Cablegate: Vietnam: Embassy Input for 2004 Special 301 Review

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 29549
(B) 03 HANOI 2795
(C) HANOI 406
(D) 03 HCMC 1035
(E) HCMC 0115


1. (SBU) Embassy recommends continued placement of Vietnam
on USTR's Special 301 Watch List for 2004 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:

-- Vietnam continued to make some progress in strengthening
its IPR legal regime in 2003, with new regulations on the
protection of layout designs of integrated circuits,
royalties, border protection for copyright, procedures for
establishing IPR for industrial designs and advertising (as
it relates to IPR).

-- The Government of Vietnam maintains a strong public
commitment to IPR protection and works closely with
international donors, including the USAID-funded Support for
Trade AcceleRation (STAR) project.

-- The U.S.-Vietnam Bilateral Trade Agreement (BTA) with its
major provisions on IPR, codifies Vietnam's commitment to
make its IPR regime TRIPs-consistent.

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


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

2. (SBU) Embassy recommends that USTR keep Vietnam on its
Special 301 "Watch List" for the coming year because IPR
piracy in many product categories remains rampant, despite
some progress in strengthening the IPR legal regime over the
last year. While Vietnam sporadically conducted law
enforcement actions against IPR violations, IPR enforcement
remains the exception rather than the rule. Additionally,
Vietnam is behind schedule in meeting the IPR commitments
included in Chapter Two of the BTA, the majority of which
were due to be implemented no later than December 10, 2003.
Finally, market access barriers, especially with regard to
"cultural products" continue to impede the availability of
legitimate product, further complicating efforts to combat

--------------------------------------------- -----------
BTA - Strong IPR Commitments, but lagging implementation
--------------------------------------------- -----------

3. (U) Chapter Two of the 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, or in some cases, to
provide protection stronger than 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. Vietnam's leadership has
expressed consistent, strong support for implementing fully
Vietnam's commitments in the agreement, including the IPR

4. (SBU) Despite strong public support for BTA
implementation, the GVN is lagging in implementing its IPR
obligations, particularly those related to enforcement. The
majority of Vietnam's IPR-related obligations in the BTA
were due to be implemented no later than December 2003.
These obligations specifically include providing expeditious
remedies to prevent and deter infringement, prompt and
effective provisional measures, and criminal procedures and
penalties for willful trademark counterfeiting or
infringement of copyrights or neighboring rights on a
commercial scale. Vietnam also committed, upon entry into
force of the BTA, to enforce existing laws, the U.S.-Vietnam
Copyright Agreement, and the Paris Convention. No such
routine and reliable enforcement exists. Additionally, in
the BTA, Vietnam committed to accede to several
international intellectual property conventions "promptly."
Although the BTA entered into force in December 2001,
Vietnam has not yet submitted its applications to the Berne
Convention (literary and artistic works), Geneva Convention
(phonograms), and Brussels Convention (satellite signals).
These applications have been pending signature by the
President since the fall of 2003 (Ref B).

Improvements in IPR Laws Continue

5. (U) Vietnam began extensive legal reforms to bring its
IPR laws and regulations into compliance with BTA (and
therefore TRIPs) standards before entry-into-force of the
agreement. In 2003, Vietnam made some progress on
strengthening its IPR legal framework. The GVN issued the
following legal and regulatory IPR reforms over the past

-- A March 13, 2003 decree (Government Degree No.24/2003/ND
CP) detailing the implementation of a November 2001
Ordinance on Advertisement. This Decree required
advertisements for inventions, utility solutions, industrial
designs and trademarks, appellations of origin of goods,
geographical indications, trade names, copyright and related
rights to ensure the veracity of IPR-related information.
The Ministry of Science and Technology (MOST) was tasked
with coordinating with the Ministry of Culture and
Information (MOCI) to oversee implementation of this Decree;

-- A May 2, 2003 decree (Government Decree No.
42/2003/ND-CP) on Industrial Property Protection for Layout
Design of Integrated Circuits. This decree established
protection for original semiconductor integrated circuit
layout-designs. However, it did not protect the principles,
processes, or methods used by such integrated circuits, or
information or software included with integrated circuits.
This was the first regulation to address the protection of
the layout design of integrated circuits in Vietnam;

-- A July 01, 2003 circular (Inter-Circular No.
21/2003/TTLT-BVHTT-BTC) jointly promulgated by MOCI and the
Ministry of Finance (MOF) on royalties. This Circular
established guidelines for royalty payment regimes and the
use of royalty funds for some types of works (stipulated in
Government Decree No.61/2002/ND-CP of June 11, 2002). The
Decree also prescribed specific grades or percentages of
royalties for each genre and scale of work;

-- A July 16, 2003 circular (MOCI Circular No.
43/2003/TT-BVHTT) on implementation of the March 13, 2003
Decree on Advertising. This circular stipulated that
advertisements adhere to the properties of the trademark as
announced or registered with the relevant State management

-- An October 17, 2003 circular (Joint Circular
No.58/2003/TTLT-BVHTT-BTC) on copyright protection for
import and export commodities at the border, jointly issued
by the MOCI and the MOF. This Circular provided guidelines
for registration to protect most goods subject to copyright
according to the Law on Customs and related regulations. The
Circular entitled organizations or individuals with
registered goods to request customs officers to seize
imports or exports that are suspected of copyright

-- A November 5, 2003 circular (MOST Circular
No.29/2003/TT-BKHCN) on the Procedures for Establishing
Industrial Property Rights for Industrial Design. This
circular simplified the procedures and requirements related
to establishing IPR for industrial designs. It abolished
the requirement for notarized documents, reduced the number
of application copies required, and shortened the time
required for both the formal examination and the substantive
examination of claimed industrial designs from 13 months to
9 months; and,

-- A November 5, 2003 circular (MOST Circular
No.30/2003/TT-BKHCN) on the Procedures to Establish
Industrial Property Rights for Patent and Utility Solutions.
The circular streamlined NOIP's internal regulations and
processes with respect to the registration of patents and
utility solutions. The period of time required for
examination of invention or utility solution applications
was reduced from 3 months to 1 month for the formal
examination and from 18 months to 12 months for the
substantive examination. The Circular also established
procedures on granting, invalidating and canceling the title
of protection of patents and utility solutions.

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

-- The GVN has incorporated comments from the International
Union for the Protection of New Varieties of Plants (UPOV)
Secretariat into its draft ordinance on new plant varieties.

The GVN expects to submit the draft to the National Assembly
in June and to accede to UPOV some time in 2004;

-- The Supreme People's Court continues to revise an amended
draft Civil Procedure Code, which provides the legal basis
for IPR enforcement procedures. The GVN expects to approve
the amended Code by the end of 2004; and,

-- There are several draft regulations on IPR enforcement,
which the GVN expects to finalize in 2004. These include
joint circulars between the MOST and: 1) the Ministry of
Finance on industrial property protection at border; 2) the
MOT on market control over domestic goods with respect to
industrial property protection; 2) the Ministry of Post and
Telecommunications (MPT) on settling domain name disputes
that relate to IPR; and, 4) the Ministry of Planning and
Investment on protection of businesses' trade names.

Piracy Still Rampant

7. (U) While there was some progress on reforming the legal
and regulatory regime over the past year, there has been
little, if any, impact on the proliferation of counterfeit
and pirated goods in Vietnam. 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
are pirated. Trademark violations are also prevalent, with
all types of clothing and other items carrying unlicensed
versions of famous trademarks available at shops of all
sizes, including large state-owned stores, throughout the
major cities. None of these areas of piracy appear to have
been reduced over the past year.

8. (SBU) In one exceptional trademark case in August, the
Can Tho Department of Science and Technology (DOST) fined
the Vietnam Beverage Company (VBC) approximately USD 660 for
infringing the Sunkist trademark, ordered VBC to stop
producing and distributing products confusingly similar to
the Sunkist trademark, and ordered the removal of the
infringing labels from tens of thousands of cans, bottles
and cartons.

9. (SBU) State-owned television and cable stations
sporadically show unlicensed U.S. films on local television
and cable channels. Most of these films are "borrowed" from
legitimately licensed channels (such as HBO and Star Movies,
which do not allow dubbing) and dubbed in Vietnamese for
widespread viewing. Public cinemas as well as private cafes
sporadically show pirated films, although this problem is
not as widespread as the retail sale of pirated DVD, VCD or
videocassette versions of the same films.

10. (U) In terms of consumer and business software for PC's,
piracy is the norm. Anecdotal evidence and industry sources
suggest that GVN agencies use mostly pirated software on
PC's in government offices. However, at its annual New
Year's party, Microsoft awarded several GVN departments with
prizes for their use of legitimate software. Microsoft
experienced an estimated fifty percent growth in its sales
to government agencies and state-owned enterprises in
Vietnam this year. U.S. companies engaged in sales here of
such software continue to complain that, even if they
significantly drop licensing charges, Vietnamese businesses
and government agencies generally will not 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).

11. (U) Software piracy is also a strong disincentive for
local software developers. Most companies choose to sell
their products only as packages bundled with hardware
because stand-alone software is easily and quickly copied
and sold on the local market.

Enforcement Remains Weak

12. (SBU) Despite the stated 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. The organizational structure of GVN IPR agencies is
complicated and bureaucratic; multiple agencies are tasked
with overlapping functions or, equally problematic, gaps are
left in coverage. Institutional experience on IPR
enforcement is extremely low. Government IPR agencies focus
primarily on "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. 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

13. (SBU) The Market Management Bureau (MMB), an enforcement
agency within the Ministry of Trade, engages in some IPR
enforcement, usually in response to specific complaints from
IPR holders. In one notable case in 2003, the MMB raided
multiple shops and one state-owned factory in Hanoi selling
counterfeit Nike products and later destroyed all of the
goods confiscated during the raids. However, no fines were
levied against the infringers (Ref C). Additionally, in
September, inspectors from the HCMC Department of Culture
and Information (DCI) raided an optical media shop in HCMC
and confiscated over 100,000 items (mostly Vietnamese music
CDs) (Ref D). At the time of the HCMC raid, local press
reports quoted the relevant officials as saying the shop
owner would be prosecuted, a claim echoed privately in
meetings with Congenoffs. Yet, several months later, there
has been no prosecution and DCI sources say the case has
been referred back to the district police for further

14. (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 eleven months of
2003 its inspectors carried out approximately 19,000
surprise inspections (an increase of more than 6,000 over
2002). MOCI inspectors collected fines of 5 billion VND
(about USD 318,000) in 2003 and forwarded documents for
criminal liability prosecution of 12 cases. Two cases on
copyright violation were brought to court for trial.
According to NOIP, the Market Management Bureau (MMB)
detected and handled 5,805 cases of producing and trading in
counterfeit goods - of which about one third were related to
IPR. (Note: The majority of the rest are related to food
safety. End note.)
Lack of Availability of Legitimate Product

15. (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 remains 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. Even now, the consumer
pool is clearly growing. The prevalence of motorbikes
costing in excess of 6000 USD on city streets, the number of
shops offering higher-end consumer electronics, and the
popularity of restaurants and clubs with near Western prices
take credence away from the oft-repeated assertion that
Vietnamese simply cannot afford legitimate products.
Expensive software suites may remain out of reach for small
businesses but the price of the latest pop album may not be
beyond the means of young urban consumers.

Growing Domestic Demand

16. (SBU) One relatively recent development has been
evidence of a increasing 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. Clearly reflecting this
development, several industries in Vietnam have established
business associations, which identify IPR as one of their
priority concerns. These new associations include: the
Vietnam Software Association (VINASA); Vietnam center for
Protection of Music Copyright (VCPMC, established in April
2002); the Recording Industry Association of Vietnam (RIAV,
established June 2003); and the Literature Copyright Center
of Vietnam (LCCV, to be formally established in the fourth
quarter of 2004). These associations are all relatively new
and inexperienced in lobbying. It will clearly take time
for them to learn to lobby effectively the GVN on IPR

17. (U) In a recent, rather lavish, display of trademarks
and branding the Ho Chi Minh City government organized a
"Festival Honoring Vietnamese Trademarks" (Ref E). The
festival's main component was a nighttime parade that
traveled down a main boulevard through the city's preeminent
shopping and commercial district. The parade's floats each
represented a well know Vietnamese company and celebrated
the company's products. The Ho Chi Minh City People's
Committee Chairman opened the evening's festivities with a
speech extolling the value of Vietnamese businesses. The
prominence of logos, brand names, and company banners was an
encouraging sign that local business and government leaders
understand the importance of this issue, or at least the
protection of Vietnamese brands.

--------------------------------------------- --------
Technical Assistance helps Build Enforcement Capacity
--------------------------------------------- --------

18. (U) In 2003 Vietnam received considerable IPR-related
technical assistance from a number of foreign donors, NGO's
as well as multiple USG agencies. This assistance included
conferences, seminars, training, establishment of an IPR
resource collection in a library in HCMC, study tours and
review/comments on draft pieces of legislation. In 2004,
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
IPR-related technical assistance to the GVN:
-- Support for revising the IPR section of the Civil Code.
STAR will provide the Ministry of Justice with extensive
comments on draft revisions to the IPR section (Part VI) of
Vietnam's Civil Code as part of MOJ's efforts to bring the
Civil Code into compliance with the BTA (and TRIPs). This
will include changes required to conform to the various
international IP conventions noted in the BTA (particularly
Berne, Geneva and Brussels). Follow-on activities will
include technical workshops with the MOJ drafting team and
key National Assembly committees as well as a large public

-- Support for Development and Promulgation of a Civil
Procedure Code. Star will support a retreat and technical
workshops for key drafters, Vietnamese experts and key
National Assembly deputies working on the revision of
Vietnam's Civil Procedure Code;

-- Capacity building for courts that will handle IPR cases.
Specific initiatives include a study mission for the Chief
Justice of the Supreme People's Court and four additional
senior judges and staff to the U.S and IPR training for 20-
30 judges from key courts throughout Vietnam;

-- Support for the MOJ's efforts to draft a decree on IPR
remedies through comments on drafts and technical workshops;

-- Support for MOJ efforts to draft a Code on Judgment
Enforcement by providing comments on an initial draft
concept paper, organizing several technical workshops, and
organizing a study tour to the U.S. for key experts
responsible for drafting the Code to learn how the U.S.
judicial system enforces court judgments;

-- Support for stronger IPR enforcement at the local level
through training for a core group of the Economic Police (a
division of the Ministry of Public Security tasked with IPR
enforcement); supporting an IPR enforcement workshop with
the HCMC People's Committee under the lead of its Department
of Science and Technology; and supporting publication of a
guidebook on IPR enforcement;

-- Support for GVN efforts to improve IPR enforcement at the
border through workshops with customs officials on border

-- Support for the further development of Vietnamese
copyright stakeholders through technical assistance to the
Copyright Center of Vietnam and the Recording Industry
Association of Vietnam. The focus will be on amending the
legal framework to enable the functioning of collective
management organizations and their activities;

-- Support for GVN efforts to accede to UPOV in 2004 through
training and policy seminars; and,

-- Support for efforts by MOCI and the Ministry of Trade to
develop regulations on optical disc production and

Conclusion and Recommendation

19. (SBU) Vietnam will remain a market in which IPR
violations are of concern for at least the foreseeable
future. That said, the BTA and Vietnam's desire to accede
to the WTO provide us with strong tools for engaging the GVN
on IPR enforcement. 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. 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 continue to
press senior GVN officials at every opportunity to address
IPR piracy and counterfeiting in Vietnam. We will continue
to stress that legal reform is not sufficient for Vietnam to
meet its obligations -- it must enforce its own laws -- and
that lack of IPR enforcement will hinder the GVN's attempts
to attract information technology investment.

20. (SBU) RECOMMENDATION: Embassy believes it important to
maintain consistent pressure on Vietnam to enforce IPR. For
that reason, we recommend Vietnam be maintained on USTR's
Special 301 Watch List in 2004.

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