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Cablegate: Big Ipr Bust Suggests Progress, but Politics Also Played A

VZCZCXRO7761
RR RUEHCHI RUEHDT RUEHNH
DE RUEHHM #0584/01 2330310
ZNR UUUUU ZZH
R 210310Z AUG 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC 6002
INFO RUEHHI/AMEMBASSY HANOI 3902
RUCNASE/ASEAN MEMBER COLLECTIVE
RHHMUNA/USPACOM HONOLULU HI
RUEHHM/AMCONSUL HO CHI MINH CITY 6238

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000584

SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND EEB/TPP/IPE JURBAN
STATE FOR EEB/TPP/IPE FOR HALLOCK, WATTS, AND KEAT
STATE ALSO PASS USTR DBISBEE AND RBAE

E.O. 12958: N/A
TAGS: ECON KIPR EAID ETRD VM
SUBJECT: BIG IPR BUST SUGGESTS PROGRESS, BUT POLITICS ALSO PLAYED A
ROLE

REF: A) HANOI 032 AND PREVIOUS B) HCMC 551 AND PREVIOUS

HO CHI MIN 00000584 001.2 OF 002


1. (SBU) Summary: An interagency team charged with enforcing
intellectual property rights (IPR) raided a factory and a
private house in Ho Chi Minh City last month, confiscating close
to 100 boxes of pirated CDs and DVDs as well as the
industrial-scale equipment used to manufacture them. The
aggressiveness in pursuing this particular case may well have as
much to do with the content of many of the discs -- pornography
and a variety show with anti-communist digs deemed "reactionary"
by the GVN. These factors, combined with the size of the
operation, means authorities may deem the case serious enough to
pursue criminal penalties. While the raid is a positive sign of
continued Vietnamese efforts to improve IPR enforcement, it
remains to be seen whether this bust will be a one-off event, or
the beginning of an improved, sustained crackdown on copyright
infringement. The Market Management Bureau, government entity
charged with fighting counterfeit products and digital piracy,
appears to be making a good effort to be as effective as they
can in a still unclear legal environment. End Summary.

Grabbing the Goods
------------------
2. (SBU) EconOff met recently with HCMC Market Management Board
(MMB) Deputy Chief Le Van Lieu and MMB Professional Affairs
Chief Duong Cong Khanh to discuss a July 3rd raid on a large
counterfeit CD/DVD operation in the Go Vap district of Ho Chi
Minh City. According to Mr. Khanh, Inter-Agency Team 814 (under
the Department of Culture, Sports and Tourism) confiscated two
industrial-type disc making machines in addition to 11 boxes of
DVDs and CDs with no stamps and no brands. Later the same day,
the team raided the home of the company's owner and confiscated
280 master DVDs and CDs, one CPU, one laptop and 14 writing
drives, and an additional 84 boxes of discs. Many of the DVDs
are uncopyrighted copies of Vietnamese overseas performance
shows with sensitive anti-GVN content.

3. (SBU) MMB officials said they consider this to be a sizable
bust and that the scale of the operation as well as the content
of the DVDs is serious enough to warrant possible criminal
prosecutions. According to local media, the perpetrators have
many supply contracts, each worth between USD 1,685 and USD
2,247. MMB expressed doubt that other production facilities of
this scale exist in Ho Chi Minh City, noting that it is hard to
keep big production facilities under wraps and that very
low-priced CDs and DVDs flooding in from China usually
discourage Vietnamese from producing them locally. Mr. Khanh
said he does believe, however, other low-scale production rings
likely abound around HCMC and its neighboring provinces.

IPR, Pornography and Politics
-----------------------------
4. (SBU) While it is good to see a major raid on a pirate CD/DVD
shop, the fact is that IPR concerns were not the only motivation
for July's decisive enforcement action. The politically
sensitive nature of the materials is also significant. Among
the CDs and DVDs confiscated, many contained pornographic
material while others contained something perhaps even worse in
Vietnam -- "reactionary" materials. Many discs were copies of
"Paris By Night," a popular variety show often performed in
Orange County, California, that is classified as a "reactionary
cultural product" by the GVN because of its anti-communist digs
and references. "Paris By Night" cannot be legally purchased in
Vietnam and Vietnamese who perform in the show -- even if they
only sign or make non-controversial statements -- are banned
from performing on their return to Vietnam. The fact that the
factory was producing and distributing this material increases
the likelihood that the GVN will pursue criminal penalties in
this particular case but may not necessarily reflect an overall
increased attention to IPR violators. Indeed, compared to
genuine concerns about IPR infringement, the material's
political content may have been an equal if not leading
motivating factor for the July 3 bust.

Market Management Bureau: Organization and Recent Record
--------------------------------------------- -----------
5. (SBU) Administered by the HCMC Department of Industry and
Trade, the MMB is mandated to monitor and inspect suspected
cases of IPR violations and trade fraud practices. In Ho Chi
Minh City, MMB has a total staff of 500, which is divided into
three main sections: Administration, Organizational Affairs
(OA), and Professional Affairs (PA). The PA section oversees 28
inspection teams (24 teams at the district level and four mobile
teams) and focuses on rights infringement, counterfeit goods, as
well as brand and design infringement. MMB transfers any cases
deemed as "serious violations," or with value of violated goods

HO CHI MIN 00000584 002.2 OF 002


exceeding USD 1,700, to the economic police.

6. (SBU) Mr. Khanh detailed a listing of MMB's accomplishments
over the last 18 months. From the beginning of 2008 through the
first six months of 2009, the agency has handled 102 cases of
IPR infringement and imposed a total of USD 35,000 in
administrative penalties. Of the total cases, 48 were imposed
between January and June 2009. If that rate continues, the
total amount in 2009 would double that of 2008. Khanh estimates
the value of violated goods, produced primarily in China, at
around USD 150,000. Violations have mostly been in the
following categories: CDs and DVDs (43,000), footwear, clothing,
printer cartridges, calculators, handbags and sunglasses.

Limitations of the Law
----------------------
7. (SBU) Although Mr. Khanh said his agency is eager to tackle
IPR violators, barriers in the law still inhibit swift action.
For example, article 105 of the IPR law stipulates that the
rights holder must file a formal complaint in order for the MMB
(or any other enforcement agency) to proceed with a piracy case.
Similarly, another article stipulates that the rights holders
must send a "cease-and-desist" letter to the violators before
enforcement agencies can act. One small exception to this rule
are cases where the copyright violations involve very famous
brands such as Rolex watches or Gucci bags. In these instances,
MMB is authorized to confiscate the goods even without a
complaint but can't impose further penalties until the rights
owners initiate a formal complaint. Mr. Khanh said that despite
best efforts, it was often difficult to access rights owners or
their rightful representatives, thus keeping the MMB's hands
tied. In addition, his agency also receives many calls from
provincial MMBs requesting assistance in contacting with rights
holders, but because neither the provincial nor district MMB's
are able to find them, the cases are not pursued.

8. (SBU) To circumvent the many limitations on his agencies
efforts, MMB has tried to impose fines on violators for other
related charges, such as smuggling or importing goods without a
license. Mr. Khanh added, however, that these measures are less
desirable than actual IPR sanctions since the associated fines
are lower than for IPR violations.

Outside Support
---------------
9. (SBU) MMB said that although it can be difficult to locate or
get rights holders' assistance, it receives strong cooperation
from some well-known brands, such as Nike, Adidas, and Hennessy.
Mr. Khanh noted that Nike is one of several companies that have
provided training to MMB staff, which has enabled MMB them to
detect the differences between genuine and counterfeit goods.
He emphasized the utility of such training and MMB's interest in
participating in any USG-sponsored IPR training or other
technical assistance in the future.

Comment
-------
10. (SBU) While the content of many of the discs seized during
the July 3 raid may play a role in how aggressively the police
and courts pursue this particular case, the simple fact that the
MMB is on their toes and looking for creative ways to do their
job effectively in a challenging environment is good news. The
fact that crackdowns like this are still rare relative to
rampant violations, however, underscores Vietnam's continued
shortcomings in this area. Notwithstanding MMB's statements,
provisions requiring rights-holders' permission before
authorities can pursue IPR violators technically were removed
with the passage of the new IPR law. The problem lies in the
slow promulgation of corresponding regulations as well as the
slow propagation of new rules to the district level. Confusion
about IPR regulations among judges and enforcement bodies such
as the MMB persists, hampering further progress.

11. (U) This cable was coordinated with Embassy Hanoi.
FAIRFAX

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