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