Cablegate: Vietnam: Year 2003 Special 301 Review: Embassy

This record is a partial extract of the original cable. The full text of the original cable is not available.





E.O. 12958: N/A

REF: (A) STATE 43420

(B) HANOI 1496
(C) HANOI 2168
(D) HCMC 1123
(E) HANOI 2893



1. (SBU) Embassy recommends continued placement of Vietnam
on USTR's Special 301 Watch List for 2003 as enforcement of
IPR in Vietnam remains weak and IPR violations are rampant.
We do not believe elevation to the Priority Watch List is
warranted, however, as:

-- The U.S.-Vietnam Bilateral Trade Agreement (BTA) with its
major provisions on IPR, commits Vietnam to make its IPR
regime TRIPs-consistent by December 2003;

-- Vietnam continued over the past year to make progress in
strengthening its IPR legal and enforcement regimes, with
new regulations supporting copyright issues for
architectural works as well as preparations for Vietnam's
accession to UPOV and other IPR-related conventions.

-- the Government of Vietnam maintains a strong public
commitment to IPR protection; and,

-- the size of the market for U.S. intellectual property
products in Vietnam remains small, given Vietnam's low GDP
per capita, one of the lowest in the world.

End Summary.

--------------------------------------------- ----------
Continued Placement on Special 301 Watch List Warranted
--------------------------------------------- ----------

2. (SBU) Embassy recommends that USTR continue placement of
Vietnam on its Special 301 "Watch List" for the coming year
because IPR piracy in many product categories remains
rampant in Vietnam, despite continued progress in the
strengthening of Vietnam's IPR legal regime. While Vietnam
did conduct some law enforcement actions against IPR
violations over the past year, IPR enforcement remains the
exception rather than the rule. At the same time, market
access barriers, especially with regard to "cultural
products" continue to impede the availability of legitimate
product, further complicating efforts to combat piracy.

--------------------------------------------- ------------
BTA - Basis for Bilateral and Multilateral IP Cooperation
--------------------------------------------- ------------

3. (U) Chapter two of the U.S.-Vietnam Bilateral Trade
Agreement (BTA), which entered into force on December 10,
2001, codifies Vietnam's commitment to bring its IPR legal
regime and enforcement practices up to international
standards by December 2003, to protect IP consistent with
WTO TRIPs standards, and in some cases, such as protection
of satellite signals, to extend protection beyond TRIPs.
The BTA covers the fields of: copyright and related rights,
encrypted satellite signals, trademarks (including well-
known marks), patents, layout designs of integrated
circuits, trade secrets, industrial designs, and plant
varieties. The BTA incorporates by reference the major
substantive provisions of the principal international
conventions governing IP, as well as the WTO TRIPs
Agreement. The BTA also commits Vietnam to join the key IP-
related conventions (it is not already a party to) by 2003.
Vietnam's leadership has expressed consistent and strong
support for implementing fully Vietnam's commitments in the
agreement, including the IPR chapter.

4. (SBU) The BTA is viewed by many, including Vietnam's
leadership, as a roadmap for Vietnam's trade and investment
regime reform and WTO accession. As such, Vietnam's BTA
commitments, including those on IPR, are widely seen as
steps Vietnam must take to integrate into the world economy
and get access to world markets and capital necessary for
Vietnam's economic growth. In short, the BTA has provided
Vietnam for the first time with clear links between IPR
protection and Vietnam's ability to access and compete in
world markets.
5. (SBU) In addition, the BTA increases international
pressure on Vietnam in the IPR area. First, by requiring
Vietnam to accede to a number of international IPR
conventions, the BTA's IPR commitments actually translate
into multilateral commitments to protect IPR. In addition,
many of Vietnam's partners in WTO accession talks have
already indicated that they expect Vietnam to accord their
companies and nationals the same treatment in areas such as
IPR as that pledged to the U.S. in the BTA. Thus, the BTA
has created strong expectations and commitments for Vietnam
in the IPR area vis--vis all of Vietnam's trade and
investment partners, again, significantly upping the ante
for Vietnam as it reforms its IPR regime.

Improvements in IPR Laws Continue

6. (U) Vietnam began extensive legal reforms to bring its
IPR laws and regulations into compliance with BTA (and
therefore TRIPs) standards even before entry-into-force of
the BTA. In 2002, Vietnam continued to make progress on
strengthening its legislative IPR regime. The following
were developments on legal and regulatory reform in the IPR
sector over the past year:

-- A May 17, 2002 official letter (Ministry of Trade
Official Letter No. 1901/TM-QLCL) regarding protection of
Vietnamese trademarks in foreign markets. This official
letter seeks to coordinate efforts of ministries and
People's Committees to publicize law and regulations related
to IP and to research and disseminate legal regulations on
the registration of trademarks in other major markets
including the U.S., EU, Japan and ASEAN as well as
registration of international trademark protection under the
Madrid Agreement.

-- A June 7, 2002 official letter (Ministry of Trade
Official Letter No. 2209/TM-QLTT) regarding establishing
guidelines for combating IPR violations. This official
letter tasks the Market Management Bureaus (MMB) with
increasing the number of inspections related to imported
counterfeit goods; requires MMB to consult with the Ministry
of Trade before issuing a decision on a case involving
foreign goods; and tasks MMB, in coordination with other
agencies, to draft an inter-ministerial circular on
inspection and settlement of IPR cases.

-- A June 11, 2002 decree (Government Decree 61/2002/ND-CP)
on copyright royalties. This decree establishes guidelines
governing royalties for authors and owners of works. The
decree provides specific grades and/or percentages for each
genre and scale of work.

-- A July 22, 2002 official letter (Government Official
Letter No. 4029/VPCP-QHQT) requests the Ministry of Culture
and Information, in conjunction with other ministries,
provide the Prime Minister a report on Vietnam's accession
to the Berne Convention, the Brussels Convention, and the
Rome Convention. This official letter also tasks the
Ministry of Agriculture and Rural Development, in
coordination with other ministries, to submit to the Prime
Minister a proposal regarding Vietnam's accession to UPOV.

-- A December 18, 2002 circular (Ministry of Finance
Circular No. 92/2002/TT-BTC) provides guidelines for the
collection of fees related to registration of new plant
varieties. New varieties protection charges and a fee scale
are listed in the collection levels table issued with this
circular. This circular is part of GVN preparations for
joining UPOV.

-- A December 6, 2002 decision (Ministry of Agriculture and
Rural Development Decision No. 143/2002/QD-BNN) details the
procedures for conducting tests for distinctness, uniformity
and stability of varieties of rice hybrids, potatoes,
soybeans, rice, peanuts, corn and tomatoes.
-- A January 24, 2003 circular (Ministry of Culture and
Information and Ministry of Construction joint circular no.
04/2003/TTLT/BVHTT-BXD) on copyright issues related to
architectural works. This circular provides definitions of
owners of architectural works and details the scope of
owners' rights. Registration procedures for copyright
protection are also introduced. This is the first time this
issue has been addressed by the GVN.

-- A regulation issued by the Ministry of Agriculture and
Rural Development on the uniformity and stability tests of
new plant varieties.

7. (U) In addition, a number of other laws and regulations
are in the draft stage including:

-- A draft decree on the Protection of Layout Designs of
Integrated Circuits was submitted by the National Office of
Industrial Property (Ministry of Science and Technology) to
the Prime Minister's office in 2002. The Office of the
Government is currently revising the draft. The GVN expects
to promulgate the decree in early 2003.

-- The Ministry of Justice, with the assistance of both USG-
funded technical assistance providers and the Japanese
International Cooperation Agency (JICA), is in the process
of revising the Civil Code provisions related to IPR. The
draft revision is likely to be submitted to the National
Assembly this year.

-- The Supreme People's Court continues to revise a draft
Civil Procedure Code which will include procedures necessary
for IPR enforcement.

Piracy Still Rampant

8. (U) While significant progress on the legal and
regulatory regime continued at a rapid pace over the past
year, enforcement has had little obvious impact at the
street level, at least with regard to music, motion picture,
software and trademark violations. Hanoi, HCMC and most
other major cities in Vietnam are rife with music CD, VCD
and DVD shops, with 100 percent of the U.S. product on sale
pirated. Also rampant are video rental shops in which all
the videos rented are pirated. Trademark violations are
also prevalent, with all types of clothing and other items
carrying unlicensed versions of famous trademarks available
at small shops and stands throughout the major cities. None
of these areas of piracy appeared to be reduced over the
past year. In one exceptional trademark case (reported in
June 02 - see ref (B)), the Ministry of Science and
Technology (MOST) fined a Hanoi candy shop approximately USD
460 for infringing the Mars candy trademark and ordered and
oversaw the removal of the infringing labels from 328

9. (SBU) Although nearly all unlicensed showing of U.S.
films on Vietnam's state-owned television stations ended
following implementation of the U.S.-Vietnam Copyright
Agreement in December 1997, local private and state-owned
television stations still violate this from time to time.
These exceptions, however, are generally infrequent. Public
cinemas as well as private cafes sporadically show pirated
films, although this problem is not as widespread as the
retail sales of pirated DVD, VCD or videocassette versions
of the same films. In one case, however, after a U.S. film
distributor's application to distribute the film "The Last
Castle" in Vietnam was rejected by the Ministry of Culture
and Information's censorship board, the film ended up not
only widely available in local DVD shops but was also shown
at a state-owned movie theater in HCMC. (Reftel (C))

10. (U) In terms of consumer and business software for PC's,
piracy appears to be the norm. Anecdotal evidence and
industry sources suggest that Vietnam Government agencies
use mostly pirated software on PC's in government offices.
U.S. companies engaged in sales here of such software
complain that, even if they drop licensing charges to next
to nothing, Vietnamese businesses and government agencies
refuse to buy legitimate product because they have no budget
for software and because of the ready availability of
pirated versions. Alternatively, some businesses and
government agencies purchase a limited number of legitimate
copies, which they then install on numerous machines (far
exceeding the limitations set by the licensing agreement).
Computer hardware retailers reportedly complain to U.S.
software companies that the PC market in Vietnam is so
competitive and their margins so slim, that to pay even
token licensing fees for software would not only wipe out
their profits but basically all their sales.

Enforcement Remains Weak

11. (SBU) Despite the commitment at the highest levels of
the Vietnamese Government to creating a body of law on IPR
consistent with international norms and meeting Vietnam's
international commitments, IPR enforcement remains weak.
Vietnam is just beginning to establish institutional
experience in enforcing IPR. Thus far, IPR laws are only
really known and/or understood well by a few Ministries in
Hanoi particularly the Ministry of Science and Technology
(MOST), through its National Office of Industrial Property
(NOIP) which oversees patents and trademarks and the
Ministry of Culture and Information (MOCI), which oversees
copyrights. However, these agencies are responsible only
for "administrative" enforcement of IPR laws, and are mostly
limited to issuing administrative findings and occasionally
issuing warnings either by letter or orally to small
retailers of pirated material. They have no law enforcement
arm and cannot conduct raids or seize goods. At the local
level, Vietnam's enforcement personnel seem almost
completely uninformed on Vietnam's own laws and how to
implement them. From the police to the courts, Vietnam's
judicial system is relatively unaware of the rights of IPR
holders or how to prosecute, adjudicate and enforce those
rights. Currently there are no procedures in place to
provide recourse or compensation to rights holders whose
rights have been violated. The Market Management Bureau, an
enforcement agency within the Ministry of Trade, engages in
some IPR enforcement, usually in response to specific
complaints from IPR holders.

12. (SBU) In October 2002 the HCMC Market Management Board
(MMB) conducted a well-publicized illegal software raid in
Vietnam. The MMB, in conjunction with Microsoft, raided 6
or 7 (of the probably hundreds) of local computer shops
selling pirated software, seizing approximately 7000 disks.
The results of this raid demonstrate clearly some of the
weaknesses in Vietnam's enforcement regime. The MMB teams
seized only disks clearly labeled Microsoft, leaving behind
blank CDs and blatantly pirated software of non-Microsoft
origin, such as Adobe. There was a lack of consistency
among the various MMB teams - particularly with respect to
the officials' understanding of what they were authorized to
seize. Only nominal fees were levied (12 million Dong per
violator, or approximately USD 780), there has apparently
been no follow up by local authorities, and the shops
quickly re-opened. (Reftel D)

13. (U) Vietnam's agencies do from time to time engage in
publicized enforcement campaigns that target unlicensed
goods, including those involving copyright and trademark
violations, but also those with "illicit or pornographic
content." MOCI reported that in the first nine months of
2002 its inspectors carried out 12,791 surprise inspections,
identified 2,914 businesses in violation of the law and
suspended the business licenses of 96 companies as a result.
They confiscated 215,799 CDs, VCDs, and DVDs and 33,512

Lack of Availability of Legitimate Product

14. (U) Given the relative poverty of Vietnam, with a per-
capita GDP of around 400 dollars, the size of the market for
U.S. IP product is still relatively small. While losses to
piracy are as high as 100 percent of the market, the dollar
value remains a tiny fraction of losses faced by U.S. IPR-
related companies in the rest of the region. In addition,
some types of products, such as those deemed "cultural
products", are still subject to censorship and control
regulations that impede market access. That said, Vietnam's
economy has much potential and, with a well-educated
population of 80 million, it will eventually become one of
the major economies in the region.

Growing Domestic Demand

15. (SBU) One striking development over the last year has
been evidence of a growing awareness in many sectors of
Vietnam's economy of the value of IPR protection for
Vietnamese products both in Vietnam and abroad. While this
understanding is still only evident among a small percentage
of the population, it is growing - among Vietnamese
agricultural exporters, apparel companies, software
developers, and artists for example. This year there have
been multiple news articles and seminars touting the value
of brand names. Also, for the first time, a Vietnamese
author threatened a lawsuit against a publishing house that
had published the author's work without authorization. These
groups are a long way from representing a critical mass in
Vietnam, but as their numbers increase, they will add to the
international pressure on the GVN to develop effective
enforcement capabilities in line with its international
commitments on IPR.

--------------------------------------------- -----------
Technical Assistance helpful in Building Enforcement
--------------------------------------------- -----------

16. In 2002 Vietnam received considerable IPR-related
technical assistance from a number of foreign donors, NGO's
as well as multiple USG agencies including the Departments
of State and Agriculture, USAID, Customs, the U.S. Patent
and Trademark Office and the U.S. Copyright Office. (For a
more complete discussion of IPR-related technical assistance
in Vietnam see reftel (E).) This assistance included
conferences, seminars, training, study tours and
review/comments on draft pieces of legislation. In 2003,
Vietnam will continue to receive a significant level of IPR
related technical assistance. Of particular note, the
Support for Trade AcceleRation (STAR) Project, (the USAID-
funded technical assistance program specifically addressing
BTA implementation issues) plans to provide the following
technical assistance to the GVN:

-- Support MOCI's development of regulations on optical disk
production and distribution;

-- Provide detailed comments on the Ministry of Justice's
redrafting of the Civil Code chapter on IPR (Note: The
Civil Code establishes the legal basis for IP protection in

-- Support GVN efforts to meet the requirements necessary to
accede to key IP conventions;

-- Support GVN efforts to develop a civil procedure code -
particularly with respect to issues related to IPR
enforcement (such as provisional measures, injunctive
relief, ex-parte hearings, attorneys' fees); and

-- Support public education programs to raise awareness with
regard to the importance to Vietnam for improving the
protection of IP rights.

Conclusion and Recommendation

17. (SBU) Vietnam will remain a market in which IPR
violations are of concern for at least the foreseeable
future. That said, Vietnam's commitments in the BTA to put
into place over a short period of time an IPR regime that
meets world standards is impressive and rare for a country
at Vietnam's stage of development. U.S. policy should
continue to work toward ensuring Vietnam's commitments are
translated into good law and regulation in the near term and
effective enforcement in the medium term. This can be most
effectively achieved in Vietnam with a combination of
support for IPR reform and pressure at senior government
levels to translate good IPR law and regulation into real
IPR protection. Further USG funding for technical
assistance in IPR, particularly with respect to building
capacity for IPR enforcement in Vietnam's law enforcement
and judicial organs, would greatly advance this objective.
At the same time, Mission intends to press senior GVN
officials at every opportunity to address IPR piracy in
Vietnam, highlighting the fact that legal reform is not
sufficient for Vietnam to meet its obligations -- it must
enforce those laws.

18. (SBU) RECOMMENDATION: Embassy believes it important to
maintain pressure on Vietnam to enforce IPR, even as we
continue to recognize the progress Vietnam has made on legal
reform in this area. For that reason, we recommend Vietnam
be maintained on USTR's Special 301 Watch List in 2003.

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