Cablegate: Special 301 Kuala Lumpur Input

VZCZCXRO2939
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0130/01 0561000
ZNR UUUUU ZZH
R 251000Z FEB 10
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 3912
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 0006

UNCLAS SECTION 01 OF 04 KUALA LUMPUR 000130

SIPDIS

DEPT FOR EB/TPP/IPE: T McGowan AND EAP/MTS: D Bischof
DEPT PASS USTR FOR J. GROVES and K. EHLERS
USDOC FOR ITA/MAC/OIPR
USDOC ALSO FOR USPTO
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: ECON ETRD KIPR MY
SUBJECT: SPECIAL 301 KUALA LUMPUR INPUT

REF: STATE 3361

Sensitive but Unclassified. Not for Internet distribution.

Summary and Recommendation
--------------------------

1. (SBU) In 2009 Malaysian IPR enforcement authorities continued to
make significant progress in fighting IPR piracy as compared to the
previous year. Malaysia also continued its legislative efforts to
modernize its copyright laws and come into compliance with various
trade commitments, including the WIPO Copyright Treaty and the WIPO
Performances and Phonograms Treaty. The United States and Malaysia
continued to cooperate closely, in particular through Malaysia's
participation in our IPR training programs. Nevertheless, as the
overall piracy rates in Malaysia remain high for most types of IP,
there is substantial room for the Malaysian government to continue
to improve prosecution efforts and the efficiency of its IPR courts,
to include seeking certain legislative reforms to strengthen the
Malaysian authorities and IPR protection.

2. (SBU) Recommendation: The Malaysian Government's record in 2009
showed a significant commitment to strengthening IPR protection with
substantial improvements in enforcement activities and training, as
well as improvements in prosecutions, and action in its IPR courts.
Despite these many positive trends, however, industry estimates on
current IPR piracy levels indicate that piracy remains a serious
problem. Malaysia also needs to move from the drafting process to
actually introducing into parliament proposed amendments intended to
strengthen its copyright act. Embassy Kuala Lumpur therefore
recommends that Malaysia remain on the Special 301 Watch List. End
Summary and Recommendation.

Enforcement Efforts Improved
----------------------------

3. (SBU) Immediately upon assuming office in March 2009, the new
Minister of Domestic Trade, Co-operatives and Consumerism (MDTCC)
Ismail Sabri Yaakob made it clear that he would make IPR enforcement
a priority again. He instructed Ministry officials to improve
co-operation with private sector stakeholders and told his
enforcement division to make IPR enforcement a high priority. He
also revived the previously defunct Special Anti-Piracy Taskforce
(SAPTF) which includes government officials, rightholders, and
industry associations. According to international law firms and
industry rightholder's associations in Kuala Lumpur, these Malaysian
government initiatives have resulted in better and faster
enforcement action throughout the country.

4. (SBU) Some rightholders complain that subordinating local MDTCC
enforcement officers to the Malaysian Administrative and Diplomatic
Services (MADS) in state level offices unnecessarily slows down
enforcement. In 2009, MDTCC launched a new web-based system for
submitting IPR violation complaints and raid requests. Despite
this, some industry groups, especially those filing large number of
requests, still complain that many of the requests don't even
receive a response.

5. (SBU) The official number of raids, arrests, and prosecuted cases
in 2009 is not available from MDTCC at this time, but Post will
report septel when the official statistics are available, usually
during the month of March. According to Malaysian industry
organization statistics, the number of criminal raids was
significantly down, with total number of raids reported at 291, as
compared to 668 raids in 2008. However, several industry
associations report that thanks to better co-operation between
rightholders and MDTCC, the government raids are better targeted and
more productive, and they result in higher-value prosecutions.

6. (SBU) While there has been some recent improvement in MDTCC
investigations, industry sources say those enforcement efforts are
often restricted to the downstream retail facilities. Industry
hopes that MDTCC will conduct more full fleged investigations that
lead to the source of distribution or the manufacturing facility for
pirated products in Malaysia.

7. (U) Besides the IPR enforcement unit of MDTCC, the Royal
Malaysian Customs (RMC) also has authority to enforce IPR under its
ex-officio capacity under the Trade Marks Act of 1976. The RMC has
been reluctant to get involved in IPR enforcement, and detains goods
on suspicion of infringing or counterfeit only if the rights holder
files a complaint with the Register of Trade Marks under MDTCC.
(NOTE: Since the rights holder seldom would have prior knowledge of
infringed goods shipments, RMC usually does not get involved with
the interception of counterfeit goods at the ports of entry.)

KUALA LUMP 00000130 002 OF 004

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

8. (U) In 2009 Malaysian IPR enforcement officers continued to exert
increasing pressure on the producers and exporters of counterfeit
optical disc media products. While the number of enforcement
actions slowed down, the IPR courts established in 2007 were able to
more effectively hear complex cases involving optical media
infringement issues. Local and international industry associations
report that Malaysia has addressed its export piracy problem in most
sectors, but they assert that the export of pirated entertainment
software remains a problem.

9. (U) Statistics compiled by the industry indicate an increase in
the estimated level of piracy in records and music, but no
significant change in piracy of business software. The estimated
piracy level of records and music remained unchanged at 60 percent,
while the business software piracy rate remained unchanged at 60
percent.

10. (SBU) MDTCC works with the Business Software Alliance to target
students, company directors, and employees, and includes both
educational efforts as well as targeted enforcement. The program
was launched in 2007 and targets the use of pirated software, with a
focus on business software. The KL Business Software Alliance
representative said that the program was effective. Based on the
improvements from this program and general responsiveness of
Malaysian authorities, it recommends that Malaysia should be removed
from the Special 301 watchlist.

Book Publishing
---------------

11. (SBU) The book publishing industry reports that the book piracy
situation remained a significant problem in Malaysia in 2009,
especially due to commercial, large-scale illegal photocopying of
textbooks in and around university campuses. Reportedly, photocopy
pirates save soft copy scans of books onto portable hard drives or
computers, and can either transfer the illegal copy electronically
or print directly from the computer. These new technologies make
detection of infringement more difficult.

12. (SBU) The illegal copying of text books reportedly is
widespread, especially in Klang Valley university campuses, where
some lecturers are actively involved and sometimes provide sample
copies of textbooks to infringers. Pirated books are often
delivered by vans directly to students. Some websites also offer
scanned copies of books for download.

13. (SBU) Local law firms complain that there is no uniform approach
to the pre-requisites for conducting raids. Reportedly, some MDTCC
officers require publishers to submit declarations as proof of
ownership in advance for each title in a given raid. Prosecutions
against illegal copy shops remain slow and often problematic because
of lack of preparation by prosecutors and officials handling the
cases. While these enforcement efforts are lacking, Malaysia is
addressing the widespread illegal copying on college campuses
through targeted awareness programs, such as the "IP Mobile Clinic"
which was launched in 2009 and visits key college campuses
throughout Malaysia.

Internet Piracy
---------------

14. (U) According to industry representatives, internet piracy
increased in 2009 mostly due to greater internet and broadband
penetration. Malaysia had 66 percent internet penetration as of the
end of 2009, with almost 17 million internet users. Broadband
penetration increased by about 200,000 to 1.4 million subscribers.

15. (U) Music piracy from the internet remains the most significant
form of internet piracy in 2009, but motion picture piracy is also
increasing. The Recording Industry Association of Malaysia (RIM)
has claimed a significant increase in demand for digitized music in
Malaysia, which has eroded the sales of compact discs (including
pirated discs). RIM estimates that 25 percent of losses due to
music piracy are internet-based, and that 99 percent of music on the
internet in Malaysia is infringing copies. RIM also complained
about Malaysian piraters using websites to advertise the sale of
physical pirated goods.

16. (SBU) Online piracy is also an increasing problem for the
entertainment software industry. Illegal use of gaming software

KUALA LUMP 00000130 003 OF 004

over the Internet and at Internet cafes remains a significant
problem. Some of the "business models" used by the infringers are
becoming more complex and more difficult to track down. For
example, the game software may be installed on servers off-site,
sometimes off-shore, and used in the cafe's premises or by access
codes issued by the infringers.

17. (SBU) Industry is pushing legislation that would address the
liability of landlords and shopping mall owners who allow their
premises to be used for copyright infringement. Malaysia is
conducting a comprehensive review of its institutional arrangements
and enforcement regime. MDTCC has indicated in discussions with
Malaysian industry associations that the amendments to the copyright
laws would allow criminal action to be taken against the owners of
business premises who willingly allow their tenants to carry out
infringing activities. This review and expected amendments to the
copyright laws will be subject to full cabinet and parliament
reviews and approval, and the law is expected to be tabled at the
parliament during 2010.

Motion Picture Piracy
---------------------

18. (U) Despite success of voluntary industry efforts to curb
camcording in movie theaters, camcorder piracy remains a significant
problem, especially with the proliferation of advanced cell phone
technology which facilitates less detectable recording.

19. (SBU) Malaysian authorities currently use existing Malaysian
statutes to arrest and prosecute those caught recording movies in
cinemas. However, such arrestees can be charged only with theft,
not piracy. The Motion Picture Association continues to push for
the implementation of stand-alone anti-camcording legislation, both
to strengthen the authorities' hands (by broadening the scope of
illegal activity and by increasing fines) as well as to promote
greater understanding of this piracy problem among the Malaysian
public.

20. (SBU) The export of pirated discs has been significantly reduced
by good cooperation between rightholders, MDTCC officials stationed
at major international airports, and the Royal Malaysian Customs.
The increased access to broadband internet, however, may also have
contributed to this trend in reduced exports of physical pirated
materials.

Courts and Prosecution Improved
-------------------------------

21. (U) Special intellectual property courts now operate in Kuala
Lumpur, Penang, Terengganu, Kelantan, and Pahang. The first branch
was launched in Kuala Lumpur in July 2007. The plan is to expand
the IPR courts to all of Malaysia's 14 states and the administrative
capital region of Putrajaya. Six high courts, holding both civil
and appellate jurisdiction, will be established in Kuala Lumpur,
Selangor, Johor, Perak, Sabah and Sarawak. The IP courts are
organized to operate independently of the rest of the court system,
with both judges and prosecutors assigned exclusively to the IP
courts.

22. (SBU) MDTCC has created 25 Deputy Public Prosecutor positions
specialized in handling the prosecution of criminal IP cases.
Currently, 22 of the positions are filled. The combination of
special prosecutors and IPR courts should lead to a more effective
prosecution of infringers. Industry groups argue that the combined
efforts of investigation and prosecution should be targeted to
detecting the source of the pirated copies and not just raids to the
retail sales outlets. While retail raids may generate a lot of
publicity, the confiscated goods often are stolen before they are
destroyed, and make their way back to the market.

23. (U) The various IP industry associations in Malaysia hope that
the new courts will increase the efficiency of the judicial system
in processing IPR related cases. The MDTCC has also taken steps
together with Malaysian and international industry associations and
interested international governments, including the U.S., E.U. and
Sweden, to build the capacity of its enforcement officers to handle
complex evidence in order to build stronger criminal cases against
IP pirates. MDTCC and Royal Malaysian Police investigation officers
participated in 35 training sessions conducted on copyright
investigations and prosecutions by the Motion Picture Association of
America's local representatives. Recording Industry Association
trained 100 MDTCC officers on the role of ISPs and on internet and
forensic investigations. Local industry associations and bar
association continue to provide this training.

KUALA LUMP 00000130 004 OF 004

U.S.-Malaysia IPR Cooperation
-----------------------------

24. (SBU) In 2009 the U.S. government continued close cooperation
with the Malaysian government to promote increased IPR protection.
Several Malaysian officials attended USG-funded IP training programs
that were offered in 2009 by the U.S Patent and Trademark Office
(USPTO). Among the programs attended by Malaysian officials were
USPTO Global Intellectual Property Academy programs on enforcement,
patents, and trademarks. Malaysian officials attending this
training were from MyIPO (Malaysian Intellectual Property
Organization), MDTCC, IPR Courts, and Attorney General's office.
The International Law Enforcement Academy (ILEA) in Bangkok also
provides IPR enforcement training and has made slots available for
Malaysian enforcement officials.

Malaysia's International IP Obligations
---------------------------------------

22. (SBU) Malaysia has made progress towards ratifying multilateral
IP treaties. Malaysian government officials hope to secure
parliamentary ratification of Malaysia's accession to the WIPO
Copyright Treaty and the WIPO Performances and Phonograms Treaty
after the amendments of the respective domestic acts are passed by
the Parliament. MDTCC and MyIPO officials estimate that the
legislative process could be completed by the end of 2010. The GOM
also foresees Malaysian accession to several other IP treaties,
including the Convention Relating to the Distribution of
Program-Carrying Signals Transmitted by Satellite; the Protocol
Relating to the Madrid Agreement Concerning the International
Registration of Marks; the Budapest Treaty on the International
Recognition of the Deposit of Microorganisms for the Purposes of
Patent Procedure; and the Trademark Law Treaty. Malaysia has not
committed yet to joining the International Convention for the
Protection of New Varieties of Plants (aka the UPOV Convention),
preferring to wait until it can evaluate the effect of its
newly-implemented domestic plant protection legislation.

23. (SBU) The Ministry of Health announced in 2007 that the
government would implement a legal framework called "Test Data
Protection Directive" to protect pharmaceutical data in order to
meet the data protection obligations under TRIPS Article 39.3. The
announcement indicated that such protection would be extended for 5
years for new products, and 3 years for new indications of existing
products. The time period in both cases would begin from the date
that such protection was extended in the product's country of
origin. Ministry of Health indicates that they have finalized the
directive, and that the directive would be implemented before the
end of 2010.

KEITH

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