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Vietnam: MISSION RECOMMENDS THAT VIETNAM REMAIN ON THE 2007 SPECIAL 301 WATCH LIST - PART 2 OF 2

     
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Reference ID: 07HANOI309
Created: 2007-02-22 06:34
Released: 2011-08-30 01:4
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Origin: Embassy Hanoi

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DE RUEHHI #0309/01 0530634
ZNR UUUUU ZZH
O 220634Z FEB 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4650
INFO RUEHBK/AMEMBASSY BANGKOK PRIORITY 5419
RUEHHM/AMCONSUL HO CHI MINH 2576
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 06 HANOI 000309
 
SIPDIS
 
SENSITIVE
SIPDIS
 
STATE FOR EAP/MLS AND EB/TPP/IPE JBOGER
STATE ALSO PASS USTR JCHOE-GROVES AND DBISBEE
STATE ALSO PASS USPTO FOR JURBAN
STATE ALSO PASS LIBRARY OF CONGRESS FOR TEPP
AMEMBASSY BANGKOK FOR USPTO JNESS
USDA FOR FAS/FAA/AO HUETE
USDOC FOR ITA/MAC/OIPR CPETERS AND 4430/MAC/AP/OPB/VLC/HPPHO
 
E.O. 12958: N/A
TAGS: ETRD ECON KIPR VM
SUBJECT: MISSION RECOMMENDS THAT VIETNAM REMAIN ON THE 2007 SPECIAL
301 WATCH LIST - PART 2 OF 2
 
REF:  (A) STATE 007944 (B) 06 HANOI 000427
 
(U) SENSITIVE BUT UNCLASSIFIED, DO NOT POST ON THE INTERNET
 
Implementation of the New Law on Intellectual Property
--------------------------------------------- ---------
 
14. (U) In January 2006, six months before the IP Law officially
entered into force, the Ministry of Culture and Information (MOCI),
Ministry of Science and Technology (MOST), Ministry of Agriculture
and Rural Development (MARD), Ministry of Finance (MOF), Ministry of
Trade (MOT), and Ministry of Public Security (MPS) jointly signed a
"Plan of Action on Cooperation in Preventing and Fighting against
IPR Violation during the period of 2006-2010," commonly referred to
as Program 168.  The program has helped to correct one of Vietnam's
glaring shortfalls -- poor coordination among the country's varied
enforcement agencies.  Agencies in Ho Chi Minh City report they are
using Program 168 to facilitate inter-agency cooperation at the city
level.
 
15. (U) Some key highlights of Program 168 include:
 
-- Information dissemination: Under MOCI's lead, the participating
ministries, in coordination with local People's Committees, are
responsible for developing a concrete plan to disseminate
information on Vietnam's IPR commitments, legislation and
enforcement activities.  This information is to form the basis of an
annual report to the Prime Minister on nationwide IPR enforcement.
 
-- Strengthened Enforcement: The ministries shall provide guidelines
on IPR enforcement to their functional departments and local
People's Committees.  Inspection, supervision and sanctions shall be
strictly implemented at the national level by GVN ministries and by
the People's Committees at the local level.
 
-- Capacity building for enforcement officials: The ministries shall
provide more training to officials of enforcement agencies, with a
special focus on international cooperation.  Notably, the ministries
will coordinate with the Ministry of Education and Training to
develop a specialized curriculum on IPR for undergraduate and
graduate students.
16. (U) Other legal and regulatory IPR-related reforms in 2006:
 
-- Decree No. 56 of June 2006 stipulates administrative offenses in
the culture and information field.  Decree 56 introduces various new
copyright offenses and provides for higher fines (in most cases) on
copyright infringements committed for commercial purposes, such as
copying TV or radio programs, film, tapes or discs; trading in
pirated software (new offense); or importing/exporting pirated
films, tapes, discs, TV or radio programs, written works, computer
software and fine art (new offense).
 
-- Decree No. 100 of September 2006, details the copyright
provisions of the Civil Code and the IP law. Decree 100 governs
author's rights and related rights held by performers, sound/video
recording producers, and broadcasting organizations.  Foreign
individuals and organizations whose works are covered by copyright
and related rights protection may directly file applications for
copyright and related rights registration at the Copyright Office of
Vietnam (COV) or provincial Culture and Information Services where
they are based. This Decree further clarifies terms related to
copyright and related rights, specifies provisions of copyright
protection term, copyright and related rights registration
procedures and certificates, and settlement of copyright-related
complaints and disputes.
-- Decree No. 103 of September 2006 on industrial property contains
general provisions on the establishment and scope of IPR, including
patents, trademarks, industrial designs, integrated circuit layouts,
well-known marks, business secrets and trade names. Key provisions
on appeal procedures, required documents and regulations on
ownership assignment and IP rights licensing are also clearly
regulated;
-- Decree No. 105 of September 2006 provides details on IPR
enforcement and state administration of IPR.  Decree 105 governs all
IP enforcement matters (civil, criminal and administrative remedies,
import-export controls and unfair competition).  This includes
copyright infringement and infringements of IP subject matter such
as trademarks and patents.  Other key provisions govern the
determination of infringing acts, damages for compensation, and the
 
HANOI 00000309  002 OF 006
 
 
procedures and required documents for the enforcement of IP rights.
Infringement tests, provisions on calculating damages, the disposal
of infringing goods and border enforcement measures are set out.
Notably, Vietnam asserts jurisdiction over cyber crimes occurring
abroad that are directed at consumers or information users in
Vietnam.
-- Decree No. 106 of September 2006 on administrative sanctions in
industrial property details administrative authority competence and
procedures for handling administrative breaches of industrial
property (IP) rights. Beyond the penalties of warnings and fines
defined in previous regulations, Decree 106 provides penalties such
as confiscation of evidence, suspension of an infringer's business
activities and compulsory remedial measures including removal of
infringing elements from the infringing goods, destruction or
distribution for non commercial purposes of infringing goods and
publication of corrective notices. For the first time, this Decree
permits penalties to be calculated based on the actual value of
infringing goods. Fine levels of up to five times the value of
infringing goods may be imposed.  A fine of USD 625 to USD 940 may
be imposed if a trademark is placed on business instruments, and
infringes trademark rights.
-- On December 25, 2006, the National Assembly passed the Law on
Cinematography, which came into effect as of January 1, 2007. The
law provides protection for all cinematographic works under the
Civil Code and IP Law.  The law contains various provisions related
to copyright, such as requiring that proper copyright be evidenced
for imported films. Film producers and television stations may
import and export films, but the quantity of films imported may not
exceed the quantity of films they produce annually by a ratio of
more than 2:1.
 
Implementing Regulations to be adopted in 2007
--------------------------------------------- -
 
17.  (U) Relevant GVN agencies continue to draft circulars to guide
implementation of these new IPR decrees.  The National Office of
Intellectual Property (NOIP) is responsible for drafting
implementing regulations concerning industrial property.  Those
regulations include:
 
-- A joint circular on settling IP violations, drafted by the
Supreme People's Court (SPC) and  Supreme People's Procuracy (SPP);
-- A joint circular guiding the trial of IP related criminal cases,
drafted with SPC, SPP, MPS and Ministry of Justice (MOJ);
-- A circular guiding implementation of Decree 103 on industrial
property, drafted by MOST;
-- A circular on IP expert witnesses drafted by MOST; and
-- Guidelines for examiners processing applications on all IP
subjects.
 
18. (U) The following copyright regulations are expected to be
issued in 2007:
-- Decree on administrative fines in the copyright field drafted by
MOCI;
-- Prime Minister's Instructions on software protection drafted by
MOCI;
-- Decree on protection of optical disks drafted by COV; and
-- Joint Circular on settling copyright infringement in the court
drafted by PSC, PSP, MOJ and MOCI.
 
19. (U) MARD is responsible for drafting guiding regulations on
plant varieties in 2007, specifically:
 
-- A Decision on collection of charges and fees on protection of
plant varieties (to be issued by MOF);
-- Decree to amend Decree 57/2002 on sanctioning administrative
violations in the plant varieties field; and
-- Decisions on supplementing the types of protected plant
varieties.
 
International Agreements
------------------------
 
20. (SBU) Apart from the international IPR agreements that Vietnam
is required to accede to under the BTA, NOIP contacts report that
the GVN is finalizing procedures to accede to the Hague Agreement
Concerning the International Registration of Industrial Designs.
Vietnam expects to join this agreement in 2007.  In 2006, Vietnam
officially completed its procedures to join the Rome Convention for
 
HANOI 00000309  003 OF 006
 
 
the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations (effective March 1, 2007), the
International Union for the Protection of New Varieties of Plants
(UPOV) (December 24, 2006), the Madrid Protocol Relating to the
Madrid Agreement Concerning the International Registration of Marks
(July 11, 2006) and the Brussels Convention relating to Distribution
of Program-Carrying Signals Transmitted by Satellite (January 12,
2006).  COV claims that the new IPR Law adopted most provisions of
the 1996 WIPO Copyright Treaty (WCT) and WIPO Performances and
Phonograms Treaty (WPPT).  The GVN does not currently plan to accede
to the WCT and the WPPT, but officials told the Embassy that the GVN
may consider doing so eventually.
 
Enforcement Mechanisms Remain Weak
----------------------------------
 
21. (U) According to the new Decree 105, the current organizational
structure for state administration of IPR will remain in place.
This structure is overly complicated and bureaucratic, with no less
than five ministries involved.  Multiple agencies are tasked with
overlapping functions, but there are also gaps in coverage.
 
22.  (SBU) Institutional experience on IPR enforcement is extremely
limited, and local law enforcement personnel remain uninformed on
Vietnam's IP laws and procedures.  Government IPR agencies rely
heavily on "administrative" enforcement of IPR laws and typically
only issue administrative findings or warnings either by letter or
orally to small retailers of pirated material.  The lack of
experience with IP issues among Vietnam's judges is another concern.
Recently, Vietnam's Chief Justice admitted before the National
Assembly that the court system is facing a shortage of judges, so
the GVN's plan to develop a specialized IPR court seems unlikely in
the near term.  Under the new IPR regulations, to provide
impartiality, experts at NOIP, MOST and the provincial Departments
of Science and Technology (DOST) no longer have the ability to
assist enforcement agencies in pursing trademark and other
infringements.  Removing this body of expertise from the process
will likely delay dispute resolution.
 
23. (U) In addition to the inter-agency coordination mechanisms set
up under Program 168 (paras 14-15), the GVN will establish a special
task force empowered with the right to use police or military force
to fight IPR violations.  Under the direction of the Ministry of
Trade's (MOT) Market Management Bureau (MMB), the task force will
include representatives from the Economic Police, Ministry of
Defense, Customs, the MOST inspectorate, the MOCI inspectorate and
the Ministry of Health.
Enforcement Efforts in 2006
---------------------------
24. (U) MOCI:  According to national data, MOCI officials inspected
20,414 businesses in 2006.  (Note: While Hanoi agencies say their
numbers are nationwide, it is difficult to determine if they are
comprehensive.  HCMC numbers are also included in paras 24-29, where
possible, to give perspective.  End Note.)  MOCI inspectors
collected fines of 11 billion Vietnamese Dong (VND) (USD 680,000) in
2006 (down from 12 billion in 2005) and forwarded documents for
criminal prosecution in nine cases (down from 22 cases in 2005).
Last year, cultural inspectors issued warnings to 519 business (down
from 1,001 businesses in 2005), suspended the operations of 289
businesses (up from 116 businesses in 2005), and revoked the
business licenses of 160 businesses (up from 25 businesses in 2005).
 They also confiscated more than 930,000 pirated optical disks.
Cultural inspectors also participated in several software raids (see
paragraph 10).
 
25. (U) MOST/NOIP:  MOST issued fines in 88 IP infringement cases
(up from 51 in 2005) and three unfair competition cases, with a
monetary penalty of VND 170.2 million (about USD 10,640)(compared to
a fine of VND 115 million or USD 7,100 in 2005). NOIP assisted in
addressing 601 industrial property violations and 31 unfair
competition cases related to IP.
 
26. (U) Market Management Bureau (MMB):  According to incomplete
figures on IPR enforcement efforts of the MMB in 2006, the agency
handled a total of 2,172 cases and imposed fines of VND 4.387
billion (USD 287,000), of which there were 448 industrial design
violations, 1,715 trademark infringements, 2 commercial names
violations, 1 patent infringement and 6 unfair competition cases.
The MMB also seized 30,000 pirated disks, imposing fines of USD
 
HANOI 00000309  004 OF 006
 
 
1,750. In HCMC, the city's MMB reported it handled 87 IPR-related
cases in 2006, most of which were settled with administrative fines
and confiscation or destruction of products determined to be fake or
an infringement on trademarks.  A handful of cases were forwarded to
the police for prosecution.  The cases involved products from such
companies as Nike, Adidas, Honda, Toyota, Yamaha, Hewlett Packard,
Rolex and Omega.
 
27. (U) Customs: In 2006, Customs acted on a number of trademark and
origin infringements.  Most IPR violations included electronic
products, mobile phone accessories and other consumer commodities.
For example, Haiphong Customs seized and destroyed counterfeit Nokia
cell phone accessories and fake Casio calculators.  Customs also
discovered a shipment of cigarettes that was in violation of "Camel
Filters" trademark.  The national Customs Department worked closely
with local customs officials to implement the new IPR regulations
and monitor counterfeit goods notified by the rights holders.  The
HCMC Customs department reported it handled 20 IPR complaints in
2006.  Fourteen of those complaints were determined to be
legitimate; Customs found in the remaining six cases that the
complainants could not prove they were the authorized
representatives of the rights-holders.  In only two of the 14 cases
were violations discovered; in the remaining 12 cases, Customs
officials reportedly have yet to identify any shipments that could
be considered violations.  The cases include leather goods, Wilson
tennis racquets, Winston cigarettes and Louis Vuitton products.
HCMC Customs told ConGen EconOff that Customs officials can only
take action against products where the rights-holder has filed a
complaint.  Customs officials are not authorized to stop shipments
they suspect to be in violation of IPR laws and regulations.
 
28. (U) Courts: According to data provided by NOIP, the court system
settled 11 of the 14 civil IPR-related cases it received.  In the 51
criminal cases submitted to the courts (involving a total of 110
defendants), 41 cases were brought to trial. Of the 91 defendants in
these trials, 47 were given jail terms.  The head of HCMC's Economic
Court told us the court heard 10 to 15 IPR cases in 2006, out of a
total of 1,200 cases that came before the Economic Court last year.
Violators in most of these cases were required to pay administrative
fines.
 
29. (U) Economic Police: In 2006, MPS reports discovering and
investigating 156 IPR violations, 12 more cases than 2005.  The most
commonly infringed products were foodstuffs, clothing, cosmetics,
medicine, software and electronic accessories.  For instance, on
December 7, the economic police halted an alcohol-making ring in
Hoang Mai district of Hanoi. The police seized 500 counterfeit
liquor bottles with fake labels, empty bottles and production
machinery.  The case was prosecuted under the criminal law and three
defendants were sent to prison. Several other cases were handled
through civil penalties.  Recently, Ho Chi Minh City police raided
an establishment that produced counterfeit perfume. The police
seized and destroyed 3,790 perfume bottles with imitation trademarks
of Hugo Boss, Valentino, and Gucci.  The offender was convicted
under the criminal law.
 
Growing Costs of IPR Infringement
---------------------------------
 
30. (U) Despite Vietnam's relatively low average per capita GDP of
around 713 dollars (2006), incomes across the country are rising,
particularly in the larger cities.  With these rising incomes, a
culture of consumerism is increasingly taking hold - increasing the
losses to U.S. firms from piracy and counterfeiting.  Industry
estimates show that the cost of signal piracy in the television
sector alone was USD 37 million.  Although the dollar value remains
a fraction of losses faced by U.S. IPR-related companies in other
parts of the region, damages from IPR infringement are rising
steadily.  In addition, some items deemed "cultural products" (i.e.,
music, movies, books) are still subject to censorship and control
regulations that impede market access.
 
Public Awareness
----------------
31. (U) Public and private awareness of the value of IPR protection
is low but continues to grow.  According to COV, Vietnamese media
carried over 1,000 news articles on copyright, more than double the
2005 figure of 450.  Vietnamese IPR agencies organized a number of
workshops, panels and public forums to help increase public
 
HANOI 00000309  005 OF 006
 
 
awareness of IPR.  The COV website regularly updates information on
copyright legislation and news, as well as provides a database on
copyright registration.
 
32. (U) With growing awareness of their rights, individuals and
businesses are becoming increasingly active in self-protection.  COV
issued 3,147 copyright certificates in 2006, a 55 percent increase
over 2005.  NOIP received more than 2,400 applications for
registration of inventions (11 percent higher than 2005), 1,600
applications for registration of industrial designs (12 percent
higher than 2005), over 23,000 applications for registration of
trademarks (13 percent higher than 2005), five applications for
registration of geographical indications and one application for
registration of layout designs of integrated circuits.  In November
2006, MMB organized an exhibition on "Authentic vs. Counterfeiting
Goods" in Ho Chi Minh City with the display of more than 450 goods,
including Nike, in order to help consumers identify fake goods.
 
33. (U) Copyright associations continue to expand their operations.
The Vietnam Literature Copyright Centre (VLCC) increased its
membership to 500 from 350 in 2005.  Total royalties of VLCC members
in 2006 were VND 200 million (USD 12,500).  The Vietnam Center for
Protection of Music Copyright (VCPMC) has also grown; it now
represents 1,000 members (up from 700 last year).  The total
revenues of association members reached VND 3 billion (USD 187,500)
in 2006, up 35 percent from 2005.  The Vietnam Anti-Counterfeit and
Intellectual Property Protection Association (VACIP), which
represents companies with foreign investment, continues to actively
promote IPR protection and hold public discussions.
 
Technical Assistance helps Build Enforcement Capacity
--------------------------------------------- --------
 
34. (U) In 2006, Vietnam continued to receive considerable
IPR-related technical assistance from a number of foreign donors and
NGOs as well as multiple USG agencies, such as USAID, Customs, ILEA,
USPTO and USDOJ.  This assistance included conferences, seminars,
training and review of draft pieces of legislation.  For example,
the USG provided IPR training in Hong Kong, Bangkok and Washington
for 27 GVN officials from NOIP, COV, the SPC, MMB, Customs and the
Police.
 
35. (U) Some examples of IPR technical assistance conducted in 2006
include:
 
-- COV organized a workshop on "Management of Copyright and Related
Right" with assistance from the EC-ASEAN Intellectual Property
Rights Cooperation Program (ECAP II)
 
-- HCMC Department of Science and Technology conducted 10 seminars
to educate government officials on the new IP Law.
 
-- COV, in cooperation with the Business Software Alliance and
Microsoft organized a workshop on "Copyright for software" in Hanoi
and Ho Chi Minh City
 
-- PSC in coordination with STAR, USPTO and DANIDA's Business Sector
Programme Support (BSPS) hosted 5 training courses for 349 judges
-- NOIP received assistance from US, EU, Switzerland, Japan and WIPO
for training activities
-- Customs worked with ECAPII and French Embassy on providing
training for its officials
-- Police cooperated with French Police, Australian Police,
Microsoft, British American Tobacco company, and Pfizer
Pharmaceutical Company
 
Training needs
---------------
 
36.  (U) In 2007, the GVN will continue to require detailed legal
consultations and technical assistance as it finishes drafting
implementing regulations for the new IP Law.  Training for the
various enforcement agencies will be essential to take advantage of
Vietnam's strengthened enforcement provisions.  Many of these
agencies are concerned that they often have difficulty finding
English-speaking IPR officials to send to training programs.
Vietnam would greatly benefit from increased in-country training
activities conducted in Vietnamese.
 
 
HANOI 00000309  006 OF 006
 
 
-----------------------------
Conclusion and Recommendation
-----------------------------
 
37.  (SBU) IPR violations in Vietnam will continue to be a concern
for the foreseeable future.  While the GVN has demonstrated more
resolve to uphold its IPR obligations on several fronts, it will
take time to educate government officials and the public and to
instill a more widespread respect for intellectual property rights.
Vietnam's commitments under the BTA and WTO accession provide us
with strong tools for engaging the GVN on IPR enforcement.  Vietnam
has also expressed interest in being considered for the U.S.
Generalized System of Preferences (GSP) program and seems favorably
disposed to the U.S. proposal to enter into a Trade and Investment
Framework Agreement (TIFA).  Vietnam's GSP aspirations provide
additional incentive for improved IPR enforcement, while a TIFA
presents a mechanism to engage the GVN on specific steps to fulfill
its IPR-related BTA and WTO commitments.  The USG should continue to
provide funding for technical assistance on IPR, particularly
building the capacity of Vietnam's law enforcement and judicial
agencies.  At the same time, the Mission will continue to press GVN
officials at every level to address IPR piracy and counterfeiting
problems throughout Vietnam.
 
Recommendation
--------------
 
38. (SBU):  Because of the remaining IPR issues noted above, the USG
will have to continue to push Vietnam to protect IPR effectively.
Therefore, we recommend USTR maintain Vietnam on the Special 301
Watch List in 2007.
 
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