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### Viewing cable 04HANOI513, VIETNAM: EMBASSY INPUT FOR 2004 SPECIAL 301 REVIEW

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04HANOI513 | 2004-02-23 09:35 | 2011-08-25 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Hanoi

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 07 HANOI 000513

    SIPDIS

    SENSITIVE

    STATE FOR EB/IPC WILSON AND EAP/BCLTV
    STATE ALSO PASS USTR BURCKY/ALVAREZ AND BRYAN
    STATE ALSO PASS USPTO FOR URBAN
    STATE ALSO PASS LIBRARY OF CONGRESS FOR TEPP
    USDA FOR FAS/FAA/AO HUETE
    USDOC FOR LASHLEY AND 4431/MAC/AP/OPB/VLC/HPPHO
    USDOC ALSO FOR ITA/TD/OTEA/JJANICKE AND ITA/TD/SIF/CMUIR

    E.O. 12958: N/A
    TAGS: KIPR ETRD ECON VM IPROP BTA
    SUBJECT: VIETNAM:  EMBASSY INPUT FOR 2004 SPECIAL 301 REVIEW

    SENSITIVE BUT UNCLASSIFIED PROTECT ACCORDINGLY

    REF:      (A) STATE 29549
              (B) 03 HANOI 2795
              (C) HANOI 406
              (D) 03 HCMC 1035
              (E) HCMC 0115

    SUMMARY

    ¶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
    world.

    END SUMMARY.

    --------------------------------------------- ----------
    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
    piracy.

    --------------------------------------------- -----------
    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
    chapter.

    ¶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
    year:

    -- 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
    agencies;

    --        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
    violation;

    --   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.

    SIPDIS
    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
    violated.

    ¶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
    "investigation."

    ¶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
    issues.

    ¶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
    seminar;

    -- 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
    measures;

    -- 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
    distribution.

    -----------------------------
    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.
    BURGHARDT

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