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Cablegate: Czech Republic: Post Recommends Watch List For

VZCZCXRO7431
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHPG #1228/01 3191528
ZNR UUUUU ZZH
P 151528Z NOV 07
FM AMEMBASSY PRAGUE
TO RUEHC/SECSTATE WASHDC PRIORITY 9817
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 PRAGUE 001228

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/NCE AND EB/IPE JBOGER
STATE PASS USTR FOR JCHOE-GROVES AND WMOORE
COMMERCE FOR 4232/ITA/MAC/MROGERS
COMMERCE PASS USPTO

E.O. 12958: N/A
TAGS: KIPR ETRD ECON PGOV EZ
SUBJECT: CZECH REPUBLIC: POST RECOMMENDS WATCH LIST FOR
SPECIAL 301 OUT-OF-CYCLE REVIEW

REF: A. 11/7 TLAPA-AMBASSADOR LETTER
B. PRAGUE 849
C. PRAGUE 742
D. PRAGUE 578
E. PRAGUE 457
F. STATE 56305
G. PRAGUE 399
H. PRAGUE 315
I. PRAGUE 274
J. PRAGUE 244

1. (SBU) SUMMARY AND RECOMMENDATION: Post recommends the
Czech Republic be placed on the Special 301 Watch List at the
upcoming out-of-cycle IPR review (OCR). The Czechs have had
seven months to develop and implement an action plan with
limited progress to report. The Czech IPR inter-ministerial
committee developed and presented an action plan to the
cabinet on October 3, and the committee has not initiated
concrete actions to implement this plan. The IPR violations
at the border markets originally noted by recording industry
watchdog groups in April have continued relatively free from
prosecution, and the border markets have grown in size and
permanence. Post has visited the pirate markets on multiple
occasions and viewed first-hand the scale of IPR violations
and lack of legitimate business at the markets. End Summary
and Recommendation.

Fair Warning Given
---- ------- -----
2. (SBU) Since the April 30 announcement that the Czech
Republic will face an out-of-cycle IPR review, Post has
regularly engaged the Ministry of Industry and Trade (MIT)
and the IPR inter-ministerial committee to explain
Washington's position and press for the development and
execution of an action plan to combat piracy at these
markets. In his July 17 meeting with Deputy Minister of
Industry and Trade Martin Tlapa (ref H), Ambassador Graber
reinforced the U.S. position, including the need to see
measurable results for the CR to stay off the Special 301
Watch List. (Note: Minister of Industry and Trade Martin
Riman was unavailable for this meeting with Ambassador
Graber, which Post believes was due to an unrelated political
issue. End Note.) Tlapa got the message but noted that,
"lots of people here think you won't put us on the Watch
List." During each subsequent visit with Czech government
officials, Emboffs made clear that both an action plan and
measurable accomplishments were needed before the OCR, and
failure to show results could result in Czech placement on
the Watch List. The Ambassador made a final appeal to Tlapa
November 1, urging the Czechs to provide the USG with a
statement for the Special 301 OCR, including evidence of
enforcement actions taken and a timeline for the action plan
items. Post has not yet received a statement, and does not
expect a response other than the November 7 letter from Tlapa
to Ambassador Graber.

Baby Steps in the Right Direction But Still Falling Short
---- ----- -- --- ----- --------- --- ----- ------- -----
3. (SBU) The Czechs have held four inter-ministerial meetings
since May to discuss the problem and possible solutions.
Emboffs have been invited to three of these meetings, and
representatives from the recording industry to two. The
action plan developed from these meetings includes about 60%
of the suggestions made by the USG and industry, including a
no tolerance policy, increased criminal regulations, higher
penalties and training for judges and prosecutors. However,
the action plan lacks some items suggested by the USG,
including increased law enforcement presence at the markets,
legislating landlord liability and revocation of business
licenses for IPR violators, and it is devoid of concrete
implementation timelines for any of the items.

4. (SBU) New legislation increased fines and punishments for
IPR violations as expected, but the lack of consistent
enforcement and quick judicial proceedings hobbles the
usefulness of these changes. While the pace of progress has
been limited, these legislative changes are positive and
create a stronger future framework for IPR protection.
Enforcement of existing laws remains the biggest problem. To
remedy this, Post and industry groups are coordinating
training opportunities, including USPTO-sponsored courses,
for the Czech Ministry of Interior on a number of IPR
enforcement topics.

5. (SBU) The positive trend in IPR enforcement at the border

PRAGUE 00001228 002 OF 002


markets in late 2006 and early 2007 did not continue into the
summer. Although 6,000 armed inspectors of the Customs
Directorate were given authority to address the IPR issue,
the number of confiscations and raids dropped in the first
half of 2007. According to MIT-provided statistics, the
Czech Business Inspectorate performed twenty-eight raids in
September and October and confiscated approximately $1.7
million USD in pirated goods. However, discussions with
Customs officers indicates that these statistics are
questionable, and that the raids were not as successful as
MIT presented. The Customs officers complained that the
recent shift from occasional raids and inspections conducted
by individual agencies to more infrequent, large-scale raids
with participation from all agencies led to the market owners
being tipped off ahead of time, with a resultant reduction in
confiscations.

Political Will Vacuum
--------- ---- ------
6. (SBU) Tlapa's November 7 letter to Ambassador Graber (ref
A) is evidence of the continuing lack of political will.
Despite his promise to Department of Commerce Assistant
Secretary Bohigian to address IPR violations at the border

SIPDIS
markets after his March 8 visit to Washington, Tlapa failed
to match his statements with actions. His letter claims that
public condemnation of the piracy problem is by itself a
strong signal of government engagement. It further explains
his belief that the appropriate government role is high-level
coordination and makes excuses for the lack of progress and
for why a detailed action plan is not needed, including the
ludicrous statement that GOCR cannot tell us what they are
doing to fight IPR violations because this information is con
fidential.

7. (SBU) Industry watchdog groups feel the Czechs have
dragged their feet developing and implementing their action
plan and should be placed on the Priority Watch List. One
explanation, although hardly excusable, is that the action
plan was developed over the summer vacation season, when many
government employees are out of the office for long periods
of time. Consequently, the action plan was not approved by
the Minister of Industry and Trade until September and
finally presented to government in October. While these
difficulties do not fully mitigate the Czech government's
lack of progress, the action plan is now in place and the
GOCR needs time to demonstrate it will follow through. While
placement on the Special 301 Watch List will send a strong
signal and give needed support to our allies in the Czech
ministries, placement directly on the Priority Watch List
could complicate efforts to constructively engage the Czech
government in the future.

Rollout Plan
------- ----
8. (SBU) Post continues to sensitize Czech officials about
the possibility of being placed on the Watch List and we are
developing a rollout strategy to inform the relevant
ministries about the upcoming OCR decision. Any information
Washington can provide on the timing of the OCR decision
process will be greatly appreciated. Despite our repeated
warnings, we believe that most Czechs will be somewhat
surprised if they are placed on the Watch List. The GOCR has
listed IPR issues (specifically in relation to China) as a
priority during EU Presidency, and being placed on the Watch
List could cause some embarrassment. Although a handful of
people with the most sober understanding of the situation and
process are aware of this reality, most simply do not believe
the USG will take this action because of other bilateral
political considerations such as missile defense. Placement
on the Special 301 Watch List will provide political cover
for our allies within the Czech government, allowing them to
push through needed improvements to the IPR situation without
alienating or leaving them feeling hopeless by jumping ahead
to the Priority Watch List.
Graber

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