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UNCLAS SECTION 01 OF 05 VILNIUS 000165 
 
SIPDIS 
 
STATE FOR EB/IPE SWILSON AND EUR/NB GERMANO 
STATE PLEASE PASS TO USTR JCHOE-GROVES AND LOC STEPP 
COMMERCE FOR JBOGER AND USPTO JURBAN 
 
E.O. 12958: N/A 
TAGS: ECON KIPR ETRD LH
SUBJECT: LITHUANIA: YEAR 2005 SPECIAL 301 REVIEW 
 
REF:  A. SECSTATE 23950 
 
 ¶B. 04 VILNIUS 00226 
 ¶C. 04 VILNIUS 00241 
 ¶D. 04 VILNIUS 00273 
 ¶E. 04 VILNIUS 00372 
 
 
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SUMMARY 
------- 
 
¶1.  Lithuania is making progress against intellectual 
property rights (IPR), but it should remain on the Watch 
List for 2005 due to persistent weaknesses in its 
enforcement system.  A local industry association estimates 
that the rate of piracy for recorded music, films, and 
games dropped to 40 percent of the total product in 
circulation, down from 55-65 percent in 2003.  Local IPR 
advocates indicate that two large organized crime 
syndicates with Russian links control piracy activities 
related to these items.  The GOL conducted an IPR Public 
Awareness Campaign, but has still not decided whether to 
require mandatory source identification coding on optical 
discs.  It seized 316,948 units of audio CDs, DVDs, videos, 
PC games and other pirated products, (up from 142,800 units 
in 2003) worth USD 3,548,966, launched cases against six of 
an estimated 20 distributors of illegal works on the 
internet, and filed 131 criminal cases and 180 
administrative protocols (versus 86 pretrial investigations 
and 171 administrative protocols in 2003).  Court 
procedures remain slow and cumbersome.  Fines levied 
against IPR violators are low and do not deter pirating. 
The police are understaffed in the IP section, and border 
surveillance is inadequate.  End Summary. 
 
------------------- 
OVERALL PIRACY RATE 
------------------- 
 
¶2.  The Lithuanian Music Industry Association (LMIA), which 
collects and maintains general piracy statistics, estimates 
the general level of piracy for music, films, and games in 
the Lithuanian market at about 40 percent, down from 55-65 
percent in 2003.  Definitive figures, LMIA cautions, are 
difficult to derive due to problems with tracking the use 
of rented films and internet games.  LMIA's figures reveal 
a piracy level of musical works of 30-40 percent, with 
international repertoire representing 58 percent of the 
total.  This is significantly lower than the International 
Intellectual Property Alliance's (IIPA) figures of 80 
percent for records and music, 65 percent for motion 
pictures, 58 percent for business software, and 85 percent 
for entertainment software.  The Chairman of the Board of 
the Phonogram Producers and Distributors Association (FGPA) 
in Lithuania stated that the piracy rate of phonograms 
(CDs, musical videos, and DVDs) is greater than 70 percent, 
resulting in annual losses of USD 20 million. 
 
¶3.  FGPA stated that at least two large organized crime 
groups, likely under Russian mafia control, coordinate and 
control piracy in Lithuania.  The FGPA estimates that each 
of these Vilnius-based groups has stockpiled 200-300,000 
illegal CDs, and sells nearly 300,000 discs per month 
equally to Lithuanian and foreign customers.  Over 50 
percent of this volume has pirated American content.  The 
FGPA Chairman explained that organized crime sells its CDs 
through direct marketing to cafes, bars, offices, and at 
marketplaces, and by exporting them to Poland, Germany, 
Latvia and Estonia.  More than 90 percent of the illegal 
product is imported from Russia, Belarus, Ukraine and 
Poland, while the rest is burned locally. 
 
------------------- 
LAWS PROTECTING IPR 
------------------- 
 
¶4.  Lithuania did not modify its IPR-related laws in 2004. 
A GOL working group has been charged with drafting the 
relevant legal amendments by August 2005.  These amendments 
will bring the country's copyright and industrial property 
rights laws into line with EU standards.  The amendments 
will require the publication of court judgments in 
newspapers as a preventive measure to discourage IPR 
violations. 
 
------------ 
GOL OUTREACH 
------------ 
 
¶5.  The GOL conducted an IPR Public Awareness Program in 
¶2004.  The Ministry of Culture organized public 
consultations in each of the country's ten largest cities. 
The Ministry invited representatives of cultural 
institutions (libraries, museums, theaters, publishers) and 
small businesses to attend these sessions in order to 
discuss copyright agreements and the identification of 
protected works. 
 
-------------------- 
OPTICAL MEDIA PIRACY 
-------------------- 
 
¶6.  The GOL has not decided whether to require mandatory 
source identification coding (SID) of all optical discs 
produced in the country.  The Ministry of Culture will make 
a decision following a meeting with representatives of the 
recording industry in early 2005.  We question the impact 
of such a rule, however, since most pirated CDs are 
manufactured outside of Lithuania. 
 
-------------------------- 
USE OF GOVERNMENT SOFTWARE 
-------------------------- 
 
¶7.  A Government Information Society Development Committee 
is considering a draft resolution which will recommend that 
government institutions use open source computer software 
programs.  The GOL does not have a timeframe for the 
resolution's adoption, but intends to allocate funds to 
support training to familiarize agencies with the new 
software. 
 
--------------- 
INTERNET PIRACY 
--------------- 
 
¶8.  The GOL intends to include in its amendments to the 
copyright law procedures that would clarify its Ecomas 
Directive of 2000, which required an internet service 
provider (ISP) to act expeditiously and block content, upon 
the request of the appropriate IP right holder.  The 
amendments will define the requirements that the request 
must fulfill, and a timeframe for the ISP to act.  The 
Managing Director of the Lithuanian Neighboring Rights 
Association (Agata) informed us that the issue of who 
should take lead responsibility for internet content is 
under consideration by Lithuania's Constitutional Court. 
 
------------------------------------------- 
TRIPS COMPLIANCE AND OTHER IP-RELATED ISUES 
------------------------------------------- 
 
¶9.  On January 1, 2004, the GOL implemented a six percent 
tax on blank media carriers to help remunerate the authors 
of copyrighted works.  The Agency of the Lithuanian 
Copyright Protection Association (LATGAA) collected LTL 2 
million (USD 757,576) in blank media carrier taxes in 2004, 
and distributed this sum to authors. 
 
¶10.  The GOL amended its trademark law on February 19, 
2004, and its design law on April 29, 2004, to conform to 
EU regulations and directives.  Community trademarks and 
designs were given precedence over corresponding national 
products.  The GOL did not modify its patent law in 2004. 
Parliament, however, will consider amendments during its 
Spring 2005 session that will harmonize Lithuanian law with 
an EU directive on biotechnological inventions.  All 
Lithuanian legal limitations to the exclusive rights of 
copyright owners and producers of sound recordings conform 
to TRIPS exceptions and EU law. 
 
¶11.  Three Lithuanian laws protect geographical indicators: 
the Law on Plant Variety Protection, the Law on 
Competition, which prohibits the declaration of improper 
origin, and the Law on Trademarks, which bars the 
registration of a trademark with misleading geographical 
indicators (GI).  Prior to joining the EU, the GOL, on 
April 26, 2004, modified its Order "On the Protection of 
Geographical Indicators in Agricultural Products and 
Foodstuffs" to implement the EU regulation protecting GIs. 
The Patent Law (effective February 1, 1994) provides patent 
protection to all technical products, including those 
derived from genetic resource sharing.  There was no change 
in 2004 to Lithuania's June 16, 1998, Law on the Legal 
Protection of Topographies of Semiconductor Products, which 
covers integrated circuits.  The Law on folklore 
supervision protects the rights of folklore artists, 
registers their works, and requires publisher-author 
agreement on remuneration. 
 
------------------------------------ 
LITHUANIA HAS RATIFIED WIPO TREATIES 
------------------------------------ 
¶12.  The GOL ratified the two World Intellectual Property 
Organization (WIPO) treaties in 2002 and incorporated their 
requirements into national law via amendments to the 
copyright law of March 5, 2003.  Enforcement of the law has 
been weak.  The police initiated only five criminal cases 
against internet piracy in 2004, up from four in 2003. 
Embassy feels that this modest progress made little headway 
in combating the high level of internet piracy in the 
country. 
 
----------------------------------------- 
GOL'S RESPONSE TO IIPA'S LEGAL CRITICISMS 
----------------------------------------- 
 
¶13.  The Ministry of Culture responded to criticisms of its 
Copyright Act that IIPA included in its 2005 Special 301 
submission to the Department.  IIPA noted that it was 
unclear whether Lithuania assesses damages for each act of 
infringement or for each work infringed.  The Ministry 
noted that it is considering the introduction of a sampling 
procedure under the Civil Procedure to help identify the 
legality of an entire batch of products.  Though the IIPA 
alleges that the term of protection is too short, the 
Ministry states that it provides an adequate term of 
protection for works (for 70 years of an author's life, and 
an additional 70 years after his death).  The Ministry 
stated it had not heard of the "private copying exception" 
mentioned by IIPA in its submission.  Article 3 of 
Lithuania's Law on the Protection of Intellectual Property 
and Neighboring Rights covers the first release or 
simultaneous publication -- in Lithuania -- of works or 
phonograms.  Lithuanian law confirms the rights of 
broadcasters to receive royalties, in compliance with the 
International Rome Convention (Article 12) and the WIPO 
treaty (Article 15).  Agata collects these broadcasting 
royalties. 
 
----------- 
ENFORCEMENT 
----------- 
 
Police 
------ 
 
¶14.  The Criminal Police, together with LMIA, conducted 
inspections of 239 companies and retailers in 2004.  It 
seized 316,948 units of pirated products, mostly audio CDs. 
65 percent of black market sales in Lithuania were for 
musical products, 31 percent were for audiovisual works, 
and four percent for games.    The corresponding proportion of 
these products in the legal market is music - 52.25 
percent, audiovisual works - 26.75 percent, and games - 21 
percent.  In 2003, the police confiscated 142,800 units of 
CDs, videos and computer software, and brought three 
actions against organized crime groups in 2004.  In 
February, it seized 36,000 units, including 11,000 
audiocassettes and 20,000 audio CDs, of pirated product 
from an illegal warehouse in Vilnius.  It seized another 
170,000 units from a second Vilnius warehouse and from a 
production facility in July, and more than 30,000 CDRs 
(including 10,000 blank CDRs) and 2,800 DVDs smuggled from 
Russia in Kaunas in December. 
 
¶15.  The total value of products seized by the police in 
2004, utilizing the lowest legal retail prices, was LTL 
9,369,270 (USD 3,548,966), of which music works constituted 
LTL 6,149,970 (USD 2,329,534) of the total, audiovisual 
works LTL 2,940,960 (USD 1,114,000), and games programs LTL 
278,340 (USD 105,432).  LMIA's data suggests that losses to 
the owners of international repertoire music works rights 
in 2004 were about USD 6.13 million. 
 
¶16.  An LMIA representative reported that, following the 
establishment of a five-person specialized IPR police unit, 
crime bosses masterminding piracy activities and retails 
outlets selling pirated goods have increasingly been 
targeted by law enforcement.  The specialized unit utilizes 
city police officers to conduct the raids and undercover 
stings.  Every major police department in Lithuania 
dedicates one officer to coordinating IPR activities. 
 
--------------- 
INTERNET PIRACY 
--------------- 
 
¶17.  The police launched six cases (one administrative, 
five criminal) against internet distributors.  In one raid, 
police seized 2,900 films from a distributor.  In 2003, 
police initiated four criminal prosecutions against 
websites marketing pirated products.  LMIA estimates that 
there may be as many as 20 distributors selling pirated 
products over the internet.  Agata and FGPA are trying to 
establish cooperative agreements between ISPs and rights 
holders under which the ISPs will agree to block the 
broadcasting of protected works.  The Agata Managing 
Director noted the difficulty in getting permits from 
international phonogram producers, since many don't have 
local offices in Lithuania.  Protecting IPR rights on the 
internet, she said, is an area of particular interest for 
her organization, since there is a growing potential for 
abuse of IPR on the internet. 
 
------------------------------------ 
INADEQUATE INTER-AGENCY COORDINATION 
------------------------------------ 
 
¶18.  The coordination between GOL agencies charged with IPR 
protections could improve. 
 
Customs 
------- 
 
¶19.  Customs intercepted few pirated products in 2004. 
Most pirated products are smuggled into Lithuania without 
an opportunity for Customs inspection.  Further, now that 
Lithuania is part of the EU, Customs does no inspection of 
vehicles entering through Poland and Latvia.  They only 
inspect at the borders with Belarus and Kaliningrad, 
reducing the amount of contraband they might find.  The FGPA 
Chairman criticized the Customs Intelligence Service for 
not being more active in identifying corrupt Customs 
officers and cars carrying smuggled goods.  He noted that 
one car is capable of concealing 6-10,000 CDs. 
 
The Courts 
---------- 
 
¶20.  The police filed 131 criminal cases and 180 
administrative protocols for IPR violations in 2004. (An 
administrative protocol is a description of a violation of 
the Administrative Code, which is judged by an 
Administrative Court.)  In 2003, the police began 86 
pretrial investigations, and filed 171 administrative 
protocols. 
 
¶21.  The maximum penalty for piracy is LTL 2,000 (USD 758), 
but courts usually award penalties of between LTL 100-200 
(USD 38-76).  Pirates often receive lower penalties by 
claiming mitigating circumstances as a basis for leniency. 
Industry representatives told us that these fines fail to 
adequately deter piracy.  Pirates, they tell us, fear 
retaliation from organized crime more than penalties 
imposed by the judicial system.  The Ministry of Culture 
told us that a draft law under consideration by parliament 
would increase the maximum fine for individuals under the 
new Administrative Code to LTL 5,000 (USD 1,894), and for 
legal persons to LTL 10,000 (USD 3,788). 
 
¶22.  The relevant laws are new, and experts cite the need 
for judges to receive training in interpreting these laws. 
During a December 2004 USG-funded visit by U.S. Patent and 
Trademark Office Senior Counselor Michael Keplinger, Court 
of Appeals Judge Virginija Cekanauskaite remarked that her 
colleagues could use training in how U.S. and other foreign 
judges interpret IPR statutes. 
 
¶23.  IIPA and FGPA raise valid concerns about the 
cumbersome nature of the court-mandated expert review 
process.  The courts require that experts submit reports 
after identifying, examining, and translating the title of 
each seized album.  Courts require these reports to confirm 
that the stolen intellectual property belongs to the rights 
holder, a process that necessitates the comparison of each 
CD code with corresponding legal CD codes.  By contrast, 
common European practice sanctions the use of sampling. 
 
------------------------- 
BALTIC OPTICAL DISC PLANT 
------------------------- 
 
¶24.  In its submission, IIPA noted the recording industry's 
complaint alleging pirate production at the Baltic Optical 
Disc (BOD) plant.  The LMIA and FGPA told us that the plant 
is "clean."  LMIA opined that production of pirated goods 
at BOD is unlikely, because the plant is inspected by the 
police, LATGAA, LMIA and NCB (the Nordic Copyright Bureau). 
LMIA added that these inspections had found no evidence of 
piracy. 
--------------------------------------------- ----- 
RECOMMENDATION -- KEEP LITHUANIA ON THE WATCH LIST 
--------------------------------------------- ----- 
¶25.  Lithuania continues to have IPR problems, despite its 
progress.  We concur with the thrust of IIPA's criticisms, 
and with its recommendation that Lithuania remain on the 
Watch List for 2005.  The piracy rate dropped to about 40 
percent from 55-65 percent in 2003, the government 
conducted a Public Awareness Campaign on IPR protections, 
and is making a good faith effort to tackle internet 
piracy, launching cases against six of an estimated 20 
distributors of illegal media.  The Criminal Police seized 
316,948 units of pirated products, up from 142,800 units in 
¶2003.  The police brought three actions against organized 
crime groups in 2004.  Enforcement, however, remains the 
weakest element in the country's IPR protection system. 
There appears to be insufficient political will to tackle 
the problem.  Additional high-level attention focused on 
the importance of IPR protections would be beneficial on 
the ground.  The law enforcement effort against piracy is 
constrained by inadequate resources, corruption, low fines, 
and a slow and cumbersome process of redress in court. 
 
-------------------------------------------- 
EMBASSY'S EFFORTS TO PROMOTE IPR PROTECTIONS 
-------------------------------------------- 
 
¶26.  We will continue to urge Lithuania to make greater 
efforts to address weaknesses in its enforcement system. 
USG-funded programs made it possible for U.S. experts to 
hold a two-week training session for Lithuanian Customs and 
Police officers in January 2005, for two Lithuanian Court 
of Appeals judges to participate in an IPR business- 
judicial roundtable in Bratislava, and for a U.S. copyright 
expert to speak at a GOL conference to commemorate the 10th 
anniversary of Lithuania's membership in the Berne 
Convention.  We also solicited and arranged the first ever 
visit to Lithuania of a representative of the Motion 
Picture Association of America to discuss piracy issues 
with key distributors and government officials.  We will 
encourage the GOL to approach IPR violations within the 
broader context of complex crimes encompassing tax evasion 
and illegal employment, and to continue to go after the 
organized crime bosses masterminding piracy in Lithuania. 
 
MULL