Cablegate: 2008 Special 301 Review -- Romania

DE RUEHBM #0139/01 0520603
R 210603Z FEB 08





E.O. 12958: N/A

REF: STATE 09475


1. (SBU) Post recommends that Romania remain on the Special 301
Watch List for 2008. Although industry contacts report that there
has been a decline in physical optical disc piracy, the growth of
internet piracy - both peer-to-peer file sharing and
business-to-consumer piracy - is a worrisome trend. Romania has an
adequate legal framework for IPR protection, but enforcement efforts
remain ineffective and a low priority for judges, prosecutors, and
police. There has been increased cooperation between enforcement
authorities and industry representatives, but post has yet to
witness consistent prosecutorial results. Too many IPR cases are
dismissed by prosecutors for a perceived "lack of social harm." End

IPR Progress

2. (SBU) Following is a list of positive developments in the field
of IPR enforcement since last year's Special 301 review:

-- The number of dedicated IPR prosecutors at the General
Prosecutor's Office (GPO) increased from four to nine. The number
of designated prosecutors at the tribunal and appellate court levels
has increased to 102.

-- The EU "Phare" Program was established to strengthen the
institutional capacity of IPR protection. In 2007, the Government
of Romania (GOR) requested technical assistance to establish an
online inter-institutional system, professional training courses,
media campaigns, and a study to establish a methodology to estimate
piracy rates. The system was initiated by Danish technical experts
in 2007 and is scheduled to become operational in 2008.

-- There has been a steady decrease in the number of pirated optical
discs sold by street vendors. This is due both to the fact that
street vendors are easy targets for the police, and because market
changes have made it easier and cheaper for end-users to acquire
products via the internet.

-- In 2007, post sponsored a senior expert on patents, a senior
expert on trademarks, an IPR judge, and a chief IPR prosecutor to
attend training at the U.S. Patent and Trademark Office's IPR
Enforcement Academy in Alexandria, Virginia. During the first
quarter of 2008, post will send another chief IPR prosecutor and the
President of the Civil and IPR Section of the Supreme Court for
training. The Danish Patent and Trademark Office, the U.K.
Intellectual Property Office, and private industry sources have also
provided training opportunities for Romanian judges, prosecutors,
police, border officials, and industrial property rights experts.

-- Post organized and hosted several well-received and well-attended
IPR events in 2007, including a U.S.-EU IPR Roundtable, with key
addresses by Department of Commerce Deputy Assistant Secretary Paul
Dyck and a chief representative of the U.K. Patent Office in London.
Post also sponsored a three-day Cyber-Crime conference; hosted an
IPR Border Measures workshop with the American Chamber of Commerce;
and participated in the GPO's IPR Seminar at the National Institute
of Magistrates (NIM), with econoff responsible for the IPR portfolio
giving the keynote address.

-- Romania adopted the Singapore Treaty on Trademarks of the World
Intellectual Property Organization (WIPO) on August 22, 2007.

-- Legal reform continued in 2007 with further amendments to the
basic Patent Law of 1991 and the Industrial Design Protection Law of
1992 to make them fully consistent with EC directives. Also, for
the first time, Romania enacted legal regulation of utility models
to protect the rights of inventors (Utility Model Number 350/2007).

Obstacles in IPR Enforcement

3. (SBU) Despite these positive developments, post's assessment is
that the GOR still does not effectively enforce IPR legislation.
Successful prosecution of IPR crimes, leading to conviction, remains
the weakest link. Romanian prosecutors are magistrates, and their
professional evaluations are based on obtaining successful verdicts
from the courts. IPR cases are technically complex, time consuming,
and frequently dismissed by judges based on a "lack of social harm."

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Therefore, prosecutors often try to maintain positive evaluations
by imposing administrative sanctions, only risking a push for
criminal sanctions when the "social harm" is incontrovertible and
the evidence is overwhelming.

4. (U) Internet piracy was the fastest-growing IPR infringement
phenomenon in 2007. Although the legal framework is in place to
combat internet piracy, enforcement lags far behind. Internet
piracy is exacerbated by the fact that many Internet Service
Providers (ISPs) actively market their downloading speeds for
movies, music, and games, and have been hesitant to cooperate with
enforcement authorities. While the market for physical pirated
optical discs has diminished, both at the retail (street) level and
through website sales, internet piracy and peer-to-peer (P2P) file
sharing grew significantly in 2007 in the wake of wider access to
high-speed broadband internet services. Additionally, many internet
cafes offer customers both a venue to download and burn copyrighted
software and to play and use unlicensed products, such as games.

5. (U) Despite significant improvements, there are still substantial
delays in criminal investigations. The Copyright Office (ORDA), a
quasi-independent government agency funded through the Ministry of
Culture, often required several months - and in some cases, more
than a year - to deliver technical assessments of seized goods to
the police. ORDA still administers an obligatory system of placing
hologram stickers on music and video products, unpopular with the
optical disc industries for these media due the costs incurred and
doubts about its efficacy. ORDA reported a 37 percent increase in
the number of items subject to technical inspection (year over year)
while selling 86 percent more holograms to phonogram copyright
holders and almost three times more holograms to video copyright

6. (U) One of the major concerns, first raised by the Business
Software Alliance (BSA), is the current legal requirement for
investigators to have a computer search warrant issued in advance of
a check of the licensing status of installed software. Such a
warrant may only be issued by a judge and only if a criminal
investigation has been officially initiated. However, a criminal
investigation may only be initiated upon verification of sufficient
evidence. In practice, this has been a Catch-22 and it has been
difficult to meet the evidentiary threshold required to launch an

Enforcement Statistics (2007)

7. (U) In 2007, Romania concluded 5,492 IPR-related cases, down 27.8
percent year over year. Only 162 of these cases ended with an
indictment, an increase of 6.6 percent compared to the previous
year. The majority of concluded cases (51.9 percent) only resulted
in administrative fines short of trial due to a determination that
the crime lacked social harm, a minor decrease from the year before
(54.9 percent). 2.3 percent of the cases were dismissed because the
charges were dropped or the case was settled out of court, down from
18 percent in 2006. In 2007, there were 122 final court dispositions
(up from 54 in 2006): 43 cases ended in fines (up from 21); 38 ended
with a suspended prison sentence (up from 21); the criminal court
reassigned 24 cases to the civil court (nine in 2006); and 17 cases
ended in acquittal (an increase from five in 2006).

8. (U) In 2007, the State Office for Inventions and Trademarks
(OSIM), a GOR institution with no enforcement duties, provided
expert, technical industrial property rights assessments in 495
police, border authority, prosecutors' offices, and customs cases,
up 70 percent year over year. OSIM reported 458 industrial property
rights cases to the courts in 2007, a 52.7 percent increase from the
previous year. Out of these, 410 cases involved trademarks, 35
involved industrial design, and 13 involved patents. 368 cases were
cancellation requests (trademarks, patents, industrial design), 60
were requests for forfeiture of rights (trademarks), and 30 were
lawsuits regarding the prohibition of imports and the marketing of
suspected counterfeit products.

9. (U) Customs officials reported seizing approximately 20.2 million
pieces of counterfeited goods in 2007, up substantially from 9.6
million pieces in 2006 and 3.6 million in 2005. Footwear, clothing,
cell phone accessories, cosmetics and toiletries, cigarettes,
leather goods, and sunglasses accounted for most of the seizures.

The View from Industry Representatives

10. (SBU) Private industry representatives tell post that Romania

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has adequate laws in place to protect intellectual property rights.
The problem lies with enforcement: they would like to see more
prosecutions, stiffer deterrent penalties, and fewer dismissals
based on "lack of social harm." Court proceedings are still very
lengthy, and often require further in-depth investigations of piracy
channels. Industry representatives noted a sharp increase in P2P
downloading, such as with the BitTorrent or the less popular eDonkey
protocol, and they expect this trend to continue as broadband
internet penetration increases. (Note: Although the broadband
penetration rate is the second lowest in the EU at an estimated 10.5
percent, broadband connectivity increased over 90 percent in 2007.
End note.) Industry representatives stressed the need for Romanian
enforcement agencies to stay abreast of technological advances in
piracy. The industry says that collaboration with the police has
been relatively good and improving, but they report no improvement
in their cooperation with prosecutors. Although private industries
noted incremental progress in ORDA's response to court requests for
IPR forensic analyses, the average response time remains

11. (SBU) BSA estimates that the piracy rate for business software
likely declined slightly in 2007, down from an estimated 69 percent
piracy rate in 2006. End-user piracy (corporate and household) and
illegal distribution (hard disk loading and distribution of
home-burned optical discs) has had the most damaging impact on the
local market. No industrial-scale optical disc piracy has been
reported yet; all copying is done by home burning - often in
home-based "burning studios." BSA's relationship with the local
enforcement authorities has significantly improved since the less
reliable ORDA was stripped of enforcement duties in 2005, with sole
enforcement responsibility remaining with the police and
prosecutors. In 2007, authorities conducted over 680 raids of
end-users and re-sellers, up from 600 cases in 2006. BSA reported
61 total convictions in 2007, with two convictions of illegal
re-sellers of business software leading to deterrent sentences,
including a sentence for five years, seven months' imprisonment
without the possibility of suspension or parole.

12. (SBU) An attorney who specializes in entertainment software IPR
enforcement and who represents two major gaming companies reported
that the bulk of IPR violations involved unauthorized use of games
in internet cafes and retail sales of burned pirated products, both
of which increased slightly in 2007. Pirated products are largely
produced domestically; only one case was identified as having been
imported from replication factories in the Republic of Moldova or
Ukraine. The attorney said she is unaware of any seizures or
detentions of entertainment software products by Romanian customs
authorities in 2007. Cooperation with local police remained solid
in 2007, with the attorney praising the initiative of the police in
pursuing IPR infringers. There was no change in the number of cases
dismissed for lacking social harm from the year before; however, in
a positive development, prosecutors' decisions are more commonly
communicated to the copyright holders.

13. (U) Problems with delays, weak sentencing, and difficulties in
collecting court-ordered damages remain, according to the
entertainment industry. It takes the police a minimum of three to
four months, and sometimes up to ten months, to transfer cases to
the court. The average amount of time needed to obtain a criminal
court decision is between one and three years, with appeals taking
even longer. Romanian courts are still reluctant to impose
deterrent penalties. They typically impose, in descending order,
suspended jail sentences (from one to two years), criminal fines
(from USD 150 to USD 4,200) or administrative fines (same range as
above). The only sentence in 2007 for imprisonment (one year, seven
months) without suspension involved a case of a recidivist copyright
infringer with six other open criminal complaints. In a majority of
2007 convictions, the court awarded the damages claimed by the
plaintiff. However, defendants generally did not comply with the
court order to pay the damages unless the rights holder initiated
further legal proceedings.

14. (SBU) The Romanian Organization against Copyright Theft (RO-ACT)
represented the Motion Picture Association (MPA) on IPR matters
until MPA Brussels decided in late 2007 to discontinue financing
local associations in Romania, Slovakia, Bulgaria, Cyprus, and
Lebanon. The RO-ACT representative noted that until that time, he
witnessed significant growth in internet piracy due to the wider
availability of broadband internet services and falling prices from
regular Internet Service Providers (ISPs) and small neighborhood
companies using Local Area Networks (LANs). In larger cities,
significant numbers of video files are shared over these LANs, which
often have much lower service fees than traditional ISPs.
BitTorrent and eDonkey P2P sites represent another type of emerging
piracy. Individuals and small companies, many of which also offer

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discount internet access, maintain a majority of these sites. The
RO-ACT representative stated that police cooperation was acceptable,
but complained that the weakest link is at the magisterial level.
He forecast that internet piracy will increase hand-in-hand with
broadband internet penetration.

15. (SBU) The Phonogram Producers Union in Romania (UPFR) estimated
that although physical piracy nearly disappeared in 2007, internet
piracy has increased dramatically. The International Federation of
Phonogram Industries (IFPI) complained in writing to both the
national police and General Prosecutor's Office in November 2007 on
behalf of the UPFR about the lack of progress in 16 criminal
complaints of internet piracy, first filed in April 2007. UPFR
reported in 2008 that there has been no progress in 15 of the cases,
and that one case has moved forward incrementally. The national
police told UPFR that the 15 cases do not meet their evidentiary
threshold and that they will not be investigated further. UPFR
feels that the evidence in the cases is comparable to similar cases
that were prosecuted successfully in other countries in the region.
Efforts by UPFR to get clarification on the actual evidentiary
requirements have been unsuccessful. UPFR is increasing their
number of complaints in the hopes that at least one of them will
move forward. Eighteen complaints were filed in December 2007, and
a similar number in January 2008.

16. UPFR hopes that the first successful prosecution of internet
piracy will bring needed media attention to the issue. UPFR is in
the final stages of planning a national and regional media campaign
against internet music piracy, which would hopefully build on a
deterrent-creating, precedent-setting conviction. Both UPFR and the
GPO have acknowledged to post that cooperation between them has been
unsatisfactory. Additionally, UPFR shares the frustration that
rigid warrant regulations hamper the ability of investigators to
gather the evidence needed to prosecute cases successfully.

Comment and Recommendation

17. (SBU) Post recommends that Romania remain on the Watch List for
2008. Although there has been significant progress in eradicating
street vendors of pirated optical discs, post notes that overall
enforcement efforts have failed to live up to IPR industries' and
analysts' expectations, particularly in light of Romania's accession
to the EU one year ago. Despite participation by officials in
numerous training programs, including many funded and conducted by
the USG, there remains a persistent and pervasive lack of
understanding of the need for determined enforcement and deterrent
convictions throughout Romania's judicial system. This is
compounded by a reluctance to commit the resources and time required
to stay current with the technological developments in piracy.
Romanian authorities are poorly positioned to combat the torrential
rise in internet piracy, prosecution of which remains inadequate as
prosecutors downplay the seriousness of IPR offences in comparison
with other types of criminal activity. In too many instances,
either prosecutors fail to pursue IPR cases or magistrates take the
easiest path by dismissing cases for a perceived lack of social
harm. Another remaining issue is insufficient feedback from the
enforcement bodies and courts to the copyright holders. Romanian
magistrates have yet to demonstrate sustained, concrete results in
defending intellectual property rights. End Comment.


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