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DE RUEHIN #0562/01 0550529
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FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 8661
INFO RUEHBJ/AMEMBASSY BEIJING 4712
RUEHUL/AMEMBASSY SEOUL 7612
RUEHKO/AMEMBASSY TOKYO 7442
RUEHCN/AMCONSUL CHENGDU 1055
RUEHGZ/AMCONSUL GUANGZHOU 8990
RUEHHK/AMCONSUL HONG KONG 5905
RUESLE/AMCONSUL SHANGHAI 8387
RUEHSH/AMCONSUL SHENYANG 4975
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 07 TAIPEI 000562 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EB/IPE LACROSSE, PASS USTR FOR 
JCHOE-GROVES, WINTERS, WINELAND, AND STRATFORD, USDOC FOR 
4431/ITA/MAC/AP/OPB/TAIWAN/MBMORGAN AND JBOGOR, DOC PASS 
USPTO JURBAN AND LOC STEPP 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD TW
SUBJECT: AIT/T VIEWS ON SPECIAL 301 REVIEW 2006 
 
REF: A. STATE 14937 
     ¶B. 05 TAIPEI 4927 
     ¶C. 05 TAIPEI 4549 
     ¶D. 05 TAIPEI 4330 
     ¶E. 05 TAIPEI 4059 
     ¶F. 05 TAIPEI 3807 
     ¶G. 05 TAIPEI 3777 
     ¶H. 05 TAIPEI 3712 
     ¶I. 05 TAIPEI 3307 
     ¶J. 05 TAIPEI 2909 
     ¶K. 05 TAIPEI 2143 
 
¶1.  Summary:  The environment for Intellectual Property 
protection in Taiwan continues to improve as key sectors of 
society embrace the reality that Taiwan's economic prosperity 
is increasingly dependent on innovation.  Taiwan authorities 
have continued effective enforcement actions targeted at 
optical media piracy, counterfeit pharmaceuticals and fake 
branded goods.  Efforts to combat internet-related piracy 
continue and show promise in spite of increasing use of the 
internet to market infringing goods.  Judicial decisions are 
beginning to reflect a better understanding of intellectual 
property law and Taiwan's Intellectual Property Office has 
proven itself committed to providing training to law 
enforcement officials and judges, lobby for needed 
legislative action, and cooperate with industry to find 
creative solutions to IPR problems where legislation is 
lacking. 
 
¶2.  But Taiwan's IPR protection regime still has some large 
holes that continue to provide opportunities for IP pirates. 
Although Taiwan's Ministry of Economic Affairs is a strong 
supporter of IPR protection, that dedication is not uniformly 
in evidence throughout the government.  Taiwan's Ministry of 
Education (MOE) has not embraced government promises to 
create a positive environment for intellectual property. 
MOE's unwillingness to take any actions to address illegal 
downloading and copying on university campuses fosters a 
disregard for IP among Taiwan's future leaders and is cause 
for serious concern.  Taiwan's Department of Health has 
displayed a similar unwillingness to take the lead in efforts 
to clamp down on the flow of counterfeit pharmaceuticals into 
Taiwan.  The decision by the Ministry of the Interior to 
transfer 18% of the IPR Police unit to other public security 
duties suggests the Taiwan government is beginning to view 
IPR protection as a lower priority.  Finally, Taiwan's unique 
political status makes needed cooperation with regional law 
enforcement agencies to combat cross-border trade in 
counterfeit goods extremely difficult.  In view of the 
continuing lack of response by some Taiwan government 
agencies to the problems of intellectual property violations, 
AIT/T recommends Taiwan remain on the Special 301 Watch List 
for 2006.  End Summary 
 
============================== 
Optical Media Piracy in Taiwan 
============================== 
 
¶3.  Since 2003, Taiwan has made great progress in controlling 
optical media piracy.  The passage of the Optical Media Law 
in 2001 required optical disk (OD) manufacturing plants to be 
licensed and mandated the use of Source Identification (SID) 
Codes, giving Taiwan law enforcement the legal framework to 
crack down on counterfeiters.  Creation of enforcement task 
forces, including the Joint Optical Disk Enforcement (JODE) 
Task Force and the Integrated Enforcement Task Force (IETF), 
had a significant effect on manufacturing and retail sales of 
pirated optical media.  Trade associations report the number 
of stalls in night markets, traditionally a primary channel 
for counterfeit media, has fallen from over 300 to less than 
50 island-wide, a number that has remained steady for the 
past two years. 
 
¶4.  As Taiwan authorities have effectively shut down 
counterfeiting activities in optical media plants and retail 
markets, counterfeiters have moved to using DVD burners 
installed in private residences.  Counterfeiters reportedly 
take orders by phone or internet, burn copies on demand and 
use express mail services to make deliveries.  Taiwan law 
 
TAIPEI 00000562  002 OF 007 
 
 
enforcement and trade associations believe that the number of 
Chinese websites offering counterfeit media is growing and 
note a rise in shipments of small quantities of counterfeit 
optical media, primarily movies, from China.  Local trade 
associations in Taiwan believe the optical media piracy rate 
is falling, albeit slowly for movies and software.  The 
International Federation of Phonographic Industries (IFPI) 
reports a dramatic drop in counterfeit CDs from 36% to 26%, 
but attributes this to the growing ease and popularity of 
digital content downloading. 
 
============================================= ======= 
Enforcement Action by Police and Special Task Forces 
============================================= ======= 
 
¶5.  Taiwan law enforcement had a number of successes in 2005. 
 Taiwan's Joint Optical Disk Enforcement (JODE) Task Force 
conducted 1193 inspections of optical disk manufacturers in 
2005, up slightly from 2004.  While no violations were found, 
seven OD manufacturing plants did close.  The IPR Police 
conducted 5000 raids, filed 1428 cases and made 1593 arrests 
for IPR infringement, compared to 1219 cases and 1052 arrests 
in 2004.  This improved result may reflect the change in late 
2004 of the IPR Police from an ad-hoc task force to an 
official arm of the National Police. 
 
¶6.  The National Police also used regular units to 
investigate IPR infringement cases.  2005 figures show a 
signicant increase in the number of cases filed and suspects 
arrested.  Cases increased by 10% to 4648 and arrests 
increased 21% to 5245 in 2005.  Trademark cases increased 
dramatically, reflecting additional resources directed 
towards investigation of sales of counterfeit branded and 
luxury goods, primarily smuggled from China.  National Police 
seizures of counterfeit optical media decreased compared to 
the same period in 2004.  Officials attribute this drop to 
the growing popularity of downloading digital content from 
the internet. 
 
¶7.  Taiwan Customs reported the same number of seizures of 
IPR-infringing imports in 2004 and 2005, but noted an 
increase in seizures of copyright-infringing optical media. 
Taiwan Customs also seized 11 incoming shipments and one 
outbound shipment of counterfeit PC boards for Nintendo game 
players.  While changes in the copyright law in 2004 allowed 
for ex officio inspections by Taiwan Customs, the law 
requires rightsholders to verify within a short period that 
the seized materials are counterfeit.  The Motion Picture 
Association has assigned personnel to Chiang Kai Shek 
International Airport to verify the authenticity of suspect 
parcels but Customs reports that some rightsholders are not 
responsive to requests to verify suspect trademark 
violations. 
 
===================================== 
Computer Software Piracy, No Progress 
===================================== 
 
¶8.  The Business Software Association believes the software 
piracy rate in Taiwan has remained consistent over the past 
three years at 43%, in spite of some reports that suggest 
that business software is increasingly being downloaded and 
exchanged by P2P users.  Anecdotal evidence suggests that 
most servers offering cracked software are based in China. 
Although the Taiwan government has made efforts to ensure the 
use of only registered and legal software in government 
offices, AIT is aware of cases where Taiwan government 
offices are alleged to have purchased IP-infringing products 
or allowed illegal downloading of copyrighted software.  In 
one instance, the Ministry of Defense purchased 
copyright-infringing copies of software from an unlicensed 
vendor.  Another case alleges users under the Ministry of 
Education illegally downloaded over 30,000 copies of its 
software. 
 
=========================================== 
Book Piracy Remains an Unquantified Problem 
=========================================== 
 
 
TAIPEI 00000562  003 OF 007 
 
 
¶9.  Representatives of the Taiwan Book Publishers Association 
(TBPA) believe the level of police cooperation in combating 
book piracy is acceptable, but complain that judges are 
reluctant to issue search warrants.  TBPA alleges that some 
on-campus copyshops are actively copying textbooks but do not 
face sanctions from university administrators.  Confusion 
over the definition of "fair-use" reportedly encourages 
professors and students to routinely copy all or large parts 
of a copyrighted work.  Police are reluctant to conduct 
enforcement activities on campus after a 2002 raid on Cheng 
Gong University in Tainan led to wide-spread student 
protests.  TBPA complains that the Ministry of Education has 
been unwilling to establish a channel for dialogue on this 
issue and has not taken effective steps to curb illegal 
copying on campus. 
 
================================= 
Trademark Piracy a Growing Threat 
================================= 
 
¶10.  As optical media piracy rates appear to be dropping, 
investigations and seizures of counterfeit branded goods in 
Taiwan is increasing.  Police say this is because more 
resources have been deployed to crack down on sale of 
counterfeit bags and clothing.  In 2005 police filed 2244 
cases involving trademark infringement, up 21% from 2004, and 
arrested 2627 sspects, up 20% from 2004.  Taiwan Customs 
reported that the number of seizures of counterfeit branded 
goods fell from 208 in 2004 to 174 in 2005.  However, Taiwan 
Customs impounded 2,393,323 items in 2005, compared to just 
63,264 items in 2004.  Counterfeit cigarettes accounted for 
most of these items, but substantial quantities of 
counterfeit cosmetics, leather goods (including bags), PC 
boards, medicines, and clothes were also seized.  In 
addition, Taiwan Customs made three seizures of export goods 
totaling 700 items, including one shipment of counterfeit 
Ford auto parts. 
 
============================================= ===== 
Pharmaceutical Piracy Wide-Spread, DOH Not Engaged 
============================================= ===== 
 
¶11.  A targeted effort by Taiwan's Ministry of Justice in 
2005 led to a number of seizures of counterfeit 
pharmaceuticals island-wide.  A few examples: In May, police 
arrested a nurse's aide in Taoyuan and charged her with 
selling counterfeit weight-loss drugs over the internet.  The 
accused reported she bought the counterfeit Reductil from 
someone she had met on-line and received shipments of 
counterfeit drugs from Vietnam.  In December 2005, Taiwan's 
IPR Police busted a ring selling counterfeit pharmaceuticals 
on the internet, arresting two and seizing 5000 counterfeit 
pills of Reductil, Viagra, Cialis, and other drugs.  After 
several months of investigation, four police units raided a 
warehouse in the Taipei suburb of Xizhi, seizing 550,000 
counterfeit pills of Reductil, Stillnox, Viagra, Cialis, 
Zantac, Tamiflu, and others.  Police estimated the street 
value of the seizure as over USD 9 million.  Two people were 
arrested.  Large quantities of high-quality packaging 
materials, instruction pamphlets and labels were also found. 
The quality of the counterfeit products was extremely high. 
Police believe the drugs were smuggled from China in bulk, 
then packaged and distributed to pharmacies, medicine shops, 
and night market vendors all over Taiwan. 
 
¶12.  The majority of counterfeit pharmaceutical products 
appear to be smuggled into Taiwan, usually from China, before 
being packaged and distributed locally.  However, according 
to a statement from one of the defendants in the large case 
above, they had recently begun importing chemicals from China 
with an eye to producing some counterfeit drugs in Taiwan. 
Packaging is reportedly produced in Taiwan and has become so 
sophisticated that industry representatives are sometimes 
unable to determine the fakes from a visual inspection. 
 
¶13.  The Taiwan Department of Health (DOH) has not made 
efforts to stop counterfeiting of pharmaceutical products a 
priority.  DOH has no enforcement arm and relies on the 
Ministry of Justice to lead anti-counterfeiting efforts.  In 
 
TAIPEI 00000562  004 OF 007 
 
 
2003, DOH established an interagency committee that meets 
biannually to share information and provide training on 
recognizing counterfeit pharmaceuticals.  DOH has made no 
effort to cooperate with TIPO to take action against 
counterfeit pharmaceuticals, nor does it play any official 
role in pharmacy accreditation.  DOH is focused on consumer 
safety and because there have been no reports of adverse 
reactions from counterfeit pharmaceuticals, combating 
counterfeits is not a priority for DOH. 
 
=========================== 
Changes in IPR Laws in 2006 
=========================== 
 
¶14.  Taiwan's Legislative Yuan passed amendments in 2005 that 
would allow trademark registrations to claim multiple 
priority rights.  This gives TIPO the legal basis to 
recognize trademark registration from other countries and set 
priority dates based on the first trademark registration. 
Taiwan also passed legislation to establish a patent attorney 
system and provide for specialized patent attorney licensing. 
 In addition, TIPO began negotiations with Internet Service 
Providers (ISPs) and digital content providers to devise an 
ISP Code of Conduct for intellectual property protection. 
While not legally binding, the proposed Code of Conduct would 
spell out agreed upon measures that ISPs and content 
providers could take when intellectual property infringing 
items are offered for sale or trade over the internet.  ISPs 
have been reluctant to agree to specific measures, although 
negotiations continue.  Property rights associations are 
considering whether to propose the amendment of appropriate 
laws as a means to encourage ISPs to reach a negotiated Code. 
 
 
¶15.  On January 1, 2006, Taiwan's Ministry of Foreign Affairs 
officially abolished its Anti-counterfeiting Committee.  The 
committee was established in 1981, but its duties had been 
assumed by TIPO after the creation of that body in 1999. 
Since that time, the ACC had become a liaison body within 
TIPO without permanent staff or budget.  After extensive 
consultation with rightsholders groups and interested parties 
(including the U.S. Department of State) TIPO officially 
disbanded the ACC.  The extensive consultations demonstrate 
the willingness of TIPO officials to engage local and 
international stakeholders and are a positive indication of 
Taiwan's willingness to work with the international community 
on IP protection. 
 
====================================== 
P2P Cases - One Step Back, Two Forward 
====================================== 
 
¶16.  In 2005, Taiwan's Courts issued two conflicting rulings 
in cases brought against Peer to Peer (P2P) service 
providers.  In June, EZPeer was found not guilty of copyright 
violations after the Shilin District Court found that EZPeer 
did not illegally reproduce or transmit copyrighted 
materials.  The Court ruled that Taiwan law did not prohibit 
the use of P2P services, but implied that users could be 
liable for copyright violations.  Recording industry 
association IFPI has appealed the decision.  In September, 
the Taipei District Court found Kuro and its management 
guilty of copyright violations, fining the company USD 93,000 
and sentencing three senior managers to up to three years in 
prison.  A Kuro user was also sentenced for downloading 900 
copyrighted songs from Kuro and sentenced to four months 
(commutable to a fine of approximately USD 1500.)  The Taipei 
Court found Kuro's advertisements and web banners encouraged 
users to violate copyrights.  The Court was also influenced 
by Kuro's staff admitting to uploading thousands of songs to 
the Kuro server at the direction of Kuro management.  Kuro 
has appealed this ruling. 
 
============================================= ========== 
Data Protection Approved, Still Waiting for Regulations 
============================================= ========== 
 
¶17.  Amendments to Taiwan's Pharmaceutical Law in January 
2005 provided pharmaceutical companies with five years of 
 
TAIPEI 00000562  005 OF 007 
 
 
data protection for new drugs.  New products must be 
registered in Taiwan within three years of release in an 
advanced country market (A10 countries.)  Implementing 
regulations have been drafted and circulated widely among 
innovative pharmaceutical companies and generic producers. 
While these regulations have not yet been officially adopted, 
DOH officials have assured manufacturers that products 
registered after the February 2005 promulgation of the law 
will be able to benefit from the data protection provisions. 
DOH expects the regulations to be officially adopted no later 
than June 2006. 
 
===================== 
2005 Training Efforts 
===================== 
 
¶18.  TIPO and Taiwan Customs organized training sessions for 
judges, prosecutors and enforcement officials throughout the 
year, often in cooperation with rightsholders.  Nintendo held 
three training sessions for approximately 60 Taiwan Customs 
officials in March and August 2005 to explain how to identify 
counterfeit Nintendo hardware and game cartridges.  TIPO 
conducts regular training sessions for prosecutors and new 
judges on IPR regulations and laws.  Additional workshops for 
50 judges and patent examiners on Identifying Patent 
Infringements took place in August 2005 and 157 police took 
part in seminars on Inspection and Prevention of 
Counterfeiting on the Internet in September.  Also in 
September 2005, AIT and TIPO hosted a seminar attended by 88 
judges, prosecutors and law enforcement personnel on 
Combating Internet Piracy.  Speakers included representatives 
from industry associations (MPA, BSA, IFPI, and PhRMA), the 
U.S. Department of Justice, the U.S. Patent and Trademark 
Office, The Bronx District Attorney's Office, TIPO and the 
IPR Police.  TIPO regularly sends its staff to training 
sessions conducted by the USPTO in Washington. 
 
¶19.  A regional IPR Seminar held in Hong Kong in September 
2005 illustrated the difficulty Taiwan law enforcement has in 
interacting with regional counterparts.  AmConGen Hong Kong 
originally invited law enforcement representatives from 
across East Asia to participate in a seminar designed to 
improve regional efforts to combat internet piracy.  However, 
Hong Kong authorities subsequently refused visa requests for 
Taiwan experts and made it known that Taiwan invitees with 
valid visas would be refused entry.  Hong Kong's refusal to 
issue visas was presumably in response to PRC concerns about 
Taiwan participation in this regional cooperative event. 
Taiwan is not eligible to join WIPO and is not a signatory to 
the WIPO Copyright Treaty or the WIPO Performances and 
Phonograms Treaty. 
 
======================== 
IPR Court Coming in 2007 
======================== 
 
¶20.  After much discussion by legal experts and the Judicial 
Yuan, an IP Court Planning Committee was established in 
September 2005.  The Committee agreed to include both 
criminal and civil IPR cases in the mandate of the IP Court. 
However, current draft legislation would require district 
courts to handle first instance criminal cases involving 
copyright violations.  Under this proposal, the IP Court 
would hear criminal copyright cases only on appeal.  An IP 
Court Organic Act and an IP Cases Trial Act have been 
proposed to Taiwan's Legislative Yuan and TIPO expects these 
bills to be considered in the current legislative session. 
Training for prospective IP Court judges will begin in March 
2005, with the first session of training expected to conclude 
in July 2005.  Subsequent training sessions for IP Court 
judges will be scheduled after July. 
 
========================= 
Areas of Concern for 2006 
========================= 
 
¶21.  Over the past three years, TIPO has proven itself to be 
a reliable partner in efforts to combat intellectual property 
violations.  AIT has worked closely with TIPO leadership to 
 
TAIPEI 00000562  006 OF 007 
 
 
conduct effective training for legal officials, lobby for 
needed changes in IPR law and regulation, and exchange views 
with rightsholders and law enforcement officials.  TIPO 
officials have been in the forefront of efforts to meet new 
challenges to IP protection as the internet increasingly 
abets counterfeiters.  However, TIPO's influence over other 
government bodies is limited and not all sectors of Taiwan's 
government or society are fully supportive of efforts to 
combat intellectual property violations. 
 
================================ 
MOE Needs to Take Responsibility 
================================ 
 
¶22.  The Ministry of Education (MOE) has been particularly 
reluctant to embrace protection of intellectual property. 
Rightholders believe IPR infringement on MOE-administered 
Internet Service Provider TANet is rampant.  TBPA believes 
illegal copying of textbooks at on-campus copyshops is also 
pervasive.  A cultural sympathy in Taiwan for students likely 
contributes to MOE's decision to "turn a blind eye" to this 
illegal behavior.  However, as a government agency, MOE has 
the responsibility to abide by laws prohibiting illegal 
downloading or copying of copyrighted material.  MOE has not 
taken steps to do so and has been unwilling to meet with 
rightsholders groups or with TIPO to discuss steps that can 
be taken to address these problems. 
 
============================================= ====== 
Improve Cooperation in Battle on Counterfeit Pharma 
============================================= ====== 
 
¶23.  The Department of Health is also reluctant to take 
concrete measures to address what by most estimates is a 
serious counterfeit pharmaceutical problem in Taiwan. 
Despite the considerable efforts of Taiwan law enforcement 
officials, industry estimates that as much as 25% of 
pharmaceuticals sold in Taiwan are counterfeit or illegal 
parallel imports, a figure DOH accepts.  For popular 
"lifestyle" drugs, counterfeits could be as high as 40% of 
the market.  Recent police raids suggest counterfeiters are 
now targeting public fears of Avian Flu to distribute 
counterfeit Tamiflu.  DOH has biannual meetings with law 
enforcement and pharmaceutical associations but sees 
counterfeiting as a public health issue, rather than an IPR 
issue.  DOH has refused to include TIPO in its biannual 
counterfeiting working group meetings.  The absence of 
confirmed cases of adverse reactions to counterfeit drugs 
leads DOH to make this problem a low priority.  Although 
penalties for manufacture, distribution or sale of 
counterfeit drugs were increased by amendments to the 
pharmaceutical law in 2004, DOH was unable to provide any 
examples of cases where pharmacists had been arrested or lost 
licenses for selling counterfeit products.   DOH has only a 
limited role in issuing pharmaceutical licenses and has no 
power to audit or revoke licenses once issued. 
 
====================== 
Fully Staff IPR Police 
====================== 
 
¶24.  The legal establishment of the IPR Police in 2004 was a 
victory for rightsholders and a large factor in Taiwan's 
removal from the Special 301 Priority Watch List in 2005. 
The force was established at 220 persons and the view at the 
time was that the size of the force could grow as additional 
funding became available.  Instead, budget cuts and 
reassignment of personnel to "public security" efforts have 
cut the size of the IPR Police from 220 to 180 officers.  The 
IPR Police is not the only special police unit to lose staff, 
the Environment and Forestry Units have reportedly been 
eliminated.  But the reduction in staff sends the wrong 
message to rightsholders and IPR infringers.  In addition, 
the IPR Police face shortages in internet expertise and the 
latest computer equipment.  In spite of these shortcomings, 
the IPR Police has done exceptional work in 2005.  Fully 
staffed, trained and equipped, this unit could do even more. 
 
============================================= 
 
TAIPEI 00000562  007 OF 007 
 
 
Opportunities for Regional Cooperation Needed 
============================================= 
 
¶25.  Taiwan's unique political status can make opportunities 
for cooperation with international counterparts rare. 
Although Taiwan officials have participated in regional 
meetings under the auspices of APEC or as NGO members, direct 
communication that could usefully address cross-border IP 
infringement is difficult.  As Taiwan's law enforcement 
efforts to crack down on production of counterfeit products 
have been more successful, manufacturers have moved 
off-shore, often to China.  This creates a structural 
difficulty for Taiwan officials who have limited 
communication with their counterparts across the Strait. 
Efforts to facilitate that communication have had little 
success.  Taiwan Customs reports they have virtually no 
communications with their counterparts from China and Hong 
Kong Customs officials recently refused to meet with Taiwan 
Customs officials.  As more and more counterfeit products are 
exported and smuggled out of China, the inability of Taiwan 
to participate in regional information sharing networks will 
make combating IP piracy in Taiwan increasingly difficult. 
 
 
============================================ 
Future Training Opportunities and Objectives 
============================================ 
 
¶26.  As Taiwan moves to tackle the problems posed by internet 
piracy, U.S.-sponsored training that addresses internet 
investigations and prosecutions and includes experienced U.S. 
prosecutors as speakers would be particularly welcome. 
Taiwan is also in the process of establishing an IPR Court. 
Seminars by U.S. judges with experience in hearing IPR cases 
would be helpful as Taiwan trains its own judges for duty on 
this new Court.  Efforts to assist Taiwan to build regional 
information sharing networks among law enforcement officials 
are badly needed to assist Taiwan to combat an increasing 
torrent of counterfeit goods coming from China and other 
countries.  Initiatives directed towards Ministry of 
Education and Department of Health officials would also be 
useful in creating a better understanding of the importance 
of IPR protection in education and health.  Finally, advance 
notice of USPTO and other training opportunities would be 
helpful in ensuring maximum Taiwan participation at these 
events.  Currently, announcements of training opportunities 
are made a few months in advance, this does not provide 
sufficient time for some nominees to seek approval and obtain 
funding.  Earlier notifacation of yearly training programs 
would facilitate greater Taiwan attendance at these important 
events. 
KEEGAN