VZCZCXRO4443
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #0475/01 0530818
ZNR UUUUU ZZH
P 220818Z FEB 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 3383
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS

UNCLAS SECTION 01 OF 03 JAKARTA 000475 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
FOR EAP/MTS; EB/TPP/IPE JBOGER 
COMMERCE FOR 4430/BERLINGUETTE AND PETERS 
COMMERCE PASS USPTO FOR URBAN AND FOWLER 
DEPT PASS USTR FOR DKATZ, JGROVES, RBAE, CCOLLEY 
 
E.O. 12598: N/A 
TAGS: ECON ETRD KIPR ID
SUBJECT: INDONESIA IPR - ANNUAL SPECIAL 301 SUBMISSION 
 
Ref: a) State 07944; b) Jakarta 00011 
 
¶1. (SBU) Summary:  Since Indonesia's upgrade to the Special 301 
Watch List in November 2006, the Government of Indonesia (GOI) has 
continued to make steady progress towards improving its enforcement 
and protection of intellectual property rights (IPR).  A National 
Intellectual Property (IP) Task Force now holds regular interagency 
coordination meetings, and President Yudhoyono (SBY) signed a decree 
in November 2006 committing the GOI to legalize all its computer 
software.  Parliament passed a new Customs Law on November 15 that, 
when fully implemented, will provide ex officio powers for Customs 
Officials to seize suspected infringing products.  Jakarta 
Metropolitan Police continue to elicit praise from local and 
regional International Intellectual Property Association (IIPA) 
representatives for raids on notorious malls, vendors, distributors 
and factories.  The Ministry of Industry's Optical Disk Factory 
Monitoring Team (ODFMT) inspected registered factories in November 
2006 and February 2007 and issued initial warning letters to some 12 
optical disk (OD) factories.  The Ministry of Industry (MOI) plans 
to assign full-time staff to the ODFMT, conduct more regular 
inspections (including inspections after hours), and begin 
sanctioning non-compliant factories.  A recent Supreme Court ruling 
in favor of the company Intel in a trademark infringement case case 
bodes well for future cases. 
 
¶2.  (SBU) Summary, continued. Despite these steps, the GOI needs to 
further improve the operations of the ODFMT and involve the police 
more closely in the ODFMT's operations.  It also needs to step up 
prosecutions and deterrent convictions of IPR violators and combat 
book piracy and pharmaceutical counterfeiting.  But the GOI is 
steadily taking ownership over the IPR issue, and our interactions 
with Indonesia on the issue have grown less confrontational and more 
collaborative.  To further encourage this important U.S. policy 
success, we recommend that Indonesia remain on the Watch List for 
the entire 2007 Special 301 regular cycle.  End Summary. 
 
¶3.  (SBU) In response to Ref A, we reviewed this year's Special 301 
submissions from the GOI, IIPA, Intel, PhRMA, and the Phillip Morris 
Company.  In general, we agree with their data, characterizations, 
and assessments of the state of IPR protection and enforcement in 
Indonesia.  Piracy and counterfeiting rates remain high and, 
although improving, enforcement remains weak.  At the same time, GOI 
engagement and political will continue to improve and are gaining 
their own momentum. 
 
National IP Task Force Remains Active 
------------------------------------- 
 
¶4. (SBU) According to GOI contacts, The National IP Task Force 
continues hold regularly scheduled quarterly working level meetings, 
as well less frequent senior and Ministerial-level meetings.  At the 
working level, the Task Force has developed a national IP strategy 
and strengthened data collection and interagency coordination. 
However, the lack of a formal budget continues to hamper the Task 
Force, and it must rely on limited funding from the Ministry of 
Justice Directorate General for IPR.  Nevertheless, the Task Force's 
regular interagency meetings, particularly those of senior and 
ministerial level officials, are encouraging greater GOI focus on 
IPR.  Following the first Task Force meeting last year, for example, 
the Minister of Justice and National Police Chief collaborated in 
developing a clever, animated TV spot emphasizing the costs of 
piracy on Indonesia's culture and creative arts. 
 
SBY Leads Efforts to Legalize GOI Software 
------------------------------------------ 
 
¶5.  (SBU) There are other recent examples of growing GOI initiative 
and high-level political will to improve IPR protection.  On 
November 13, SBY signed a decree establishing an Information 
Communication Technology National Team.  The team consists of 
academics, business leaders and GOI officials and aims to create an 
IT regulatory regime that can contribute to economic growth, job 
creation and poverty alleviation.  One of the ICT National Team's 
stated objectives is to work towards legalizing all government 
software, regardless of whether it is open source or licensed. 
Further, the Team will also pursue approaches to cracking down on 
the use of pirate software in internet cafes, universities and the 
private businesses.  The ICT team will report directly to President 
SBY and work out of an office at the Ministry of Communication and 
Information Technology. 
 
¶6.  (SBU) Two months after SBY signed the decree, Minister of 
Communication and Information Sofyan Djalil signed an MOU with PT. 
Microsoft Indonesia, under which the software maker will help GOI 
ministries legalize and upgrade their MS Windows products at a 
significantly discounted price.  Although there has been some public 
 
JAKARTA 00000475  002 OF 003 
 
 
criticism of the MOU, including by State Minister for Research and 
Technology Kusmayanto Kadiman, SBY has stood behind the agreement. 
PT Microsoft Indonesia President Director Tony Chen recently told us 
he was "astonished" by the GOI's growing commitment to legalize its 
software and recommended we encourage the GOI by maintaining 
Indonesia on the Special 301 Watch List. 
 
Customs Law Enacted with Ex Officio Powers 
------------------------------------------ 
 
¶7.  (SBU) Parliament passed a new Customs Law on November 15, 2006, 
that, when fully implemented, will provide ex officio powers for 
Indonesian Customs officials to seize suspected infringing products 
without a court order.  The new law retains ex officio powers that 
existed in the old law, but also clears up court jurisdictional 
issues that had blocked their implementation.  Indonesia Customs 
expects to promulgate the new law's implementing regulations, 
including those pertaining to ex officio powers, by the end of 
¶2007. 
 
Jakarta Police Sustaining Enforcement 
------------------------------------- 
 
¶8. (SBU) As noted in the GOI's submission, and confirmed by local 
IIPA representatives, the Jakarta Metropolitan Police have sustained 
enforcement actions against malls, vendors, distributors and 
factories of pirated optical discs.  Ratu Plaza, Indonesia's most 
notorious modern market for pirated ODs, has been the subject of 
repeated raids, and one Motion Pictures Association (MPA) regional 
representative told us recently that some of Ratu's vendors have 
given up or moved to other, less-centrally located malls.  That same 
MPA representative described the Jakarta Police's continuing police 
cooperation as "brilliant" and he too recommended Indonesia remain 
on the Watch List.  Our EEB-funded senior IPR technical advisor has 
been instrumental in training and encouraging the Jakarta Police to 
step up their IPR enforcement.  Looking forward, the advisor will 
work to encourage greater police collaboration with the ODFMT and 
prosecutors, as well as greater police enforcement actions beyond 
the boundaries of metropolitan Jakarta. 
 
Monitoring Team Yielding Some Results 
------------------------------------- 
 
¶9. (SBU) As noted in ref b, the ODFMT, with training and planning 
support from our second EEB-funded advisor, conducted monitoring 
visits to all registered optical disc factories in November 2006. 
The MOI subsequently sent 12 warning letters to factories observed 
to have irregularities.  However, the letters highlighted only minor 
infractions, and there has been little ODFMT follow-up.  Although 
the visits revealed weaknesses in the ODFMT's capacity and security 
procedures, they also gleaned useful baseline data on the capacity 
and activities of registered optical disc factories.  More 
importantly, the visits allowed the ODFMT to collect forensic 
exemplars from a majority of the known production machines in 
Indonesia's registered factories.  The International Federtion of 
the Phonographic" Industry (IFPI) continus to analyze tthese 
exemplars in its forensic laboratory in London, and already they are 
yielding important information. 
 
¶10.  (SBU) The ODFMT still requires considerable institution and 
capacity building to be fully effective.  The ODFMT does not have 
full-time monitors, and relies largely on MOI and Police officials 
temporarily seconded from other positions.  t needs direct support 
from the police, particulrly if it is tt c"n*duct visits at night 
and to wlll guarded factories.  The ODFMT also needs to impe ment a 
more credible system of warning and sanctioning factories in 
violation of laws and regulations. 
 
¶11.  (SBU) MOI Director General for Downstream Chemical Industries 
Benny Wahyudi told us on February 20 that the ODFMT visited seven 
factories on February 17, and inspected the five that were open and 
operating.  He promised to provide us with the results of those 
visits as soon as they were compiled.  Wahyudi agreed that the 
Monitoring Team needs at least one full-time staff member.  He 
noted, though, that this person might have to be a contractor, as 
the MOI did not have a specific budget and position set aside to 
staff the ODFMT.  Wahyudi also agreed that the MOI would need to 
work closer with the police and develop a more effective system of 
warning and sanctions.  He suggested that the Embassy senior advisor 
for the ODFMT would be instrumental in helping the MOI address these 
challenges. 
 
Glimmer of Hope in Intel Case 
----------------------------- 
 
¶12. (SBU) The Supreme Court's February 1 ruling in favor of Intel in 
 
JAKARTA 00000475  003 OF 003 
 
 
the Intel Jeans case is also a favorable development.  In the case, 
the court cancelled the trademark of a local brand of jeans, Intel 
Jeans, and ruled that Intel is entitled to trademark protection as a 
well known brand.  The ruling bodes well for the Supreme Court's 
upcoming decision in the appeal of Intel's Panggung case (the 
Indonesian firm PT Panggung produces a number of electronics 
products under the registered trademark "Intel").  While the 
Commercial Court's previous rulings against Intel in the Panggung 
case have been setbacks, Intel's legal counsel recently described 
the case as an aberration in the Commercial Court's otherwise 
respectable record in handling civil IPR cases, particularly those 
involving trademarks. 
 
Significant Concerns Remain 
--------------------------- 
 
¶13. (SBU) Despite the clear momentum on IPR issues, there are 
remaining concerns.  Indonesia's record on IPR prosecutions remains 
poor.  Frequent prosecutor rotations, lack of transparency, and 
corruption make this a daunting task; and high level political will 
and support will be critical to making headway on IPR convictions 
and prosecutions.  Pharmaceutical counterfeiting and book piracy 
also remain largely unchecked.  GOI officials tell us frequently 
that they consider pharmaceutical counterfeiting to be a serious 
health concern for the country, as well as a potential rallying 
point for greater public support for IPR protection and enforcement. 
 Key GOI officials have endorsed a University of Indonesia study 
revealing alarming pharmaceutical counterfeiting rates and its high 
cost to the Indonesian economy.  The GOI, however, has yet to 
effectively engage the pharmaceutical industry on these issues. 
Book piracy remains rampant in universities and local bookshops. 
Indonesia has yet to develop an association or other means through 
which publishers and authors can collect and distribute book 
royalties.  The GOI would very likely welcome U.S. technical 
assistance in this area. 
 
Watch List is the Best Option 
----------------------------- 
 
¶14. (SBU) Over the past two years, the combination of a 
reform-minded government in Indonesia and five regular or 
out-of-cycle Special 301 reviews has done much to change our 
interactions with the GOI on IPR issues.  GOI leaders are pursuing 
initiatives to promote IPR that were a only short time ago beyond 
our expectations.  At the same time, our relationships with working 
level contacts have become much more collaborative, particularly 
following Indonesia's removal from the Priority Watch List last 
November.  Four months later, although much work remains, the GOI is 
moving forward on IPR issues largely under its own steam.  With the 
GOI taking increasing ownership of the issue and steadily improving 
its IPR enforcement and protection, we believe a third consecutive 
OCR would be counterproductive.  Accordingly, Embassy Jakarta 
recommends strongly that Washington agencies retain Indonesia on the 
Special 301 Watch List for the 2007 regular Special 301 cycle, with 
no OCR. 
 
HEFFERN