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Cablegate: Thailand 2008 Special 301 Submission

VZCZCXYZ0006
RR RUEHWEB

DE RUEHBK #0587/01 0540009
ZNR UUUUU ZZH
R 230009Z FEB 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 1927
RUCPDOC/USDOC WASHDC

UNCLAS BANGKOK 000587

SIPDIS

SENSITIVE

SIPDIS

STATE FOR EB/TPP/IPE JENNIFER BOGER
STATE PASS USTR FOR JENNIFER CHOE GROVES
USDOC FOR ITA/MAC/OIPR CASSIE PETERS

E.O. 12958:N/A
TAGS: ECON ETRD KIPR TH
SUBJECT: THAILAND 2008 SPECIAL 301 SUBMISSION


1. (SBU) Summary and Recommendation: The elevation of Thailand to
Priority Watch List in 2007 sparked some improvement in police
enforcement of intellectual property rights in the past year, but
such efforts were insufficient to make any noticeable dent in the
availability of pirated and counterfeit merchandise in Thailand.
Thailand continues to be a source of and destination for pirated
movies, music, software, and books, counterfeit drugs, apparel, and
other counterfeit merchandise. Although industry welcomed the
improved police attention to IP enforcement, continuing deficiencies
in other enforcement units, the courts and the legal infrastructure
served to negate much of the progress in other areas. Post
recommends Thailand's continued placement on the Priority Watch List
until noticeable improvements can be observed in enforcement efforts
and declining piracy rates. End summary.

2. (SBU) Last year's decision to place Thailand on the Special 301
Priority Watch List (PWL) was a controversial event in Thailand.
Most observers presumed that the decision was based primarily on
that year's policy of the Royal Thai Government (RTG) to issue
compulsory licenses on three patented pharmaceutical drugs.
However, others in and outside the government capitalized on the PWL
decision to emphasize the inadequacy of intellectual property
protection in Thailand and pushed the need to improve enforcement.
At the same time, Thailand became a focus of international anti-IP
activists, who counseled the RTG on various IP issues. Elements of
the Royal Thai Police and the Department of Intellectual Property
launched plans to better coordinate enforcement and crack down on
infringers, but their efforts have yet to result in noticeable
declines in piracy rates or the availability of pirated merchandise
on the streets and in the shops of Thailand. Structural
deficiencies within the courts, the police and the legislation that
governs IP protection plague enforcement efforts, as does a lack of
urgency and will among the government and general public to
seriously tackle the problem. Local rights holders have joined
international rights holders in demanding stronger enforcement
action, staging a series of protests at local police stations over
the past few months.

Legal structure improving, but slowly
-------------------------------------

3. (SBU) Thailand has implemented its obligations under the WTO
TRIPs Agreement but has not gone substantially further to modernize
its laws to keep pace with technological development. Thailand is
well behind other similarly situated countries in implementing
treaties and international standards needed to encourage the growth
of domestic IP-centered industries. Of the 12 significant IP
treaties that the U.S. promotes bilaterally, Thailand is a member of
only one; ASEAN neighbors Indonesia, the Philippines and Vietnam are
each members of six. In January 2008, Thailand started the process
to join the Paris Convention and Patent Cooperation Treaty, but the
RTG has not moved forward to implement the Madrid Protocol on
trademarks. Thailand is currently considering various pieces of
legislation that would amend its patent, trademark, copyright,
broadcasting and IP border enforcement laws. For U.S. industry, the
most important legislation would be copyright amendments
implementing some provisions of the WIPO Copyright Treaties. The
Department of Intellectual Property (DIP) is not prioritizing these
amendments, instead focusing on creating an unpopular mandatory
collective management system, eliminating minimum penalties for
copyright infringements, and creating exceptions to copyright law
for people with disabilities.

4. (SBU) In the patent area, industry believes that Thailand fails
to protect pharmaceutical and agricultural test data from unfair
commercial use as required by Section 39.3; the RTG reads that
section as requiring only trade secret protection for such data.
Introductions of generic competitors to pharmaceuticals still under
patent are common, and industry bemoans the lack of a patent linkage
system that would help them avoid costly litigation. Thailand's
handling of conflicting trademarks and geographical indications
(GIs) is also problematic, with GIs being given greater weight.

5. (SBU) In the final legislative session under the previous
government, the National Legislative Assembly passed a new Film Act
which would allow for a film quota benefiting local producers, and a
new Broadcast Act that cable providers believe will do little to
tackle rampant cable piracy.

Enforcement ticks up, but piracy and counterfeiting abound
--------------------------------------------- ------

6. (SBU) Inadequate enforcement remains the Achilles heel of IPR
protection in Thailand. Rights holders decry a general lack of
interest among enforcement authorities in undertaking extensive
investigations into pirate networks, or sustained enforcement
pressure against retail and wholesale establishments and
manufacturers of pirate merchandise. Although police often
cooperate effectively with rights holders to carry out raids and
seize infringing product, little effort is made to follow up on
information obtained during raids to arrest the "big fish" who run
the piracy trade. Too often raids end with the seizure of a small
amount of product and the arrest of a low-level sales clerk caught
with a stack of pirated DVDs. For most pirate operators, absorbing
the occasional raid is simply a cost of doing business and has
little impact on business. Rights holders also complain that a
substantial amount of pirate and counterfeit product disappears from
the scene of raids.

7. (SBU) The DIP released statistics in February showing seizures
of 3,746,036 items of pirated merchandise in 2007, up nearly
one-third from 2006. In a meeting with Embassy officers, local
rights holders agreed that the number of police raids was higher,
but said the quality of raiding had declined. Rights holders say
they are struggling with getting police cooperation for larger raids
and in obtaining timely search warrants from the courts, and are
therefore relegated to carrying out smaller raids on retail areas.
Although these thousands of small raids net large amounts of
merchandise overall, they do little to dismantle pirate networks.

8. (SBU) In early 2007, Police Major General Visut Vanichbut, the
new commander of the Royal Thai Police's Economic and Technological
Crime Suppression Division (dubbed ECOTEC), lit a fire under police
IP enforcement, publicly declaring it his personal mission to remove
Thailand from the Priority Watch List. In a number of high profile
raids, General Visut led police units to hit pirate optical disc
operations that resulted in the seizure of an optical disc
production line, hundreds of CD-R burners, and hundreds of thousands
of pirated DVDs. ECOTEC officers undertook some of these raids on
an ex officio basis, hitting pirate establishments on their own
initiative rather than waiting for complaints from rights holders as
the police had always done before. Industry reported less product
on the street for some time, though the long-term impact appears to
have been limited. General Visut also established four mobile
enforcement units to tackle piracy outside Bangkok. Unfortunately,
ECOTEC has limited manpower and rights holders are not able to
depend exclusively on this unit to carry out a large number of
investigations and raids.

9. (SBU) Gen. Visut's efforts to improve enforcement were warmly
welcomed by industry, but his enthusiasm has not been widely shared
within the rest of the police force. District police stations and
other enforcement authorities are notoriously lax in clamping down
on piracy in their areas and accusations are frequently leveled that
corrupt officers protect the practice. Rights holders organized
several protests against the commander of the police district
encompassing many of the so-called "Red Zones" where pirated
merchandise is most prevalent. Most investigations are still done
primarily by rights holders, who hand over complete evidence to the
police or the Department of Special Investigations to conduct a
raid. Police may be willing to carry out the requested raids,
although rights holders say that they are sometimes turned down.
When police do conduct a raid, rights holders generally must pay for
the raid. Right holders complain that the price of raids increased
significantly in 2007.

10. (SBU) Rights holders had high hopes for the Department of
Special Investigations (DSI), a unit established in 2002 to
investigate large-scale crimes. DSI had been responsible for a
number of large IPR cases in 2005 and 2006, but IPR enforcement
efforts dropped off in 2007. Rights holders initially praised the
DSI commander (recently rotated out) as competent, but said he was
short of resources. In addition to some internal squabbling, in
2007 DSI was occupied with a large number of corruption cases and
simply did not have the staff or resources to devote to IPR
enforcement.

11. (SBU) Industry has higher praise for Thai Customs, which
continues to cooperate well with rights holders on enforcement and
takes frequent ex officio action to seize shipments of pirated
merchandise. DIP reported 628 Customs cases in 2007 that resulted
in 1,332,319 items seized. Customs officials are diligent on
keeping records of seized property and ensuring destruction. The
bulk of seizures are from imported shipments. Customs has made
seizures from exported shipments, but typically opens containers
being exported only if the shipment is highly suspicious. Customs
officials have no authority to inspect transshipments or goods in
transit, but legislation is in the pipeline to grant that
authority.

Notorious Markets
-----------------

12. (SBU) Thai IP authorities have labeled certain areas of Bangkok
and other parts of Thailand as "red zones" where infringing product
is most readily available. In Bangkok the red zones are Klong Thom,
Saphan Lek and Baan Mor shopping areas, Patpong and Silom shopping
areas, Mah Boon Krong (MBK) Center, the Sukhumvit Road area (soi
3-19), and perhaps the most notorious, Panthip Plaza, a five-story
mall with dozens of pirate stalls selling the latest DVDs and
software. In Thailand's second city, Chiang Mai, the Night Market
shopping area, Computer Plaza, Icon and Rimkam Market are considered
red zones. In the rest of Thailand, red zones include four markets
in Songhkla province, and tourist markets in the beach towns of the
provinces of Phuket, Surattani, Chonburi and Krabi.

Courts issue few deterrent sentences, and slowly at that
--------------------------------------------- ---

13. (SBU) Thailand's Intellectual Property Court, once a model for
the region, is not operating to its full potential. Rights holders
frequently complain that few offenders of piracy crimes receive
sentences more serious than a small fine or community service. DIP
reported that 7,118 arrests were made in 2007, but industry says
only 15-17 actually received prison sentences (and it is not clear
those sentences were actually served). For their part, judges say
that police continue to bring up on charges only low-level offenders
that the judges feel do not merit harsh punishment, while failing to
charge large operators that the courts are ready and willing to try.
The court also complains that many right holders settle cases out
of court, and in fact use the court's search warrants to shake down
infringers as an alternative source of revenue. Other IP observers
confirm that some right holders rent out their powers of attorney to
raid teams that enforce on their behalf. These teams then conduct
raids in cooperation with police, but rather than seize infringing
product simply demand cash on the spot. Judges have bridled at the
use of their warrants for what they see as little more than
extortion. (Note: U.S. music and motion picture companies have
long pledged not to settle retail hard goods piracy cases and push
for criminal sentences in all cases.) The court has become more
reluctant to issue search warrants, partly in reaction to the above
practice, but also in the belief that industry should take cases
through the civil, rather than criminal system. While industry says
they usually receive the warrants after several attempts, they
frequently arrive too late to execute the planned enforcement
action.

14. (SBU) A new case management system in the IP court has also
slowed down civil cases. Although a rights holder can obtain a
preliminary injunction against a pirate operator, the case will
likely not be heard until the following year. However, the court
has taken action to reduce the rapid turnover of judges, who
typically stayed for only one year and were unable to build up
sufficient case knowledge. Judges are now able to stay in position
for two to three years and move up within the court.

Compulsory licenses continued in 2007, policy faces review
--------------------------------------------- -----

15. (SBU) Thailand issued compulsory licenses in late 2006 and
early 2007, breaking the patents on three pharmaceutical products
registered in Thailand. Thai health authorities said their actions
were legal under WTO rules, but pharmaceutical industry
representatives complained vociferously about not only the patent
breaking but what they saw as the lack of transparency in the RTG's
decision making process and its unwillingness to discuss the matter
with company representatives before issuing the licenses. After
issuing the licenses, officials from Thailand's Ministry of Public
Health (MoPH) opened up discussions with representatives of the
companies to negotiate price reductions and improve access to their
medicines. However, Ministry officials stuck to their initial
demand that companies lower their prices to within five percent of
the generic price, and did not yield from that position. No
agreements were reached. Several times during 2007 the MoPH
imported a generic version of the patented antiretroviral efavirenz
under the compulsory license. The Ministry also announced plans to
import generic versions of the other two compulsorily licensed
drugs, Kaletra from Abbott and Plavix from Sanofi-Aventis, but as
yet no generic copies of those two drugs have been sighted in
Thailand.

16. (SBU) In the latter half of 2007 the MoPH notified three
European pharmaceutical manufacturers that it was considering
compulsory licenses on four additional cancer drugs and invited the
companies for discussions before making its decision. Little
progress was made and in January 2008 the Minister of Public Health
announced he had signed compulsory licenses on all four drugs.
However, the Ministry stated that it would not exercise the
compulsory license on Novartis' Imatinib as the company had agreed
to expand its access program, but left open the option to use the
license at a later date if access was impaired.

17. (SBU) In February 2008 a new elected government was sworn in to
replace the former coup-installed government that had held office
for 16 months. In one of his first acts, new Minister of Public
Health Chaiya Sasomsab declared that the new administration would
review the compulsory license policy and determine whether the
licenses had been properly issued. A review involving officials
from the Ministries of Foreign Affairs, Commerce and Public Health
is underway, though the officials are focusing only on the most
recent round of compulsory licenses rather than the initial three
issued in late 2006 and early 2007.

18. (SBU) The politics surrounding the compulsory licensing
situation have made it difficult for industry to get any traction in
dealing with the significant counterfeit pharmaceutical problem in
Thailand. Industry reports that counterfeiting of erectile
dysfunction drugs is near 100 percent in certain tourist-oriented
locations, but this is only a small part of the problem. More
troubling is a range of counterfeit medicines meant for diseases
endemic in developing countries, such as infections, hepatitis and
malaria. The RTG acknowledges the problem, but is ill-equipped to
work through the chain of sellers and suppliers of fake drugs. On
February 14, DIP signed an MOU with industry, the police, DSI, and
Customs, to increase efforts to combat counterfeit pharmaceuticals.
DIP pointed to this effort as a clear indication that Thailand
should be removed from the Special 301 Priority Watch List.
Noticeably absent from the signing ceremony was the Food and Drug
Administration (FDA) which has enforcement authority over
pharmacies. The FDA reportedly refused to sign the MOU because the
definition of "counterfeit" might include locally-produced generic
drugs that violate patents still in effect in Thailand.

Internet piracy a looming threat
--------------------------------

19. (SBU) Movie and music representatives do not consider internet
piracy to have a dramatic effect on their businesses, but recognize
that with growing Internet penetration and faster broadband it may
soon pose a threat. An estimated 13 million Thais have access to
the Internet, approximately 20 percent of the population. Over half
a million of those have broadband quick enough to download music,
though movie downloading remains too slow to warrant much activity.
Internet service providers say they act on rights holders complaints
and take down infringing sites upon request. Rights holders claim
that a number of pirate outfits selling counterfeit apparel and
handbags via the Internet are based in Thailand, though the websites
are typically hosted outside the country and are difficult to
trace.

Comment and Recommendation
--------------------------

20. (SBU) Embassy recommends that Thailand remain on the Priority
Watch List until we have seen more serious measures taken against IP
violations and a visible decline in piracy. The active enthusiasm
of General Visut and his ECOTEC unit was a welcome development in
2007 and must be recognized as a positive step in improving IPR
enforcement in Thailand. However, he and his small team are
insufficient to root out an entrenched network of pirate
manufacturing and retailing, or change a culture of permissiveness
to piracy and counterfeiting.

21. (SBU) The RTG continues work on improving its legal code to
clear obstacles from better police enforcement. But, more
significantly, to begin a serious eradication of IP violations, the
RTG must summon the political will to demand that its enforcement
arms elevate intellectual property piracy as a greater concern and
undertake the intensive, sustained effort necessary to clear out
networks of pirate manufacturers and retailers. At the end of 2007,
national elections ushered in a new government to replace the
previous coup-installed government. We are optimistic that the
newly-elected Ministers will have a more expansive view toward both
domestic and foreign business and will be more open to recognizing
the contribution of intellectual property to the development of the
Thai economy. Embassy will be working closely with the new economic
leadership to encourage a higher priority to developing and
protecting intellectual property, and greater diligence in enforcing
Thailand's IP laws.
JOHN

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