VZCZCXYZ0000
RR RUEHWEB

DE RUEHUL #0601/01 0542246
ZNR UUUUU ZZH
R 232246Z FEB 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC 6135
INFO RUCPDOC/USDOC WASHDC 2800
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 1746

UNCLAS SEOUL 000601 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR EB/TPP/IPC AND EAP/K 
STATE PASS USTR FOR CHOE-GROVES, CUTLER AND KI 
COMMERCE PASS USPTO FOR URBAN 
STATE PASS LIBRARY OF CONGRESS FOR TEPP AND POOR 
TREASURY FOR IS/ISA/BUCKLEY AND ITT/CHANG 
COMMERCE FOR 4431/IEP/OPB/EAP/MBMORGAN AND JBOGER 
GENEVA FOR USTR 
 
TAGS: ETRD KIPR ECON PREL KS
E.O. 12958: N/A 
SUBJECT: KOREA SPECIAL 301 IPR REVIEW: EMBASSY RECOMMENDS 
RETAINING "WATCH LIST" STATUS FOR KOREA 
 
REF: A) SEOUL 212 
 
     B) 05 SEOUL 5122 
     C) 05 SEOUL 4551 
     D) 05 SEOUL 3942 
     E) 05 SEOUL 3903 
     F) 05 SEOUL 3277 
     G) 05 SEOUL 2936 
     H) 05 SEOUL 2435 
     I) 05 SEOUL 1256 
     J) 05 SEOUL 932 
     K) 05 SEOUL 872 
 
OVERVIEW 
-------- 
 
¶1. (SBU) Following Korea's removal from the Special 301 
"Priority Watch List" in April 2005, the Korean government 
continued to move forward in a number of areas to improve 
the level of intellectual property rights (IPR) protection 
in Korea.  These measures included: introducing legislation 
that will significantly enhance protection for sound 
recordings transmitted over the Internet (both peer-to-peer 
and web-casting); implementing regulations that restore the 
ability of the Korea Media Rating Board to take necessary 
steps to stop film piracy; increasing enforcement activities 
by the Standing Inspection Team against institutions using 
illegal software; establishment of the Copyright Protection 
Center to better safeguard IPR both online and offline; and 
a commitment to the continue the implementation of the "IPR 
Master Plan" under the leadership of the Prime Minister's 
Office, with the aim of providing overall policy guidance to 
the government as it works to further improve IPR protection 
in Korea. 
 
¶2. (SBU) Korean recognition of the importance of IPR 
protection has increased in recent years, and will likely 
improve further as the amount and value of domestic Korean 
IPR grows.  Recent judicial decisions concerning piracy of 
copyrighted materials, and the scope of liability in cases 
involving illegal file-sharing and other IPR cases, are 
providing useful precedents and helping to bring Korea's 
legal system in line with international norms.  While some 
civil society groups continue to call for "fair use" and 
demand "netizen" rights, general public sentiment towards 
IPR violations is progressing toward acknowledgement of the 
criminality of using IPR content without paying for it. 
 
¶3. (SBU) Public and private interest in effective IPR 
enforcement has been manifested through a series of 
seminars, conferences and resolutions considering how to 
actively enforce rightholders' claims.  As Korea moves to 
establish itself as a world leader in information technology 
(IT) through innovations in both hardware and software, more 
attention is being paid to the benefits that will accrue to 
Korean rightholders through a comprehensive and vigorous 
approach to IPR enforcement.  Additionally, the Korean 
government's pursuit of a U.S.-Korea Free Trade Agreement 
should provide additional impetus this year toward further 
enhancement of Korea's IPR regime. 
 
¶4. (SBU) Despite this progress, the Embassy's view is that 
Korea should be retained on the Special 301 "Watch List." 
Korea's IPR protection regime continues to have important 
gaps, and changes need to be made to Korean law to 
strengthen protection of temporary copies, and allow for 
technological protection measures, Internet Service Provider 
(ISP) liability, ex parte relief, and coordination between 
Korean health and IPR authorities to prevent marketing 
approvals for patent-infringing products.  In addition, 
Korea still lacks full retroactive protection for pre- 
existing copyrighted works, and its copyright terms need to 
be extended.  Finally, we remain concerned about 
insufficient progress in fighting book piracy in 
universities and street vendor sales of illegally copied 
DVDs, and continue to cast a watchful eye to ensure no 
erosion of protection for confidential pharmaceutical test 
data.  End Overview. 
 
KOREAN IPR PROTECTION IN 2005 
----------------------------- 
 
¶5. (U) In support of the above recommendation, this message 
focuses primarily on new developments in Korean intellectual 
property rights protection in 2005, while also outlining the 
general state of affairs on IPR protection, including the 
enforcement situation, and the identification of continuing 
gaps in Korea's IPR protection regime.  While not an 
exhaustive review, we have addressed most salient issues. 
The issues covered below are: 
 
-- Copyright Law 
-- Computer Program Protection Act 
-- Copyright Treaties 
-- Copyright-related Judicial Cases 
-- Data Protection 
-- Patent Protection 
-- Enforcement Trends 
-- Software Piracy 
-- Optical Media Piracy 
-- Counterfeit Goods 
-- International Cooperation and Training 
-- Korea's "IPR Master Plan" 
-- Conclusion and Comment 
 
COPYRIGHT LAW 
------------- 
 
¶6. (U) Because Korea has one of the highest levels of 
broadband Internet penetration in the world, the United 
States has urged the Korean government to develop an 
effective response to the unique challenges posed by the 
changing nature of digital copyright piracy.  In particular, 
we have sought improvements to Korean copyright law to stem 
Internet-based copyright violations. 
 
¶7. (U) In 2005, the Korean government prepared and submitted 
several very important amendments to the Copyright Act.  The 
proposed amendments would significantly enhance protection 
for sound recordings transmitted over the Internet, either 
through peer-to-peer transmission or via web-casting, by 
giving rightholders, performers, and phonogram producers 
significantly enhanced rights to control the transmission or 
broadcast of their phonograms.  The amendments would also 
limit public performances of copyrighted works and eliminate 
the complaint requirement in certain cases. 
 
¶8. (U) Unfortunately, while the necessary legislation for 
these amendments was introduced and underwent preliminary 
deliberation at the Committee level in Korea's National 
Assembly in late 2005, as of this report, the legislation 
has not yet been enacted into law.  Korean and foreign 
copyright protection groups have testified at informal and 
formal hearings in support of the legislation, and the USG 
has also submitted formal comments in support of the 
legislation.  On the other side, "user rights" groups have 
sought to water down or stall the legislation.  We will 
continue to monitor progress and encourage the Korean 
National Assembly to take action on these important 
amendments. 
 
¶9. (U) Beyond the pending improved legislation, the United 
States continues to discuss further improvements to the 
Copyright Act with the Korean government.  Currently, Korean 
law does not extend the reproduction right to cover copies 
made in the temporary memory of a computer, a significant 
and still growing manner for use of copyrighted works.  The 
United States continues to urge Korea that to strengthen 
both the Copyright Act and Computer Program Protection Act 
by revising the laws to clarify that the copyright owner has 
the exclusive right to make copies, temporary or permanent, 
of a work or phonogram.  We are also still concerned about 
limitations on the use of technological protection measures 
(TPM's) that manage access to a work, and we seek further 
clarification on Internet Service Provider liability.  The 
current Copyright Act amendments still leave unclear the 
scope of the underlying liability of service providers and 
the limitations on and exceptions from that liability. 
 
¶10. (U) The U.S. Government has also told the Korean 
government that the private copy exceptions of the Copyright 
Act generally should not be applicable to the Internet 
environment, which by its very nature extends far beyond 
 
private home use.  Concerning library exceptions under 
Korea's Copyright Act, the U.S. Government believes that a 
notice period of at least 30 days should be given to 
rightholders prior to the unauthorized digitization of their 
works, to minimize any negative effects.  Under the current 
law, library exceptions still apply only to literary works 
and not to broadcasts, performances and sound recordings. 
The U.S. Government has also urged Korea to delete the 
reciprocity limitations relating to database protection in 
the Copyright Act, as it discourages the introduction of 
databases from countries without such legislation, including 
the United States. 
 
¶11. (U) Korea currently provides copyright protection for 
the life of the author plus 50 years.  In line with 
international trends, the United States is urging Korea to 
extend the term of copyright protection for works and sound 
recordings to the life of the author plus 70 years or 95 
years from date of first publication where the author is a 
legal entity. 
 
COMPUTER PROGRAM PROTECTION ACT 
------------------------------- 
 
¶12. (U) Improvement of Korea's Computer Program Protection 
Act (CPPA) to meet current challenges, as well as to comply 
with new global norms, continues incrementally.  Proposed 
amendments to the CPPA would increase the power of the 
Program Mediation and Deliberation Council (PDMC) and 
increase penalties for assorted violations of Korean IPR- 
related laws.  Those amendments were introduced and 
underwent preliminary deliberation in Korea's National 
Assembly in late 2005.  However, as of this report, the 
legislation has not yet been enacted into law.  While 
supporting the amendments, the USG has suggested additional 
improvements to the CPPA. 
 
¶13. (U) Concerning software streaming programs -- computer 
programs permitting the "streaming" of software from a 
single server to multiple work stations -- no progress was 
made in 2005 in clarifying the PDMC's mistaken 
interpretation of the CPPA which included the inappropriate 
normative statement that software developers "should" offers 
users a license permitting streaming of their programs (Ref 
F). 
 
COPYRIGHT TREATIES 
------------------ 
 
¶14. (U) Korea has ratified the WIPO Copyright Treaty (WCT), 
and has committed to ratifying the WIPO Performances and 
Phonograms Treaty (WPPT) after the prerequisite legislation 
has been submitted and approved. 
 
COPYRIGHT-RELATED JUDICIAL CASES 
-------------------------------- 
 
¶15. (U) Complaints were filed throughout 2005 by a variety 
of groups concerned with illegal sharing of files, 
principally music.  We are encouraged by a number of cases 
concluded in 2005 that seem to provide the precedent for 
increased legal protection for rightholders. 
 
¶16. (U) Following a long series of appeals, in 2005 Soribada 
III, which was Korea's most infamous peer-to-peer (P2P) 
service provider, was ordered to shut down by Korea's 
highest court, effectively ending the appeals process.  A 
final decision on Soribada's proposal to modify its service 
to comply with the court's order and Korean laws is expected 
soon.  Prosecutors also ordered Daum and Naver, two of 
Korea's largest Internet portals, to cooperate in efforts to 
shut down blogs and other sites that share copyrighted 
files. 
 
¶17. (U) Bugs Music, a major P2P provider, also agreed to 
stop providing files for free following a lengthy court 
battle.  Local rightholders sued to prevent Bugs Music from 
continuing its service, and the settlement included Bugs 
Music switching to a fee-based service and the transfer of 
60 percent of the shares, as well as management rights, to a 
domestic music industry group. 
 
 
DATA PROTECTION 
--------------- 
 
¶18. (U) At USG prompting, the Korea Food and Drug 
Administration (KFDA) officially reconfirmed on March 31, 
2005 that different versions of original drugs undergoing 
post-marketing surveillance (PMS) in Korea are subject to 
Korea's data protection regulations.  This means that 
manufacturers have to supply a full portfolio of clinical 
data in order to obtain market approval if they intend to 
market their drug while the original drug is still under 
PMS, thus ensuring the continued honoring of commitments 
related to data protection required by Article 39.3 of the 
WTO TRIPS Agreement. 
 
PATENT PROTECTION 
----------------- 
 
¶19. (U) Patent protection in Korea is generally solid, as 
long as patent rights are clearly established.  The Korean 
Intellectual Property Office (KIPO) has amended relevant 
rules to address U.S. concerns regarding restrictions on 
patent term extension for certain pharmaceutical, 
agrochemical and animal health products. 
 
¶20. (U) However, an issue of continuing concern has been the 
lack of coordination between the Korea Intellectual Property 
Organization (KIPO) and the Korea Food and Drug 
Administration (KFDA), which can result in the granting of 
marketing approval for products that may infringe on 
existing patents. 
 
¶21. (U) Also on the patent front, U.S. firms have pointed to 
Korean courts' apparent unwillingness to provide injunctive 
relief in cases where KIPO or a lower court has established 
that a rightholder's patent has been infringed upon, if the 
case remains under appeal at the Patent Court or a higher 
court.  This allows the infringing products to remain on the 
market until a final determination has been made.  Korea's 
Patent Court apparently lacks the legal authority to grant 
injunctive relief.  Although the Korean civil courts have 
the authority to issue injunctive relief in patent cases, in 
practice such relief remains rare, since the civil courts 
tend to defer to the Patent Court. 
 
ENFORCEMENT TRENDS 
------------------ 
 
¶22. (U) The establishment of Korea's Copyright Protection 
Center (CPC) in 2005, to conduct both online and off-line 
copyright investigations, was a welcome move and we have 
urged the Korean government to make effective use of the 
CPC's investigative capabilities and to make its services 
available to all rightholders, Korean and international. 
The CPC has been receptive and generally internationalist in 
approach.  From its inception in April 2005 until year's 
end, CPC investigated nearly 37,000 online users, and 
brought criminal complaints against 802.  These 
investigations resulted in the deletion of almost 13 million 
illegal files, the vast majority being music. 
 
¶23. (U) Among its most prominent cases, the CPC abetted the 
useful judicial precedents noted above by filing a criminal 
complaint against Soribada III, a renowned peer-to-peer 
service provider, and against five individuals for 
maintaining illegal files on one of Soribada's chat sites. 
CPC also filed criminal complaints against individuals for 
illegally uploading music to be shared on Internet "cafes" 
and "blogs."  Additionally, CPC filed charges against the 
operator of one such "cafe" for facilitating the illegal 
sharing of files through his Internet site. 
 
¶24. (U) During the same period, the CPC also looked into 
3,452 cases of possible offline copyright violations -- 
covering music, video, publications, and games.  Of those 
investigations, approximately 2,900 resulted in seizure or 
administrative action, and 546 were referred for criminal 
complaints.  In the offline arena, music-related cases made 
up the largest group -- both in terms of number of cases, 
and in seizures. 
 
 
¶25. (U) According to ROKG data on the level of fines and 
jail sentences imposed on infringers, there is an 
accelerating rate of investigations, trials and convictions 
in many areas.  For instance, during the first three 
quarters of 2005 (latest data available), fines were issued 
in 17,015 cases of IPR violations.  Jail sentences were 
issued in 780 cases, with 103 cases resulting in 
imprisonment.  The United States continues to urge Korea to 
further strengthen penalties for IPR violations in order to 
increase their deterrent effect against piracy. 
 
¶26. (U) Korean authorities from a variety of agencies and 
authorities worked together to increase the level of IPR 
awareness on university campuses before conducting intensive 
enforcement campaigns coinciding with the opening of the 
school year in September 2005.  During this enforcement 
campaign, more than 110 copy-shops were investigated, with 
more than 5,500 seizures of illegally copied publications. 
While the number of facilities investigated and the number 
of publications seized was more than double that of the 
previous year, the overwhelming majority of the seizures 
were copies of Korean publications. 
 
¶27. (U) In January 2006, the Seoul Central District 
Prosecutor's office declined to prosecute more than 13,000 
individuals accused of illegal file sharing by a copyright 
enforcement NGO (Ref A), even as it clarified that it would 
pursue charges against individuals involved in online 
copyright infringement for commercial gain.  While the 
Prosecutor's explanation for its decision did not 
specifically establish thresholds for prosecution, the 
Embassy is concerned that the prosecutors unintentionally 
sent a mixed message to the public, especially young users 
of popular Internet file-sharing services. 
 
SOFTWARE PIRACY 
--------------- 
 
¶28. (U) Korea has made significant progress towards 
decreasing the rate of software piracy in recent years.  The 
Standing Inspection Team (SIT) of the Ministry of 
Information and Communication continues to conduct raids on 
commercial firms and other institutions suspected of using 
illegal software.  The total number of raids conducted by 
the SIT in 2005 was 2,537, according to Korean authorities. 
Of those inspected, some 1,556 were found to be using 
pirated software. 
 
¶29. (U) Despite these efforts, Korea's software piracy rate 
in 2005 was estimated to be 46 percent by the Business 
Software Alliance (Ref B) -- the same piracy rate as in 
2004, but reflecting a slight decline in estimated losses 
from USD 276 million in 2004 to USD 258 million in 2005. 
The Seoul office of the Alliance reports that it has enjoyed 
good cooperation in enforcement actions with Korean 
authorities, including the Standing Inspection Team. 
 
OPTICAL MEDIA PIRACY 
-------------------- 
 
¶30. (U) While pirated audio-visual DVD's, sold on the street 
by informal vendors, may not be as significant a problem as 
in other countries, concerns remain about ineffective 
enforcement efforts.  The Korean government has not 
routinely conducted enforcement actions against retail-level 
operations, in order to focus their efforts on locating 
large caches of pirated material, or large-scale copying 
facilities.  In 2005, the Korean police did conduct a 
targeted campaign for a certain time against pirated goods 
sold at the Yongsan Electronics Market, the most notorious 
outlet, and this raid appeared to have some limited impact 
on the trade.  We will continue to urge the Korean 
government to be more proactive at all levels of 
enforcement, large and small, in order to reinforce public 
perceptions of the criminality of copyright violations. 
 
COUNTERFEIT GOODS 
----------------- 
 
¶31. (U) The Korea Customs Service kicked off a special 
 
border enforcement initiative in February 2006 to focus on 
intercepting counterfeit items -- especially garments and 
high-end consumer goods, as well as pharmaceuticals and 
automotive parts.  This three month program consists of 
nearly 100 inspection teams working with rightholders and 
counterparts in KIPO and a number of international chambers 
of commerce.  This effort follows two similar initiatives in 
2005, which resulted in 63 convictions and seizures worth 
USD 23 million.  By country, Korean firms are concerned most 
about counterfeit auto parts, Europeans about fashionable 
consumer goods, and both American and European firms suffer 
from counterfeit pharmaceuticals.  Many counterfeits appear 
to be imported from China or Southeast Asia.  Adequate 
protection of trademarks also continues to be a problem of 
concern in Korea. 
 
INTERNATIONAL COOPERATION AND TRAINING 
-------------------------------------- 
 
¶32. (U) Following up on an April 2005 meeting between Korean 
government officials and a Strategy Targeting Organized 
Piracy (STOP!) delegation, Korean customs, patent and other 
officials have continued to discuss best practices and 
enhanced efforts to fight the trade in counterfeited goods. 
Since then, USG and Korean officials have continued that 
dialogue in the customs, patent and enforcement areas. 
Korean customs practices follow TRIPS requirements in cases 
of suspect goods and the Korean Customs Service (KCS) 
conducts inspections and raids using specially-trained IPR 
task force teams. 
 
¶33. (U) The generally high level of technical expertise in 
Korea has allowed USG training to focus on trademark 
adjudication, and judicial and administrative processes -- 
especially related to copyrights and patents.  USG-funded 
training took place on several occasions in 2005, both in 
Seoul and in Washington, including a special State 
Department-funded IPR Enforcement Workshop in Seoul which 
was heavily attended by IPR-related judges and prosecutors. 
 
KOREA's "IPR MASTER PLAN" 
------------------------- 
 
¶34. (U) The Korean government has reaffirmed its commitment 
to the "IPR Master Plan," originally issued in early 2005, 
and has assured us that the Plan will continue to evolve to 
address new concerns as they arise. (Ref I)  The Master 
Plan, which is maintained and monitored by the Prime 
Minister's Office, may serve as a useful way to ensure USG 
concerns on IPR issues are recognized and remain on the 
Korean government's agenda as priorities. 
 
¶35. (U) In addition to the items already on the Master Plan 
-- see last year's submission for a full listing -- we have 
asked the Korean government to also include and consider 
many of our other concerns, such as the following: 
 
-- Renunciation of Program Deliberation and Mediation 
Committee (PDMC) statement on software licensing; 
-- Providing all rights under the Copyright Act on a 
national treatment basis; 
-- Codifying doctrines of secondary liability for copyright 
infringement; 
-- Providing for ex parte remedies; 
-- Strengthening of technological protection measure 
provisions; 
-- Narrowing of library exceptions; 
-- Avoiding over-broad exemptions for distance learning; 
-- Extension of copyright terms; 
-- Maintaining an efficient and fair system of ratings for 
foreign works and sound recordings; 
-- Effective enforcement actions, including enforcement 
against textbook piracy, DVD piracy, and end-user software 
piracy; 
-- Application of sentencing guidelines to ensure deterrent 
sentences; 
-- Harmonization of the Copyright Act and Computer Program 
Protection Act; 
-- Continued cooperation on the STOP! Initiative; 
-- Continued cooperation on the APEC Anti-counterfeiting and 
Piracy Initiative. 
 
 
CONCLUSION AND COMMENT 
---------------------- 
 
¶36. (SBU) Korea's planned future growth is centered on its 
acknowledged strengths in IT, and the country's stated 
desire to serve as a regional leader in investment and 
exports.  This, coupled with an increasing need to protect 
Korean IPR, provides us reason to believe Korea will 
continue to be a cooperative partner in protecting American 
IPR and rightholders.  The overall IPR environment in Korea 
is improving and there are signs that it will get better. 
The year 2005 was particularly encouraging on the 
enforcement front.  While this is good news, there are still 
a number of areas in both the legislative and enforcement 
arenas where protections should be increased.  Therefore, we 
recommend Korea remain on the Special 301 Watch List for 
¶2006. 
 
¶37. (SBU) As a final point, the Embassy notes that in its 
2006 Special 301 submission, the International Intellectual 
Property Association (IIPA) suggests an out-of-cycle review 
for Korea, particularly to assess progress on book and music 
piracy during 2006.  While we agree that it is imperative 
that we signal to Korea how important it is for the National 
Assembly to pass the pending Copyright Act amendments as 
soon as possible, the Embassy believes that an out-of-cycle 
review is unnecessary for both tactical and practical 
reasons.  Tactically, this year's Free Trade Agreement talks 
already provide strong leverage to pursue additional changes 
to Korean IPR law in 2006.  In practical terms, any out-of- 
cycle review could merely end up duplicating the effort to 
negotiate the IPR Chapter of the FTA, since the out-of-cycle 
review and FTA negotiations could end up taking place at the 
same time. 
 
VERSHBOW