug Administration of Vietnam (DAV)
agreed, after urging by the USTR and U.S. industry, to modify its
internal procedure and grant five years of data exclusivity to new
pharmaceuticals entering the Vietnamese market, in line with
Vietnam's BTA and TRIPs obligations.  The Mission is currently
waiting to learn how the DAV will implement the new rule, including
whether data exclusivity will be automatic, comprehensive,
retroactive and, as industry group PhRMA noted, "without procedures
and formalities."
 
HANOI 00000184  002.2 OF 005
 
 
 
VIETNAMESE ASSOCIATIONS INCREASE VISIBILITY
-------------------------------------------
 
8. (U) In October 2008, the Recording Industry Association of
Vietnam (RIAV) filed its largest civil lawsuit to date against
Vietnamese internet service provider FPT and Nokia for music
copyright violation, seeking compensation of more than VND 50
billion.  At a press conference, RIAV presented evidence that Nokia
had offered cell phone buyers a promotional package that directed
customers to an FPT-run website that offered 1,000 songs and
ringtones.  RIAV also accused FPT of offering 10,000 unlicensed
downloadable music files and streaming infringing content.  RIAV
said Nokia has admitted wrongdoing, but that neither FPT nor Nokia
have shown sufficient "good will in negotiations," prompting RIAV to
proceed with civil court proceedings.  While no court date has been
set, RIAV anticipates the trial will take place in early 2009, and
serve as a deterrent and means to raise IPR protection public
awareness.
 
9. (U) Vietnamese Public Television aired a number of IPR-related
programs, including a game show on IP rights.  IPR agencies
organized a number of workshops, panels and public forums to help
increase IP awareness.  The Copy Office of Vietnam (COV) website
regularly updates information on copyright legislation, including a
copyright registration database.  The GVN also sponsored a number of
IPR awareness events on World IP Day, April 26, 2008.
 
10. (U) Due to heightened awareness of IP, individuals and firms in
Vietnam have become increasingly assertive about protecting their
rights.  In 2008, the COV reports issuing 4,992 copyright
certificates, a 55 percent increase over 2007.  NOIP reports it
received 3,484 patent applications for inventions, a 13 percent
increase over last year.
 
11. (U) Copyright associations also continued to expand their reach.
 The Vietnam Literature Copyright Center (VLCC) collected VND
300,000 million ($17,000) in royalties in 2008, while The Vietnam
Center for Protection of Music Copyright (VCPMC) collected VND 15
billion (USD 833,000) worth of fees last year.
 
12. (U) The Vietnam Center for Protection of Music Copyrights
represents both Vietnamese and foreign songwriters and composers and
is a member of the International Confederation of Societies of
Authors and Composers (known by its French acronym CISAC).  The
branch of VCPMC in southern Vietnam, enabled by support from the
Departments of Culture, Sports, and Tourism in 24 provinces,
reported major increases in copyright royalties collected from TV
and radio stations, live provinces, CDs, karaoke, hotels,
restaurants, bars, and websites.
 
IPR CHALLENGES
--------------
 
13. (U) Despite these developments, IP enforcement in Vietnam
remains weak and violations are rampant.  Several factors continue
to undermine proper IPR enforcement in Vietnam.  First is the
government's reliance on administrative measures to combat IP
infringement.  GVN officials tell us just 1 percent of all IP
infringement cases in Vietnam are prosecuted under existing criminal
statutes.  A second complicating factor is the sheer number of
entities involved in IP enforcement, with no less than eight
ministries and agencies responsible for intellectual property in
Vietnam.  To help streamline enforcement, the GVN has formed an
interagency committee (Standing Committee 127) with representatives
of all agencies involved in IPR protection.  However, despite the
new committee and the National Office of Intellectual Property
Rights' (NOIP) stated goal to create a "one-stop shop" for rights
holders, the task of sorting out overlapping jurisdictions and
completing the requisite procedural requirements remains confusing
and time-consuming.
 
14. (U) Industry estimates place rates of pirated optical discs in
Vietnam at 95 percent and pirated software at 83 percent.  Anecdotal
evidence supports these estimates.  Hanoi, Ho Chi Minh City (HCMC)
and most other cities are rife with pirated DVDs, CDs, and VCDs.
While local media producers in HCMC have recently reported increased
availability of legitimate, locally-recorded and produced Vietnamese
music CDs, market access barriers continue to limit the availability
of legitimate imports, further complicating efforts to combat
piracy.  In 2007, in an effort to tackle the problem, the COV, an
agency under the MOCST, initiated the drafting of new optical disc
legislation that would regulate the domestic production, export,
import and circulation of all optical discs, but this work remains
unfinished.
 
HANOI 00000184  003.2 OF 005
 
 
 
15. (U) The costs of IPR infringement remain high.  The
International Intellectual Property Alliance (IIPA) pegged 2008
trade losses from pirated software in Vietnam at $123 million.
Although software piracy rates decreased by 9 percent from 2004,
estimated trade losses over the period increased by more than $90
million due to the rapid proliferation of personal computers in
Vietnam.  While the GVN issued a directive in 2007 aimed at lowering
the rate of software infringement to the regional average (Decision
No. 51), raids have thus far been too infrequent and the fines too
minimal to reduce piracy significantly.
 
TECHNICAL ASSISTANCE AND RAISING AWARENESS
------------------------------------------
 
16. (U) Vietnam continued to receive IPR-related technical
assistance from a number of foreign donors in 2008, including the
Government of France, the European Patent Office (EPO), the World
Intellectual Property Organization (WIPO), USAID and the U.S. Patent
and Trademark Office (USPTO).
 
17. (U) In 2009, the GVN will continue to require technical
assistance to improve its IPR enforcement capacity.  Six GVN members
will attend a weeklong seminar on IPR enforcement at the ILEA
Academy in Bangkok in April 2009.  In addition, the Mission hopes to
collaborate with the Bureau of International Narcotics and Law
Enforcement (INL) to offer Vietnam a technical capacity-building
project to enhance IPR enforcement.
 
18. (U) Enforcing IP law in Vietnam is complicated by a lack of
understanding among retailers of their legal obligations and the
economic impact upon the IP owners from the sale of pirated or
counterfeit goods.  This is not necessarily limited to small
mom-and-pop establishments; GVN officials tell us that some of
Vietnam's largest retailers routinely peddle infringing goods.  To
combat this problem, Post is engaging with the Market Management
Bureau to develop an IPR Outreach booklet for distribution in May
2009 in areas with high rates of infringing goods.  The booklet,
funded jointly by the Department of State and Post, will describe
how to identify a fake or pirated good, explain the legal and
economic consequences of peddling such wares, suggest locations
where vendors can obtain legitimate goods for sale, and note why IP
protection is important to Vietnam and its citizens.
 
INTERNATIONAL AGREEMENTS
------------------------
 
19. (U) In 2006, Vietnam fulfilled its BTA obligations by joining
five key international IP conventions.  After completing procedures
to join the Rome Convention for the Protection of Performers,
Producers of Phonograms and Broadcasting Organizations, Vietnam
officially joined the Convention on March 1, 2007.  The Mission
continues to urge Vietnam to join the 1996 WIPO Copyright Treaty
(WCT) and the WIPO Performances and Phonograms Treaty (WPPT), but
the GVN has continued to defer action on those agreements.
 
IPR LEGISLATIVE REFORMS IN 2008
-------------------------------
 
20. (U) The GVN reported the following IPR-related legislative
reforms in 2008 and early 2009:
 
- Joint Circular No. 01/2008/TTLT-TANDTC-VKSNDTC-BCA-BTP guiding
penalties for infringement of intellectual property rights, February
2008;
 
- Ordinance on the Handling of Administrative Violations, which
revises the fine ceiling to align it with Vietnam's Law on
Intellectual Property;
 
- Joint Circular No. 02/2008/ TTLT-TANDTC-VKSNDTC-BVHTTDL-BKHCN-BTP
guiding regulations for IPR dispute settlement, April 3, 2008;
 
- Prime Minister's Directive on Strengthening Management and
Protection of Copyrights and Related Rights (No. 36/2008/CT-TTg),
December 31, 2008;
 
- Circular No. 29/2009/TT-BTC, dated February 10, 2009, revising and
supplementing Circular 166, February 12, 1998;
 
- Decision No. 515/QD-TCHQ, establishing an IPR Enforcement System
to streamline procedures and link central and provincial customs
departments, February 22, 2008;
 
- Decision 916/QD-TCHQ, establishing procedures for the inspection
 
HANOI 00000184  004.2 OF 005
 
 
of exports and imports, March 31, 2008;
 
- Decision No. 2808/QD-TCHQ, on the operations manual for IPR
Customs Enforcement, December 31, 2008;
 
- A joint circular drafted by MOCST, MOST, MOF and MPI regarding
financial support for the purchase of legitimate software and
guiding the collection and distribution of royalties;
 
- Circular 12/2008/TT-BCT, outlining procedures for market
management bodies to take jurisdiction of, and resolve
administrative breaches in, the intellectual property sector.
 
- Prime Ministerial Directive No. 28/2008/CT-TTg ordering "urgent
action" against counterfeit goods and low quality products,
September 8, 2008.
 
2008 ENFORCEMENT EFFORTS
------------------------
 
21. (U) The GVN reported the following enforcement efforts in 2008:
 
- MOST/NOIP: processed 154 cases, including 118 trademark
infringement cases, 32 industrial design cases, three patent
infringement cases and one unfair competition case; destroyed 54,969
trademark-infringing goods and 95 patents infringing goods.  Total
fines were approximately VND 800 million ($45,000).
 
- The Market Management Bureau (MMB), Vietnam's largest IPR
administrative enforcement agency, reported 2,575 IPR infringement
investigations, including 2,195 trademark cases, 404 industrial
design cases, six geographical indication cases, four unfair
competition cases and two trade name cases.  Total fines were nearly
VND 8 billion ($4.4 million).
 
- Through February 2009, the Vietnam General Department of Customs
received 26 requests to inspect exports and imports for IPR
infringement.  The goods were trademarked Nokia, Nike, Seiko, HP,
Epson, Smirnoff, Gucci, Casio, Ensure, Oral-B, New Era, Gillette,
and Proctor & Gamble.  Customs reports seizing goods on ten
occasions, suspending clearance on five occasions, identifying
infringing goods worth VND 200 million ($11,500) and imposing fines
worth VND 400 million ($23,000).  Infringing goods included cell
phones, cell phone parts and Benson & Hedges cigarettes.
 
- The Ministry of Public Security's Department of Economic Police
reports investigating and seizing infringing goods in 76 cases,
focusing on the following product categories: food, clothing,
cosmetics, pharmaceuticals and electronic parts.
 
- On March 29, 2008, MPS arrested a group smuggling counterfeit
Viagra and Cialis across the Chinese border to Lang Son Province en
route to Hanoi, HCMC, Bac Ninh and Bac Giang.  Two people were
sentenced to 40 months in prison.
 
- In October 2008, MPS initiated criminal proceedings against a
group producing fake versions of the drug Rovanten; and, in
September 2008, against suspects producing and distributing fake
fertilizer.
 
- In HCMC, MPS investigated 20 IPR infringement cases, initiating
criminal proceedings in two cases; imposing administrative fines in
one case, with transfer of 15 cases to district and commune economic
police.
 
- The MOCST Inspectorate processed 20 software copyright
infringement cases; destroyed 2,000 illegal copies of infringing
software; and seized and destroyed 2,364 infringing books, 953,477
videocassettes and 236,364 disc cases.
 
- The MOCST ordered seven internet websites, including 24h.com.vn,
socbay.cpm.vn, zing.vn, bongdaso.com, vnmedia.vn, clip.vn and
baobongda.com.vn to remove or cease broadcasting infringing content.
 National internet service provider FPT paid VND 20 million ($1,150)
in fines for allegedly allowing an affiliated website to broadcast
pirated content.  Total fines were VND 255 million ($14,500).
 
- The Copyright Office of Vietnam (COV) processed 52 copyright
infringement cases, of which they settled 30, and transferred the
remainder to MOCST.
 
- In Dong Nai Province, the Department of Science and Technology
(DOST) reports investigating several hundred establishments, fining
58 for industrial property infringements.  Total fines were not
reported.
 
HANOI 00000184  005.4 OF 005
 
 
 
LEGAL UDPATES EXPECTED IN 2009
------------------------------
 
22. (U) The GVN expects to issue the following IPR-related
legislation in 2009:
 
- Revision of IPR provisions in the Criminal Code;
 
- Revision of the 2005 Law on Intellectual Property;
 
- Decree on the Handling of Administrative Violations Related to
Copyrights and Related Rights to introduce compatibility with the
revised ordinance on the handling of administrative violations;
 
- A joint circular drafted by MOCST, MOST, MOF and MPI regarding
financial support for the purchase of legitimate software;
 
- Decree to regulate optical disk management and distribution in
Vietnam (COV);
 
CONCLUSION AND RECOMMENDATION
-----------------------------
 
23. (SBU) Despite continuing progress, Vietnam will continue to
grapple in the near term with the challenge of reducing the massive
scale of IPR violations.  GVN authorities, including at the highest
levels, have demonstrated their understanding of the problem and
expressed their resolve to protect and enforce IP rights.  The GVN,
moreover, has shown a willingness to cooperate with the United
States and other trading partners to address its serious IP problems
and we expect those efforts to continue in 2009.  Vietnam's BTA and
WTO/TRIPs commitments provide us with strong tools for engaging the
GVN on IPR enforcement, and the Trade and Investment Framework
Agreement (TIFA) also provides a useful forum.
 
24. (SBU) On the legislative front, Vietnam's forthcoming criminal
code revision will fill gaps in Vietnam's IPR legal foundation by
providing rights holders with multiple remedies for IP infringements
-- administrative, civil and criminal.  The most significant
remaining challenge lies in building the capacity and improving the
efficacy of Vietnam's enforcement and judicial systems.  Vietnam's
desire to participate in the GSP preference program and attract
continued high levels of foreign direct investment should motivate
the GVN to continue to improve its IPR enforcement record.  With
additional resources and time to implement its IPR legislative
framework, the Mission expects Vietnam to develop a more consistent
track record of IPR enforcement.  In the meantime, we recommend
Vietnam's continued placement on the Special 301 Watch List.
 
25. (U) This message was coordinated with ConGen Ho Chi Minh City.
 
MICHALAK

 
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