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### Viewing cable 05TAIPEI712, TAIWAN SPECIAL 301 REVIEW: AIT SUBMISSION

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05TAIPEI712 | 2005-02-23 10:10 | 2011-08-23 00:00 | UNCLASSIFIED | American Institute Taiwan, Taipei

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 04 TAIPEI 000712

    SIPDIS

    STATE FOR EAP/RSP/TC, EB/IPE SWILSON, STATE PASS AIT/W,
    USTR FOR KI AND JCHOE-GROVES, DOC FOR JBOGER, USPTO FOR
    JURBAN AND LOC FOR STEPP

    E.O. 12958: N/A
    TAGS: KIPR TW IPR
    SUBJECT: TAIWAN SPECIAL 301 REVIEW: AIT SUBMISSION

    REF: A. 04 TAIPEI 3690

         ¶B. 04 TAIPEI 3953
         ¶C. 04 TAIPEI 4066
         ¶D. TAIPEI 313
         ¶E. TAIPEI 458
         ¶F. TAIPEI 533
         ¶G. STATE 23950
         ¶H. STATE 30789

    ¶1.  Summary and recommendation:  After an out-of-cycle review
    (OCR) in November 2004, Taiwan was removed from the Special
    301 Priority Watch List in January 2005 and downgraded to the
    Watch List in recognition of improvements to the legal regime
    for protection of copyright and Taiwan's strengthening of
    enforcement capabilities.  Additional concerns at that time
    included passage of amendments to relevant laws to protect
    pharmaceutical test data, effective actions against piracy of
    copyrighted works over the internet, continued strengthening
    of enforcement efforts so that piracy rates continue to fall,
    and replacement of the Export Monitoring System (EMS) with a
    system that is at least as effective.  In the short time
    since the OCR, Taiwan authorities have managed to secure the
    passage of a bill to protect pharmaceutical data, conducted
    training for Taiwan Customs officials responsible for
    replacing the EMS, and continued their efforts to create a
    specialized intellectual property court.  There is no
    question that the environment for intellectual property
    protection in Taiwan continues to improve.  However, AIT
    believes it is premature to reconsider the recent decision to
    place Taiwan on the Special 301 Watch List.  The recently
    passed DE law has yet to be implemented, it is still unclear
    whether Taiwan Customs will be able to effectively assume the
    duties of the EMS, judicial reforms are only beginning, and
    Taiwan authorities are still struggling to find ways to
    counter internet piracy.  End Summary and recommendation.

    ===========================================
    Optical Media Enforcement Efforts in Taiwan
    ===========================================

    ¶2.  Taiwan has made considerable improvements in the
    intellectual property protection regime over the past two
    years.  As a major producer of blank Optical Disks (OD),
    Taiwan gained a reputation as a center of OD piracy.  But the
    passage of the Optical Media Law in 2001 that required OD
    plants to be licensed and mandated the use of Source
    Identification (SID) codes gave the Taiwan authorities a
    legal framework to pursue counterfeiters.  Creation of the
    Integrated Enforcement Task Force (IETF) in 2003 to join the
    Joint Optical Disk Enforcement (JODE) Task Force to crack
    down on both retail sale and manufacture of pirated optical
    media has had a significant effect on the availability of
    pirated product in the marketplace.  According to Motion
    Picture Association investigators, the number of nightmarket
    outlets selling pirated materials in Taiwan has fallen from
    over 300 to less than 50 since the creation of the task
    forces.  Raids and inspections continued at a brisk pace in
    2004, with JODE on track to conduct over 1000 inspections of
    OD factories and IETF on track to conduct close to 4000
    inspections of retail distribution centers.  Both IETF and
    JODE reported fewer cases of piracy and fewer infringing
    materials seized compared to 2003.  In response to U.S.
    criticism, the IETF, which had formerly been an ad hoc task
    force without a separate budget or personnel mechanism,
    formally became an arm of the National Police in November
    2004, with the budget provided by the Ministry of Economic
    Affairs.

    ¶3.  In addition, the National Police also conducted
    approximately 3000 raids and inspections directed at IP
    infringement from January to September 2004, had arrested
    more than 3000 suspects, and confiscated 1.6 million
    counterfeit CDs and DVDs.  U.S. Customs seizures from Taiwan
    dropped from US$26.5 million in FY2002 to U.S.$610,000 in
    FY2003 and to just US$60,000 in the first half of FY2004.

    ¶4.  As reflected in U.S Customs IPR Seizure statistics for
    2004, counterfeit garment and branded goods trade remains a
    problem.  Taiwan's National Police has been actively raiding
    and confiscating counterfeit goods and the Ministry of
    Justice has established regional warehouses to securely store
    siezed goods until they can be destroyed.  A recent raid
    resulted in the seizure of 5000 high quality fake Abercrombie
    and Fitch branded garments worth aproximately US$250,000.

    ===================================
    Government Use of Licensed Software
    ===================================

    ¶5.  Taiwan declared 2002 an IPR Action year and with the
    cooperation of the Business Software Alliance (BSA) began a
    program to ensure that all government offices use licensed
    software.  The Taiwan Intellectual Property Office believes,
    and BSA agrees, the number of government offices using
    unlicensed software is close to zero.  BSA announced that the
    software piracy rate in Taiwan fell from 54 percent in 2002
    to 43 percent in 2003, the second lowest rate in Asia after
    Japan.

    =======================================
    Improving the Legal Environment for IPR
    =======================================

    ¶6.  In the past twelve months, Taiwan's Legislative Yuan has
    passed several pieces of legislation that substantially
    improved legal protections for intellectual property.
    Revisions in the Patent Law to simplify filing procedures
    took effect in July 2004.  Amendments to the Pharmaceutical
    Law passed by the LY in March 2004 increased penalties for
    those engaged in the production or distribution of
    counterfeit drugs.  In August 2004, the Copyright Law was
    amended to provide protection for technical anti-piracy
    measures, created minimum sentences for commercial piracy,
    and gave Taiwan Customs ex officio seizure authority.  These
    amendments addressed most of the weaknesses of the previous
    law and were applauded by rightsholder groups.

    ¶7.  In January 2005, Taiwan's LY passed additional amendments
    to the Pharmaceutical Law that will provide for five years of
    data protection for new drugs.  Pharmaceutical companies must
    apply to register their drugs in Taiwan within three years of
    release in an advanced country market.  Implementing
    regulations for the new law are currently being drafted by
    the Department of Health and the law will go into effect in
    August.  This new law meets TRIPS requirements for data
    protection for pharmaceuticals and was welcomed by the
    international research pharmaceutical industry.

    ¶8.   In a further sign of Taiwan's eagerness to be seen as
    taking steps to protect intellectual property, the Judicial
    Yuan (JY) has announced plans to establish an IPR Court.  The
    scope of the court, whether criminal cases as well as
    administrative and civil cases should be heard, is currently
    under debate within the JY and legal community.  While the
    initiative is praiseworthy, establishment of a functioning
    IPR Court, regardless of its scope, will take some time and
    is not likely to be completed before 2006.  The Ministry of
    Justice expects that the JY will formally propose legislation
    leading to the establishment of the IPR Court in the current
    LY session.

    ¶9.  Taiwan authorities have eagerly embraced opportunities
    for IPR related training.  In September 2004, officials from
    the U.S. Department of Justice came to Taiwan to present a
    seminar to prosecutors and law enforcement on the FBI's
    CyberCrime Center.  In December 2004, the TIPO, the MOJ, and
    Taiwan National Chengchi University invited Judge Randall
    Rader to come to Taiwan to provide training to Taiwan judges
    and prosecutors.  In January 2005, the Institute for the
    Study and Development of Legal Systems presented a three-day
    seminar for judges and prosecutors on U.S. legal protections
    for intellectual property.  In addition, TIPO provides
    training for all new judges on Taiwan's intellectual property
    law and enforcement practice.

    ==================================
    Concerns and Areas for Improvement
    ==================================

    ¶10.  Taiwan has made great progress in protection of
    intellectual property over the past two years.  The legal
    environment has been strengthened, enforcement actions are
    more frequent and are resulting in confiscation of
    counterfeit products and arrests, and training of judges and
    law enforcement officials continues.  Nevertheless, there
    remain areas where significant improvements should be made.
    These include Taiwan's handling of internet-based piracy and
    improvements in the judicial system's ability to decide IPR
    related cases in an expeditious and fair manner.  Taiwan's
    ability to control the manufacture and distribution of
    counterfeit pharmaceuticals has benefitted from changes in
    the law but is still constrained by unclear division of
    responsibilities and lack of resources.  The recent abolition
    of the Export Monitoring System (EMS) and the assumption of
    these duties by Taiwan Customs has also been the source of
    some concern.

    ===============
    Internet Piracy
    ===============

    ¶11.  Internet piracy continues to threaten the rights of
    copyright holders.  Taiwan is home to two membership based
    Peer to Peer (P2P) file sharing companies, Kuro and EZPeer,
    that charge members monthly fees and exercise virtually no
    control over shared content.  In practice, the vast majority
    of traded content consists of copyright protected material,
    especially music.  Although the International Federation of
    Phonographic Industries (IFPI) filed civil and criminal suits
    against these two P2P companies in 2003, these cases have not
    been effective in discouraging internet piracy.  Taiwan's
    legal process is slow and the ability of the court to enforce
    civil penalties is limited.  Taiwan authorities are aware of
    the precedent these important cases could set and are
    becoming increasingly concerned about the problem of internet
    piracy.  The Ministry of Education has taken steps to limit
    the size of file downloads on MOE controlled servers as a
    means of discouraging internet piracy on campus.  But the
    Taiwan government has yet to articulate a coherent strategy
    to combat the wider problem of illegal downloads and file
    sharing of copyrighted materials.

    ================
    Judicial Reforms
    ================

    ¶12.  Taiwan's Judicial Yuan (JY) is struggling with ways to
    improve its ability to protect intellectual property.  The
    proposed establishment of the IPR Court is both a positive
    step and an illustration of the problems that the JY must
    resolve to create a more effective system of protecting
    intellectual property.  At present, trademark, copyright, and
    patent cases all have access to different legal remedies.
    When possible, criminal cases are preferred by rightsholders.
     While some members of the judiciary believe this illustrates
    the muscular nature of Taiwan's legal regime for copyright
    protection, in reality it betrays the weakness of Taiwan's
    civil courts.  Rightsholders are forced to rely on criminal
    cases to protect their rights, even in relatively minor
    instances of copyright violation because civil penalties are
    not effective deterrents.  This is an expensive and
    inefficient use of Taiwan's limited resources and has
    contributed to the slow pace of legal proceedings in IP
    related cases.  Although Taiwan's judiciary regularly
    expresses its commitment to IP protection, inexperienced
    judges and heavy caseloads further exacerbate efforts to
    reach fair and speedy judgments.

    ========================================
    Dealing with Counterfeit Pharmaceuticals
    ========================================

    ¶13.  According to industry surveys of pharmacies in Taiwan,
    as much as half of some popular lifestyle pharmaceuticals
    sold in Taiwan could be counterfeit.  Expensive medications
    for heart problems are also a target for counterfeiters.
    Passage of amendments to the pharmaceutical law in early 2004
    substantially increased penalties for manufacture,
    distribution and sale of counterfeit pharmaceutical products.
     These changes, combined with a concerted effort by the
    Ministry of Justice to focus enforcement efforts on
    pharmaceutical counterfeiting, were intended to improve
    protections for both legitimate manufacturers and consumers.
    Industry surveys are not complete, but the lack of clear
    lines of responsibility for enforcement are certain to be a
    barrier to sustained enforcement efforts.  The Department of
    Health, not TIPO, is charged with preventing the manufacture
    and sale of counterfeit pharmaceuticals.  However, the DOH
    does not appear to have made this a priority.  Taipei City
    health officials have done a better job of regulating and
    inspecting pharmacies in the city.  As a result, the
    incidence of counterfeits in Taipei is reportedly lower than
    other parts of Taiwan.  But the prevelence of counterfeit
    pharmaceuticals island-wide remains a cause for concern.

    ==================================
    The Export Monitoring System (EMS)
    ==================================

    ¶14.  The abolishment of the EMS at the end of 2004 has led
    some rightsholders groups to express concerns that Taiwan is
    abandoning efforts to protect electronic game cartridges and
    other computer hardware from counterfeiting.  Taiwan
    authorities have been eager to abandon the EMS for some time,
    noting that only one case of counterfeit product had been
    discovered by EMS since 2001 and suggesting that EMS's US$1
    million budget could be channeled to other uses including
    additional personnel for the IETF or development of the
    National Police Cybercrime unit.  Taiwan Customs has assumed
    responsibility for inspection and has organized several
    training sessions in various locations around the island.
    Nevertheless, industry remains wary of Taiwan Customs
    willingness and ability to maintain EMS's standard of IP
    protection.  This concern is exacerbated by the Customs
    decision to return some EMS inspection equipment to the
    Entertainment Software Association.  AIT will continue to
    monitor the performance of Taiwan Customs in handling this
    new responsibility.
    PAAL

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