US embassy cable - 04HANOI406

UNCLAS SECTION 01 OF 02 HANOI 000406 
 
SIPDIS 
 
STATE FOR EB/TPP/MTA/IPC ALISON AREIAS AND EAP/BCLTV 
STATE ALSO PASS USTR BURCKY/ALVAREZ AND BRYAN 
STATE ALSO PASS USPTO FOR URBAN AND FOWLER 
STATE ALSO PASS LIBRARY OF CONGRESS FOR TEPP 
USDOC FOR LASHLEY AND 4431/MAC/AP/OPB/VLC/HPPHO 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, ECON, VM, IPROP 
SUBJECT: VIETNAM: NIKE RAIDS IN HANOI - SMALL STEP IN THE 
RIGHT DIRECTION 
 
1.  SUMMARY:  In November 2003, the Ministry of Trade's 
Market Management Bureau (MMB), in cooperation with Nike's 
Brand Protection Specialist, raided 21 private sport shops 
and a state-owned knitwear factory, confiscating more than 
1,200 counterfeit items.  Two months later, the MMB 
destroyed all of the goods it had confiscated.  While the 
number of goods destroyed represents only a fraction of the 
total number of counterfeit Nike products available 
throughout Vietnam, Nike representatives termed the raids a 
victory.  Building on this successful operation, Nike is 
working to formalize future cooperation with the MMB on IPR 
enforcement in Vietnam.  End Summary. 
 
2.  On October 1, Nike Vietnam formally requested the MMB 
raid shops in Hanoi that sell counterfeit Nike products. 
After a short consultation with other GVN IPR agencies, the 
MMB's deputy director, Mr. Vuong Tri Dung issued a decision 
to perform the raids.  On October 7, a team of MMB 
inspectors, in conjunction with Nike's Brand Protection 
Specialist, raided 21 private sport shops and the state- 
owned Hanoi Knitwear Factory, confiscating 229 pairs of 
shoes, 244 shirts, 558 pairs of socks, 32 pairs of shorts, 
16 hats and six kilograms of Nike labels.  All of the shops 
were forced to remove Nike advertisement boards and commit 
not to violate Nike's trademark in the future. 
 
3. On January 9 MMB's Mr. Dung and representatives from the 
Economic Police, (Note:  Another IPR enforcement agency, 
under the Ministry of Public Security. End note.) the 
People's Procuracy, and the Finance Department of Hanoi, 
supervised the destruction of all of the seized products. 
This is the first time that the GVN has destroyed 
confiscated counterfeit Nike products.  In the past, 
infringers were simply required to remove the infringing 
labels or signs.  In its news release, Nike expressed its 
appreciation for the MMB's decisive actions.  MMB did not, 
however, levy any fines against the companies that were 
raided.  MMB told econ assistant that fines of between VND 
20 million and VND 100 million (USD 1275 to USD 6375) will 
be levied only if any of the stores violate Nike's trademark 
again. 
 
4.  Since September 2003, Nike has made it a priority to 
develop a strong cooperative relationship with the MMB and 
credits the success of these raids to its ongoing efforts. 
In early October, Nike organized a two-day training session 
for ten MMB officials on how to identify counterfeit goods. 
Nike also provided MMB officials with information on 
Vietnam's IPR commitments in the U.S. Vietnam Bilateral 
Trade Agreement (BTA) and how IPR is related to Vietnam's 
WTO accession. 
 
Basis for Future Cooperation 
---------------------------- 
 
5.   Nike has had a representative office in Ho Chi Minh 
City since 1995.   In 2003, Nike exported about USD 550 
million worth of shoes and USD 70 million worth of garments 
from Vietnam.   All of Nike's production is for export. 
Only 4 retailers in Hanoi and 6 shops in Ho Chi Minh City 
are licensed to distribute Nike products and all merchandise 
for legitimate sale in Vietnam is imported.  Nike takes 
stringent methods to prevent theft of its trademark - 
including destroying all remains and "seconds."  Despite 
these efforts, Nike faces rampant infringement of its 
trademark throughout Vietnam.  Counterfeit products are 
widely available in all major cities.   Additionally, 
according to local Nike reps, some counterfeit products may 
be exported to neighboring countries including Cambodia and 
Laos. 
 
6.   With the goal of building on the success of these 
raids, Nike is now working with the MMB to draft a proposal 
on cooperation. Under the terms of the proposal, the MMB 
will be responsible for conducting a specific number of 
raids per year on a regular basis.  At the same time, Nike 
will establish a fund for those activities and provide more 
training for MMB officials.  The MMB expects to conclude the 
agreement next week.  Moreover, the Ministry of Trade has 
suggested using the MMB's cooperation agreement as a model 
document for other provinces and cities' Market Management 
Bureaus. 
 
7.   Comment: Nike has a considerable investment in Vietnam 
and is working hard to establish good cooperation with the 
GVN on IPR issues. Although Nike and the GVN have a long way 
to go to ensure full protect of Nike's trademark, this raid 
and the efforts to conclude a cooperation agreement are a 
good first step.  The raids also demonstrate that it is 
possible for IPR-dependant industries to establish 
cooperative relationships with the GVN on IPR enforcement. 
Despite being plagued by widespread counterfeit products, 
Nike remains upbeat about its operations in Vietnam. 
 
8. Comment continued:  The lack of punitive fines in these 
cases is disappointing.  The GVN remains reluctant to levy 
fines large enough to deter future infringement.  Mission 
will continue to monitor GVN IPR enforcement efforts and 
encourage the GVN to take stronger measures against 
violators. 
 
BURGHARDT