VZCZCXRO6711
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHUP #0155/01 0611310
ZNR UUUUU ZZH
P 021310Z MAR 09
FM AMEMBASSY BUDAPEST
TO RUEHC/SECSTATE WASHDC PRIORITY 3937
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 BUDAPEST 000155 
 
SENSITIVE 
SIPDIS 
 
EEB/TPP/IPE FOR JENNIFER BOGER; COMMERCE FOR ITA/MAC/OIPR 
SILVIA SAVICH, COMMERCE PASS USPTO; STATE PLEASE PASS TO 
USTR FOR JENNIFER CHOE-GROVES 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR EU HU
SUBJECT: HUNGARY: 2009 SPECIAL 301 REPORT POST 
RECOMMENDATIONS 
 
REF: A. SECSTATE 08410 
     ¶B. 08 BUDAPEST 00179 
 
¶1. (SBU) SUMMARY AND RECOMMENDATION: Hungary continues to 
make headway on its Special 301 initiatives, as well as IPR 
regulatory enforcement more broadly.  The National Board 
Against Counterfeiting and Piracy (HENT) -- which acts as an 
overarching structure for information sharing, police and 
judicial training, public outreach and public-private 
cooperation -- made strong progress this past year.  While 
legislation and enforcement efforts are aligned, the 
continued leniency in the courts hinders progress. 
Accordingly, Post recommends that Hungary remain on the Watch 
List; however, we suggest that the report include a caveat 
that the progress and positive actions of the HENT be noted 
as a promising move toward eventual removal from the list. 
END SUMMARY AND RECOMMENDATION. 
 
---------------------------- 
THE HENT IS UP AND RUNNING 
---------------------------- 
 
¶2. (SBU) Industry and government representatives alike were 
enthused about the focus and progress of the HENT, 
established in January 2008.  Several sources stated that the 
U.S. Embassy's efforts in raising IP protection awareness 
lead to its establishment.  As outlined in reftel B, the HENT 
is a public-private partnership comprised of 20 permanent 
members, 10 from government and 10 from industry. In a 
meeting on February 12, Paulina Oros, from the office of the 
New Order Project, presented Econoff with a copy of the 
HENT's two-year strategy and explained its workings. The HENT 
meets monthly, with the five sub-committees meeting bi-weekly 
focused on statistics, information/education, pharmaceutical 
and agricultural, internet services/illegal downloads, and 
enforcement.  The strategy is broken down into these five 
areas detailing each initiative with a description, needed 
funding, responsible individual, and a deadline. 
 
¶3. (SBU) Collaborating with electronics store giants, 
MediaMarkt and Saturn, the HENT launched a large-scale 
consumer information campaign in late 2008.  Warning of the 
consequences of counterfeit and pirated goods, nearly 600,000 
red leaflets were attached to merchandise in 23 outlets.  An 
additional 20,000 stickers were placed on electronic hardware 
such as computers, DVD burners, and LCD monitors.  The 
campaign includes posters in customer service areas, check 
out lanes, and bathrooms.  In April, the campaign will add a 
second partner, PhotoHall, a multimedia retail chain, with 75 
outlets.  So far, the GOH has covered the roughly $10,000 
cost of the program. 
 
¶4. (U) The information campaign was furthered on February 11, 
when HENT added a new category at the Hungarian music awards 
(Fonogram), giving an award for the most legally downloaded 
album of the year. 
 
¶5. (SBU) To further the concept of "Software as a Company 
Asset" among accountants and CFOs, the tax authority 
sponsored the first IP awareness seminar on February 27. 
Members from the tax authority discussed software 
inspections, while representatives from the National Standard 
Board addressed compliance processes like ISO 19770 and 
independent licensing specialists. 
 
--------------------------------------------- -- 
IP INFRINGEMENT RIPPLE -- LOCAL INDUSTRY INPUT 
--------------------------------------------- -- 
 
¶6. (SBU) According to the Hungarian Patent Office (HPO), 
Hungary's economy sustained losses of nearly $500 million due 
to copyright infringement and piracy in the music, film and 
software industries - a 50 percent decrease from what 
industry officially reported in 2005. 
 
¶7. (SBU) In a meeting on February 11, Andras Kalman, from the 
local audiovisual association (ASVA), told Econoff that the 
Motion Picture Association (MPA) canceled the contract for 
legal representation on IP matters with ASVA that same day. 
He believed it was because of Hungary's small market. "It 
could be that the damage isn't worth the focus," he said. 
MPA representative confirmed that "the move was strictly an 
economic decision," suggesting a comfort level with the local 
enforcement authorities to protect their own film markets as 
well as MPA's.  Mr. Kalman echoed both praise for the HENT 
and frustration with judicial leniency.  He recommended 
 
BUDAPEST 00000155  002 OF 002 
 
 
Hungary remain on the watch list. 
 
¶8. (SBU) On February 18, Sandor Simonkovics, from the 
Business Software Alliance (BSA) of Hungary, told Econoff 
that he expects the software piracy rate to remain unchanged 
from last year at 42 percent.  Though it was a banner year -- 
BSA trained 500 tax inspectors on software licensing, the GOH 
included IPR clauses in employee contracts, BSA and the GOH 
stood up a hotline for tax inspectors and accountants, the 
Tax Authority is integrating software inspections into their 
general inspection processes, and GOH and BSA subcontractors 
now must certify to the legal use of software -- BSA 
attributes the continued willingness to use pirated software 
to the economic problems cause by the recent crisis.  Adding 
injury, the GOH decided to re-compete 30 percent of its 
software contract for public schools with Microsoft. 
According to Microsoft, the GOH has not yet solicited bids 
for the 30 percent, but no longer pays the licensing fees to 
Microsoft.  Additionally, smaller electronics stores continue 
to sell personal computers without software, while clerks 
offer their "installation services" for a fee. 
 
¶9. (SBU) On February 18, Andras Vajda, the local PhARMA 
representative, told Econoff that Hungarian laws on 
pharmaceutical patent protection is aligned with EU standards 
and industry needs.  However, he explained that judges are 
focused on protecting national interests, to include earlier 
introduction of less expensive drugs (generics) for the 
State-funded health care program. He did not recommend 
Hungary be placed on the Priority Watch list as their 
struggle with the GOH is based less on patent protection and 
more on tax structures.  (COMMENT: Post notes that this 
statement from Hungary-based PhARMA rep differs from the 
PhARMA assessment submitted in Washington, which continues to 
call for Hungary's elevation to the Priority Watch List.  END 
COMMENT.) 
 
-------------------------- 
ALL CARROTS AND NO STICKS 
-------------------------- 
 
¶10. (SBU) Sources agreed that Hungarian regulations and laws 
on IP are harmonized with the EU directive. Enforcement is 
carried out by a specialized, internet-savvy unit in the 
police and customs departments, while IP cases are heard in a 
special court in Budapest.  However, all sources declared 
that the leniency of the courts mocks positive enforcement 
efforts.  Although, the HPO statistics showed that nearly 
28,668 IP investigations were opened in 2008 -- with 75 
percent brought to trial -- they failed to reveal the actual 
fines or jail time.  Enforcement relies on goodwill and soft 
measures, seriously lacking hard consequences.  Poised to 
protect the rights of the individual, the current political 
climate deadens any strong measures.  Court cases show great 
forgiveness specifically with software and pharmaceutical IP 
infringements.  This leniency emboldens the public.  The HPO 
explained that external training, offered by NGOs, the U.S. 
Patent Office, and ILEA, is more effective than internal 
debates. 
 
¶11. (SBU) Last December, Parliament voted down an amendment 
to the copyright act, which clarified that the private 
copying exception does not extend to copying from illegal 
sources.  The vote was not based on the grounds that they 
support internet piracy but rather they argued that the legal 
language was too vague and placed responsibility on the 
user's awareness of illegal sources.  The HPO and the MOJ 
view the attempted amendment as "simply a clarification to 
the copyright act," and both believe internet piracy is 
covered under the basic law.  Additionally, the IT 
association lobbied against the amendment, seeing it as a 
first step of stopping the free flow of information on the 
internet.  It is unlikely the amendment will be proposed 
again this year. 
 
¶12. (SBU) COMMENT: While the GOH has made good progress with 
the HENT and plans to continue down this path, Post 
recommends that Hungary remain on the Watch List in 2009.  We 
believe it is important to encourage continued progress in 
the strengthening of Hungary's IP environment.  We will 
continue to support external training of the judiciary and 
work closely with the HPO and MOG as well as a broad array of 
interested industries to offer assistance as appropriate. 
END COMMENT. 
Foley