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Cablegate: Taiwan Ipr: 2010 301 Watch List Submission

VZCZCXRO9466
PP RUEHCN RUEHGH
DE RUEHIN #0178/01 0531000
ZNR UUUUU ZZH
P 221000Z FEB 10
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 3352
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 07 TAIPEI 000178

SENSITIVE

STATE FOR EAP/RSP/TC, EAP/EP
STATE PLEASE PASS USTR
USTR FOR RAGLAND AND ALTBACH
USDOC FOR 4430/ITA/MAC/AP/OPB/TAIWAN
USDOC ALSO FOR ITA/MAC/OIPR
USDOC FOR USPTO GIN, BROWNING, AND SNYDOR

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD KIPR TW
SUBJECT: Taiwan IPR: 2010 301 Watch List Submission

REFTEL:

A) 2008 Taipei 49
B) 2008 Taipei 1655
C) Taipei 17
D) 2009 Taipei 26
E) 2007 Taipei 2442
F) 2007 Taipei 2498
G) 2009 Taipei 249
H) 2007 Taipei 2529
I) 2007 Taipei 2595
J) 2007 Taipei 2005

Overall Assessment: No Watch List for Taiwan
------------------- ------------------------

1. (SBU) The Taiwan authorities continued to strengthen intellectual
property rights (IPR) enforcement over the past 12 months. The
specialized IP Court, which began accepting cases in July 2008,
adjudicated 1007 cases in 2009. The Legislative Yuan (LY) passed
ISP-related amendments to the Copyright Law that clarify ISPs'
responsibilities to protect copyrighted materials, limit an ISP's
liability if the provider quickly removed IPR-infringing material,
and allow ISPs to terminate or limit service for users who ignore
three notices of infringement from the ISP. The Ministry of
Education (MOE) took further steps to reduce electronic piracy on
Taiwan's campuses, and schools continue to track and punish
violations. The Taiwan Intellectual Property Office (TIPO)
submitted to the LY an amended Patent Act that would track more
closely with international standards for issuance of compulsory
licenses, extend the protection period on pharmaceuticals whose
entry into the market is slowed by approval delays, and increase
compensation to license-holders for licensing violations. The LY,
however, did not act on the bill before the end of the 2009 session.


2. (SBU) However, problems remain. Although physical copying of
movies and music continued a decade-long fall, digital piracy of
music, movies, and software continues to be a problem. Although
Taiwan's software piracy rate dropped slightly to 39 percent--the
third-best in Asia behind Japan and Singapore--some software
companies' representatives believe that the actual rate is
significantly higher. Rights holders continue to cite Taiwan Customs
as a weak link in Taiwan's improving efforts against piracy.

3. (SBU) Overall, due to Taiwan's steadily improving IPR
environment, AIT thinks Taiwan should not be included on the 2010
Watch List. In 2010, we will encourage Taiwan to enforce
newly-enacted Copyright Act amendments, pass amendments to the
Patent Act that address industry concerns on compulsory licensing,
and continue to combat digital and textbook piracy on university
campuses. End overall assessment.

-----------------------
Ongoing Areas of Review
-----------------------

Notorious Markets
-----------------

4. (SBU) Piracy in Taiwan's night markets has continued a
decade-long decline, and there are no "notorious" physical markets.
According to the Recording Industry Foundation in Taiwan (RIT),
which represents the international recording industry, only
Hsin-Ming night market in Taoyuan County is notable for piracy, with
three to five stalls selling illegal music and DVDs.

Optical Media
-------------

5. (SBU) According to RIT and the Taiwan Foundation Against Optical
Theft (TFACT, the local arm of the Motion Picture Association),
optical disc piracy is no longer a major problem in Taiwan. RIT
figures show that as legitimate CD sales in Taiwan have dropped by
half since 2005, the percentage of pirated copies has dropped from
almost 40 percent to a steady 22 percent over the past three years,
a drop RIT attributes to the popularity of digital piracy. TFACT
thinks pirated movies have shown a similar decline.

6. (SBU) RIT estimates there are no more than 20 physical outlets
island-wide for pirated CDs--most of which are night market
stalls--down from about 30 in 2007 and 250 a decade ago. Other
rights holder groups agree that large-scale production and

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distribution of physically-pirated goods is declining.

7. (SBU) According to RIT, the Taiwan police initiated 105
music-related physical piracy cases in Taiwan in 2009, up from 90 in
2008, but lower than 136 and 227 cases in 2007 and 2006,
respectively. Rights holder groups believe that most domestic
physical movie counterfeiting is now smaller-scale burning of
counterfeit DVDs on home computers, with the majority of pirated
DVDs coming from the PRC and other overseas mail-order sites that
take orders over the Internet and deliver physical copies by mail.

Digital Piracy
--------------

8. (SBU) Digital piracy of music and movies is the number one
concern in Taiwan for movie and music industry groups. Industry
statistics, however, show rights holders are becoming more effective
at enforcing intellectual property rights. In 2009, RIT sent over
1000 takedown letters asking major Internet service providers (ISPs)
and auction sites to remove unauthorized music content. According to
RIT, 98 percent of allegedly unauthorized files were removed, up
from 91 percent in 2008, and only 80 percent in 2006 and 2007. The
local office of the Business Software Alliance (BSA) reports that in
2009, notified ISPs removed unauthorized content in "almost 100
percent" of cases. TFACT figures show a take-down success rate of 82
percent.

9. (SBU) Digital piracy prosecutions are also dropping fast: Taiwan
prosecuted 73 music-related digital piracy cases in 2009, down from
122 in 2008 and 265 in 2007. RIT's Alex Chen attributes the drop to
more successful notice-and-takedown efforts by the recording
industry, a greater awareness of intellectual property among the
general public, and the increasing availability of legitimate music
online. Chen noted, however, that RIT does not believe digital
piracy itself is dropping, only that industry is getting better at
identifying and taking action against websites hosting copyrighted
material.

10. (SBU) Taiwan took steps in 2009 to improve its ISP-related
legislative framework. In April 2009, the Legislative Yuan (LY)
passed amendments to the Copyright Act that clarify ISP's
responsibilities to protect copyrighted materials, limit an ISPs'
liability if the provider quickly removed IPR-infringing material,
and allow
ISPs to terminate or limit service for users who ignore three
notices of infringement from the ISP. Taiwan became the second
jurisdiction in the world to codify such a "three-strikes" measure.
Unfortunately, the law's implementing regulations, which TIPO
finalized in November, did not detail how ISPs should define "three
strikes." Enforcement of the new law will therefore be uneven across
ISP providers.

Digital Piracy - Peer-to-peer
-----------------------------

11. (SBU) In June 2007, Taiwan passed legislation providing a legal
basis for prosecuting online peer-to-peer platforms whose service
allows for the exchange of IPR-infringing materials, and by the end
of 2007, the authorities had shut down the two largest P2P service
providers in Taiwan (ref A). In 2008, the MOE issued increasingly
strict Internet guidance to universities, including new rules
forbidding all peer-to-peer (P2P) software use except with explicit
permission, requiring daily bandwidth limits, and monitoring
download volume per student (ref B).

12. (SBU) In November 2009, in response to rights holder complaints
that P2P violations still occur in student dormitories that use
non-TANet, commercial ISPs, the MOE agreed to add an administrative
rule requiring universities to ban the use of P2P software on
commercial ISPs in university dormitories (ref C).

Software, Including Use and Procurement by Authorities
------------------------ -----------------------------

13. (SBU) According to the latest BSA surveys, 39 percent of
member-company software used in Taiwan in 2008 was unauthorized.
This is a one percentage-point drop from the 2007 figure, and places
Taiwan third-best in Asia--behind only Japan and Singapore--and 23rd
worldwide.

14. (SBU) The true picture of software piracy is likely worse,
however (ref D). In a recent meeting, BSA's Taiwan representative
told econoff that BSA's survey methodology undercounts the level of

TAIPEI 00000178 003 OF 007


unauthorized use, including illegal copies, expired licenses, and
under-reporting of licensed users. Software company representatives
privately estimate to us that 70 to 90 percent of business software
in Taiwan is unauthorized. According to rights holders, such
unauthorized use of software is common not only in the business
community, but also on university campuses and within official
agencies.

TRIPS Compliance and Other IPR Issues
-------------------------------------

15. (SBU) In January 2008, the EU completed a Trade Barriers
Regulation (TBR) investigation into Taiwan's 2006 decision to issue
a compulsory license (CL) to local company Gigastorage to produce
CDs using Philips' licensed technology (ref E). The EU report
concluded Taiwan's Patent Law is inconsistent with WTO rules on
intellectual property, and recommended that the European Commission
start WTO proceedings if Taiwan did not take concrete steps to amend
its Patent Law within two months.

16. (SBU) In response, TIPO drafted amendments to the Patent Act,
and in early December, the Executive Yuan (EY) approved the
amendments and passed them on to the legislature. The amended Act
would bring Taiwan's CL regulations closer to international
standards, strengthen patent protection on animals and plants for
bio-tech development, extend the protection period--for up to five
years--on pharmaceuticals whose entry into the market is slowed by
Taiwan authority approval delays, and more clearly spell out
compensation formulae for licensing violations.

17. (SBU) AIT contacts at Philips recently told us the amended texts
are satisfactory, a view that the Deputy Head of the European
Economic and Trade Office in Taiwan echoed to econoff in January.
The LY, however, was unable to pass the amendments before its autumn
session ended in January 2010. TIPO's Deputy Director General,
Margaret Chen, recently told econoff that the LY would "certainly"
take up the amendments again in the spring session, and will likely
pass them.

Data Protection
---------------

18. (U) Taiwan has three laws that cover data protection: the
Personal Data Protection Law, the Trade Secrets Act, and the
Integrated Circuit Layout Protection Act. AIT has heard no
complaints from industry about problems with data protection in
Taiwan.

Data Protection - Pharmaceuticals
---------------------------------

19. (U) To satisfy TRIPS Article 39.3, in January 2005, Taiwan
revised the Pharmaceutical Affairs Law to provide for five years of
data protection in order to prevent unfair commercial use of test
data submitted by pharmaceutical companies for marketing approval
from regulatory authorities. In early December 2009, the EY
approved proposed amendments to the Patent Act that would extend
this protection period up to five more years if the Taiwan
regulatory process delays a patented medicine's entry onto the
market. According to TIPO, the LY will consider the amendment in the
spring legislative session.

20. (U) The current Law allows competitors to refer to the
originators' data and submit generic filings three years after the
originator gains market approval, and requires drug companies to
register a new product in Taiwan within three years of the product's
release in an advanced-country market.

21 (SBU) However, the Law only covers new chemical entity products,
and not new indications for previously-developed drugs. In
addition, the Law limits the applicability of data protection to
registrations filed within three years--from the first approval
granted anywhere in the world--for a product based on that new
chemical entity, which industry claims is inconsistent with the
objectives of TRIPS data protection rights, and may not effectively
prohibit premature commercial use, especially for new indications of
older drugs.

Data Protection - Patent Linkage
--------------------------------

22. (SBU) Taiwan has not yet established patent linkage in the
regulatory procedures for approving generics (ref F), which means

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that a generic drug can get drug marketing approval from the Taiwan
Department of Health and a reimbursement price from the Bureau of
National Health Insurance before the original drug's patent has
expired.

23. (SBU) Under a 2005 revision to the Pharmaceutical Affairs Law,
the Taiwan authorities require patent-owners to register a drug's
patents when the patent-owners receive the product license in
Taiwan. Therefore, data similar to that submitted in the "Orange
Book" system in the United States is available to the Taiwan
authorities. However, Taiwan has no plans to implement a U.S.-style
patent linkage system.

Production, Import, and Export of Counterfeit Goods
--------------------------------- -----------------

24. (SBU) Most large-scale pirating of optical media, software, and
clothing has shifted to other locations in Asia. Over the past
decade, enforcement authorities have increased the frequency and
effectiveness of raids against night markets and large-scale optical
media factories, significantly reducing the number of pirated
products for retail sale. In response, IP pirates have shifted from
large optical media plants to small, custom optical-media burning
operations, often for home delivery and sale over the Internet, or
have shifted production overseas.

25. (SBU) Infringement of trademarked goods, such as cigarettes,
clothing, handbags, watches, and footwear, is also an area of
concern in Taiwan. In 2009, infringement-related cases and arrests
both rose from the previous year: police filed 1040 cases last year,
a 19.13 percent jump from 2008, and arrested 1,180 suspects, up
23.17 percent from 2008. The jump may, however, simply be a return
to previous levels, because 2008 cases and arrests were down 27
percent and 25 percent from 2007, respectively.

26. (U) Taiwan Customs reported that the number of seizures of
counterfeit branded goods increased in 2009 to 270 cases from 226
cases in 2008. There were 300 seizures in 2007. Taiwan Customs
impounded 1,215,282 items in 2009, compared to 1,104,557 items in
2008, and 4,446,506 items in 2007. As in 2008, counterfeit
cigarettes accounted for 85 percent of seized goods, with clothes
and medicines making up three percent each, and auto parts,
footwear, and leather products for about one percent each or less.

27. (U) In 2009, Taiwan Customs recorded only three cases of export
commodities found to infringe trademarks--down from four cases in
2008--although the 102,672 trademark-violating individual goods
seized in the 2009 cases were a 78-percent increase from the 57,626
items seized in 2008.

28. (U) Under its Optical Disk Law, Taiwan routinely inspects
exports of disks and disk-manufacturing equipment. In 2009, Customs
found only 15 illegal export cases involving optical disks--down
from 31 cases in 2008--none of which were disks suspected of
violating copyrights. Instead, all 15 cases involved false
declarations of export quantity.

29. (SBU) Original-drug manufacturers remain concerned about
counterfeit drugs, but for the third year in a row, the AmCham
Pharmaceutical Committee's annual policy priority paper ranked the
issue last in importance, below other IPR issues such as patent
linkage and data exclusivity.

Enforcement: Police and Courts Good, Sentences Still Light
------------ ----------------------- ---------------------

30. (U) Taiwan's Joint Optical Disk Enforcement (JODE) Task Force
conducted 820 inspections of optical disk manufacturers in
2009--over half during non-work hours--and found only two violations
of Taiwan law. Similar raids in 2006, 2007, and 2008 found no
violations of Taiwan law.

31. (SBU) Continuing a recent downward trend (ref G), in 2009, the
IPR Police conducted 16.48 percent fewer raids (5241 in total) than
in 2008, and began 5.5 percent fewer infringement cases. Arrests,
however, were down less than one percent, suggesting the police have
improved targeting.

32. (U) Seizures of counterfeit goods declined in all major
categories from 2008 to 2009, with pirated music, movie, and
software/video-game disk seizures down 17.8 percent, 11.2 percent,
and 19 percent, respectively. These numbers reflect the increasingly
digital nature of piracy in Taiwan.

TAIPEI 00000178 005 OF 007

33. (SBU) As in previous years, very few successful IPR-related
prosecutions result in jail time for violators. In 2009, Taiwan
courts handed down 29 percent fewer sentences for IPR-related crimes
(1,768) than in 2008 (2,497). As in 2008, the vast majority--92
percent--of cases in 2009 resulted in a fine or a jail term of six
months or less. [Note: In Taiwan, jail terms of six months or less
are almost automatically converted into fines. End note.]

34. (SBU) The long-awaited specialized IP Court started accepting
cases in July 2008 (ref F), and by year's end had received 694
cases. In 2009, the IP Court handled 1878 cases, and closed out
1364. The Court accepts first-instance and appeals civil and
administrative cases, as well as criminal case appeals. AIT industry
and Ministry of Justice (MOJ) contacts have praised the Court for
its knowledgeable experts, and note the IP Court is handling cases
faster than non-specialized courts (ref D).

Enforcement: Customs
--------------------

35. (SBU) Movie, music, and software rights holders--along with
pharmaceutical companies--continue to complain that Taiwan Customs
is a weak link in Taiwan's relatively good efforts against piracy
(ref D). Industry representatives tell us pharmaceuticals, music,
and movies are commonly sent to Taiwan by mail-order in small
batches--the majority from China, but also from South East Asia--but
Customs officials do not seem willing to spend time seizing these
smaller quantities of counterfeits. Rights holders attribute this
reluctance to Customs officers wanting to avoid the large amount of
paper work required for even relatively small seizures, as well as a
lack of manpower available for follow-up investigations.

36. (SBU) Changes to the copyright law in 2004 allowed for ex
officio inspections by Taiwan Customs, but the law requires rights
holders to verify within a short period that the seized materials
are counterfeit. Although TFACT and other rights holders report to
us that they routinely send personnel to Taoyuan International
Airport and other ports of entry to verify the authenticity of
suspect parcels, Customs tells us some rights holders are not
responsive to requests to verify suspect trademark violations.

37. (SBU) AmCham Taipei's IPR Committee also considers Customs
enforcement relatively weak. The Committee's 2010 draft White Paper
on IPR issues recommends Taiwan broaden and streamline Customs
inspection and seizures. AmCham calls for:

--A more organized, speedy, and transparent system for investigating
and prosecuting suspected importers of counterfeit or smuggled
goods.
--More disclosure of information related to Customs seizures,
including basic information on importers and exporters.
--A database of fined, convicted, and/or suspected importers of
counterfeit and smuggled goods that could be shared, monitored, and
added to by Customs, the Judicial Yuan, the Taiwan Intellectual
Property Office (TIPO), the Ministry of Justice, the Ministry of
Interior, and the Ministry of Finance.
--More training for Customs officials on recognizing counterfeit and
smuggled goods.
--An online database of trademarks, copyrights, and
brands--including images of trademarks and brands, contact
information of rights holders, countries of production, and
licensees--available to Customs personnel as they inspect shipments
at the ports of entry.
--Increased inspections of postal and express mail service
packages.

Campus Anti-Piracy Efforts
--------------------------

38. (SBU) In early 2007, the Ministry of Education (MOE) started a
three-year Campus IP Action Plan to combat IPR violations at
Taiwan's universities (ref H). Under the Plan, the MOE maintains
IPR-related requirements and targets for Taiwan universities, and
publicly grades each university's performance on numerous metrics in
order to promote best practices and shame less successful schools
into taking more action. In 2008, the MOE issued increasingly strict
guidance for the Taiwan Academic Network (TANet), the Ministry's
island-wide high-school and university intranet, including new rules
forbidding all peer-to-peer (P2P) software use except with explicit
permission, requiring daily bandwidth limits, and monitoring
download volume per student (ref D).


TAIPEI 00000178 006 OF 007


39. (SBU) The Plan--originally intended to run for three years to
end-2009--led universities to take tangible steps to deal more
seriously with IPR protection, especially in combating unauthorized
file-sharing on TANet (refs B, D, and I). The MOE, encouraged by
schools' improvements under the Plan and spurred by continual U.S.
engagement, decided in November 2009 to continue with the Plan
indefinitely.

Campus Anti-Piracy Efforts - Textbooks
--------------------------------------

40. (SBU) The Action Plan also targets illegal textbook copying.
Taiwan university administrators tell us that under the Plan,
on-campus copying of textbooks has become less rampant and less
visible in Taiwan year on year, especially at on-campus copy shops.
They also report off-campus copy shops are either more reluctant to
copy textbooks in whole or in part, or have begun to refuse to copy
more than a few pages of any one book (ref B).

41. (SBU) The Taiwan Book Publishers' Association (TBPA), however,
continues to complain that the situation has not improved, but has
merely gone underground. According to TBPA's chairwoman, off-campus
copy shops still take orders through representatives on campus and
standing student relationships, then deliver books directly to
customers.
TPBA, however, does not have direct evidence to back up the
organization's claims: in a repeat of results from the three
preceding years, Police copy-shop raids at the beginning of the 2009
fall semester failed to turn up significant amounts of violating
materials.

42. (SBU) To bolster TBPA's claims about widespread textbook piracy,
the Association asked professors Yu Ching-hsiang and Cheng Yu-ting
of National Chengchi University to undertake a survey of over a
thousand students at 20 Taiwan colleges. According to the survey,
52 percent of Taiwan college students admit to having photocopied at
least one entire textbook. A similar survey in 2007 showed that
roughly half of college students buy pirated versions of some books
and supplementary materials (ref J).

Treaties
--------

43. (U) Taiwan is not a member of the United Nations and is
therefore not a signatory to the 1996 WIPO Copyright Treaty (WCT) or
the WIPO Performances and Phonograms Treaty (WPPT). However, Taiwan
abides by the terms of both treaties.

Sour Note: Collective Management
--------------------------------

44. (U) ON January 12, the LY passed amendments to the Copyright Act
and the Copyright Intermediary Organization Act (now known as the
Copyright Collective Management Act, or CCMA). The Copyright Act
amendments exempt owners of restaurants and other public venues,
television content providers, and broadcasting stations from
criminal, though not civil, responsibility for unwittingly
rebroadcasting materials that violate copyright.

45. (SBU) The amendments to the Copyright Collective Management Act
(CCMA) allow users to pay a TIPO-determined licensing rate to the
rights holder if the user and the rights holder's designated
collective copyright management organization (CMO) are not able to
reach agreement on a rate. CCMA amendments mandate a single CMO
contact window for users, ban rights holders or CMOs from using
commissioned agents to collect licensing fees, and require rights
holders to set a single rate for identical content provided through
different artist management agencies.

46. (SBU) Music rights holders in Taiwan are not happy about the
changes. According to RIT's Lee, removing criminal liabilities for
rebroadcasting violating works is a step backwards in enforcement.
Lee agrees it makes sense to set a single licensing window for
users' convenience, but thinks this should be set up on a volunteer
basis among CMOs and users. RIT also fears TIPO-imposed licensing
rates will be unfairly low, and thinks that, due to the large number
of potential broadcasting venues in Taiwan--including stores,
restaurants, schools, karaoke bars, and clubs--rights holders will
not be able to collect fees efficiently without using commissioned
agents.

Comment
-------

TAIPEI 00000178 007 OF 007

47. (SBU) Taiwan continues to build on the significant progress
identified in last year's report, including passing tough new
ISP-related digital piracy amendments, and indefinitely extending
the Campus IP Action plan.
We assess that the Taiwan authorities will continue to support
effective IPR policies, including efforts to reduce piracy on
campuses. In 2010, we will press Taiwan to enforce newly-enacted
Copyright Act amendments, pass amendments to the Patent Act that
address industry concerns on compulsory licensing, and continue to
combat digital and textbook piracy on university campuses.

STANTON

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