VZCZCXRO5589
PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #0249/01 0550450
ZNR UUUUU ZZH
P 240450Z FEB 08
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 8190
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 05 TAIPEI 000249
SIPDIS
SENSITIVE
SIPDIS
STATE PLEASE PASS TO AIT/W AND EAP/RSP/TC
STATE PASS USTR/DAVID KATZ AND JARED RAGLAND
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN
USDOC ALSO FOR ITA/MAC/OIPR
USDOC PASS TO USPTO GIN, BROWNING, AND LOC STEPP
E.O. 12958: N/A
TAGS: ECON ETRD KIPR TW
SUBJECT: Taiwan IPR: 2008 301 Watch List Submission
REFTEL: A) 2007 Taipei 2529, B) Taipei 8, C) 2007 Taipei 2442, D)
2007 Taipei 2498, E) Taipei 49
Overall Assessment
------------------
1. (SBU) In 2007, Taiwan continued to take measures to reduce
intellectual property right (IPR) infringement and strengthen its
IPR regime. AIT notes several positive developments over the past
year, most importantly the June passage by the Legislative Yuan (LY)
of a new law aimed at ending illegal file-sharing over peer-to-peer
(P2P) platforms, which enabled officials to shut down some of the
worst violators. Pharmaceutical industry representatives praised
Taiwan for increasing its efforts to combat counterfeit
pharmaceuticals, and the Ministry of Education (MOE) worked to
reduce IPR violations on Taiwan's college campuses with its Campus
IP Action Plan. In addition, the specialized IP Court remains on
schedule to open in July of this year, though some rights-holder
groups fear that there will not be enough judges or specialized
prosecutors to cover the estimated caseload.
2. (SBU) However, many problems remain. While physical copying of
optical-disk media continues to decline, digital piracy of music and
movies is a growing problem, and the authorities failed to send to
the LY an amendment to the Copyright Law that would limit an
Internet service provider's (ISP) liability if the ISP quickly
removed IPR-infringing material. Although the Business Software
Alliance reported that Taiwan's software piracy rate has dipped
slightly to 41 percent in 2007 from 43 percent the year before, some
software companies' representatives believe that the actual rate is
significantly higher. Rights-holders continue to criticize Taiwan
Customs for not doing enough to prevent counterfeit drugs, CDs, and
DVDs from entering Taiwan by mail. Although the MOE's Campus IP
Action Plan has led to some improvements in IP enforcement at
Taiwan's universities, the Plan has been hampered by its voluntary
nature, as well as the Ministry's reluctance to more actively engage
with rights-holder groups. Finally, Taiwan's overly-broad use of
compulsory licenses seems to violate its commitments under the
Agreement on Trade-related Aspects of Intellectual Property Rights
(TRIPS).
3. (SBU) Overall, despite continued progress in IP enforcement, AIT
does not believe that Taiwan has taken sufficient steps to merit
removal from the Watch List. In 2008, we will encourage Taiwan to
demonstrate continued commitment to IPR enforcement by passing the
ISP amendment, opening the long-awaited IP Court on schedule, and
reducing digital piracy on university campuses. End overall
assessment.
-----------------------
Ongoing Areas of Review
-----------------------
Notorious Markets
-----------------
4. (SBU) Piracy in Taiwan's night markets has declined over the past
decade, and there are no "notorious" physical markets. In addition,
in the wake of the June 2007 passage of the P2P bill, the
authorities have successfully shut down and prosecuted the worst of
the infringing P2P platforms. Ironically, the infringing website of
most concern to the Taiwan authorities is now GoFoxy dot net, which,
although aimed at a Taiwanese market, is hosted in the United
States.
Optical Media
-------------
5. (SBU) According to the International Federation of the
Phonographic Industry (IFPI), which represents the international
recording industry in Taiwan, as legitimate CD sales in Taiwan have
dropped by half since 2004, the percentage of pirated copies has
fallen from 36 percent of all copies sold to 22 percent (ref A).
IFPI estimates that the number of physical outlets for pirated CDs
has also fallen to only 30 stores around Taiwan, versus 250 a decade
ago, and other rights-holder groups agree that large-scale
production and distribution of physically-pirated goods is
declining. According to police records, there were 227
music-related physical piracy cases in Taiwan in 2006 and only about
150 in 2007. Rights-holder groups believe that most domestic
physical movie counterfeiting is now individuals burning 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.
TAIPEI 00000249 002 OF 005
Digital Piracy
--------------
6. (SBU) Digital piracy of music and movies, however, continues to
grow and is now the number one concern for movie and music
rights-holder groups. According to police statistics, Taiwan
authorities prosecuted 165 music-related digital piracy cases in
2006, which increased 60 percent in 2007 to 265 cases. According to
local experts, the Internet movie piracy rate is lower than that for
music downloads, but they believe that the movie downloading problem
will worsen as broadband Internet service becomes cheaper and more
widely available. Rights-holder groups also assert that Taiwan's
judiciary does not take the digital piracy problem as seriously as
it does physical piracy, despite the fact that Internet violators
have the potential to reach even more customers than traditional
underground DVD factories.
7. (SBU) There has been some good news in the fight against digital
piracy in Taiwan, however. In 2006 and 2007, IFPI members sent more
than 2500 "Cease and Desist" letters asking major Internet service
providers (ISPs) and auction sites to remove unauthorized music
content, with an 80 percent success rate in having the ISP remove
the offending content. 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. In September 2007, law enforcement agencies worked with
IFPI to raid and shut down the two largest P2P service providers in
Taiwan: Kupeer and Hip2p (ref A). Most Taiwan colleges have also
begun to enforce maximum daily download limits in order to restrict
student use of P2P platforms on school computers, though
administrators tell econoff that they are reluctant to completely
ban the use of P2P software (Ref B).
8. (SBU) Taiwan continues to make progress on developing legislation
that would limit an ISP's liability if the provider quickly removed
IPR-infringing material, but no legislation has yet been passed into
law. In 2007, the Taiwan Intellectual Property Office (TIPO)
proposed an amendment to the Copyright Law and sought comments from
the United States--along with ISPs and rights-holder groups. The
current version incorporates many U.S. suggestions. Although the
bill was forwarded to the LY last year, the 2007 LY session ended
before action was taken on the bill. TIPO plans to re-introduce the
proposed amendment during 2008's LY session.
Software, Including Use and Procurement by Authorities
------------------------ -----------------------------
9. (SBU) According to surveys done by the Business Software Alliance
(BSA), 41 percent of member-company software used in Taiwan is
unauthorized, down from 43 percent in 2006 and 2005. The true
picture of software piracy is likely worse, however. Software
makers have told AIT that that BSA's worldwide survey methodology
undercounts the true level of unauthorized use by at least 10
percentage points in Taiwan. According to rights-holders,
unauthorized use of software--including illegal copies, expired
licenses, and under-reporting of licensed users--is common not only
in the business community, but also on university campuses and
within official agencies. However, rights-holders tell AIT that
although BSA's numbers may underestimate the problem, the situation
in Taiwan is slowly improving, and that its 41-percent piracy rate
compares favorably with Singapore's 39 percent and Hong Kong's 53
percent.
TRIPS Compliance and Other IPR Issues
-------------------------------------
10. (SBU) Compulsory licensing is a practice whereby a company can
request that the authorities grant the company a license to produce
a patented product without the rights-holder's permission, and often
at a below-market rate. In 2004, TIPO granted the Taiwan company
Gigastorage a compulsory license to use Philips patents to produce
CD-Rs and CD-RWs. On January 31, the EU released a Trade Barriers
Regulation (TBR) investigation report on the Philips compulsory
licensing case. The EU investigators found that Taiwan violated its
commitments under the TRIPS agreement, and recommended that the EU
initiate WTO action if Taiwan does not revoke the original grants of
compulsory licenses against Philips, as well as take concrete steps
to change the laws on such licenses within two months of the release
date of the report. Although Gigstorage's compulsory license was
withdrawn in September 2007, Philips has appealed Taiwan's original
decision to issue the license, and expects that the Taipei High
Administrative Court will hand down its ruling on this case in the
first half of 2008 (ref C).
11. (SBU) 2007 also saw an attempt by Taiwan to expand the potential
TAIPEI 00000249 003 OF 005
use of compulsory licensing. After strong protests from business
groups and trading partners, however, in October, the LY suspended
debate on a proposed amendment to the Patent Act that would have
allowed Taiwan authorities a broader use of compulsory licensing for
pharmaceuticals and other patented products for domestic use and
export. TIPO, the agency responsible for drafting amendments to the
Act, has told AIT that it has no plans to re-introduce such a bill
to the LY during the 2008 session.
Data Protection
---------------
12. (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.
13. (SBU) In February 2006 Taiwan implemented a new Pharmaceutical
Law which provides pharmaceutical companies five years of data
exclusivity for new drugs. This coverage is limited to chemical
entity products and does not cover new indications. It also allows
competitors to refer to the originators' data and submit generic
filings three years after the originator gains market approval. New
products must be registered in Taiwan within three years of release
in an advanced-country market. Taiwan has not yet established a
system of patent linkage in the regulatory procedures for approving
generics. The Department of Health has expressed some interest in
setting up such a system and has studied the U.S. Orange Book
system, but so far there are no plans to implement a U.S.-style
patent linkage system (ref D).
Production, Import and Export of Counterfeit Goods
----------------------- --------------------------
14. (SBU) Most large-scale pirating of optical media, software, and
clothing has shifted to other locations in Asia. Since 2002,
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, over the past few years, 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.
15. (SBU) Trademark infringement, including fake cigarettes,
clothing, handbags, watches, and footwear is also an area of concern
in Taiwan, but official enforcement efforts remain robust. In 2007,
police filed 2890 cases involving trademark infringement, up 38%
from 2006, and arrested 3,279 suspects, up 37% from 2006. Taiwan
Customs reported that the number of seizures of counterfeit branded
goods increased from 241 in 2006 to 300 in 2007, and Taiwan Customs
impounded 4,446,506 items in 2007, compared to 2,973,653 items in
2006. Counterfeit cigarettes accounted for most of these items,
since each of about four million cigarettes each count as one item,
but Customs also seized counterfeit cosmetics, leather goods, PC
boards, medicines, and clothing. In addition, Taiwan Customs seized
7707 trademark-violating export goods.
16. (SBU) Rights-holder groups have praised Taiwan's efforts over
the past year against counterfeit pharmaceuticals (ref E). The
International Research-based Pharmaceutical Manufacturers'
Association (IRPMA), the original-drug manufacturers' industry group
in Taiwan, remains concerned about counterfeit drugs, but in its
2008 Policy Priority Paper, IRPMA ranks the issue far below other
IPR issues such as patent linkage and data exclusivity.
Enforcement: Active Police, Slow Courts, Light Sentences
--------------------------- ----------------------------
17. (SBU) Taiwan's Joint Optical Disk Enforcement (JODE) Task Force
conducted 1008 inspections of optical disk manufacturers in 2007,
and found no violations of Taiwan law. The IPR Police conducted
6582 raids, filed 18 percent more infringement cases in 2007 than in
2006 and made 15 percent more arrests. The IP Police's efforts show
the increasingly digital nature of piracy in Taiwan. Of the 2280
infringement cases that the IP Police handled in 2007, 1791 were
Internet infringement cases, with the rest retail and night-market
cases.
18. (SBU) The National Police also continued to use regular units
to investigate IPR infringement cases, and 2007 figures show an
increase in the number of cases filed and suspects arrested. Cases
increased by 22% to 6,274 and arrests increased 25% to 7,119.
Continuing a trend of the past several years, police seizures of
TAIPEI 00000249 004 OF 005
counterfeit optical media decreased compared to the same period in
last year, which officials attribute to the growing popularity of
downloading digital content from the Internet. Most successful
IPR-related prosecutions, however, do not end in jail time for the
violators. In 2007, Taiwan courts handed down 2,434 sentences for
IPR-related crimes, and 2069 were fines or short jail terms that are
typically converted into fines.
19. (SBU) Rights-holder groups continue to complain about the slow
pace of Taiwan's judicial process. According to Spencer Yang,
Executive Director of the Taiwan Foundation Against Copyright Theft
(TFACT), TFACT's case against the Ezpeer P2P site has dragged on
since 2005, and the Foundation also has two other cases that it
raised with the courts in November 2006 and are still under
investigation by the prosecutor's office. The specialized IP Court
may help with this process, and we expect the court will start
hearing cases in July 2008. Rights-holder groups, however, while
encouraged by the court's establishment, are pessimistic that the IP
Court will be able to improve IPR-related prosecutions since it will
only have about 10 specialized IP judges and the same number of
prosecutors. Currently, the Taipei District Court alone has 12
judges who hear IP cases as part of their normal caseload.
20. (SBU) Industry contacts believe that Taiwan Customs is the
weakest link in Taiwan's overall efforts against imported pirated
goods. According to rights-holder groups, the most popular way to
smuggle counterfeit drugs and optical disks into Taiwan is by
mail-order from Thailand or China. Rights-holder groups, however,
complain that Customs is not willing to spend time seizing smaller
quantities of counterfeits or doing follow-up investigations.
Although most pirated CDs and DVDs now come into Taiwan by air
parcel in packs of five or less, Customs officers have little
interest in intercepting such packages due to the large amount of
paperwork each case requires, as well as a lack of manpower
dedicated to follow-up investigations (ref E).
21. (SBU) Taiwan Customs conducts border inspection on both imports
and exports for pirated goods. In 2007, Taiwan Customs seized three
export and 300 import shipments with trademark infringements and 77
import shipments with copyright infringements. Of the 77 import
copyright infringement cases, most infringements were related to
counterfeit Nintendo games. While changes to the copyright law in
2004 allowed for ex officio inspections by Taiwan Customs, the law
requires rights holders to verify within a short period that the
seized materials are counterfeit. TFACT routinely sends personnel
to Taoyuan International Airport to verify the authenticity of
suspect parcels, but Customs reports that some rights holders are
not responsive to requests to verify suspect trademark violations.
22. (SBU) In 2007, the Taiwan Ministry of Education (MOE) made
reducing campus intellectual property rights (IPR) violations a
priority, and their efforts are may be creating some positive
results. Although the Campus IP Action Plan that the MOE released
end-October was watered down by university complaints, many schools
have stepped up enforcement efforts in response to the Plan's
incentives. Textbook copying and other physical piracy appear to
have continued their decade-long decline due to heightened
enforcement and increased understanding of Taiwan's IPR laws by
students and copy shop employees (Ref B), as well as the increasing
use of cheaper, Chinese-language texts. Rights-holder groups,
however, have told AIT that the action plan results are tentative at
best and that digital piracy is rampant on Taiwan's university
campuses. Software companies complain that the MOE and universities
are not doing enough to combat unauthorized software use on
campuses, and also that the MOE has not held promised meetings with
rights-holder groups.
23. (SBU) Rights-holder groups have also complained that--due to a
loophole in Taiwan's Copyright Law--clearly counterfeit goods seized
during investigations are often returned to defendants if the
investigation does not end in an indictment. In late January,
however, TIPO completed a draft amendment to the Copyright Law and
sent the draft to the Ministry of Justice (MOJ) for comment. TIPO
recently told econoff that if the MOJ and TIPO can quickly agree on
the draft's language, TIPO will send the amendment to the EY for
approval this spring, which could mean that the amendment would be
taken up by the LY by mid-year. In the meantime, TIPO's Deputy
Director General, Margaret Wang, recently told us that TIPO is
working with the MOJ and Judicial Yuan (JY) to find a way to
mitigate this problem until the law can be changed.
Treaties
--------
24. (U) Taiwan is not a member of the UN and is therefore not a
TAIPEI 00000249 005 OF 005
signatory to the 1996 WIPO Copyright Treaty (WCT) or the WIPO
Performances and Phonograms Treaty (WPPT).
Comment
-------
25. (SBU) Taiwan has made significant progress in addressing the
outstanding IPR problems identified in last year's report. We
believe that the Taiwan authorities firmly support an effective IPR
policy, but have thus far not been able to ensure complete
implementation of that support. Specifically, Taiwan has prepared
viable legislation on Internet service provider (ISP) liability, but
has not yet submitted it to the legislature. Although Taiwan has
laid the groundwork for the long-planned Intellectual Property (IP)
Court, the Court is not yet up and running. If the U.S. makes these
two issues a priority, however, we are optimistic that we can help
facilitate substantial progress over the next six months. At the
same time, we want to ensure that Taiwan maintains its current
efforts under the IP Action Plan to reduce piracy on campuses.
With these three major goals in mind, therefore, we believe that if
Taiwan continues its campus anti-piracy efforts, passes ISP
liability legislation, and opens the IP Court in July as scheduled,
Taiwan should benefit from an out-of-cycle review with the goal of
recognizing sustained progress on IP through removal from the Watch
List.