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Cablegate: Indonesia Should Remain On Watch List

VZCZCXRO6211
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #0371/01 0560935
ZNR UUUUU ZZH
R 250935Z FEB 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8092
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHKL/AMEMBASSY KUALA LUMPUR 2456
RUEHBK/AMEMBASSY BANGKOK 8342
RUEHGP/AMEMBASSY SINGAPORE 6273
RUEHDT/AMEMBASSY DILI 0932

UNCLAS SECTION 01 OF 02 JAKARTA 000371

SIPDIS

SINGAPORE FOR SUSAN BAKER

SIPDIS
SENSITIVE

DEPT PASS TO USTR SCHWAB
DEPT FOR EAP/MTS, EAP/IPE, EB/TPP, EB/IPE
COMMERCE FOR JKELLY
USTR FOR BWEISEL
USTR FOR KELHERS AND RBAE
TREASURY FOR IA-BAUKOL

E.O. 12598: N/A
TAGS: KIPR BEXP EINV ECON ID
SUBJECT: INDONESIA SHOULD REMAIN ON WATCH LIST

REF: A: Jakarta 07 2091; B: Jakarta 07 2301; C: Jakarta 07 1813; D:
Jakarta 07 2797

JAKARTA 00000371 001.2 OF 002


1. (SBU) Summary: Post recommends that Indonesia remain on the
Special 301 intellectual property rights (IPR) Watch List for 2008.
Although problems persist, Indonesia has continued to make limited
improvements in the enforcement and protection of IPR since its
upgrade to the Special 301 Watch List in November 2006. These
include actions by the Government of Indonesia (GOI) to prioritize
IPR prosecutions and improve the monitoring of optical disk
factories, in addition to carrying out a successful string of
IPR-related enforcement activities. End Summary.

Largest Counterfeit Drug Seizure Ever
-------------------------------------

2. (SBU) Indonesia made progress with IPR enforcement on several
fronts in 2007. Notably, Indonesian authorities carried out the
single largest operation ever worldwide against distributors of
counterfeit pharmaceuticals (reftel A). This seizure took place
less than a month after Indonesian police closed down two optical
disk factories suspected of illegal production (reftel B). The past
year also saw increased cooperation between the GOI and the
pharmaceutical industry. The GOI worked successfully with a
consortium of pharmaceutical manufacturers to fund sample testing of
seized medicines and finance construction of a storage facility for
seized goods. The GOI and the International Pharmaceutical
Manufacturers Group (IPMG) also collaborated on a ceremony to
publicly destroy seized drugs.

Attorney General Prioritizes IPR
--------------------------------

3. (SBU) In 2007, Attorney General Hendarman Supandji expanded the
mandate of Indonesia's elite prosecutorial task force to include IPR
violations (reftel D). IPR prosecutions are now prioritized with
other serious transnational crimes including terrorism, money
laundering and human trafficking. The addition of IPR represents a
significant institutional commitment by the Attorney General's
Office to successfully prosecute IPR violators.

Progress in Optical Disk Monitoring
-----------------------------------

4. (SBU) During 2007, the Indonesian Ministry of Industry (MOI)
Optical Disk Factory Monitoring Team (ODFMT) conducted fifty
inspections of registered factories (including limited after hours
inspections) resulting in issuance of thirteen warning letters to
non-compliant factories. Fourteen production lines were sealed due
to non-compliance and three remain sealed to date. A warehouse
adjoining a factory suspected to have unregistered replicating
equipment was also sealed. Exemplars have been collected from 65% of
registered lines (the remainder were not operational at the time of
inspection) and 122 have been submitted to the International
Federation of the Phonographic Industry (IFPI) laboratory for
forensic comparisons.

5. (SBU) The MOI has also assigned three full-time members to the
ODFMT team to strengthen its efforts. Following raids on three
optical disk factories which were sealed by law enforcement
authorities (reftel C), the ODFMT suspended the production licenses
of all three factories pending court decisions. In 2008, the owners
of eleven factories that had non-compliance issues were summoned and
warned to comply. Some institutional reluctance remains however to
applying required sanctions against non-compliant factory owners.
Some MOI officials complain that MOI's enforcement function
conflicts with its role to foster and develop local industry.
Meanwhile, the Secretary General of the Ministry of Industry has
expressed interest to work with software distributors to legalize
the Ministry's own use of software. (The Ministry of Trade is
engaged in similar negotiations with Microsoft, but an agreement has
not yet been reached.)

6. (SBU) The GOI still has much work to do, and private sector
Special 301 submissions highlight legitimate criticisms of
Indonesia's IPR regime. We agree that Indonesia still needs to

JAKARTA 00000371 002.2 OF 002


enhance its enforcement efforts, including the successful
prosecution of IPR violators. The GOI needs to improve Indonesia's
IPR regulatory structure, particularly in the area of judicial
reform (as underscored by the long-running dispute over the Intel
Corporation trademark, for example.) And while we were pleased to
see the GOI establish a National IPR Task Force, it's performance to
date has been disappointing. In consideration of the demonstrated
progress Indonesia has made and its continued political commitment
and cooperation to improve its IPR regime, we recommend that
Indonesia remain on the Special 301 Watch List for 2008.

HUME

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