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UNCLAS SECTION 01 OF 04 TAIPEI 003690 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EB/IPC AREIAS, STATE PASS AIT/W 
AND USTR, USTR FOR SKI AND BPECK, DOC FOR KSCHLEGELMILCH, 
USPTO FOR JURBAN/DLASHLEY-JOHNSON, AND LOC FOR STEPP 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR TW IPR
SUBJECT: TAIWAN SPECIAL 301 OCR: AIT VIEWS 
 
REF: A. TAIPEI 0533 
     ¶B. TAIPEI 1600 
     ¶C. TAIPEI 2672 
     ¶D. TAIPEI 2877 
     ¶E. TAIPEI 3093 
     ¶F. TAIPEI 3198 
 
¶1.  (SBU)Summary: Taiwan authorities charged with protecting 
Intellectual Property Rights have made substantial progress 
since the last review in March 2004.  AIT recommends reducing 
Taiwan's current Special 301 classification from the Priority 
Watch List to the Watch List.  Further reductions might be 
warranted once Taiwan meets its WTO commitments to protect 
pharmaceutical data, deter on-line piracy, control illegal 
copying on University campuses, and improve the judicial 
process to ease prosecution of IPR cases.  Taiwan will also 
need to continue effective enforcement actions against 
counterfeiting activities.  End Summary. 
 
¶2.  (U) The period from March to November 2004 has seen 
Taiwan authorities take significant actions to improve the 
environment for IPR protection in Taiwan and to continue 
positive enforcement activities.  Most significant of these 
improvements was the passage of amendments to the copyright 
law that addressed serious shortcomings in the legal 
environment for copyrighted materials.  Taiwan also created 
new protections for pharmaceuticals, and stepped up 
enforcement actions to protect optical media, 
pharmaceuticals, and branded goods.  Increased surveillance 
by Customs authorities is credited by Taiwan officials with 
further limiting exports of counterfeit products, and new 
powers for those authorities 
should increase their effectiveness.  Taiwan 
institutionalized what had previously been an ad hoc joint 
task force focusing on retail Optical Disk piracy enforcement 
and plans to expand its membership, and is drafting plans to 
create a specialized IPR court.  The Department of Health 
(DOH) drafted and submitted to the Legislative Yuan (LY) a 
Data Exclusivity (DE) law.  Problems still remain, 
specifically, the failure of the LY to pass DE legislation, 
the continued operation of P2P sites, continued digital and 
print piracy on university campuses, and protracted legal 
procedures that discourage resolution of IPR complaints. 
 
Legal Environment:  Copyright amendments 
---------------------------------------- 
 
¶3.  (U) On August 24, responding to high level lobbying from 
the government, Taiwan's LY passed amendments to the 
copyright law that plugged many of the holes left by the 2003 
attempt at copyright reform.  The new law granted Taiwan 
Customs ex officio authority to impound suspected counterfeit 
goods, provided protection for "anti-piracy measures", 
created minimum sentences for those convicted of commercial 
piracy, and eliminated arbitrary personal use provisions. 
Those convicted of violating IPR with commercial intent will 
now receive a sentence of six months to five years and be 
fined between USD15,000 and USD150,000.  Non-commercial 
piracy is punishable by up to three years in prison and/or a 
fine of up to USD22,000.  Industry pronounced itself mostly 
pleased, but noted that the amendments did not address the 
issue of internet piracy. 
 
Stiffer penalties for pharmaceutical piracy 
------------------------------------------- 
 
¶4.  (U) On March 30, Taiwan passed amendments to the 
Pharmaceutical law that increased penalties for producing, 
distributing or selling counterfeit products.  Penalties for 
producing or importing counterfeit drugs now include 
imprisonment for up to twelve years and a fine of up to 
USD750,000, under certain circumstances.  This is up from the 
former maximum penalty of a USD4,500 fine.  The penalty for 
sale or distribution of counterfeit pharmaceuticals is now up 
to seven years in jail and a fine of up to USD150,000. 
 
Changes to Patent and Trademark laws and regulations 
--------------------------------------------- ------- 
 
¶5.  (U) The Patent Act was amended in February 2003 and 
revisions took effect in July 2004.  The changes make patent 
applications easier to file, including instituting an 
e-filing system, simplified patent litigation procedures, and 
adopting a post-grant dispute filing system.  Trademark 
examiners were made subject to new regulations requiring them 
to take into account usage in determining whether the mark is 
likely to cause confusion.  The examination standards for 
three-dimensional shapes, colors and sounds took effect July 
1, 2004. 
 
Establishment of an IPR Court 
----------------------------- 
 
¶6.  (U) After several months of consideration, the Judicial 
Yuan has decided to support the creation of a specialized IP 
court.  Debate has centered on whether such a court would 
have power to adjudicate criminal, civil and administrative 
cases, whether the court should be at a district or appellate 
level, and whether judges should be permanently assigned or 
rotated through the court.  Ministry of Justice contacts 
inform AIT that the Judicial Yuan will formally propose the 
Court in next Legislative session. 
 
Illegal Photocopying 
-------------------- 
 
¶7.  (U) Although illegal photocopying continues to be a 
problem on university campuses, the American Association of 
Publishers (AAP) tells AIT it is generally satisfied with the 
increased awareness and level of cooperation they are 
receiving from enforcement officials.  In conjunction with 
AAP, the National Police conducted a series of raids and 
inspections in mid and late September around many of the 
major universities in Taiwan in an attempt to discourage 
illegal photocopying of textbooks at the beginning of the new 
fall term.  AAP plans to work with the Ministry of Education 
to develop policy guidelines that 
discourage illegal photocopying. 
 
Enforcement Actions: Legalization of the IETF 
--------------------------------------------- 
 
¶8.  (U) On November 1, 2004 Taiwan officially 
institutionalized what had been an ad hoc anti-piracy task 
force.  The Integrated Enforcement Task Force (IETF) is a 
220-person police detail committed to combating retail 
optical disk piracy.  During the first nine months of 2004, 
the IETF conducted 2,964 inspections, made almost 800 arrests 
for optical media piracy, and confiscated over 590,000 
illegal CDs.  Despite this record of improved enforcement, 
stakeholders were concerned that the ad hoc nature of the 
task force was detrimental to recruitment of personnel and 
betrayed a lack of commitment to continued enforcement 
actions.  The task force is now a permanent body that falls 
under the jurisdiction of the national police but will be 
funded by the Ministry of Economic Affairs.  There are 
reportedly plans to increase the number of personnel to 600 
by 2006. 
 
Major Blow to Optical Media Piracy 
---------------------------------- 
 
¶9.  (U) In May, Taiwan police, Coast Guard, and Ministry of 
Justice (MOJ) officials conducted a series of raids in the 
Taichung area that resulted in the seizure of over 400,000 
illegal CDs, 400 CD burners, and one unlicensed CD injection 
machine.  Eight suspects were arrested and seven were 
indicted.  The suspects could face sentences as long as five 
years inprisonment.  According to the Taichung Prosecutors 
Office, the suspects were eligible for bail and are currently 
not in custody.  Police estimate the group was responsible 
for as much as ten percent of all counterfeit optical media 
produced in Taiwan. 
 
Attacking Counterfeit Pharmaceuticals 
------------------------------------- 
 
¶10.  (U) The MOJ has made the investigation of pharmaceutical 
cases a top priority.  In October, Taichung enforcement 
authorities raided nine separate locations in Central and 
Southern Taiwan and seized almost one million counterfeit 
tablets of Viagra, Reductil, and Stilnox.  Four persons were 
arrested, including a licensed pharmacist.  Subsequent 
investigation suggests the tablets were produced in China and 
smuggled into Taiwan, but that the high-quality packaging and 
printing was done in Taiwan.  The Ministry of Justice 
Investigation Bureau (MJIB) has assured AIT that the 
investigation into the source of the tablets, as well as the 
printing and packaging materials, continues.  MOJ and DOH 
inspections of pharmacies in the weeks following the arrests 
showed a marked decrease in the incidents of counterfeit 
pharmaceutical products for retail sale, according to MOJ 
sources. 
 
Additional Enforcement Actions 
------------------------------ 
 
¶11.  (U) In June, the IETF uncovered an optical disk piracy 
operation outside of Taipei that resulted in the confiscation 
of over 15,000 illegal optical disks, 
including software, games, VCDs, pornography, and music. 
Twenty seven CD burners and 4 computers were also seized.  In 
addition to the actions by IETF, the National Police 
Administration, through September reported over 3,000 raids 
on suspected IP violators and arrested over 3,000 suspects 
for IP related crimes.  The Joint Optical Disc Enforcement 
Task Force (JODE) conducted over 800 raids during the same 
time period, including 300 at night.  They found six 
instances 
of illegal optical disk manufacturing, closed eight illegal 
manufacturing plants, seized five optical disk machines and 
over 100,000 optical disks.  Taiwan Customs seized over 
64,000 illegal optical disks through September 2004, 
including more than 16,000 pirated PS2 optical disks. 
Customs also seized substantial amounts of counterfeit 
branded goods, including purses and clothing, perfume and 
other trademarked goods.  Most of these products allegedly 
originated in China. 
 
Public Education and Training 
----------------------------- 
 
¶12.  (U) The Ministry of Economic Affairs has created a 
reward program for informants in optical disk piracy cases. 
At an awards ceremony in June 2004, MOEA paid over NT$17 
million to informants and law enforcement for tips that led 
to the closure of five illegal optical media plants and 
confiscation of nine injection molders, 19 other pieces of 
heavy manufacturing equipment and over 630,000 pirated disks. 
 
 
¶13.  (U) In April 2004, TIPO began to publish a weekly IPR 
column in one of Taiwan's most important business dailies. 
The column aims to educate business people on IPR related 
concepts.  Since April 2004, IPR promotion advertisements 
have been posted in public areas such as the subway and in 
airports and broadcast on television. 
 
¶14.  (U) Training for law enforcement personnel, prosecutors 
and judges is occurring regularly.  In May, TIPO conducted 
training for 137 new IETF officers.  Representatives from the 
US Department of Justice and the FBI in September held a 
seminar for law enforcement on combating cyber-crime.  In 
April, the Ministry of Justice and Chiao Tung University 
conducted training on IPR crimes for prosecutors.  TIPO, in 
cooperation with Taiwan National Politics University's IPR 
Center, will host additional training for judges and 
prosecutors November 25-26. 
 
Unfinished business: DE protection... 
------------------------------------- 
 
¶15.  (SBU) During AUSTR Charles Freeman's July visit to 
Taiwan, the DOH committed to draft and submit to the LY a 
bill to protect research-based pharmaceutical and chemical 
data.  After consultations with a resistant local industry, 
DOH finally submitted the draft bill to the Executive Yuan 
for submission to the LY Procedure Committee in late 
September.  However, due to political disputes in the LY tied 
to the upcoming LY elections in December, the Procedure 
Committee has not yet assigned the bill to the Environment, 
Science and Health Committee for consideration.  With the LY 
in recess until after the December 11 elections and the LY 
session scheduled to conclude in late January, it will be 
difficult to pass this bill in the current session. 
 
¶16.  (SBU) The draft bill does address most of industry's 
concerns for Data Exclusivity (DE).  New chemical entities 
would be granted a five-year period of DE protection.  New 
indications would be protected for three years under the 
draft bill.  The innovative research pharmaceutical industry 
has raised concerns about one provision that would require 
new products to register in Taiwan within three years of its 
initial sale in another market or face the loss of DE 
protection in Taiwan.  Industry worries that three years will 
not allow them to complete Taiwan's complex registration 
requirements.  In an October 11 letter, the Minister of 
Health, assured AIT that companies need only file for 
registration within three years to avail themselves of DE 
protection.  He wrote that there is no need to complete the 
registration procedure within three years to benefit from the 
provisions of the proposed law. 
 
...and Internet Piracy 
---------------------- 
 
¶17.  (U) Although indictments against Peer to Peer (P2P) file 
sharing companies EZPeer and Kuro were filed in December 
2003, the legal process to restrict the use of these services 
for copyright infringing file trading between subscribers is 
glacially slow.  The cases are still under consideration by 
the Taiwan courts.  In response to a lawsuit brought by the 
International Federation of Phonographic Industries (IFPI), 
the P2P sites posted a list of songs that users were urged 
not to download, but the operators of the sites did not make 
any efforts to prevent the sharing of the specified 
copyrighted works.  The Taipei prosecutors office has made 
the this case a priority, assigning two expert prosecutors to 
handle the case, but is still awaiting judicial action. 
While Taiwan enforcement authorities are becoming 
increasingly aware of the problem of internet piracy, they 
have yet to articulate a coherent strategy for dealing with 
this threat. 
 
¶18.  (SBU) AIT Assessment: As a result of a united USG 
interagency front, the IPR environment in Taiwan is steadily 
improving.  Many of the issues highlighted in the 2004 
Special 301 Review have been addressed, including better 
cooperation to combat photocopying, effective efforts to 
resolve conflicts over power of attorney requirements, and 
institutionalization of the Integrated Enforcement Task 
Force.  Taiwan's efforts to address serious problems warrant 
its removal from the Priority Watch List.  However, work 
remains to be done in several areas, including passing 
legislation to protect pharmaceutical data and addressing 
growing concerns about internet piracy and the slow legal 
process for protecting IPR.  Until these remaining concerns 
are addressed, it is premature to consider dropping Taiwan 
from the Special 301 Watch List.   End Comment. 
PAAL