US embassy cable - 05HANOI451

UNCLAS SECTION 01 OF 07 HANOI 000451 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/IPE 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 4431/MAC/AP/OPB/VLC/HPPHO 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, ECON, VM, IPROP, BTA, WTO 
SUBJECT: VIETNAM:  EMBASSY INPUT FOR 2005 SPECIAL 301 REVIEW 
 
SENSITIVE BUT UNCLASSIFIED; PROTECT ACCORDINGLY 
 
REF:  STATE 23950 
 
1. (SBU) Summary:  Embassy recommends continued placement of 
Vietnam on USTR's Special 301 Watch List for 2004. 
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 2004 and is on track to promulgate a 
new comprehensive law on intellectual property in 2005. 
 
-- The Government of Vietnam (GVN) maintains a high-level 
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.  Vietnam has also 
committed to adhere to TRIPs upon accession to the WTO. 
 
-- The size of the market for U.S. intellectual property 
products in Vietnam, though growing, remains small, given 
Vietnam's low GDP per capita.  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 and counterfeiting in many product categories remains 
rampant and enforcement is weak.  Additionally, Vietnam has 
not met all of the IPR commitments included in Chapter Two 
of the BTA, which were due to be implemented no later than 
December 10, 2003.  Finally, market access barriers, 
especially censorship of "cultural products" continue to 
impede the availability of legitimate products, 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, and 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. 
 
4. (SBU) The GVN is lagging in implementing its IPR 
obligations, particularly those related to enforcement.  The 
BTA obligates Vietnam to provide expeditious remedies to 
prevent and deter infringement, to allow prompt and 
effective provisional measures, and to put in place 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, Vietnam committed to accede to several 
international intellectual property conventions "promptly." 
Vietnam acceded to the Berne Convention on October 26, 2004. 
However, Vietnam has not yet submitted its applications to 
the Geneva Convention (phonograms) or the Brussels 
Convention (satellite signals).  According to the National 
Office of Intellectual Property (NOIP), the GVN plans to 
complete application procedures for joining the Geneva 
Convention, the Brussels Convention, the Rome Convention for 
the Protection of Performers, Producers of Phonograms and 
Broadcasting Organizations and the International Union for 
the Protection of New Varieties of Plants (UPOV) in 2005. 
 
Improvements in IPR Laws Continue 
--------------------------------- 
 
5. (U) Vietnam has made significant progress over the past 
few years in establishing the legal framework for IPR 
protection.  The GVN issued the following legal and 
regulatory IPR-related reforms in 2004: 
 
-- On April 5, the Standing Committee of the National 
Assembly issued Ordinance No. 15/2004/PL-UBTVQH11 on plant 
varieties. This Ordinance upgraded provisions on IPR 
protection for plant varieties to meet the requirements of 
the UPOV Convention. 
 
-- On June 7, the President issued Resolution No. 
332/2004/QD-CTN on adhering to the Berne Convention on 
Copyright Protection for Literary and Artistic Works. 
 
-- On June 15, the National Assembly passed a Civil 
Procedure Code (CPC).  The CPC, which went into effect on 
January 1, 2005, regulates resolution of civil cases 
including IPR-related cases. 
 
-- On July 14, the Ministry of Science and Technology (MOST) 
issued Instruction No. 18/2004/CT-BKHCN on strengthening IPR 
enforcement and oversight of the quality of domestic, import 
and export goods. The Instruction requires inspectors to 
monitor and resolve administrative breaches of IP rights. 
 
-- On August 3, 2004 the Office of the Government issued 
Official Letter No.3985/VPCP-KG containing the Prime 
Minister's approval for MOST to draft new IPR and technology 
transfer laws. 
 
-- On October 10, the Government issued Decree 
No.175/2004/ND-CP on violations and administrative sanctions 
in the trade domain.  Articles 18 and 19 of this decree 
detail sanctions for trading in fake goods, stamps, labels 
and packages and establish procedures for assessing fines 
for these acts.  These articles also provide for additional 
measures such as seizure of equipment used for infringement; 
destruction of counterfeit goods; and, confiscation of 
illegal profit. 
 
-- On December 3, the National Assembly passed the Law on 
Publishing.  The law was announced by the President under 
Resolution No. 26/2004/L/CTN on December 14 and will come 
into effect on July 1, 2005. The law requires the state to 
develop policies that both stimulate and develop the 
publishing sector. It also requests the State to help in the 
purchase of copyrights of valuable domestic and foreign 
works. 
 
-- On December 29, MOST and the Ministry of Finance (MOF) 
issued Inter-Ministerial circular No.129/2004/TTLT/BTC-BKHCN 
on border control measures for industrial property of import 
and export goods.  This circular authorizes IP rights 
holders and their representatives to file petitions for 
applying border control measures for IP if they find 
evidence of infringement. 
 
-- On December 31, MOF issued Circular 132/2004/TT-BTC 
providing guidelines for the collection, payment, control 
and utilization of industrial property fees and charges. The 
Circular established one set of fees and charges for IP 
protection and services for all Vietnamese and foreign 
entities and individuals.  Circular 132 replaced a May 1997 
circular, which applied a two-tier price structure for IP 
fees and charges to Vietnamese and foreign applicants. 
 
-- On January 5, 2005 the Ministry of Home Affairs issued 
Decision No.12/2005/QD-BNV on establishment of the Vietnam 
Anti-Counterfeit and Intellectual Property Protection 
Association (VACIP) of foreign-invested enterprises. 
 
New Legislation to be adopted in 2005 
------------------------------------- 
 
6. (U) The NOIP has the lead on drafting a new comprehensive 
IPR law for Vietnam.  This new law should help to 
consolidate Vietnam's existing IPR regulations.  The law 
should also address shortcomings of the current legal 
framework including:  lack of provisions for remedies, 
inconsistencies with the Berne Convention, and lack of 
reference to new media such as the Internet.  NOIP is 
working with the Vietnam Office of Literary and Artistic 
Copyright and the Ministry of Agriculture and Rural 
Development on the draft law.  NOIP plans to submit a draft 
to the Standing Committee of the National Assembly and to 
the public for comment in March.  The law is on the National 
Assembly legislative calendar for review in May and approval 
in November. 
 
7. (U) Two draft regulations have been submitted to the 
Minister of Science and Technology for approval: 
 
-- A draft Circular implementing Decree No.42/2003/ND-CP on 
Industrial Property Protection for Layout Design of 
Integrated Circuits 
 
-- A draft Circular implementing Decree 54/2000/ND-CP on the 
Protection of IPR to Business Secrets, Geographical 
Indications, Commercial Names and the Protection against 
Unfair Competition. 
 
8. (U) MOST and MOF have submitted amendments to a 1999 
Decree (No. 12/1999-ND-CP) dealing with administrative 
sanctions against industrial property violations to the 
office of the Government for approval.  The proposed 
revisions seek to more clearly define IPR violations, 
increase the level of punishment and fines for violators, 
and reduce the overlapping functions of IPR enforcement 
agencies.  The revisions also seek to provide more specific 
criteria for use of administrative measures with the goal of 
reducing the use of administrative measures as a substitute 
for civil proceedings. 
 
Piracy Still Rampant 
-------------------- 
 
9. (U) The GVN has made little, if any, progress on reducing 
the amount of counterfeit and pirated goods available in 
Vietnam.  Hanoi, HCMC and most other major cities in Vietnam 
are rife with music CD, VCD and DVD and video shops, with 
100 percent of the U.S. product on sale or for rent 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. 
 
10. (SBU) State-owned television and cable stations 
occasionally show unlicensed U.S. films on local television 
and cable channels.  Some 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.  On a number of occasions, 
films that have been banned from import by censorship 
authorities have subsequently appeared for sale in pirated 
DVD form in the market. 
 
11. (U) Software industry representatives estimate that 
piracy rates in Vietnam are upwards of 92 percent.  American 
software companies such as Microsoft have had little success 
in creating a market for their legitimate product, despite 
efforts to cooperate with enforcement authorities and 
multiple years of commercial presence in Hanoi.  Anecdotal 
evidence and industry sources suggest that GVN agencies use 
mostly pirated software on PC's in government offices. 
However, Microsoft experienced an estimated forty percent 
growth in its sales to government agencies and state-owned 
enterprises in Vietnam this year. 
 
12. (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 
------------------------ 
 
13. (SBU) The organizational structure of GVN IPR agencies 
remains complicated and bureaucratic, a fact acknowledged by 
GVN officials at all levels.  Multiple agencies are tasked 
with overlapping functions or 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.  Currently there are no 
procedures in place to provide recourse or compensation to 
rights holders whose rights have been violated. 
14. (SBU) There are efforts underway to enhance the role of 
various IPR enforcement agencies.  The Economic Police 
Department (EP) of the Ministry of Public Security has 
proposed establishment of an Anti-IPR Crime Section (also 
known as "Section Seven.")  The proposal is pending approval 
of the Minister.  In addition, on July 14, MOST established 
a Task Force on IPR Enforcement and Quality Control.  The 
Task Force is chaired at the vice minister level and is 
responsible for overseeing efforts related to IPR 
enforcement and quality control, making proposals for 
activities on IPR enforcement and quality control and 
coordinating efforts with other concerned agencies. 
 
15. (U) Vietnam's agencies do engage in enforcement 
campaigns that target unlicensed goods, including those 
involving copyright and trademark violations, but also those 
with "illicit or pornographic content" and cases involving 
food and drug safety.  The Ministry of Culture and 
Information (MOCI) reported that in the first eleven months 
of 2004 its inspectors carried out 31,673 surprise 
inspections (an increase of more than 12,000 over 2003). 
MOCI inspectors collected fines of ten billion Vietnamese 
Dong (VND) (about USD 630,000) in 2004 and forwarded 
documents for criminal prosecution in ten cases.  MOST fined 
20 individuals and organizations, of which, 13 cases were 
assessed a monetary penalty of VND 112 million (about USD 
7,000). NOIP assisted in addressing 404 industrial property 
violations.  According to news reports, the EP discovered at 
least USD 12.6 million worth of pirated and counterfeit 
goods during the first six months of 2004. 
 
16. (SBU) In 2004, the Market Management Bureau (MMB), an 
enforcement agency within the Ministry of Trade, executed 
raids on 94 businesses (80 retailers and 14 factories) 
selling counterfeit Nike products in Hanoi and Ho Chi Minh 
City (HCMC).  MMB officials seized footwear, apparel and 
equipment.  Businesses were fined USD 800 on average.  Nike 
plans to continue to work with the MMB on enforcement 
issues. 
 
17.  (SBU) In May 2004, joint EP and MMB teams raided three 
computer companies in Hanoi.  Each company was fined more 
than USD 8,000 for using pirated versions of Microsoft's 
operating system, Lac Viet dictionary and Norton anti-virus 
programs.  After the raids, the head of the MMB asserted, 
"the raids were the start of a nationwide campaign to 
protect the IPR of software companies."  In November 2004, 
inspectors from Ministry of Culture and Information (MOCI), 
MOST and the EP jointly raided two large computer suppliers 
in HCMC.  Each company was fined USD 2,000.  Enforcement 
agencies removed illegal software programs installed on 30 
computers including Microsoft Windows, Microsoft Office, 
Vietkey 2000, Adobe Photoshop, ACD See and CorelDraw, with 
an estimated value of USD 10,000. In addition, they 
confiscated 40 CD-ROMs containing unlicensed software 
programs. 
 
Lack of Availability of Legitimate Products 
------------------------------------------- 
 
18. (U) Given the relative poverty of Vietnam, with an 
average per capita GDP of around 552 dollars (2004), the 
size of the market for U.S. IP product remains fairly small. 
While losses to piracy are as high as 100 percent in some 
sectors, the dollar value remains a small 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 over 82 million, it will eventually 
become one of the major economies in the region. 
 
Growing Domestic Awareness 
-------------------------- 
19. (SBU) Public and private awareness of the value of IPR 
protection for Vietnamese products both in Vietnam and 
abroad continue to grow.  In 2004, several new organizations 
focused on IPR were established in Vietnam. 
 
-- On August 25, 2004 the Ministry of Home Affairs approved 
the establishment of the Vietnam Literature Copyright Centre 
(VLCC).  VLCC is a non-governmental and non-profit 
organization under the management of Vietnam Writers' 
Association. VLCC's stated purpose is to execute the 
contracts on copyright transfer between the Center and 
authors; to help settle disputes among members; and, to 
coordinate with relevant international organizations in 
protecting literary copyright.  VLCC also disseminates 
copies of laws, regulations and international conventions on 
copyright for literary works to its members, writers and the 
general public. At present, about 100 writers have signed 
contracts with the Center. The Center has asked the U.S.'s 
William Joiner Center to act as an intermediary between the 
Vietnam Writers' Association and American writers, whose 
books are published by the Association's publishing house in 
Vietnam. 
 
-- After more than two years wait, the Ministry of Home 
Affairs approved the establishment of the Vietnam Anti- 
Counterfeit and Intellectual Property Protection Association 
of foreign-invested enterprises (VACIP) on January 05, 2005. 
VACIP is the first anti-counterfeit association for foreign 
invested enterprises in Vietnam and is modeled on the 
Quality Brands Protection Committee (QBPC) in China.  It 
will function under the supervision of the Ministry of 
Planning and Investment.  Baker & McKenzie drafted the 
charter of this organization and, to date, Nike, Unilever, 
Glaxo Smith Kline, Proctor & Gamble and Ajinomoto have 
joined.  The association will represent member companies in 
the effort to fight against counterfeit goods in Vietnam; 
protect the rights of members; provide training to 
consumers, government officials and enforcement agencies; 
and, work with GVN on new IP policies. 
 
20. (U) In September, MOST and the Ministry of Culture and 
Information (MOCI) hosted Vietnam's first national 
conference on IPR with participation of Deputy Prime 
Minister Vu Khoan.  Representatives of 28 diplomatic 
missions and international organizations and 500 
representatives from the GVN and local businesses attended. 
In his remarks, DPM Khoan acknowledged GVN failure to 
adequately enforce existing IPR regulations; warned lack of 
effective IPR protection will stifle creativeness of 
Vietnamese creators and inhibit foreign investment; and, 
noted the importance of effective IPR enforcement as part of 
Vietnam's efforts to join the WTO. 
 
21. (U) In October 2004, HCMC government agencies 
responsible for IPR hosted an Exhibition on Anti-Counterfeit 
Technologies and Protection of Prestige and Quality 
Trademarks.  The exhibition featured a dialogue with private 
business on counterfeiting and IP challenges faced by 
businesses in HCMC.  During the dialogue, businesses raised 
the most problematic issues seen in IPR enforcement: 
inadequate financial and human resources for government 
enforcement agencies; weak coordination between IPR holders, 
government enforcement agencies and consumers; lack of clear 
direction on how businesses can coordinate with, and make 
contributions to, HCMC's efforts in combating IPR 
infringements; overlapping functions among government 
enforcement agencies that delay decisions and actions on 
violations; and, low penalties for IPR violators. 
 
22. (U) Businesses participating in the dialogue proposed 
creation of an "Anti-Counterfeit Fund."   Businesses pointed 
out that since IPR enforcement officials do not have 
sufficient resources, many companies would be willing to 
make contributions to an Anti-Counterfeit Fund to assist IPR 
enforcement officials.  In return, businesses would 
contribute industry knowledge and work directly with 
relevant government agencies to strengthen IPR enforcement. 
The HCMC government asked three participants representing 
Honda, the Recording Association of Vietnam, and Tribeco (a 
local soft drink company) to submit a proposal for the Anti- 
Counterfeit Fund to the People's Committee.  For the first 
year, the pilot program would focus on IP violations of 
motorcycle spare parts, soft drinks, CDs and DVDs.  The 
proposal for the Anti-Counterfeit Fund has been submitted to 
the HCMC People's Committee and is currently under review. 
 
Technical Assistance helps Build Enforcement Capacity 
--------------------------------------------- -------- 
 
23. (U) In 2004 Vietnam continued receiving considerable IPR- 
related technical assistance from a number of foreign donors 
and NGO's as well as multiple USG agencies.   This 
assistance included conferences, seminars, training and 
review of draft pieces of legislation.  In 2005, the USAID- 
funded Support for Trade AcceleRation (STAR) project plans 
to provide the following IPR-related technical assistance to 
the GVN: 
 
-- STAR will support efforts by the HCMC Department of 
Science and Technology develop an anti-counterfeiting 
campaign in HCMC aimed at improving coordination among IPR 
enforcement agencies and increasing public awareness. 
 
--STAR will support efforts by the Supreme People's Court to 
develop implementing regulations for the new Civil Procedure 
Code, focusing primarily on provisional measures. 
 
-- STAR will help the Economic Police finalize a new 
textbook for IPR enforcement as well as case studies for use 
as the police academy. 
 
-- STAR will support Ministry of Justice efforts to develop 
a new law on judgment enforcement to replace the current 
ordinance governing this issue. 
 
--STAR will support GVN efforts to draft regulations on 
optical disk production and distribution. 
 
-- STAR will support a three-week training program for 25 
Vietnamese judges on IP law and adjudicating IP cases. 
 
-- STAR will provide training to GVN Customs officials on 
implementing new IP border measures. 
 
----------------------------- 
Conclusion and Recommendation 
----------------------------- 
 
24.  (SBU) Vietnam will remain a market in which IPR 
violations are of concern for at least the foreseeable 
future.  The BTA and Vietnam's efforts 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 as well as effective 
enforcement.  The USG should continue to support USG funding 
for technical assistance in IPR, particularly with respect 
to building capacity for IPR enforcement in Vietnam's law 
enforcement and judicial agencies.  At the same time, 
Mission will continue to press GVN officials at every level 
to address IPR piracy and counterfeiting problems throughout 
Vietnam. 
 
25.  (SBU) RECOMMENDATION:  The Mission believes it is 
important to maintain consistent pressure on Vietnam to 
protect IPR. For that reason, we recommend USTR maintain 
Vietnam on the Special 301 Watch List in 2005.  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 2004 and is on track to promulgate a 
new comprehensive law on intellectual property in 2005. 
 
-- The Government of Vietnam (GVN) maintains a high-level 
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.  Vietnam has also 
committed to adhere to TRIPs upon accession to the WTO. 
-- The size of the market for U.S. intellectual property 
products in Vietnam, though growing, remains small, given 
Vietnam's low GDP per capita. 
 
 
MARINE