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Cablegate: Hcmc Ipr Busts Demonstrate Impact of Mission Efforts

VZCZCXRO3882
RR RUEHCHI RUEHDT RUEHNH
DE RUEHHM #0039/01 0330945
ZNR UUUUU ZZH
R 020945Z FEB 10
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC 6281
INFO RUEHHI/AMEMBASSY HANOI 4165
RUEHHM/AMCONSUL HO CHI MINH CITY 6524
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 000039

SENSITIVE
SIPDIS

STATE FOR USTR DBISBEE AND RBAE
STATE FOR USPTO JNESS

E.O. 12958: N/A
TAGS: ECON KIPR EAID ETRD VM
SUBJECT: HCMC IPR BUSTS DEMONSTRATE IMPACT OF MISSION EFFORTS

REF: A) HCMC 584 B) HANOI 32

HO CHI MIN 00000039 001.2 OF 003


1. (SBU) Summary: Ho Chi Minh City police recently raided the
largest illegal disc production operation to date, seizing
millions of CDs and DVDs and disrupting a ring that is believed
to stock up to 60% of the shops selling illegal discs to the
HCMC market. This bust comes close on the heels of a separate
raid, in which authorities seized thousands of illegally
reproduced English books on behalf of American rights holder
McGraw Hill. Although weak deterrents and complex
implementation of Vietnam's IPR laws will mitigate the overall
impact on the market for infringed goods, the raids do represent
an increase in overall enforcement activities in HCMC over the
last year and steady progress on the IPR front. They also
reflect sustained Mission efforts to raise GVN awareness and
capacity about IPR, which should continue to broaden with
further USG engagement. End Summary.

HCMC IPR Enforcers on a Roll

----------------------------

2. (U) IPR enforcement agencies in HCMC have engaged in a number
of significant crackdowns over the last few months. On January
5, local media reported that district police had raided the
largest CD/DVD making production in the city's history. In
three different locations, police confiscated disc making
machines, labeling equipment and millions of discs, including
about 300,000 discs with pirated content, and thousands of
blanks made in China. According to reports, the ring leaders
belong to a private company licensed to produce blank discs who
authorities believe supply up to 60% of the shops selling
illegal discs on the HCMC market, the Mekong Delta and southern
provinces.

3. (SBU) Just one month earlier a major U.S. book publisher
triumphed when authorities busted a major copyright violator
that was selling thousands of illegal copies of McGraw Hill's
top selling English learning books. The owner of Quynh Mai
books had been illegally reprinting McGraw's products for
months, defending his actions in the name of "helping the poor
access education," and directly flouting cease and desist orders
from the National Copyright Office. However, in early December
last year, Department of Information and Communication enforcers
and the economic police raided the infringing bookstore, seizing
thousands of unauthorized copies of the McGraw Hill publications
before seizing hundreds more from the owner's warehouse and
printing facility.

4. (SBU) Finally, in a separate major IPR action last November,
GVN customs officials confiscated more than 800 counterfeit
Nokia mobile phones at HCMC's Tan Son Nhat international
airport. The phones were purported to have been manufactured in
Hungary but the associated documents and mismatching serial
numbers showed they were made in China. Both Nokia Vietnam
representatives and the importer of the imposter goods verified
that the phones were fakes.

Two Steps Forward, One Step Back?

---------------------------------

5. (SBU) Each of the crackdowns on violated goods represents a
solid step forward, yet the actions also highlight some of the
challenges that still exist in Vietnam's IPR regime. First,
while the busts were a temporary victory for the rights holders
who were directly affected, it is unlikely to impact HCMC's
overall market for pirated DVDs, counterfeit phones or illegally
printed books in a meaningful way. The fact that violations are
common, rampant, and profitable means that even when a huge
player is knocked out, it merely opens the playing field for
other violators to jump in or expand their reach. Without
stronger penalties, such as criminal convictions and larger
fines, there is little incentive for infringers to stay on the
sidelines.

6. (SBU) Although the revisions to the IPR law last year were
designed to provide for stronger penalties for IP violations,
administrative fines are still applied to the vast majority of

HO CHI MIN 00000039 002.2 OF 003


IPR violations, and fines remain too low to be a consequential
deterrent. The revised 2009 criminal code provides criminal
penalties for commercial scale IP infringement; however, IP
cases that have been pursued in the criminal courts to date have
also involved either politically offensive content or consumer
safety issues; GVN authorities could not cite any that have been
pursued in criminal courts based exclusively on IP violations.
Tran Xuan Minh, criminal judge for the People's Court, told
EconOff he did not know what sorts of penalties were likely to
be applied in the latest DVD bust since the case is still under
investigation, but criminal prosecution would likely only occur
if there is politically sensitive content. In the case of the
Nokia phones, customs officials said that the offense was not
serious enough to be handled criminally and violators were given
a monetary administrative fine. Such administrative fines often
amount to no more than a light slap on the wrist, when compared
with potential profits from the sale of infringing goods.

7. (SBU) Further complicating IPR enforcement is the
bureaucratic residue of overlapping jurisdiction and unclear
regulations. Steering Committee 168, an interagency IPR group,
was designed to be the clearing house for all IPR-related
enforcement. However, Ms. Trang, Vice Chairman of the
committee, said that the agency that conducted the bust, a HCMC
urban district police department, acted alone and that she does
not have details, indicating that interagency cooperation on IPR
enforcement is not as tight as promulgated. According to
Customs officials, implementation is also complicated by
regulations requiring enforcers to have rights holder's
permission prior to making a bust. For example, Customs
Director Mr. Le Kien Thanh told EconOff that even when his
agency has a strong suspicion that goods are pirated, they
cannot take action unless it involves a rights holder that has
"registered" with Customs. However, there are only 35 rights
holders active on that list - Nokia just happened to be one of
the lucky ones registered with HCMC Customs. This may explain
why, though this bust was important, it was the only IPR action
Customs has taken all year.

US Efforts Helping Raise Awareness

----------------------------------

8. (SBU) In the McGraw Hill case, it took IP enforcers more than
eight months to crack down after the cease and desist order had
been issued from Hanoi. McGraw had appealed to USPTO, FCS and
EconOffs for assistance in the case but had not yet tried to
engage with any local authorities. At an IPR training in late
October, HCMC ConGenOffs told the Market Management Bureau
director Nguyen The Thong during a coffee break about the IPR
infringement issues McGraw was facing. Mr. Thong said it
sounded like a case on which they could take action; about six
weeks later the Department of Information and Communications led
the team that busted the violating bookstore.

9. (SBU) Whether or not direct U.S. efforts prompted the GVN
authorities' decision to crack down in the McGraw case, indirect
U.S. efforts also may be raising awareness among GVN enforcement
agencies about IPR issues. The USPTO regional representative
has spoken regularly at local trademark and copyright
conferences, and U.S. Mission Vietnam has organized IPR training
and workshops over the last year for hundreds of enforcers,
judges, prosecutors and customs authorities. The basic message
about IPR is starting to spread into local enforcement offices,
even when it doesn't translate into clear action against
infringers. Chief Judge Tran Van Su at the HCMC People's Court
lauded the impact of U.S.-sponsored study tours, saying to
EconOff that he and other judges had gained great insight about
how IPR laws are implemented on a prior trip to the U.S.
Similarly, Mr. Thanh emphasized several times the lack of
understanding about IPR issues among GVN agencies and the value
his staff gains from participating in training.

Comment:

-------

10. (SBU) Greater IPR efforts in HCMC are occurring at a time
when, somewhat ironically, it is more difficult to meet with
agencies and get information about their activities. Several

HO CHI MIN 00000039 003.2 OF 003


enforcement agencies declined to meet with EconOff, citing
"continuing investigation" or "busy until after Tet," and it has
been difficult to get concrete details about the latest bust
concerning the nature of the goods, rights holders or potential
punishment. Yet agencies do appear to be taking more action
against infringers, even if they are reluctant to talk to USG
about it. Some offices have even gone above and beyond, such as
the HCMC People's Court, which invited EconOff to attend a
criminal trial for infringed goods. Although enforcement
appears to be making headway in HCMC, there has not been
parallel action in other provinces of northern, central, and
southern Vietnam, reflecting market realities as well as local
capacity and training. End Comment.

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

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