US embassy cable - 03HANOI486

UNCLAS SECTION 01 OF 06 HANOI 000486 
 
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 4430/MAC/AP/OPB/VLC/HPPHO 
USDOC ALSO FOR ITA/TD/OTEA/JJANICKE AND ITA/TD/SIF/CMUIR 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, KIPR, VM, IPROP, BTA 
SUBJECT: VIETNAM:  YEAR 2003 SPECIAL 301 REVIEW: EMBASSY 
INPUT 
 
REF:      (A) STATE 43420 
 
          (B) HANOI 1496 
          (C) HANOI 2168 
          (D) HCMC 1123 
          (E) HANOI 2893 
 
SENSITIVE BUT UNCLASSIFIED PROTECT ACCORDINGLY 
 
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SUMMARY 
------- 
 
1. (SBU) Embassy recommends continued placement of Vietnam 
on USTR's Special 301 Watch List for 2003 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: 
 
-- The U.S.-Vietnam Bilateral Trade Agreement (BTA) with its 
major provisions on IPR, commits Vietnam to make its IPR 
regime TRIPs-consistent by December 2003; 
 
-- Vietnam continued over the past year to make progress in 
strengthening its IPR legal and enforcement regimes, with 
new regulations supporting copyright issues for 
architectural works as well as preparations for Vietnam's 
accession to UPOV and other IPR-related conventions. 
 
-- the Government of Vietnam maintains a strong public 
commitment to IPR protection; and, 
 
-- the size of the market for U.S. intellectual property 
products in Vietnam 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 continue placement of 
Vietnam on its Special 301 "Watch List" for the coming year 
because IPR piracy in many product categories remains 
rampant in Vietnam, despite continued progress in the 
strengthening of Vietnam's IPR legal regime.  While Vietnam 
did conduct some law enforcement actions against IPR 
violations over the past year, IPR enforcement remains the 
exception rather than the rule.  At the same time, market 
access barriers, especially with regard to "cultural 
products" continue to impede the availability of legitimate 
product, further complicating efforts to combat piracy. 
 
--------------------------------------------- ------------ 
BTA - Basis for Bilateral and Multilateral IP Cooperation 
--------------------------------------------- ------------ 
 
3. (U) Chapter two of the U.S.-Vietnam Bilateral Trade 
Agreement (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, such as protection 
of satellite signals, to extend protection beyond 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.  The BTA also commits Vietnam to join the key IP- 
related conventions (it is not already a party to) by 2003. 
Vietnam's leadership has expressed consistent and strong 
support for implementing fully Vietnam's commitments in the 
agreement, including the IPR chapter. 
 
4. (SBU) The BTA is viewed by many, including Vietnam's 
leadership, as a roadmap for Vietnam's trade and investment 
regime reform and WTO accession.  As such, Vietnam's BTA 
commitments, including those on IPR, are widely seen as 
steps Vietnam must take to integrate into the world economy 
and get access to world markets and capital necessary for 
Vietnam's economic growth.  In short, the BTA has provided 
Vietnam for the first time with clear links between IPR 
protection and Vietnam's ability to access and compete in 
world markets. 
5. (SBU) In addition, the BTA increases international 
pressure on Vietnam in the IPR area.  First, by requiring 
Vietnam to accede to a number of international IPR 
conventions, the BTA's IPR commitments actually translate 
into multilateral commitments to protect IPR.  In addition, 
many of Vietnam's partners in WTO accession talks have 
already indicated that they expect Vietnam to accord their 
companies and nationals the same treatment in areas such as 
IPR as that pledged to the U.S. in the BTA.  Thus, the BTA 
has created strong expectations and commitments for Vietnam 
in the IPR area vis--vis all of Vietnam's trade and 
investment partners, again, significantly upping the ante 
for Vietnam as it reforms its IPR regime. 
 
--------------------------------- 
Improvements in IPR Laws Continue 
--------------------------------- 
 
6. (U) Vietnam began extensive legal reforms to bring its 
IPR laws and regulations into compliance with BTA (and 
therefore TRIPs) standards even before entry-into-force of 
the BTA. In 2002, Vietnam continued to make progress on 
strengthening its legislative IPR regime.  The following 
were developments on legal and regulatory reform in the IPR 
sector over the past year: 
 
-- A May 17, 2002 official letter (Ministry of Trade 
Official Letter No. 1901/TM-QLCL) regarding protection of 
Vietnamese trademarks in foreign markets.  This official 
letter seeks to coordinate efforts of ministries and 
People's Committees to publicize law and regulations related 
to IP and to research and disseminate legal regulations on 
the registration of trademarks in other major markets 
including the U.S., EU, Japan and ASEAN as well as 
registration of international trademark protection under the 
Madrid Agreement. 
 
-- A June 7, 2002 official letter (Ministry of Trade 
Official Letter No. 2209/TM-QLTT) regarding establishing 
guidelines for combating IPR violations.  This official 
letter tasks the Market Management Bureaus (MMB) with 
increasing the number of inspections related to imported 
counterfeit goods; requires MMB to consult with the Ministry 
of Trade before issuing a decision on a case involving 
foreign goods; and tasks MMB, in coordination with other 
agencies, to draft an inter-ministerial circular on 
inspection and settlement of IPR cases. 
 
-- A June 11, 2002 decree (Government Decree 61/2002/ND-CP) 
on copyright royalties.  This decree establishes guidelines 
governing royalties for authors and owners of works.  The 
decree provides specific grades and/or percentages for each 
genre and scale of work. 
 
-- A July 22, 2002 official letter (Government Official 
Letter No. 4029/VPCP-QHQT) requests the Ministry of Culture 
and Information, in conjunction with other ministries, 
provide the Prime Minister a report on Vietnam's accession 
to the Berne Convention, the Brussels Convention, and the 
Rome Convention.  This official letter also tasks the 
Ministry of Agriculture and Rural Development, in 
coordination with other ministries, to submit to the Prime 
Minister a proposal regarding Vietnam's accession to UPOV. 
 
-- A December 18, 2002 circular (Ministry of Finance 
Circular No. 92/2002/TT-BTC) provides guidelines for the 
collection of fees related to registration of new plant 
varieties.  New varieties protection charges and a fee scale 
are listed in the collection levels table issued with this 
circular.  This circular is part of GVN preparations for 
joining UPOV. 
 
-- A December 6, 2002 decision (Ministry of Agriculture and 
Rural Development Decision No. 143/2002/QD-BNN) details the 
procedures for conducting tests for distinctness, uniformity 
and stability of varieties of rice hybrids, potatoes, 
soybeans, rice, peanuts, corn and tomatoes. 
-- A January 24, 2003 circular (Ministry of Culture and 
Information and Ministry of Construction joint circular no. 
04/2003/TTLT/BVHTT-BXD) on copyright issues related to 
architectural works.  This circular provides definitions of 
owners of architectural works and details the scope of 
owners' rights.  Registration procedures for copyright 
protection are also introduced.  This is the first time this 
issue has been addressed by the GVN. 
 
-- A regulation issued by the Ministry of Agriculture and 
Rural Development on the uniformity and stability tests of 
new plant varieties. 
 
7. (U) In addition, a number of other laws and regulations 
are in the draft stage including: 
 
-- A draft decree on the Protection of Layout Designs of 
Integrated Circuits was submitted by the National Office of 
Industrial Property (Ministry of Science and Technology) to 
the Prime Minister's office in 2002.  The Office of the 
Government is currently revising the draft.  The GVN expects 
to promulgate the decree in early 2003. 
 
-- The Ministry of Justice, with the assistance of both USG- 
funded technical assistance providers and the Japanese 
International Cooperation Agency (JICA), is in the process 
of revising the Civil Code provisions related to IPR.  The 
draft revision is likely to be submitted to the National 
Assembly this year. 
 
-- The Supreme People's Court continues to revise a draft 
Civil Procedure Code which will include procedures necessary 
for IPR enforcement. 
 
-------------------- 
Piracy Still Rampant 
-------------------- 
 
8. (U) While significant progress on the legal and 
regulatory regime continued at a rapid pace over the past 
year, enforcement has had little obvious impact at the 
street level, at least with regard to music, motion picture, 
software and trademark violations.  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 rented are pirated.  Trademark violations are 
also prevalent, with all types of clothing and other items 
carrying unlicensed versions of famous trademarks available 
at small shops and stands throughout the major cities.  None 
of these areas of piracy appeared to be reduced over the 
past year.  In one exceptional trademark case (reported in 
June 02 - see ref (B)), the Ministry of Science and 
Technology (MOST) fined a Hanoi candy shop approximately USD 
460 for infringing the Mars candy trademark and ordered and 
oversaw the removal of the infringing labels from 328 
packages. 
 
9. (SBU) Although nearly all unlicensed showing of U.S. 
films on Vietnam's state-owned television stations ended 
following implementation of the U.S.-Vietnam Copyright 
Agreement in December 1997, local private and state-owned 
television stations still violate this from time to time. 
These exceptions, however, are generally infrequent.  Public 
cinemas as well as private cafes sporadically show pirated 
films, although this problem is not as widespread as the 
retail sales of pirated DVD, VCD or videocassette versions 
of the same films.  In one case, however, after a U.S. film 
distributor's application to distribute the film "The Last 
Castle" in Vietnam was rejected by the Ministry of Culture 
and Information's censorship board, the film ended up not 
only widely available in local DVD shops but was also shown 
at a state-owned movie theater in HCMC. (Reftel (C)) 
 
10. (U) In terms of consumer and business software for PC's, 
piracy appears to be the norm.  Anecdotal evidence and 
industry sources suggest that Vietnam Government agencies 
use mostly pirated software on PC's in government offices. 
U.S. companies engaged in sales here of such software 
complain that, even if they drop licensing charges to next 
to nothing, Vietnamese businesses and government agencies 
refuse to 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). 
Computer hardware retailers reportedly complain to U.S. 
software companies that the PC market in Vietnam is so 
competitive and their margins so slim, that to pay even 
token licensing fees for software would not only wipe out 
their profits but basically all their sales. 
 
------------------------ 
Enforcement Remains Weak 
------------------------ 
 
11.  (SBU) Despite the 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. 
Vietnam is just beginning to establish institutional 
experience in enforcing IPR.  Thus far, IPR laws are only 
really known and/or understood well by a few Ministries in 
Hanoi particularly the Ministry of Science and Technology 
(MOST), through its National Office of Industrial Property 
(NOIP) which oversees patents and trademarks and the 
Ministry of Culture and Information (MOCI), which oversees 
copyrights.  However, these agencies are responsible only 
for "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. They have no law enforcement 
arm and cannot conduct raids or seize goods.  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. The Market Management Bureau, an 
enforcement agency within the Ministry of Trade, engages in 
some IPR enforcement, usually in response to specific 
complaints from IPR holders. 
 
12. (SBU) In October 2002 the HCMC Market Management Board 
(MMB) conducted a well-publicized illegal software raid in 
Vietnam.  The MMB, in conjunction with Microsoft, raided 6 
or 7 (of the probably hundreds) of local computer shops 
selling pirated software, seizing approximately 7000 disks. 
The results of this raid demonstrate clearly some of the 
weaknesses in Vietnam's enforcement regime.  The MMB teams 
seized only disks clearly labeled Microsoft, leaving behind 
blank CDs and blatantly pirated software of non-Microsoft 
origin, such as Adobe.  There was a lack of consistency 
among the various MMB teams - particularly with respect to 
the officials' understanding of what they were authorized to 
seize.  Only nominal fees were levied (12 million Dong per 
violator, or approximately USD 780), there has apparently 
been no follow up by local authorities, and the shops 
quickly re-opened.  (Reftel D) 
 
13. (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 nine months of 
2002 its inspectors carried out 12,791 surprise inspections, 
identified 2,914 businesses in violation of the law and 
suspended the business licenses of 96 companies as a result. 
They confiscated 215,799 CDs, VCDs, and DVDs and 33,512 
videotapes. 
 
------------------------------------------ 
Lack of Availability of Legitimate Product 
------------------------------------------ 
 
14. (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 is still 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. 
 
----------------------- 
Growing Domestic Demand 
----------------------- 
 
15. (SBU) One striking development over the last year has 
been evidence of a growing 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 - among Vietnamese 
agricultural exporters, apparel companies, software 
developers, and artists for example.  This year there have 
been multiple news articles and seminars touting the value 
of brand names.  Also, for the first time, a Vietnamese 
author threatened a lawsuit against a publishing house that 
had published the author's work without authorization. These 
groups are a long way from representing a critical mass in 
Vietnam, but as their numbers increase, they will add to the 
international pressure on the GVN to develop effective 
enforcement capabilities in line with its international 
commitments on IPR. 
 
--------------------------------------------- ----------- 
Technical Assistance helpful in Building Enforcement 
Capacity 
--------------------------------------------- ----------- 
 
16.  In 2002 Vietnam received considerable IPR-related 
technical assistance from a number of foreign donors, NGO's 
as well as multiple USG agencies including the Departments 
of State and Agriculture, USAID, Customs, the U.S. Patent 
and Trademark Office and the U.S. Copyright Office.  (For a 
more complete discussion of IPR-related technical assistance 
in Vietnam see reftel (E).)  This assistance included 
conferences, seminars, training, study tours and 
review/comments on draft pieces of legislation.  In 2003, 
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 
technical assistance to the GVN: 
 
-- Support MOCI's development of regulations on optical disk 
production and distribution; 
 
-- Provide detailed comments on the Ministry of Justice's 
redrafting of the Civil Code chapter on IPR (Note:  The 
Civil Code establishes the legal basis for IP protection in 
Vietnam); 
 
-- Support GVN efforts to meet the requirements necessary to 
accede to key IP conventions; 
 
-- Support GVN efforts to develop a civil procedure code - 
particularly with respect to issues related to IPR 
enforcement (such as provisional measures, injunctive 
relief, ex-parte hearings, attorneys' fees); and 
 
-- Support public education programs to raise awareness with 
regard to the importance to Vietnam for improving the 
protection of IP rights. 
 
----------------------------- 
Conclusion and Recommendation 
----------------------------- 
 
17.  (SBU) Vietnam will remain a market in which IPR 
violations are of concern for at least the foreseeable 
future.  That said, Vietnam's commitments in the BTA to put 
into place over a short period of time an IPR regime that 
meets world standards is impressive and rare for a country 
at Vietnam's stage of development.  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.  This can be most 
effectively achieved in Vietnam with a combination of 
support for IPR reform and pressure at senior government 
levels to translate good IPR law and regulation into real 
IPR protection.  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 press senior GVN 
officials at every opportunity to address IPR piracy in 
Vietnam, highlighting the fact that legal reform is not 
sufficient for Vietnam to meet its obligations -- it must 
enforce those laws. 
 
18.  (SBU) RECOMMENDATION:  Embassy believes it important to 
maintain pressure on Vietnam to enforce IPR, even as we 
continue to recognize the progress Vietnam has made on legal 
reform in this area.  For that reason, we recommend Vietnam 
be maintained on USTR's Special 301 Watch List in 2003. 
Burghardt