Cablegate: 2007 Ipr Wrap-Up: Overall Progress, Some Trouble Spots

DE RUEHIN #0049/01 0111012
P 111012Z JAN 08







E.O. 12958: N/A
SUBJECT: 2007 IPR Wrap-up: Overall Progress, Some Trouble Spots

REFTEL: A) 2007 Taipei 2529, B) Taipei 0008, C) 2007 Taipei 2442, D)
2007 Taipei 2005


1. (SBU) Taiwan had mixed results combating IPR violations and
strengthening its IPR regime in 2007. A new law aimed at ending
illegal file-sharing over peer-to-peer (P2P) platforms helped
officials shut down some of the worst violators, authorities
increased efforts to combat counterfeit pharmaceuticals, and the
Ministry of Education (MOE) worked to reduce IPR violations on
Taiwan's college campuses. Digital piracy of music, movies, and
software, however, continues to be a major problem, made worse by
the authorities' failure to send to the Legislative Yuan (LY) an
amendment to the Copyright Law that would limit an Internet service
provider's (ISP) liability if the ISP quickly removed IPR-infringing
material. Rights-holders also criticized Taiwan Customs for not
doing enough to prevent counterfeit drugs, CDs, and DVDs from
entering Taiwan by mail. In 2008, we continue to encourage Taiwan
to demonstrate continued commitment to IPR enforcement by passing
the long-awaited ISP amendment and reducing digital piracy on
university campuses. End summary.

P2P Law Getting Results

2. (SBU) In June 2007, Taiwan passed legislation providing a legal
basis for prosecuting online peer-to-peer platforms whose service
allows for the exchange of IPR-infringing materials. In September
2007, law enforcement agencies worked with the International
Federation of the
Phonographic Industry (IFPI) to raid and then shut down the two
largest P2P service providers in Taiwan: Kupeer and Hip2p (Ref A).
Most Taiwan colleges have also begun to enforce maximum daily
download limits in order to restrict student use of P2P platforms on
school computers, though administrators tell econoff that they are
reluctant to completely ban the use of P2P software due to cases
where students have a legitimate need (Ref B).

ISP Amendment Still Pending

3. (SBU) In 2007, the Taiwan Intellectual Property Office (TIPO)
proposed an amendment to the Copyright Law that would limit an ISP's
liability if the provider quickly removed IPR-infringing material.
TIPO ensured that the United States--along with ISPs and
rights-holder groups such as IFPI, BSA, and MPA--had opportunities
to comment on the draft law, and the final version incorporated many
U.S. suggestions. However, the 2007 LY session ended before the
amendment could pass a third reading and become law. TIPO plans to
re-introduce the proposed amendment during 2008's LY session.

Plan to Ease Compulsory Licensing Dropped

4. (SBU) Responding in part to U.S. concerns, Taiwan has halted an
effort to expand the use of compulsory licensing, a practice whereby
one company can request that the authorities force a rights-holder
to grant the company a license for its patented product, often at a
below-market rate. In October, the LY suspended debate on a
proposed amendment to Article 76 of the Patent Act that would have
allowed Taiwan authorities a broader use of compulsory licensing for
pharmaceuticals and other patented products for domestic use and
export (Ref C). Margaret Chen, TIPO's Secretary General, told
econoff on January 2 that TIPO does not support such an amendment,
and since the bill's sponsor in the LY will not be re-elected, the
language he proposed this session to give the Taiwan authorities a
broad mandate to grant compulsory licenses is less likely find its
way into any subsequent versions of a Patent Act amendment.

5. (SBU) In a separate positive development, in a widely-watched
test case on the use of compulsory licenses in Taiwan, the Dutch
company Philips reached a financial settlement with the Taiwan
company Gigastorage for the company's past production of CD-Rs and
CD-RWs under such a license (Ref C). In May 2007, after the EU
initiated a Trade Barriers Regulation (TBR) investigation of the
case, Gigastorage requested that TIPO nullify its original license
approval, and the company stopped production of CD-Rs and CD-RWs in
Taiwan in September 2007. Philips Taiwan would not reveal the size
of the settlement to AIT, but told us that it is a "substantial sum"
to be paid in stages, though Philips raised the possibility that
Gigastorage may evade payments after the first installment.

6. (SBU) Although the compulsory license has been withdrawn, Philips

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has appealed Taiwan's original decision to issue a compulsory
license to Gigastorage, and expects that the Taipei High
Administrative Court will hand down its ruling on this case in the
first half of 2008. Philips is continuing its appeal because the
company wants legal vindication that the original decision to grant
a compulsory license was wrong (Ref C).

Physical Music and Movie Piracy Down...

7. (SBU) According to IFPI, which represents the international
recording industry in Taiwan, as legitimate CD sales in Taiwan have
dropped by half since 2004, the percentage of pirated copies has
fallen from 36 percent of all copies sold to 22 percent (Ref A).
IFPI estimates that the number for physical outlets for pirated CDs
has also fallen to only 30 stores around Taiwan, versus 250 a decade
ago. According to police records, there were 227 music-related
physical piracy cases in Taiwan in 2006 and only about 150 in 2007.

8. (SBU) Spencer Yang, the head of the Taiwan Federation Against
Copyright Theft (TFACT, formerly known as the Motion Picture
Association - Taiwan), recently told econoff that, although TFACT
did not have enough money to do a piracy survey this year, they
believe that Taiwan's physical piracy rate for DVDs has continued to
decline as the IP Police have gradually shut down most of the
island's illegal DVD "factories." According to Yang, most domestic
counterfeiting is now individuals burning counterfeit DVDs on home
computers. Yang said that the majority of fake DVDs now come from
PRC and other overseas mail-order sites that take orders over the
Internet and deliver physical copies by mail.

...Overall Digital Piracy Up

9. (SBU) Digital piracy of music and movies, however, continues to
grow and is now number one on both TFACT's and IFPI's list of
concerns. IFPI's Lee could not estimate the overall rate for
Internet music piracy, but recently noted to econoff that the police
prosecuted 165 music-related digital cases in 2006, but had already
reached 200 as of August 2007, and that raids on unauthorized sites
doubled in 2007. In 2006 and 2007, IFPI members sent more than 2500
"Cease and Desist" letters asking major Internet service providers
(ISPs) and auction sites to remove or take down unauthorized music
content, with an 80 percent success rate in having the ISP remove
the offending content.

10. (SBU) TFACT's Yang believes that the Internet movie piracy rate
is lower than that for music downloads, but that the movie
downloading problem will worsen as broadband Internet service
becomes cheaper and more widely available. Yang also told econoff
that Taiwan's judiciary does not take the digital piracy problem
seriously enough, and complained that judges give light sentences to
operators of P2P platforms and other websites that offer free movie
downloads for profit or to attract visitor traffic, despite the fact
that Internet violators have the potential to reach even more
customers than traditional underground DVD factories. Yang also
said that Taiwan's judicial process is very slow, citing TFACT's
case against the Ezpeer P2P site that has dragged on since 2005.
TFACT also has two other cases that it raised with the courts in
November 2006 and are still under investigation by the prosecutor's

Software Piracy Worse Than We Think?

11. (SBU) Digital piracy is not restricted to just music and movies.
According to surveys done by the Business Software Alliance (BSA),
41 percent of member-company software used in Taiwan is
unauthorized. The true picture of software piracy is likely worse,
however. During a December 27 meeting, BSA's Taiwan office head
told econoff that BSA's worldwide survey methodology undercounts the
true level of unauthorized use by at least 10 percentage points in
Taiwan. According to BSA Taiwan, unauthorized use of member
software--including illegal copies, expired licenses, and
under-reporting of licensed users--is common not only in the
business community, but also on university campuses and within
official agencies.

12. (SBU) Ronald Patston, Vice President of Asia Pacific Operations
for Applied Wave Research, which sells computer-aided design
software for the production of electronics, recently told econoff
that roughly 70 percent of Applied's software use in Taiwan is
unauthorized. Patston believes that the piracy rate for his
company--which is not a member of BSA--likely reflects the true

TAIPEI 00000049 003 OF 004

overall rate of software piracy in Taiwan.

Good Progress Against Counterfeit Drugs

13. (SBU) Don Shruhan, the Singapore-based director of Pfizer's
regional anti-counterfeiting office, praised Taiwan's efforts over
the past year against counterfeit pharmaceuticals. Shruhan recently
told econoff that in the quality of its police investigations,
number of prosecutions, and severity of judicial sentences, Taiwan
has become not just better than regional competitors such as
Malaysia and Korea, but comparable to more advanced countries such
as Japan and New Zealand. As a result, Shruhan said, recent
island-wide test buys of the often-counterfeited Pfizer drug Viagra
found that only 18 percent of Viagra sold by Taiwan pharmacies was
fake, down from an astounding 60 percent in 2006. The International
Research-based Pharmaceutical Manufacturers' Association (IRPMA),
the original-drug manufacturers' industry group in Taiwan, remains
concerned about counterfeit drugs, but in its 2008 Policy Priority
Paper, IRPMA ranks the issue far below other IPR issues such as
patent linkage and data exclusivity.

Customs: The Weakest Link

14. (SBU) Pfizer's Shruhan told econoff that Customs is the weakest
link in Taiwan's relatively good efforts against pharmaceutical
piracy. According to Shruhan, the most popular way to smuggle
counterfeit drugs into Taiwan is by mail-order from Thailand or
China, and he said that Customs is not willing to spend time seizing
smaller quantities of counterfeits or doing follow-up
investigations. In addition, Customs has refused repeated offers of
free training from Pfizer to help Customs identify counterfeit
drugs, and, according to Shruhan, does not seem interested in
improving their anti-counterfeiting efforts.

15. (SBU) TFACT's Yang echoed Pfizer's complaints, telling econoff
recently that although most fake CDs and DVDs now come into Taiwan
by air parcel in packs of five or less, Customs officers have little
interest in intercepting such packages. He attributes this to
Customs Officers wanting to avoid the large amount of paper work
required for even relatively small seizures, as well as a lack of
manpower dedicated to follow-up investigations. Every year, TFACT
holds four training sessions for Customs--once each in Taipei,
Keelung, Taichung, and Kaohsiung--in how to identify fake CDs and
DVDs, but Customs still allows small packages of fakes to drip into
Taiwan daily.

IP Court To Open in July 2008

16. (SBU) The long-awaited specialized IP Court is still just that:
long-awaited. We expect the court, originally scheduled to open in
March 2007, will start hearing cases in July 2008. BSA and other
rights-holder groups, while encouraged by the court's establishment,
are pessimistic that the IP Court will be able to improve
IPR-related prosecutions since it will only have about 10
specialized IP judges and the same number of prosecutors.
Currently, the Taipei District Court alone has 12 judges who hear IP
cases as part of their normal caseload. TFACT's Yang told econoff
that, in addition to being too few, the IP Court's judges will not
have adequate training needed to improve the handling and speed of
IP cases.

Campus Action Plan Sparks Some Progress

17. (SBU) In 2007, the Taiwan Ministry of Education (MOE) made
reducing campus intellectual property rights (IPR) violations a
priority, and their efforts are creating some positive results.
Although the Campus IP Action Plan that the MOE released end-October
was watered-down by university complaints, many schools have stepped
up enforcement efforts in response to the Plan's incentives.
Textbook copying and other physical piracy appear to have continued
their decade-long decline due to heightened enforcement and
increased understanding of Taiwan's IPR laws by students and copy
shop employees (Ref B). Digital piracy on Taiwan's university
campuses, however, is increasing, and software companies complain
that the MOE and universities are not doing enough to combat
unauthorized software use on campuses, and also that the MOE has not
held promised meetings with rights-holder groups.


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18. (SBU) Although Taiwan authorities did not open the long-awaited
IP Court and failed to send an Internet service provider (ISP) law
to the LY in 2007, Taiwan stepped up enforcement against illegal P2P
file-sharing, counterfeit pharmaceuticals, and textbook copying and
illegal music downloads on college campuses. Trouble spots
remain--including less-than-effective customs enforcement as well as
digital music, movie, and software piracy--and we will press Taiwan
over the coming year to pass the long-awaited ISP amendment and keep
pressure on universities to get digital piracy under control. End

© Scoop Media

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